Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements and the accompanying notes thereto and other disclosures included in this Annual Report on Form 10-K, including the disclosures under “Risk Factors.” Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”) and unless otherwise indicated are presented in U.S. dollars.
Except for the historical information contained herein, the matters discussed in this MD&A may be deemed to be forward-looking statements. Forward-looking statement are only predictions based on management’s current views and assumptions and involve risks and uncertainties, and actual results could differ materially from those projected or implied. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Words such as “may,” “expect,” “anticipate,” “estimate,” “intend,” and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements.
Our actual results and the timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this MD&A. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this MD&A, they may not be predictive of results or developments in future periods.
We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
Overview
We are a leader in the field of gene therapy and seek to deliver to patients suffering from rare and other devastating diseases single treatments with potentially curative results. We are advancing a pipeline of innovative gene therapies, including our clinical candidates for the treatment of Huntington’s disease and ALS, as well as preclinical product candidates including candidates for the treatment of rTLE and Fabry disease. In November 2022 and February 2023, our internally-developed HEMGENIX Ô , a gene therapy for the treatment of hemophilia B, was approved for commercialization by the FDA and the EMA, respectively. In June 2020, we agreed to license HEMGENIX Ô to CSL Behring, which is now responsible for commercialization of HEMGENIX Ô . We are manufacturing HEMGENIX Ô for CSL Behring and are entitled to specific milestone payments and royalties on net sales. We believe our validated technology platform and manufacturing capabilities provide us distinct competitive advantages, including the potential to reduce development risk, cost, and time to market. We produce our AAV-based gene therapies in our own facilities with a proprietary, commercial-scale, cGMP-compliant, manufacturing process. We believe our Lexington, Massachusetts-based facility is one of the world’s most versatile gene therapy manufacturing facilities.
Business developments
Below is a summary of our recent significant business developments:
CSL Behring collaboration
In June 2020 we entered into the CSL Behring Agreement pursuant to which CSL Behring received exclusive global rights to the Product. The transaction became fully effective in May 2021.
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In March and April 2022, CSL Behring submitted marketing applications for HEMGENIX Ô in the U.S. and the EU. In March and April 2022, we received the $55.0 million owed to us by CSL Behring related to submission of these marketing applications.
In November 2022, the FDA approved the marketing application for the U.S. and in February 2023 the EMA approved the marketing application for the EU. We are eligible to receive a $100.0 million payment from CSL Behring following the first sale of the Product in the U.S. We are also eligible to receive a $75.0 million payment from CSL Behring following the first sale of the Product in any of five major European countries, namely France, Germany, Italy, Spain, and the United Kingdom, provided the first sale occurs prior to July 2, 2023. We recorded the $100.0 million payment associated with the first sale in the U.S. as license revenue in the year ended December 31, 2022 as we expect this event to occur in 2023. We did not record license revenue related to a $75.0 million payment in the year ended December 31, 2022 as the accomplishment of this milestone prior to July 2, 2023 is contingent on factors outside of our control.
Concurrently with the execution of the CSL Behring Agreement, we and CSL Behring also entered into a development and commercial supply agreement, pursuant to which, among other things, we will supply the Product to CSL Behring at an agreed-upon price commensurate with the stand-alone selling price (“SSP”) until such time that these capabilities are transferred to CSL Behring or its designated contract manufacturing organization. We completed the validation of the current manufacturing process and in July 2022, following a comprehensive multi-day facility inspection, the EMA notified us that GMP certification can be issued for our Lexington, Massachusetts-based manufacturing site to produce commercial supply of HEMGENIX Ô . In August 2022, we completed the FDA pre-license inspection of the Lexington facility. On September 6, 2022 CSL Behring notified us of its intent to transfer manufacturing technology related to the Product in the coming years to a third-party contract manufacturer designated by CSL Behring. CSL Behring also informed us of its intent to retain us as a source for manufacturing after the completion of the technology transfer.
In August 2022, the GMP certification for the Amsterdam facility was amended to include release testing of the Product in the European Union following inspection by the IGJ.
W e recorded $1.7 million in revenue related to manufacturing the Product in the year ended December 31, 2022.
Huntington’s disease program (AMT-130)
On March 21, 2022, we announced that we have completed the enrollment of all 26 patients in the first two cohorts of our Phase I/II clinical trial of AMT-130 taking place in the U.S. The low-dose cohort includes 10 patients, of which six patients received treatment with AMT-130 and four patients received imitation surgery. The higher-dose cohort includes 16 patients, of which 10 patients received treatment with AMT-130 and six patients received imitation surgery. In July 2022 we crossed over one of these six patients and treated the patient with the lower dose of AMT-130.
On June 23, 2022, we announced encouraging safety and biomarker data from the 10 patients enrolled in the low-dose U.S. cohort. AMT-130 was generally well-tolerated with no serious adverse events related to AMT-130 reported in the treated patients. In the four treated patients with evaluable data, mean levels of CSF mHTT declined at all timepoints compared to baseline and decreased by 53.8% at 12 months of follow-up. In the six treated patients, measurements of CSF NfL initially increased as expected following the AMT-130 surgical procedure and declined thereafter, nearing baseline at 12 months of follow-up.
In August 2022, we announced a voluntary postponement of AMT-130 higher-dose procedures due to SUSARs reported in three of the 14 patients that were treated with the higher dose of AMT-130. In October 2022, after completing a comprehensive safety investigation, the DSMB recommended resuming treatment at the higher dose of AMT-130 for the remaining five European patients and any patients in the U.S. trial eligible to cross over from the control arm to the treatment. All three patients have experienced full resolution of the reported SUSARs.
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Acquisition of Corlieve Therapeutics
On June 21, 2021, we entered into a Sale and Purchase Agreement (“SPA”) to acquire all outstanding ordinary shares of Corlieve SAS (“Corlieve”), a privately held French gene therapy company (the “Corlieve Transaction”). Upon the closing of the Corlieve Transaction on July 30, 2021 (the “Acquisition Date”), we acquired 97.7% of the outstanding ordinary shares of Corlieve in return for EUR 44.9 million ($53.3 million as of the Acquisition Date). We paid EUR 1.8 million ($1.9 million) to acquire the remaining shares of Corlieve in 2022. We financed the Corlieve Transaction from cash on hand.
In addition to the payments to acquire 100% of the outstanding ordinary shares, Corlieve’s former and remaining shareholders are eligible to receive up to EUR 40.0 million (or $42.8 million as of December 31, 2022) upon the achievement of development milestones through Phase I/II and EUR 160.0 million (or $171.3 million as of December 31, 2022) upon the achievement of milestones associated with Phase III development and obtaining approval to commercialize AMT-260 in the U.S. and the EU. W e expect these obligations will become payable between 2023 and 2031. If and when due, w e may elect to pay up to 25% of such milestone payments through the issuance of our ordinary shares.
Termination of Bristol-Myers Squibb Agreement
In May 2015 we and BMS entered the BMS CLA. The initial four-year research term under the collaboration terminated in May 2019. On December 1, 2020, we and BMS amended the BMS CLA. As a result of the Amended BMS CLA, we recognized the remaining balance of license revenue of $27.8 million not previously recognized during the year ended December 31, 2020. The Amended BMS CLA did not extend the initial research term. For a period of one-year from the effective date of the Amended BMS CLA, BMS was able to replace up to two of the four active collaboration targets with two new targets in the field of cardiovascular disease. BMS did not replace any of the active collaboration targets. On December 17, 2020, BMS designated one of the four collaboration targets as a candidate to advance into Investigational New Drug-enabling studies (“IND-enabling studies”) entitling us to receive a $4.4 million research milestone payment. We recorded the $4.4 million as license revenue in the year ended December 31, 2020.
On November 21, 2022 we received the Termination Notice whereby the Amended BMS CLA terminated on February 21, 2023.
The Amended BMS CLA terminated two warrants that, when in effect, provided BMS the right to increase its ownership in the Company up to 19.9% upon the exercise of both warrants, with the exercise of such warrants being conditioned on the designation of a seventh, and a tenth Collaboration Target, respectively. In the Amended BMS CLA, we and BMS agreed that upon the consummation of a change of control transaction of uniQure that occurs prior to the earlier of (i) December 1, 2026 and (ii) BMS’ delivery of a target cessation notice for all four Collaboration Targets, we (or our third party acquirer) would pay to BMS a one-time, non-refundable, non-creditable cash payment of $70.0 million, provided that (x) if $70.0 million is greater than five percent of the net proceeds (as contractually defined) from such change of control transaction, the payment would be an amount equal to five percent of such net proceeds, and (y) if $70.0 million is less than one percent of such net proceeds, the change of control payment would be an amount equal to one percent of such net proceeds. We had not consummated any change of control transaction as of the Termination Notice and as of December 31, 2022, assessed the probability as of the Termination Date and released the liability related to the change of control payment to other income during the year ended December 31, 2022.
The Termination Notice did not change any of the provisions of the Investor Agreement with BMS that we entered into in 2015, but various provisions of the Investor Agreement have been terminated. We have granted BMS certain registration rights that allow BMS to require us to register our securities beneficially held by BMS under the Securities Act. BMS may make up to two such demands for us to register the shares, subject to customary limitations. In addition, independent of their demand registration rights, upon the occurrence of certain events, we must also provide BMS the opportunity to include their ordinary shares in any registration statement that we effect.
We also continue to grant BMS certain information rights under the Investor Agreement, although these requirements may be satisfied by our public filings required by U.S. securities laws.
BMS also continues to be subject to a lock up pursuant to the Investor Agreement for as long as BMS holds more than 4.9% of our ordinary shares (as of December 31, 2022 BMS held 5.08%). Without our prior consent, BMS may not sell or dispose any of its current ordinary shares.
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The Investor Agreement also continues to require BMS to vote all of our ordinary shares it beneficially holds in favor of all items on the agenda for the relevant general meeting of shareholders of our company as proposed on behalf of our company, unless, in the context of a change of control or similar transaction, BMS has itself made an offer to our company or our board in connection with the transaction that is the subject of the vote, in which case it is free to vote its shares at its discretion. This voting provision will terminate upon the later of the date on which BMS no longer beneficially owns at least 4.9% of our outstanding ordinary shares or the closing of a transaction that provides BMS exclusive and absolute discretion to vote our shares it beneficially holds.
Investment in debt securities
In December 2022, we invested $100.0 million and EUR 80.0 million (or total of $183.9 million as of investment date) of our cash on hand into short-term and long-term euro and dollar denominated sovereign bonds. The bonds have remaining maturities ranging from two to 14 months. We classify these bonds as held-to-maturity. We made no such investments in 2021 and 2020.
Covid pandemic
The coronavirus disease (“Covid”) caused by the severe acute respiratory syndrome coronavirus 2 (“Sars-CoV 2 virus”) was characterized as a pandemic by the WHO on March 11, 2020. Since then, various variants of the Sars-CoV 2 virus causing Covid have been identified.
The broader implications of Covid, including the implications from the various variants, on our results of
operations and overall financial performance remain uncertain. We have experienced and continue to experience increased lead times in the delivery of equipment and disposables that we use to manufacture materials for our various programs. Currently, these have not materially impacted our development timelines and we continue to adapt to the current environment to minimize the effect to our business. However, we may experience more pronounced disruptions in our operations in the future.
Russian-Ukrainian war
Our business is not directly impacted by the war as we do not operate in either Russia or the Ukraine. However, the war might potentially amplify the disruptive impact of the Covid pandemic.
Financial Highlights
Key components of our results of operations include the following:
Year ended December 31,
2022
2021
2020
(in thousands)
Total revenues
$
106,483
$
524,002
$
37,514
Cost of revenues
(3,343)
(24,976)
—
Research and development expenses
(197,591)
(143,548)
(122,400)
Selling, general and administrative expenses
(55,059)
(56,290)
(42,580)
Net (loss) / income
(126,789)
329,589
(125,024)
As of December 31, 2022, we had $392.8 million in cash and cash equivalents and investment securities (December 31, 2021: $556.3 million cash and cash equivalents). We had a net loss of $126.8 million in 2022, and net income of $329.6 million in 2021 and a net loss of $125.0 million in 2020. As of December 31, 2022, we had an accumulated deficit of $581.9 million (December 31, 2021: $455.1 million).
We anticipate that our expenses will increase for the foreseeable future and will include costs related to:
● advancing AMT-130 for our Huntington’s disease gene therapy program into phase III clinical study;
● advancing our gene therapy programs rTLE, SOD1-ALS and Fabry disease into Phase I/II clinical studies;
● potentially acquiring or in-licensing rights to new therapeutic targets, product candidates and technologies;
● making potential future milestone payments related to the acquisition of Corlieve, if any;
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● advancing preclinical research and development for gene therapy product candidates targeting other diseases; and
● continuing to invest in expanding, developing and optimizing our manufacturing capabilities and other enabling technologies, such as next-generation viral vectors, promoters and re-dosing.
See “Results of Operations” below for a discussion of the detailed components and analysis of the amounts above.
Critical Accounting Policies and Estimates
In preparing our consolidated financial statements in accordance with U.S. GAAP and pursuant to the rules and regulations promulgated by the SEC we make assumptions, judgments and estimates that can have a significant impact on our net loss/income and affect the reported amounts of certain assets, liabilities, revenue and expenses, and related disclosures. On an ongoing basis, we evaluate our assumptions, estimates and judgments, including those related to what we believe to be our critical accounting policies. Refer to Note 2 “Summary of significant accounting policies” for a summary of our significant accounting policies.
We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not clear from other sources. Actual results may differ from these estimates under different assumptions, judgments or estimates. We also discuss our critical accounting estimates with the Audit Committee of our Board of Directors.
We consider the following to be our critical accounting estimates:
● Recognition of revenue including the CSL Behring milestones in relation to the CSL Behring Agreement;
● Contingent consideration recorded in relation to the Corlieve business combination; and
● Valuation allowance related to Dutch and U.S. deferred tax assets.
Revenue recognition related to CSL Behring milestones
On the Signing Date we entered into the CSL Behring Agreement. The transaction became effective on Closing.
As of Closing, we identified two material performance obligations related to the CSL Behring Agreement:
(i) Sale of the exclusive global rights to the Product (“License Sale”); and
(ii) Generate information to support the regulatory approval of the current and next generation manufacturing process of Product and to provide any such information generated to CSL Behring (“Manufacturing Development”).
We determined that the fixed upfront payment of $450.0 million and the $12.4 million that we received in relation to the certain reimbursable activities to fulfill the transfer of global rights (“Additional Covenants”) in the year ended December 31, 2021 should be allocated to the License Sale. In addition, we concluded that $255.0 million of variable milestone payments, sales milestone payments and royalties should be allocated to the License Sale performance obligation as well. We determined that the License Sale was completed on May 6, 2021, when we transferred the license and CSL Behring assumed full responsibility for the development and commercialization of the Product. Upon the Closing, we evaluated the amounts of potential payments and the likelihood that the payments will be received. We utilized the most likely amount method to estimate the variable consideration to be included in the transaction price. Since we cannot control the achievement of regulatory and first commercial sales milestones, we concluded that all potential payments were constrained as of Closing. We determined that we would recognize revenue related to these payments, only to the extent that it becomes probable that no significant reversal of recognized cumulative revenue will occur thereafter. We will include payments related to sales milestones in the transaction price when their achievement becomes probable, and we will include royalties on the sale of Product once these have been earned.
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In March and April 2022, we collected the $55.0 million of variable milestone payments related to the submissions of a BLA and MAA which we had recorded as license revenue in the year ended December 31, 2021. During the year ended December 31, 2022, we recorded $100.0 million of variable milestone revenue related to a first sale of HEMGENIX™ in the U.S. as we consider this to be probable following the November 2022 FDA approval of HEMGENIX™. Despite the approval of the MAA for HEMGENIX™ by the EMA in February 2023, we did not record the $75.0 million variable milestone payment related to a first sale of HEMGENIX™ in the one of five major European countries, namely France, Germany, Italy, Spain, and the United Kingdom, as license revenue in the year ended December 31, 2022 as the payment is contingent on the milestone being achieved prior to July 2, 2023, which is contingent on factors outside our control.
Contingent consideration
On the Acquisition Date of Corlieve we recorded contingent consideration related to amounts potentially payable to Corlieve’s former shareholders. The amounts payable in accordance with the SPA are contingent upon realization of certain milestones associated with the TLE research program. Contingent consideration was measured at fair value at the Acquisition Date with changes in fair value recognized in the consolidated statements of operations in research and development expenses.
Changes in contingent consideration can result from changes in the assumed achievement and timing of estimated milestones and the discount rate used to estimate the fair value of the liability:
● We had used discount rates ranging from 10.9% to 11.9% to calculate the contingent consideration as of December 31, 2021. As of December 31, 2022 we increased the interest rates to a range of 14.0% to 14.4% to reflect increases in market interest rates. An increase in the discount rate reduces the fair value of the contingent consideration liability whereas a decrease in the discount rate increases the fair market value of the contingent consideration liability.
● As of December 31, 2021, we had estimated that AMT-260 would advance into the clinical development by early 2024, and as of December 31, 2022, we revised that estimate to late 2023. An achievement of a milestone at a later than currently expected date reduces the fair value of the contingent consideration liability whereas an achievement at an earlier than currently expected date increases the fair value of the contingent consideration liability.
● We initially recorded the contingent consideration liability on the Acquisition Date assuming a 40% probability of advancing the TLE research program into clinical development. We developed this estimate using data from an external study regarding the average likelihood of advancing into clinical development at a certain stage or preclinical development. For the year ended December 31, 2021, we had increased the probability to 55.0% following the designation of a lead candidate by us in late October 2021. During the year ended December 31, 2022 we increased the probability to 66.0% following the commencement of toxicology studies for the TLE program. The increase in probabilities resulted in a $4.4 million expense in the year ended December 31, 2022 and a $5.8 million expense in the year ended December 31, 2021.
The fair value of the contingent consideration liability as of December 31, 2022 was $35.3 million and as of December 31, 2021 was $29.5 million. The increase was primarily driven by an increase in the probability of the TLE program advancing into clinical development. If as of December 31, 2022 we had assumed TLE was certain (i.e. 100% probability) to advance into clinical development, then the fair value of the contingent consideration liability would have increased from $35.3 million to $48.8 million. If as of December 31, 2022 we had assumed that we would discontinue development of the TLE program, then we could have released the contingent consideration liability to income.
Valuation allowance related to Dutch and U.S. deferred tax assets
We are subject to corporate taxes in the Netherlands. We have been incurring net operating losses in accordance with the corporate tax laws in almost all years since we founded our business.
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As of December 31, 2022, the total amount of net operating losses carried forward under the Dutch tax regime was $264.0 million (December 31, 2021: $228.5 million). We have historically recorded a full valuation allowance. We evaluate all positive and negative evidence including future income from the CSL Behring Agreement in assessing the need for such a full valuation allowance. We concluded that as of December 31, 2022 it is more likely than not that the remaining deferred tax assets will not be realized. If we would have released the full valuation allowance as of December 31, 2022, then we would have recorded up to $74.5 million of deferred tax income during the year ended December 31, 2022.
We are also subject to corporate taxes in the U.S.. While our operations in the U.S. had initially been incurring net operating tax losses, our subsidiary in the U.S. generated taxable income in the past few years starting with 2018. Based on the design of our worldwide operations, we determined as of December 31, 2020 that we expect to continue to generate taxable income in the U.S. during the foreseeable future and therefore determined that it had become more likely than not that our U.S. deferred tax assets will be realized. Accordingly, we recorded $16.4 million of deferred tax income in the year ended December 31, 2020 from releasing the full valuation allowance against our net deferred tax assets in the U.S.. We generated taxable income in the U.S. during the years ended December 31, 2021 and December 31, 2022 and therefore continue to expect that it is more likely than not that our U.S. deferred tax assets will be realized. We would be required to record deferred tax expense to recognize a valuation allowance on a portion of or possibly even our full U.S. deferred tax asset of $21.1 million as of December 31, 2022, if we would expect not to meet the above threshold.
Recently Adopted Accounting Pronouncements
ASU 2021-10: Government Assistance
In November 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2021-10, Government Assistance (Topic 832) which discussed the requirements for disclosures, to be applied prospectively or retrospectively, related to transactions with a government. ASU 2021-10 is effective for fiscal years beginning after December 15, 2021. The new disclosure requirements required disclosures around 1) information about the nature of the transactions and the related accounting policy used to account for the transactions, 2) the line items on the balance sheet and income statement that are affected by the transactions, and the amounts applicable to each financial statement line item, and 3) significant terms and conditions of the transactions, including commitments and contingencies. The Company currently includes information on government grants and the adoption of ASU 2021-10 on January 1, 2022 has not had a material impact on the Company’s consolidated financial statements.
Results of Operations
The following table presents a comparison of the twelve months ended December 31, 2022, 2021 and 2020.
Year ended December 31,
2022
2021
2020
2022 vs 2021
2021 vs 2020
(in thousands)
Total revenues
$
106,483
$
524,002
$
37,514
$
(417,519)
$
486,488
Operating expenses:
Cost of revenues
(3,343)
(24,976)
—
21,633
(24,976)
Research and development expenses
(197,591)
(143,548)
(122,400)
(54,043)
(21,148)
Selling, general and administrative expenses
(55,059)
(56,290)
(42,580)
1,231
(13,710)
Total operating expenses
(255,993)
(224,814)
(164,980)
(31,179)
(59,834)
Other income
7,171
12,306
3,342
(5,135)
8,964
Other expense
(820)
(876)
(1,302)
56
426
(Loss) / income from operations
(143,159)
310,618
(125,426)
(453,777)
436,044
Non-operating items, net
14,900
22,188
(16,017)
(7,288)
38,205
(Loss) / income before income tax benefit / (expense)
$
(128,259)
$
332,806
$
(141,443)
(461,065)
474,249
Income tax benefit / (expense)
1,470
(3,217)
16,419
4,687
(19,636)
Net (loss) / income
$
(126,789)
$
329,589
$
(125,024)
$
(456,378)
$
454,613
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Revenues and cost of revenues
Our revenue and associated costs for the years ended December 31, 2022, 2021 and 2020 was as follows:
Year ended December 31,
2022
2021
2020
2022 vs 2021
2021 vs 2020
(in thousands)
License revenues
$
100,000
$
517,400
$
37,319
$
(417,400)
$
480,081
Collaboration revenues
4,766
6,602
195
(1,836)
6,407
Contract manufacturing revenues
1,717
—
—
1,717
—
Total revenues
$
106,483
$
524,002
$
37,514
$
(417,519)
$
486,488
Cost of license revenues
(1,254)
(24,976)
—
23,722
(24,976)
Cost of contract manufacturing revenues
(2,089)
—
—
(2,089)
—
Total cost
$
(3,343)
$
(24,976)
$
—
$
21,633
$
(24,976)
CSL Behring
We recognize license revenue in relation to the License Sale when it becomes probable that regulatory and sales milestone events will be achieved as well as when royalties on sales of Product have been earned. We recognized $100.0 million and $517.4 million of license revenue for the years ended December 31, 2022 and 2021. We recognized $100.0 million of license revenue in 2022 related to a milestone payment we expect to collect following the first sale of HEMGENIX™ in the U.S. in 2023. We recognized $517.4 million license revenue in 2021 related to the fixed upfront payment of $450.0 million and the $12.4 million we received in relation to the Additional Covenants after the Closing as well as a total of $55.0 million of payments related to milestone payments owed on submission of the MAA in March 2022 and the BLA in April 2022, which we had considered probable as of the February 25, 2022 filing of the 2021 financial statements.
We expense contract fulfillment costs associated with license revenue recognized as costs of license contract revenues. These expenses primarily consist of payments we owe to our licensors in relation to license payments we receive from CSL Behring. We incurred $1.3 million and $25.0 million of such cost in the years ended December 31, 2022 and 2021, respectively. We did not incur such costs in the years ended December 31, 2020.
We recognize collaboration revenues associated with services rendered in relation to completing the HOPE-B clinical trial on behalf of CSL Behring between Closing and December 2022, when CSL Behring fully assumed these activities as well as in relation to additional development services that CSL Behring requests. These services are provided by our employees. Collaboration revenue related to these contracted services is recognized when the performance obligations are satisfied.
We recognized $3.0 million, $2.4 million, and nil of collaboration revenue for the years ended December 31, 2022, 2021 and 2020, respectively. The increase in collaboration revenue in 2022 of $0.6 million compared to 2021 was primarily related to revenues related to full-time-employee (“FTE”) recharges of $3.0 million recognized from the CSL Behring agreement as a result of additional development services that CSL Behring requested.
We recognize contract manufacturing revenue related to contract manufacturing HEMGENIX TM for CSL Behring. Contract manufacturing revenue is realized when earned upon sales of HEMGENIX TM to CSL Behring. We recognized $1.7 million contract manufacturing revenues in the year ended December 31, 2022. We did not recognize such revenues in 2021 and 2020, as we started contract manufacturing activities to supply CSL Behring with launch supplies of HEMGENIX TM following their submission of a BLA and MAA in the spring of 2022.
We incurred $2.1 million of cost of contract manufacturing revenues related to the manufacture of the Product in the year ended December 31, 2022, compared to nil cost of contract manufacturing revenues in the years ended December 31, 2021 and 2022, respectively.
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BMS
We recognized license revenues associated with the amortization of the non-refundable upfront payment and target designation fees we received from BMS in 2015 until December 1, 2020. We evaluated our outstanding performance obligation following the amendment of the BMS CLA on December 1, 2020 and determined that our remaining performance obligation is immaterial. We updated our measure of progress accordingly and amortized the remaining balance of unrecognized revenue of $27.8 million as of December 1, 2020 as license revenue from a related party. On December 17, 2020 BMS designated one of the four Collaboration Targets as a candidate to advance into IND-enabling studies under the amended BMS CLA entitling us to receive a $4.4 million research milestone payment, which we recorded as license revenue in the year ended December 31, 2020. We recognized no license revenues in the years ended December 31, 2022 and December 31, 2021.
We recognized collaboration revenues associated with Collaboration Target-specific pre-clinical analytical development and process development activities that were reimbursable by BMS under the BMS CLA and the amended BMS CLA as well as other related agreements. Collaboration revenue related to these contracted services were recognized when performance obligations were satisfied. We recognized $1.8 million, $4.2 million and, $0.2 million of collaboration revenue for the years ended December 31, 2022, 2021 and 2020, respectively.
Following the termination of the amended BMS CLA on February 22, 2023 we do not expect to recognize any further revenue for services rendered in accordance with the BMS CLA.
Res e arch and development expenses
We expense R&D as incurred. Our R&D expenses generally consist of costs incurred for the development of our target candidates, which include:
● employee-related expenses, including salaries, benefits, travel, and share-based compensation expense;
● costs incurred for laboratory research, preclinical and nonclinical studies, clinical trials, statistical analysis and report writing, and regulatory compliance costs incurred with clinical research organizations and other third-party vendors;
● costs incurred to conduct consistency and comparability studies;
● costs incurred for the development and improvement of our manufacturing processes and methods;
● costs associated with research activities for enabling technology platforms, such as next-generation vectors, promoters and re-administration of gene therapies;
● costs associated with the rendering of collaboration services as well as the continued development of the Product;
● payments related to identifiable intangible assets without an alternative future use;
● payments to our licensors for milestones that have been achieved related to our product candidates, including approval of the BLA;
● facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance, and other supplies; and
● changes in the fair value of liabilities recorded in relation to our acquisition of Corlieve.
Our research and development expenses primarily consist of costs incurred for the research and development of our product candidates, which include:
● AMT-130 (Huntington’s disease). We have incurred costs related to preclinical and nonclinical studies of AMT-130 and have been incurring costs related to our Phase I/II trial since February 2019. Since 2021, we have also incurred costs related to our Phase Ib/II clinical trial in Europe;
● AMT-260 (Temporal lobe epilepsy) . We have incurred costs related the preclinical development of temporal lobe epilepsy, which we acquired from Corlieve on July 30, 2021;
● AMT-191 (Fabry disease) . We have incurred costs related to the preclinical development of Fabry disease;
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● Etranacogene dezaparvovec (hemophilia B) . We have incurred costs related to the research, development, and production of etranacogene dezaparvovec for the treatment of hemophilia B. During 2020 and up to the Closing of the CSL Behring Agreement we incurred costs related to the preparation of a BLA and MAA and for commercialization of the Product. We also incurred costs for manufacturing development. After the Closing, CSL Behring is responsible for the clinical and regulatory development and commercialization of the Product;
● Preclinical research programs . We incurred costs related to the research of multiple preclinical gene therapy product candidates with the potential to treat certain rare and other serious medical conditions; and
● Technology platform development and other related research . We incurred significant research and development costs related to manufacturing and other enabling technologies that are applicable across all our programs.
Our research and development expenses may vary substantially from period to period based on the timing of our research and development activities, including manufacturing campaigns, regulatory submissions, and enrollment of patients in clinical trials. The successful development of our product candidates is highly uncertain. Estimating the nature, timing, or cost of the development of any of our product candidates involves considerable judgment due to numerous risks and uncertainties associated with developing gene therapies, including the uncertainty of:
● the scope, rate of progress and expense of our research and development activities;
● our ability to successfully manufacture and scale-up production;
● clinical trial protocols, speed of enrollment and resulting data;
● the effectiveness and safety of our product candidates;
● the timing of regulatory approvals; and
● our ability to agree to ongoing development budgets with collaborators who share the costs of our development programs.
A change in the outcome of any of these variables with respect to our product candidates that we may develop, could mean a significant change in the expenses and timing associated with the development of such product candidate.
Research and development expenses for the year ended December 31, 2022 were $197.6 million, compared to $143.5 million and $122.4 million for the years ended December 31, 2021 and 2020, respectively. Other research and development expenses are separately classified in the table below. These are not allocated as they are deployed across multiple projects under development.
Year ended December 31,
2022
2021
2020
2022 vs 2021
2021 vs 2020
(in thousands)
Huntington's disease (AMT-130)
$
19,846
$
10,529
$
6,905
$
9,317
$
3,624
Temporal lobe epilepsy (AMT-260)
16,199
913
—
15,286
913
Fabry disease (AMT-191)
2,862
859
749
2,003
110
Hemophilia B (AMT-060/061)
2,474
8,738
21,458
(6,264)
(12,720)
Programs in preclinical development and platform related expenses
7,157
7,986
5,769
(829)
2,217
Total direct research and development expenses
$
48,538
$
29,025
$
34,881
$
19,513
$
(5,856)
Employee and contractor-related expenses
64,935
55,725
41,694
9,210
14,031
Facility expenses
23,582
18,796
17,390
4,786
1,406
Share-based compensation expenses
18,402
12,822
11,995
5,580
827
Disposables
17,830
14,679
10,203
3,151
4,476
Other expenses
17,223
5,818
6,237
11,405
(419)
Fair value changes related to contingent consideration
7,081
6,683
—
398
6,683
Total other research and development expenses
$
149,053
$
114,523
$
87,519
$
34,530
$
27,004
Total research and development expenses
$
197,591
$
143,548
$
122,400
$
54,043
$
21,148
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Direct research and development expenses
Huntington disease (AMT-130)
We incurred $19.8 million, $10.5 million and $6.9 million in the years ended December 2022, 2021 and 2020 respectively. In the year ended December 31, 2022, our external costs for the development of AMT-130 were primarily related to the execution of our Phase I/II clinical trial in the U.S. and in Europe. In the years ended December 31, 2021 and December 31, 2020 our external costs for the development of AMT-130 were primarily related to the execution of our Phase I/II clinical trial in the U.S. and in the year ended December 31, 2021, costs were incurred for the preparation of the Phase I/IIb clinical trial in Europe .
Temporal lobe epilepsy (AMT-260)
In years ended December 31, 2022, December 31, 2021 and December 31, 2020, we incurred $16.2 million, $0.9 million and nil, respectively, for the preclinical development of temporal lobe epilepsy, which we acquired from Corlieve on July 30, 2021. The increase in development cost in the year ended December 31, 2022 related to cost incurred in relation to a toxicology study as well as manufacturing supplies for clinical development.
Fabry disease (AMT-191)
In the years ended December 31, 2022 December 31, 2021 and December 31, 2020, we incurred $2.9 million, $0.9 million and $0.7 million, respectively, primarily related to our preclinical activities for the treatment of Fabry disease (AMT-191).
Hemophilia B (AMT-060/061)
In the years ended December 31, 2022, December 31, 2021 and December 31, 2020, the external costs for our hemophilia B program were primarily related to the execution of our Phase III clinical trial and Manufacturing Development. During 2020 and up to the Closing of the CSL Behring Agreement in May 2021, we also incurred costs related to the preparation of the global regulatory submissions and to prepare for commercialization of the Product. After the Closing, CSL Behring is responsible for the clinical and regulatory activities and commercialization of the Product. We managed the existing trials on behalf of CSL Behring until December 2022, at which point the trials began to be managed by CSL Behring. Direct research and development expenses related to clinical development incurred in the year ended December 31, 2022 and 2021 are presented net of reimbursements due from CSL Behring.
In the same periods , we also incurred costs related to the long-term follow-up of patients in our Phase I/II clinical trial of AMT-060 and our Phase IIb clinical trial of etranacogene dezaparvovec. Our Phase IIb dose-confirmation study was initiated in January 2018 and dosing occurred in July and August 2018. Patients were dosed as part of our Phase I/II clinical trial of AMT-060 in 2015 and 2016. These costs are presented net of reimbursements due from CSL Behring.
Preclinical programs & platform development
In the year ended December 31, 2022, we incurred $7.2 million of costs primarily related to our preclinical activities associated with product candidates for various other research programs and technology innovation projects.
In the year ended December 31, 2021, we incurred $8.0 million of costs related to related to our preclinical activities for product candidates including SCA3 (AMT-150) as well as various other research programs and technology innovation projects compared to $5.8 million in 2020. Costs for the year ended December 31, 2020 also include costs for Hemophilia A (AMT-180), which was deprioritized in June 2020.
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Other research & development expenses
● We incurred $64.9 million in employee and contractor expenses in the year ended December 31, 2022 compared to $55.7 million in 2021 and $41.7 million in 2020. Our cost increased in 2022 by $9.2 million compared to 2021 primarily as a result of an increase in personnel and contractor related expenses to support our growth. Costs increased by $14.0 million in 2021 compared to 2020 as a result of the recruitment of personnel to support the preclinical and clinical trial development of our product candidates;
● We incurred $23.6 million in operating expenses and depreciation expenses related to our rented facilities in the year ended December 31, 2022 compared to $18.8 million in 2021 and $17.4 million in 2020. The increase in 2022 compared to 2021 of $4.8 million primarily related to additional sites in Lexington and increased depreciation expense related to the expansion of the Amsterdam facility in prior year. The increase in 2021 compared to 2020 of $1.4 million primarily related to expansion of the Amsterdam facility;
● We incurred $17.8 million in disposables costs in the year ended December 31, 2022 compared to $14.7 million in the year ended December 31, 2021 and $10.2 million in the year ended December 31, 2020. The increases are primarily related to the expansion of our activities to support the development of our product candidates;
● We incurred $18.4 million in share-based compensation expenses in the year ended December 31, 2022 compared to $12.8 million in 2021 and $12.0 million in 2020. The increase in 2022 compared to 2021 of $5.6 million was primarily driven by the increase in awards granted, including those to newly recruited personnel as well as an increase in expense related to performance share units that were deemed probable. The increase in 2021 compared to 2020 of $0.8 million was driven primarily by grants to newly recruited personnel offset by share-based compensation expenses recorded in relation to the termination of one of our executives in 2020;
● We incurred $17.2 million in other expenses in the year ended December 31, 2022 compared to $5.8 million in 2021 and $6.2 million in 2020. The increase in 2022 compared to 2021 of $11.4 million is primarily due to $7.0 million of contractual payments we owed to licensors upon FDA approval of HEMGENIX™ and $1.1 million owed to a licensor for a valid patent claim granted within the EU. The decrease in 2021 compared to 2020 of $0.4 million is a combination of not incurring any expenses related to license payments without an alternative future use like in 2020 ($3.4 million) offset by various increases, including increases in professional fees as a result of expanding the organization and to support the cGMP validation of our Lexington facility; and
● We incurred $7.1 million of expenses for the year ended December 31, 2022 related to an increase in the fair value of contingent consideration associated with the Corlieve Transaction, compared to $6.7 million and nil for the same periods in 2021 and 2020.
Selling, general and administrative expenses
Our general and administrative expenses consist principally of employee, office, consulting, legal and other professional and administrative expenses. We incurred expenses associated with operating as a public company, including expenses for personnel, legal, accounting and audit fees, board of directors’ costs, directors' and officers' liability insurance premiums, Nasdaq listing fees, expenses related to investor relations and fees related to business development and maintaining our patent and license portfolio. Our selling costs include employee expenses as well as professional fees related to the preparation of a commercial launch of etranacogene dezaparvovec and advisory fees related to obtaining the CSL Behring Agreement.
Selling, general and administrative expenses for the year ended December 31, 2022 were $55.1 million, compared to $56.3 million and $42.6 million for the years ended December 31, 2021 and 2020, respectively.
● We incurred $21.1 million in personnel and contractor expenses in 2022 compared to $16.0 million in 2021 and $13.6 million in 2020. The increase in 2022 of $5.0 million, compared to 2021, and the increase in 2021 compared to 2020 of $2.4 million was primarily driven by an increase in personnel and contractor related expenses to support our growth;
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● We incurred $15.5 million of share-based compensation expenses in 2022 compared to $12.8 million in 2021 and $9.8 million in 2020. The increase in 2022 compared to 2021 of $2.7 million was primarily related to the increase in awards granted, including those to newly recruited personnel as well as an increase in expense related to performance share units that were deemed probable. The increase in 2021 compared to 2020 of $3.0 million was also primarily driven by the increase in awards granted including those to newly recruited personnel;
● We incurred $7.1 million in professional fees in 2022 compared to $9.4 million in 2021 and $8.0 million in 2020. We regularly incur accounting, audit and legal fees associated with operating as a public company. Additionally, in the years ended December 31, 2021 and December 31, 2020, we incurred professional fees in relation to our licensing transaction with CSL Behring and our acquisition of Corlieve; and
● We incurred $1.0 million, $5.1 million and nil in financial advisory fees in relation to our licensing transaction with CSL Behring in the years ended December 31, 2022, December 31, 2021 and December 31, 2020. These fees are calculated as a percentage of license revenue recognized under the CSL Behring Agreement.
Other items, net
We recognized $0.3 million, $3.0 million and nil in other income in relation to the equity stake received in VectorY B.V. in conjunction with a settlement agreement that the Company and VectorY B.V. entered into in April 2021 for the years ended December 31, 2022, 2021 and 2020, respectively.
We recognized nil in other income of employee retention credit under the U.S. CARES Act in the year ended December 31, 2022, compared to $2.6 million and nil such income for the same periods in 2021 and 2020, respectively.
In 2022, we recognized $5.6 million in income related to payments received from European authorities to subsidize our research and development efforts in the Netherlands compared to $5.3 million in 2021 and $1.9 million in 2020.
Other income for the years ended December 31, 2022, 2021 and 2020 also includes income from the subleasing of a portion of our Amsterdam facility. We present expenses related to such income as other expense.
Other non-operating items, net
Our non-operating items, net, for the years ended December 31, 2022, 2021 and 2020 were as follows:
Year ended December 31,
2022
2021
2020
2022 vs 2021
2021 vs 2020
(in thousands)
Interest income
$
609
$
162
$
938
$
447
$
(776)
Interest expense
(11,704)
(7,474)
(3,825)
(4,230)
(3,649)
Foreign currency gains / (losses), net
23,235
29,660
(13,613)
(6,425)
43,273
Other non-operating gains / (losses)
2,760
(160)
483
2,920
(643)
Total non-operating income, net
$
14,900
$
22,188
$
(16,017)
$
(7,288)
$
38,205
We recognize interest income associated with our cash and cash equivalents and investment securities. We recognized $0.6 million interest income in 2022, $0.2 million in 2021 and $0.9 million in 2020. Our interest income increased in 2022 by $0.4 million compared to 2021 primarily due to the interest income earned on investment securities. Interest income decreased by $0.7 million in 2021 compared to 2020 due to a changes in market interest rates during 2021.
We recognized $11.7 million interest expense in 2022, $7.5 million in 2021 and $3.8 million in 2020. Our interest expense in 2022 primarily increased by $4.2 million compared to 2021 due to an increase in market interest rates in 2022. Our interest expense in 2021 primarily increased by $3.6 million compared to 2020 due to the additional $35.0 million we drew down on our loan facility from Hercules in January 2021.
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We hold monetary items and enter into transactions in foreign currencies, predominantly in euros and U.S. dollars. We recognize foreign exchange results related to changes in these foreign currencies. In 2022, we recognized a net foreign currency gain of $23.2 million related to our borrowings from Hercules and our cash and cash equivalents and investment securities as well as loans between entities within the uniQure group, compared to a net gain of $29.7 million in 2021 and a net loss of $13.6 million in 2020.
In 2022, we recognized a $2.8 million net gain within Other non-operating gains / (losses) related to a decrease in the fair value market value of derivative financial liability related to the change of control payment (“CoC-payment”) compared to a net loss of $0.2 million in 2021 and a net gain of $0.5 million in 2020. We recorded the net gain in 2022 as no change of control event had occurred as of the February 22, 2023 Termination Date of the amended BMS CLA. We had recorded a net loss in 2021 of $0.2 million in 2021 for the increase in the fair market value of the derivative financial liability related to the CoC-payment. We recorded a net gain $0.5 million in 2020 within Other non-operating gains / (losses) related to the net impact of terminating the BMS warrants and recognizing a derivative financial liability for the CoC-payment.
Income tax
We recognized $1.5 million of deferred tax income in 2022, compared to $3.2 million of deferred tax expense in 2021 and $16.4 million of deferred tax income in 2020. Deferred tax income recorded in 2022 results from deferred tax benefits recorded related to the buildup of net operating losses by the French entity which are partially offset by deferred tax expense recorded in the U.S. as a result of the consumption of net operating losses as well as deferred tax expense resulting from the release of valuation allowance for the tax benefit of share issuance costs within the Netherlands. Deferred tax expense recorded in 2021 results from the consumption of net operating tax losses by our U.S. entity as well as deferred tax expense resulting from the release of valuation allowance for the tax benefit of share issuance costs within the Netherlands. Deferred tax income recorded in 2020 results from the release of the valuation allowance recorded for our net deferred tax assets by our U.S. entity.
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Financial Position, Liquidity and Capital Resources
As of December 31, 2022, we had cash and cash equivalents, restricted cash and investment securities of $396.0 million. Until such time, if ever, as we can generate substantial cash flows from successfully commercializing our proprietary product candidates, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution, and licensing arrangements. We believe that our cash and cash equivalents and investment securities will fund our operations into 2025 assuming the achievement of $100.0 million of first commercial sale milestone in the U.S. and into the first half of 2025 if the $75.0 million first commercial sale milestone in any of the five contractually defined European countries would be achieved prior to July 2, 2023 under the CSL Behring Agreement. Our material cash requirements include the following contractual and other obligations:
Debt
As of December 31, 2022, we had an outstanding loan amount owed to Hercules for an aggregate principal amount of $100.0 million. Future interest payments and financing fees associated with the loan total $44.5 million, with $14.9 million payable within 12 months. We are contractually required to repay the $100.0 million in full in December 2025.
Leases
We entered into lease arrangements for facilities, including corporate, manufacturing and office space. As of December 31, 2022, we had fixed lease payment obligations of $60.6 million, with $8.3 million payable within 12 months.
Commitments related to Corlieve acquisition (nominal amounts)
In relation to the Corlieve Transaction, we entered into commitments to make payments to the former shareholders upon the achievement of certain contractual milestones. The commitments include payments related to post-acquisition services that we agreed to as part of the SPA. As of December 31, 2022, our commitment amounts include up to $42.8 million in potential milestone payments through Phase I/II development and $171.3 million in potential milestone payments associated with Phase III development and the approvals of AMT-260 in the U.S. and EU. The timing of achieving these milestones and consequently the timing of payments, as well as whether the milestone will be achieved at all, is generally uncertain. These payments are owed in Euro and have been translated at the foreign exchange rate as of December 31, 2022, of $1.07/€1.00. As of December 31, 2022, we expect these obligations will become payable between 2023 and 2031. If and when due, up to 25% of the milestone payments can be settled with our ordinary shares.
Commitments related to licensors and financial advisors
We have obligations to make future payments to third parties that become due and payable on the achievement of certain development, regulatory and commercial milestones (such as the start of a clinical trial, filing of a BLA, approval by the FDA or product launch) or as a result of collecting payments related to our License Sale to CSL Behring. We also owe payments to a financial advisor related to any payments we will collect under the CSL Behring Agreement.
The table below summarizes our consolidated cash flow data for the years ended December 31:
Year ended December 31,
2022
2021
2020
(in thousands)
Cash, cash equivalents and restricted cash at the beginning of the period
$
559,353
$
247,680
$
380,726
Net cash (used in) / generated from operating activities
(145,060)
287,959
(134,828)
Net cash used in investing activities
(182,734)
(67,387)
(9,484)
Net cash generated from financing activities
1,445
94,858
7,444
Foreign exchange impact
(1,831)
(3,757)
3,822
Cash, cash equivalents and restricted cash at the end of period
$
231,173
$
559,353
$
247,680
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We had previously incurred losses and cumulative negative cash flows from operations since our business was founded by our predecessor entity AMT Holding N.V. in 1998, with the exception of generating income in 2021 after receiving the upfront payment upon Closing of the CSL Behring Agreement. We continue to incur losses in the current period. We recorded a net loss of $126.8 million for the year ended December 31, 2022, and net income of $329.6 million in 2021, and a net loss of $125.0 million in 2020. As of December 31, 2022, we had an accumulated deficit of $581.9 million.
Sources of liquidity
From our first institutional venture capital financing in 2006 through May 2021, we funded our operations primarily through private and public placements of equity securities and convertible and other debt securities as well as payments from our collaboration partners. In May 2021, we received a $462.4 million cash payment due from CSL Behring upon Closing. During 2022 we collected the $55.0 million related to CSL Behring’s global regulatory submissions for etranacogene dezaparvovec in March and April 2022 and are eligible to receive additional milestone payments, as well as royalties on net sales, from CSL Behring.
On March 1, 2021, we entered into a Sales Agreement with SVB Leerink LLC (“SVB Leerink”) with respect to an at-the-market (“ATM”) offering program, under which we may, from time to time in our sole discretion, offer and sell through SVB Leerink, acting as agent, our ordinary shares, up to an aggregate offering price of $200.0 million. We will pay SVB Leerink a commission equal to 3% of the gross proceeds of the sales price of all ordinary shares sold through it as a sales agent under the Sales Agreement. In the year ended December 30, 2021, we received net proceeds of $29.6 million from the issuance of 921,730 ordinary shares under the Sales Agreement that took place during March and April of that year. We did not issue in ordinary shares under the Sales Agreement for the 12 month period ended December 31, 2022.
On January 29, 2021, we drew down $35 million under a facility agreement with Hercules. We drew down a further $30 million under our 2021 Restated Facility with Hercules in December 2021.
We are subject to certain covenants under our 2021 Restated Facility and may become subject to covenants under any future indebtedness that could limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends, which could adversely impact our ability to conduct our business. In addition, our pledge of assets as collateral to secure our obligations under the 2021 Restated Facility may limit our ability to obtain debt financing. The 2021 Restated Facility permits us to issue up to $500.0 million of convertible debt as well as to enter into a transaction to sell the royalties under the CSL Behring agreement subject to certain conditions .
To the extent we need to finance our cash needs through equity offerings or debt financings, such financing may be subject to unfavorable terms including without limitation, the negotiation and execution of definitive documentation, as well as credit and debt market conditions, and we may not be able to obtain such financing on terms acceptable to us or at all. If financing is not available when needed, including through debt or equity financings, or is available only on unfavorable terms, we may be unable to meet our cash needs. If we raise additional funds through collaborations, strategic alliances or marketing, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves, which could have a material adverse effect on our business, financial conditions, results of operations and cash flows.
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Net Cash used in / generated from operating activities
Year ended December 31,
2022
2021
2020
(in thousands)
Cash flows from operating activities
Net (loss) / income
$
(126,789)
$
329,589
$
(125,024)
Adjustments to reconcile net (loss) /income to net cash (used in) / generated from operating activities:
Depreciation and amortization
8,537
7,299
10,648
Share-based compensation expenses
34,204
25,635
21,831
Deferred tax (income) / expense
(1,470)
3,210
(16,419)
Change in fair value of contingent consideration and derivative financial instruments, net
4,320
6,843
(483)
Unrealized foreign exchange (gains) / losses, net
(22,083)
(31,335)
14,730
Change in deferred revenue
-
-
(33,642)
Other non-cash items, net
1,605
(2,800)
-
Changes in operating assets and liabilities:
Accounts receivable, prepaid expenses, and other current assets and receivables
(4,083)
(3,959)
(6,967)
Contract asset related to CSL Behring milestone payments
(45,000)
(55,000)
-
Inventories
(6,924)
-
-
Accounts payable
9,238
(727)
(2,701)
Accrued expenses, other liabilities, and operating leases
3,385
9,204
3,199
Net cash (used in) / generated from operating activities
$
(145,060)
$
287,959
$
(134,828)
Net cash used in operating activities was $145.1 million for the year ended December 31, 2022, and consisted of a net loss of $126.8 million adjusted for non-cash items, including depreciation and amortization expense of $8.5 million, share-based compensation expense of $34.2 million, changes in the fair value of contingent consideration and the derivative financial liability of $4.3 million, unrealized foreign exchange gains of $22.1 million and a change in deferred taxes of $1.5 million. Net cash generated from operating activities also included unfavorable changes in operating assets and liabilities of $43.4 million. There was a net increase in accounts receivable, prepaid expenses, and other current assets and receivables of $4.1 million. There was a net increase in contract assets related to CSL Behring milestone payments of $45.0 million. The net increase related to $100.0 million recognized as a contract asset in the current period and collection of $55.0 million of the contract asset related to the CSL milestones of $55.0 million in March 2022 and April 2022. There was an increase in inventories of $6.9 million related to the production of HEMGENIX TM under the CSL Behring Agreement. These changes also relate to a net increase in accounts payable, accrued expenses, other liabilities, and operating leases of $12.6 million, primarily related to an increase in accounts payable.
Net cash generated from operating activities was $288.0 million for the year ended December 31, 2021, and consisted of net income of $329.6 million adjusted for non-cash items, including depreciation and amortization expense of $7.3 million, share-based compensation expense of $25.6 million, a change in fair value of contingent consideration of $6.8 million, unrealized foreign exchange gains of $31.3 million, a change in deferred taxes of $3.2 million and other non-cash items, net, of $2.8 million. Net cash generated from operating activities also included unfavorable changes in operating assets and liabilities of $50.3 million, which includes $55.0 million recognized as a contract asset related to probable CSL Behring milestone payments. Additionally, these changes also related to a net increase in accounts receivable, prepaid expenses, and other current assets and receivables of $4.0 million primarily related to an increase in various prepaids, including those related to clinical trials, partially offset by decrease in receivables as a result of collection of the BMS milestone that was recorded as of December 31, 2020 and collection of the CSL Behring receivables recorded as of December 31, 2020 for expenses for which we had a right of reimbursement and a net increase in accounts payable, accrued expenses, other liabilities, and operating leases of $8.5 million primarily related to an increase in various accruals for goods received from and services provided by vendors and an increase in personnel accrual s. Net income primarily consisted of $462.4 million license revenue recognized on Closing and $55.0 million license revenue related to CSL Behring’s global regulatory submissions for etranacogene dezaparvovec that occurred in March and April 2022 and were considered probable on December 31, 2021.
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Net cash used in operating activities was $134.8 million for the annual period ended December 31, 2020, and consisted of a net loss of $125.0 million adjusted for non-cash items, including depreciation and amortization expense of $10.6 million, share-based compensation expense of $21.8 million, fair value gain of derivative financial instruments of $0.5 million, unrealized foreign exchange loss of $14.7 million, a change in deferred tax income of $16.4 million and a decrease in unamortized deferred revenue of $33.6 million. Net cash used in operating activities also included unfavorable changes in operating assets and liabilities of $6.5 million. These changes primarily related to a net increase in accounts receivable and accrued income, prepaid expenses, and other current assets of $7.0 million and a net increase in accounts payable, accrued expenses, other liabilities, and operating leases of $0.5 million.
Net cash used in investing activities
In 2022, we used $182.7 million in our investing activities compared to $67.4 million in 2021 and $9.5 million in 2020.
Year ended December 31,
2022
2021
2020
(in thousands)
Investment in investment securities
$
(163,146)
$
—
$
—
Build out of Amsterdam site
(11,904)
(12,412)
(4,534)
Build out of Lexington site
(5,784)
(5,026)
(2,737)
Acquisition of Corlieve, net of cash acquired
(1,900)
(49,949)
—
Acquisition of licenses, patents, and other rights
—
—
(2,213)
Total investments
$
(182,734)
$
(67,387)
$
(9,484)
In 2022, we invested $163.1 million of our cash on hand into euro and dollar denominated government bonds. We made no such investments in 2021 and 2020.
In 2022, we invested $11.9 million in the build out of our Amsterdam site compared to $12.4 million in 2021 and $4.5 million in 2020. Our investments in 2022 related to investments into equipment while in 2021 investments primarily related to the construction of additional laboratories to support the expansion of our research and development activities as well as the construction of a cleanroom designed to be capable of manufacturing cGMP materials at a 500-liter scale.
In 2022, we invested $5.8 million in our facility in Lexington compared to $5.0 million in 2021 and $2.7 million in 2020. Our investments in 2022 increased as a result of the two new Lexington sites, which commenced in 2022.
We paid EUR 1.8 million ($1.9 million) to acquire the remaining outstanding shares of Corlieve in February, July and September 2022. We paid EUR 42.1 million ($49.9 million), net of EUR 2.8 million ($3.3 million) of cash acquired, during the year ended December 31, 2021 to acquire 97.7% of the outstanding ordinary shares of Corlieve on July 30, 2021.
Net cash generated from financing activities
Year ended December 31,
2022
2021
2020
(in thousands)
Cash flows from financing activities
Proceeds from issuance of shares related to employee stock option and purchase plans
$
1,445
$
2,798
$
7,444
Proceeds from loan increment, net of debt issuance costs
-
64,067
-
Proceeds from issuance of ordinary shares, net of issuance costs
-
29,565
-
Repayment of debt assumed through Corlieve Transaction
-
(1,572)
-
Net cash generated from financing activities
$
1,445
$
94,858
$
7,444
In 2022, we received $1.4 million from the exercise of options to purchase ordinary shares issued in accordance with our share incentive plans, compared to $2.8 million in 2021 and $7.4 million in 2020.
In January 2021, we received $34.6 million net proceeds from the 2021 Amended Facility and in December 2021 we received $29.5 million net proceeds from the 2021 Restated Facility for combined net proceeds of $64.1 million (nil in 2020 and 2022).
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We received net proceeds of $29.6 million associated with our ATM offering in March and April 2021. No such proceeds were received in 2022 or 2020.
Upon the acquisition of Corlieve, Corlieve held loans with an outstanding amount equal to EUR 1.4 million ($1.6 million). During the year ended December 31, 2021, the loans were repaid in their entirety.
Funding requirements
We believe that our cash and cash equivalents and investment securities will fund our operations into 2025 assuming the achievement of $100.0 million of first commercial sale milestone in the U.S. and into the first half of 2025 if the $75.0 million first commercial sale milestone in any of the five contractually defined European countries would be achieved prior to July 2, 2023 under the CSL Behring Agreement. Our future capital requirements will depend on many factors, including but not limited to:
● contractual milestone payments and royalties we might be owed in accordance with the CSL Behring Agreement;
● earnout payments we might owe the former shareholders of Corlieve, which are subject to the achievement of specific development and regulatory milestones;
● the scope, timing, results, and costs of our current and planned clinical trials, including those for AMT-130 in Huntington’s disease;
● the extent to which we acquire or in-license other businesses, products, product candidates or technologies;
● the amount and timing of revenue, if any, we receive from manufacturing products for CSL Behring;
● the scope, timing, results and costs of preclinical development and laboratory testing of our additional product candidates;
● the need for additional resources and related recruitment costs to support the preclinical and clinical development of our product candidates;
● the need for any additional tests, studies, or trials beyond those originally anticipated to confirm the safety or efficacy of our product candidates and technologies;
● the cost, timing and outcome of regulatory reviews associated with our product candidates;
● our ability to enter into collaboration arrangements in the future;
● the costs and timing of preparing, filing, expanding, acquiring, licensing, maintaining, enforcing, and prosecuting patents and patent applications, as well as defending any intellectual property-related claims;
● the costs associated with maintaining quality compliance and optimizing our manufacturing processes, including the operating costs associated with our Lexington, Massachusetts manufacturing facility; and
● the costs associated with increasing the scale and capacity of our manufacturing capabilities.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.