What changed in this filing

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Item 1. Financial Statements

2020-08-06 compared with 2020-05-07 · 156 added, 102 removed, 359 unchanged (42% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

March 31, 2020

June 30, 2020

December 31, 2019

15 unchanged sentences

Accrued expenses and other current liabilities

Deferred revenue

Operating lease liabilities

8 unchanged sentences

10,000 shares authorized, and no shares issued

and outstanding at March 31, 2020 and December 31, 2019

and outstanding at June 30, 2020 and December 31, 2019

Common stock;

$ 0.0001 par value;

100,000 shares authorized at March 31, 2020

100,000 shares authorized at June 30, 2020

and December 31, 2019;

37,291 and 36,992 shares issued and outstanding at

March 31, 2020 and December 31, 2019, respectively

June 30, 2020 and December 31, 2019, respectively

Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Accumulated deficit

5 unchanged sentences

(in thousands, except per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

License and royalty revenue

4 unchanged sentences

General and administrative

Other operating expenses

Other operating expenses (income)

Total operating expenses

Loss from operations

Other Income (Loss)

Interest income from licensing

Investment income (loss)

Total other income (loss)

Investment income

Total other income

Loss before income taxes

Income Tax Benefit

Other Comprehensive Income (Loss)

Unrealized gain (loss) on available-for-sale securities, net

Total other comprehensive income (loss)

Other Comprehensive Income

Unrealized gain on available-for-sale securities, net

Total other comprehensive income

Comprehensive loss

5 unchanged sentences

(in thousands)

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Comprehensive

1 unchanged sentence

Income (Loss)

Balances at March 31, 2020

Exercise of stock options

Stock-based compensation expense

Unrealized gain on available-for-sale securities, net

Balances at June 30, 2020

Three Months Ended June 30, 2019

Comprehensive

Stockholders’

Income (Loss)

Balances at March 31, 2019

Exercise of stock options

Stock-based compensation expense

Unrealized gain on available-for-sale securities, net

Balances at June 30, 2019

Six Months Ended June 30, 2020

Comprehensive

Stockholders’

Balances at December 31, 2019

3 unchanged sentences

Stock-based compensation expense

Unrealized loss on available-for-sale securities, net

Balances at March 31, 2020

Three Months Ended March 31, 2019

Unrealized gain on available-for-sale securities, net

Balances at June 30, 2020

Six Months Ended June 30, 2019

Comprehensive

Stockholders’

Income (Loss)

Balances at December 31, 2018

6 unchanged sentences

Unrealized gain on available-for-sale securities, net

Balances at March 31, 2019

Balances at June 30, 2019

The accompanying notes are an integral part of these unaudited consolidated financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

5 unchanged sentences

Net realized gains on sales and maturities of marketable securities

Unrealized losses (gains) on marketable equity securities

Imputed interest income from licensing

Unrealized losses on marketable equity securities

Other non-cash adjustments

6 unchanged sentences

Accrued expenses and other current liabilities

Deferred revenue

Operating lease liabilities

4 unchanged sentences

Maturities of marketable debt securities

Sales of marketable debt securities

Sales of marketable equity securities

5 unchanged sentences

Net cash provided by financing activities

Net decrease in cash and cash equivalents and restricted cash

Net increase (decrease) in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash

1 unchanged sentence

End of period

Supplemental disclosures of non-cash investing and financing activities

Non-cash consideration received for licenses granted

The accompanying notes are an integral part of these unaudited consolidated financial statements.

5 unchanged sentences

The Company’s proprietary adeno-associated virus (AAV) gene delivery platform (NAV Technology Platform) consists of exclusive rights to over 100 novel AAV vectors, including AAV7, AAV8, AAV9 and AAVrh10.

Additionally, the NAV Technology Platform is currently being applied in one commercially available product, Zolgensma®, which is marketed by a NAV Technology Licensee.

The NAV® Technology Platform is being applied by the Company, as well as by third-party licensees (NAV Technology Licensees), in the development of a broad pipeline of product candidates in multiple therapeutic areas and in one commercially available product, Zolgensma®, which is marketed by a NAV Technology Licensee.

The Company was formed in 2008 in the State of Delaware and is headquartered in Rockville, Maryland.

Liquidity and Risks

As of March 31, 2020, the Company had generated an accumulated deficit of $ 217.9 million since inception.

As of June 30, 2020, the Company had generated an accumulated deficit of $ 251.6 million since inception.

As the Company has incurred cumulative losses since inception, transition to recurring profitability is dependent upon achieving a level of revenues adequate to support the Company’s cost structure, which depends heavily on the successful development, approval and commercialization of its product candidates.

The Company may never achieve recurring profitability, and unless and until it does, the Company will continue to need to raise additional capital, to the extent possible.

As of March 31, 2020, the Company had cash, cash equivalents and marketable securities of $ 356.6 million, which management believes is sufficient to fund operations for at least the next 12 months from the date these consolidated financial statements were issued.

As of June 30, 2020, the Company had cash, cash equivalents and marketable securities of $ 339.2 million, which management believes is sufficient to fund operations for at least the next 12 months from the date these consolidated financial statements were issued.

The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, development by the Company or its competitors of technological innovations, risks of failure of clinical trials, dependence on key personnel, protection of proprietary technology, compliance with government regulations and ability to transition from clinical manufacturing to the commercial production of products.

17 unchanged sentences

The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates.

This process may result in actual results differing materially from those estimated amounts used in the preparation of the consolidated financial statements.

may result in actual results differing materially from those estimated amounts used in the preparation of the consolidated financial statements.

Significant estimates are used in the following areas, among others:

license and royalty revenue, stock-based compensation expense, accrued research and development expenses and other accrued liabilities, income taxes and the fair value of financial instruments.

The Company is actively monitoring the impact of the novel coronavirus (COVID-19) pandemic on its business, results of operations and financial condition.

The full extent to which COVID-19 will directly or indirectly impact the Company’s business, results of operations and financial condition in the future is unknown at this time and will depend on future developments that are highly unpredictable.

The Company is actively monitoring the impact of the COVID-19 pandemic on its business, results of operations and financial condition.

The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition in the future is unknown at this time and will depend on future developments that are highly unpredictable.

The most significant estimates affecting the Company’s consolidated financial statements that may be impacted by the COVID-19 pandemic are related to the Company’s assessment of credit losses on accounts receivable, contract assets and available-for-sale debt securities.

5 unchanged sentences

The following table provides a reconciliation of cash and cash equivalents and restricted cash as reported on the consolidated balance sheets to the total of these amounts as reported at the end of the period in the consolidated statements of cash flows (in thousands):

March 31, 2020

March 31, 2019

June 30, 2020

June 30, 2019

Cash and cash equivalents

9 unchanged sentences

Management assesses the collectability of its accounts receivable using the specific identification of account balances, and considers the credit quality and financial condition of its significant customers, historical information regarding credit losses and the Company’s evaluation of current and expected future economic conditions.

If necessary, an allowance for doubtful accounts is recorded against accounts receivable such that the carrying value of accounts

receivable reflects the net amount expected to be collected.

The Company did no t record an allowance for doubtful accounts as of March 31, 2020 and December 31, 2019 .

If necessary, an allowance for doubtful accounts is recorded against accounts receivable such that the carrying value of accounts receivable reflects the net amount expected to be collected.

The Company did no t record an allowance for doubtful accounts as of June 30, 2020 and December 31, 2019.

Marketable Securities

2 unchanged sentences

Marketable equity securities are classified as current assets.

Unrealized gains and losses on available-for-sale debt securities, net of any related tax effects, are excluded from results of operations and are included in other comprehensive income (loss) and reported as a separate component of stockholders’ equity until realized.

The Company uses the aggregate portfolio approach to release the tax effects of unrealized gains and losses on available-for-sale debt securities in accumulated other comprehensive income (loss).

Unrealized gains and losses on available-for-sale debt securities, net of any related tax effects, are excluded from results of operations and are included in other comprehensive income and reported as a separate component of stockholders’ equity until realized.

The Company uses the aggregate portfolio approach to release the tax effects of unrealized gains and losses on available-for-sale debt securities in accumulated other comprehensive income .

Purchase premiums and discounts on marketable debt securities are amortized or accreted into the cost basis over the life of the related security as adjustments to the yield using the effective-interest method.

Interest income is recognized when earned.

Unrealized gains and losses on marketable equity securities are included in results of operations as investment income (loss).

Realized gains and losses from the sale or maturity of marketable securities are based on the specific identification method and are included in results of operations as investment income (loss).

Unrealized gains and losses on marketable equity securities are included in results of operations as investment income .

Realized gains and losses from the sale or maturity of marketable securities are based on the specific identification method and are included in results of operations as investment income .

At each reporting date, the Company evaluates available-for-sale debt securities which have an amortized cost basis in excess of the fair value of the security to determine if the unrealized loss or any potential credit losses should be recognized in results of operations .

3 unchanged sentences

In determining whether a credit loss exists related to impaired available-for-sale debt securities, the Company considers, among other factors, the extent of the unrealized loss relative to the amortized cost basis, the credit rating of the issuer and any recent changes thereto, current and expected future economic conditions, and any adverse events or other changes in circumstances that have occurred which may indicate a potential credit loss.

The Company did no t record an allowance for credit losses on its available-for-sale debt securities as of March 31, 2020.

The Company did no t record an allowance for credit losses on its available-for-sale debt securities as of June 30, 2020.

Fair Value of Financial Instruments

39 unchanged sentences

The Company has various cloud-based software applications accounted for as service contracts, the most significant of which is the Company’s enterprise resource planning (ERP) system for which implementation was in progress on the adoption date of this standard.

The adoption of this standard resulted in the capitalization of certain costs during the three months ended March 31, 2020 related to the implementation of the ERP system which would have been expensed as incurred prior to the adoption of this standard.

The adoption of this standard resulted in the capitalization of certain costs during the six months ended June 30, 2020 related to the implementation of the ERP system and other cloud-based software applications which would have been expensed as incurred prior to the adoption of this standard.

The adoption of this standard did not have a material impact on the Company’s financial position or results of operations.

5 unchanged sentences

The following tables present a summary of the Company’s marketable securities, which consist of available-for-sale debt securities and equity securities (in thousands):

March 31, 2020

June 30, 2020

government and federal agency securities

7 unchanged sentences

Equity securities

As of March 31, 2020 and December 31, 2019, no available-for-sale debt securities had remaining maturities greater than three years.

As of June 30, 2020 and December 31, 2019, no available-for-sale debt securities had remaining maturities greater than three years.

The amortized cost of marketable debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, or to the earliest call date for callable debt securities purchased at a premium.

As of March 31, 2020 and December 31, 2019, the balance in the Company’s accumulated other comprehensive income (loss) consisted solely of net unrealized gains and losses on available-for-sale debt securities, net of income tax effects and reclassification adjustments for realized gains and losses.

During the three months ended March 31, 2020, the Company recognized net unrealized losses on available-for-sale debt securities of $ 0.8 million and income tax expense of zero in other comprehensive loss for the period.

The Company recognized net realized gains of less than $ 0.1 million on the sale or maturity of available-for-sale debt securities during the three months ended March 31, 2020, which were reclassified out of accumulated other comprehensive income (loss) during the period and were included in investment income (loss) in the consolidated statements of operations and comprehensive loss.

During the three months ended March 31, 2019, the Company recognized net unrealized gains on available-for-sale debt securities of $ 1.0 million and income tax expense of $ 0.4 million in other comprehensive income for the period.

The Company recognized net realized gains of less than $ 0.1 million on the sale or maturity of available-for-sale debt securities during the three months ended March 31, 2019, which were reclassified out of accumulated other comprehensive income (loss) during the period and were included in investment income (loss) in the consolidated statements of operations and comprehensive loss.

As of June 30, 2020 and December 31, 2019, the balance in the Company’s accumulated other comprehensive income consisted solely of net unrealized gains and losses on available-for-sale debt securities, net of income tax effects and reclassification adjustments for realized gains and losses.

During the three and six months ended June 30, 2020, the Company recognized net unrealized gains on available-for-sale debt securities of $ 1.3 million and $ 0.6 million, respectively, and income tax expense of zero in other comprehensive income for the period.

The Company recognized net realized gains (losses) of less than $( 0.1 ) million and less than $ 0.1 million on the sale or maturity of available-for-sale debt securities during the three and six months ended June 30, 2020, which were reclassified out of accumulated other comprehensive income during the period and were included in investment income in the consolidated statements of operations and comprehensive loss.

During the three and six months ended June 30, 2019, the Company recognized net unrealized gains on available-for-sale debt securities of $ 0.8 million and $ 1.8 million, respectively, and income tax expense of $ 0.3 million and $ 0.7 million, respectively, in other comprehensive income for the period.

The Company recognized net realized gains of zero and less than $ 0.1 million on the sale or maturity of available-for-sale debt securities during the three and six months ended June 30, 2019, which were reclassified out of accumulated other comprehensive income during the period and were included in investment income in the consolidated statements of operations and comprehensive loss.

The following tables present the fair values and unrealized losses of available-for-sale debt securities held by the Company in an unrealized loss position for less than 12 months and 12 months or greater (in thousands):

1 unchanged sentence

12 Months or Greater

March 31, 2020

June 30, 2020

Corporate bonds

5 unchanged sentences

Corporate bonds

As of March 31, 2020, available-for-sale debt securities held by the Company which were in an unrealized loss position consisted of 30 investment grade security positions.

As of June 30, 2020, available-for-sale debt securities held by the Company which were in an unrealized loss position consisted of 11 investment grade security positions.

The Company has the intent and ability to hold such securities until recovery, and due to the credit quality of the issuers and low severity of each unrealized loss position relative to its amortized cost basis, the Company has not identified any credit losses associated with its available-for-sale debt securities.

The Company did no t recognize any impairment or credit losses on available-for-sale debt securities during the three months ended March 31, 2020.

Marketable equity securities held by the Company as of March 31, 2020 consisted solely of common stock of Prevail Therapeutics Inc.

The Company did no t recognize any impairment or credit losses on available-for-sale debt securities during the three and six months ended June 30, 2020.

Marketable equity securities held by the Company as of June 30 , 2020 and December 31, 2019 consist ed solely of common stock of Prevail Therapeutics Inc.

The Company acquired the securities as consideration for a commercial license to the NAV Technology Platform granted to Prevail in August 2017.

2 unchanged sentences

Upon Prevail’s IPO in June 2019, the securities were reclassified to marketable securities and are measured at fair value.

During the three months ended March 31, 2020, the Company recognized unrealized losses of $ 12.2 million and realized gains of $ 7.1 million related to its marketable equity securities of Prevail, which were included in investment income (loss) in the consolidated statements of operations and comprehensive loss.

During the three and six months ended June 30 , 2020, the Company recognized net realized and unrealized gains (losses) of $ 4.4 million and $ ( 0.7 ) million, respectively, related to its marketable equity securities of Prevail .

During the three and six months ended June 30, 2019, the Company recognized unrealized gains of $ 31.7 million and did no t recognize any realized gains or losses related to its marketable equity securities of Prevail.

Fair Value of Financial Instruments

1 unchanged sentence

The following tables present the fair value of cash equivalents and marketable securities in accordance with the hierarchy discussed in Note 2 (in thousands):

March 31, 2020

June 30, 2020

Cash equivalents:

20 unchanged sentences

Management estimates that the carrying amounts of its current accounts receivable, accounts payable and accrued expenses and other current liabilities approximate fair value due to the short-term nature of those instruments.

Accounts receivable which contain

non-current portions are recorded at their present values using a discount rate that is based on prevailing market rates and the credit profile of the licensee on the date the amounts are initially recorded.

Management does not believe there have been any significant changes in market conditions or credit quality that would cause the discount rates initially used to be significantly different from those that would be used as of March 31, 2020 to determine the present value of the receivables.

Accounts receivable which contain non-current portions are recorded at their present values using a discount rate that is based on prevailing market rates and the credit profile of the licensee on the date the amounts are initially recorded.

Management does not believe there have been any significant changes in market conditions or credit quality that would cause the discount rates initially used to be significantly different from those that would be used as of June 30, 2020 to determine the present value of the receivables.

Accordingly, management estimates that the carrying value of its non-current accounts receivable approximates the fair value of those instruments.

Non-marketable equity securities are measured at cost less impairment, adjusted for observable price changes for identical or similar investments of the same issuer.

As of March 31, 2020 and December 31, 2019, the Company did no t hold any non-marketable equity securities.

No remeasurements or impairment losses were recorded on non-marketable equity securities during the three months ended March 31, 2020 and 2019.

As of June 30, 2020, non-marketable equity securities had a carrying value of $ 1.1 million and were included in other assets on the consolidated balance sheet.

As of December 31, 2019, the Company did no t hold any non-marketable equity securities.

No remeasurements or impairment losses were recorded on non-marketable equity securities during the three and six months ended June 30, 2020 and 2019.

Property and Equipment, Net

Property and equipment, net consists of the following (in thousands):

March 31, 2020

June 30, 2020

December 31, 2019

7 unchanged sentences

License and Royalty Revenue

As of March 31, 2020, the Company’s NAV Technology Platform was being applied by NAV Technology Licensees in one commercial product, Zolgensma, and in the development of more than 20 product candidates.

As of June 30, 2020, the Company’s NAV Technology Platform was being applied by NAV Technology Licensees in one commercial product, Zolgensma, and in the development of more than 20 product candidates.

Consideration to the Company under its license agreements may include:

4 unchanged sentences

Sales-based milestones are excluded from the transaction price of each license agreement and recognized as royalty revenue in the period of achievement.

As of March 31, 2020, the Company’s license agreements, excluding additional licenses that could be granted upon the exercise of options by licensees, contained unachieved milestones which could result in aggregate milestone payments to the Company of up to $ 371.4 million, including $ 0.3 million upon the submission of preclinical regulatory filings, $ 24.1 million upon the commencement of various stages of clinical trials, $ 31.0 million upon the submission of regulatory approval filings, $ 109.0 million upon the approval of commercial products by regulatory agencies and $ 207.0 million upon the achievement of specified sales targets for licensed products.

As of June 30, 2020, the Company’s license agreements, excluding additional licenses that could be granted upon the exercise of options by licensees, contained unachieved milestones which could result in aggregate milestone payments to the Company of up to $ 293.4 million, including (i) $ 0.3 million upon the submission of preclinical regulatory filings, (ii) $ 26.6 million upon the commencement of various stages of clinical trials, (iii) $ 26.0 million upon the submission of regulatory approval filings, (iv) $ 103.5 million upon the approval of commercial products by regulatory agencies and (v) $ 137.0 million upon the achievement of specified sales targets for licensed products.

To the extent the milestone payments are realized by the Company, the Company will be obligated to pay sublicense fees to licensors based on a specified percentage of the fees earned by the Company.

2 unchanged sentences

End of Period

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Receivables and contract assets:

4 unchanged sentences

End of Period

Three Months Ended March 31, 2019

Six Months Ended June 30, 2020

Receivables and contract assets:

3 unchanged sentences

Deferred revenue, current and non-current

Additions to accounts receivable during the three months ended March 31, 2020 primarily consisted of royalties on net sales of Zolgensma of $ 10.0 million, receivables recorded related to new licenses granted during the period and interest income recognized during the period related to significant financing components.

Additions to accounts receivable during the three months ended March 31, 2019 primarily consisted of amounts billed upon the achievement of development milestones by licensees and interest income recognized during the period related to significant financing components.

Deductions to accounts receivable during the three months ended March 31, 2020 and 2019 primarily consisted of amounts collected from licensees during the period.

The changes in the balances of contract assets during the three months ended March 31, 2020 and 2019 consist of development milestones deemed probable of achievement by licensees during the period, offset by the subsequent achievement of such milestones and billing of associated milestone payments by the Company.

As of March 31, 2020, the Company had recorded deferred revenue of $ 3.3 million which represents consideration received from licensees for performance obligations that have not yet been satisfied by the Company.

Unsatisfied performance obligations consist of options granted to licensees that provide material rights to the licensee to acquire additional licenses from the Company.

These performance obligations will be satisfied, and underlying revenue will be recognized, upon the exercise or expiration of the options.

The Company did no t recognize any license revenue during the three months ended March 31, 2020 and 2019 that was included in deferred revenue at the beginning of the period.

During the three months ended March 31, 2020 and 2019, the Company recognized revenue of $ 10.4 million and $ 0.8 million, respectively, from performance obligations satisfied in prior periods as a result of changes in the transaction prices of its license agreements as well as royalties on sales of licensed products and sublicense fees.

Changes in the transaction prices during the periods were primarily attributable to development milestones achieved or deemed probable of achievement during the period that were previously not considered probable of achievement.

As of March 31, 2020, the Company had recorded total current and non-current accounts receivable of $ 48.9 million, of which $ 7.1 million had been billed to customers and $ 41.8 million was billable to customers in future periods.

End of Period

Three Months Ended June 30, 2019

Receivables and contract assets:

Accounts receivable, current and non-current

Contract assets

Contract liabilities:

Deferred revenue, current and non-current

End of Period

Six Months Ended June 30, 2019

Receivables and contract assets:

Accounts receivable, current and non-current

Contract assets

Contract liabilities:

Deferred revenue, current and non-current

Additions to accounts receivable during the three and six months ended June 30, 2020 primarily consisted of royalties on net sales of Zolgensma of $ 11.9 million and $ 21.9 million, respectively, receivables recorded related to new licenses granted by the Company, amounts billed upon the achievement of development milestones by licensees during the periods, and interest income recognized during the periods related to significant financing components.

Additions to accounts receivable during the three and six months ended June 30, 2019 primarily consisted of receivables recorded related to new licenses granted by the Company, amounts billed upon the achievement of development milestones by licensees during the periods, and interest income recognized during the periods related to significant financing components.

Deductions to accounts receivable during the three and six months ended June 30, 2020 and 2019 primarily consisted of amounts collected from licensees during the periods.

The changes in the balances of contract assets during the three and six months ended June 30, 2020 and 2019 consist of development milestones deemed probable of achievement by licensees during the period, offset by the subsequent achievement of such milestones and billing of the associated milestone payments by the Company.

As of June 30, 2020, the Company had recorded deferred revenue of $ 4.5 million which represents consideration received from licensees for performance obligations that have not yet been satisfied by the Company.

Unsatisfied performance obligations consist of (i) options granted to licensees that provide material rights to the licensee to acquire additional licenses from the Company, and (ii) research and development services to be performed by the Company related to licensed products.

These performance obligations will be satisfied, and underlying revenue will be recognized, upon the exercise or expiration of the options or performance of the research and development services.

The Company did no t recognize any revenue during the three and six months ended June 30, 2020 that was included in deferred revenue at the beginning of the period.

During the three and six months ended June 30, 2019, the Company recognized $ 0.6 million of revenue that was included in deferred revenue at the beginning of the period as a result of options exercised by licensees during the period.

During the three and six months ended June 30, 2020, the Company recognized revenue of $ 16.4 million and $ 26.8 million, respectively, from performance obligations satisfied in prior periods as a result of changes in the transaction prices of its license agreements as well as royalties on sales of licensed products and sublicense fees.

During the three and six months ended June 30, 2019, the Company recognized revenue of $ 4.2 million and $ 5.0 million, respectively, from performance obligations satisfied in prior periods as a result of changes in the transaction prices of its licenses agreements as well as royalties on sales of licensed products and sublicense fees.

Changes in transaction prices during the periods were primarily attributable to development milestones achieved or deemed probable of achievement during the period that were previously not considered probable of achievement.

As of June 30, 2020, the Company had recorded total current and non-current accounts receivable of $ 46.5 million, of which $ 30.0 million had been billed to customers and $ 16.5 million was billable to customers in future periods.

As of December 31, 2019, the Company had recorded total current and non-current accounts receivable of $ 42.3 million, of which $ 0.4 million had been billed to customers and $ 41.9 million was billable to customers in future periods.

Based on the Company’s evaluation of the credit quality and financial condition of its significant customers, history of collections and evaluation of current and future expected economic conditions, no credit losses were recognized on accounts receivable or contract assets during the three months ended March 31, 2020.

AveXis March 2014 License

4 unchanged sentences

The Company recognized the following amounts under the March 2014 License with AveXis (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

License revenue

2 unchanged sentences

Interest income from licensing

As of March 31, 2020, the Company had recorded $ 10.0 million of accounts receivable from AveXis under the March 2014 License, of which $ 9.8 million were included in current assets and $ 0.2 million were included in non-current assets.

As of June 30, 2020, the Company had recorded $ 12.1 million of accounts receivable from AveXis under the March 2014 License, of which $ 11.9 million were included in current assets and $ 0.2 million were included in non-current assets.

As of December 31, 2019, the Company had recorded $ 11.0 million of accounts receivable from AveXis under the March 2014 License, of which $ 10.8 million were included in current assets and $ 0.2 million were included in non-current assets.

Abeona Therapeutics Inc.

Accounts receivable as of March 31, 2020 and December 31, 2019 included $ 26.9 million and $ 26.3 million, respectively, related to the November 2018 license agreement, as amended in November 2019 (the November 2018 License) with Abeona Therapeutics Inc.

(Abeona) for the development and commercialization of treatments for various diseases, all of which were included in current assets.

Pursuant to the November 2018 License, Abeona was required to pay the Company a license fee of $ 8.0 million on April 1, 2020.

In May 2020, after providing written notice to Abeona as required under the license agreement, the November 2018 License was effectively terminated by the Company as a result of breach by Abeona for the failure to pay the $ 8.0 million license fee due on April 1, 2020.

Pursuant to the November 2018 License, Abeona is required to pay the aforementioned $8.0 million license fee to the Company immediately upon the termination of the license agreement.

Additionally, Abeona is required to pay a $ 20.0 million license fee to the Company within 15 days of the termination date, which otherwise would have been due to the Company in November 2020.

Accounts receivable as of June 30, 2020 and December 31, 2019 included $ 28.8 million and $ 26.3 million, respectively, related to the license agreement entered into in November 2018 between the Company and Abeona Therapeutics Inc.

(Abeona), as amended in November 2019 (the November 2018 License) for the development and commercialization of treatments for various diseases, all of which were included in current assets.

Pursuant to the November 2018 License, Abeona was required to pay a license fee of $ 8.0 million to the Company no later than April 1, 2020.

Abeona failed to make this payment, and in April 2020, the Company delivered to Abeona a written demand for payment and breach notice.

Upon expiration of the applicable cure period in May 2020, the license agreement was terminated.

As a result of the termination, Abeona was required to pay a $ 20.0 million license fee to the Company within 15 days of the termination date, which otherwise would have been due to the Company in November 2020.

As of July 31, 2020, the Company had not received any portion of the $ 28.0 million in license fees due from Abeona under the license agreement.

Unpaid balances due under the November 2018 License accrue interest at 1.5 % per month.

The Company recognized interest income from licensing of $ 0.8 million during the three and six months ended June 30, 2020 related to the unpaid license fees from Abeona under the November 2018 License, which is included in the $ 28.8 million of accounts receivable due from Abeona recorded as of June 30, 2020.

Subsequent to the termination of the November 2018 License, Abeona filed a claim in arbitration alleging that the Company had breached certain responsibilities to communicate with Abeona regarding the Company’s prosecution of licensed patents under the November 2018 License.

The Company disputes Abeona’s claim and has filed a counterclaim in arbitration demanding payment of the $28.0 million of unpaid fees from Abeona, plus accrued interest.

As of June 30, 2020, the Company had not recorded any liabilities related to this matter as, based on its evaluation of the merits of Abeona’s claims, the Company believes its risk of loss is remote.

Additionally, the Company evaluated the collectability of the $ 28.8 million due from Abeona and determined that no allowance for doubtful accounts should be recorded as of June 30, 2020, as the Company intends to enforce the collection of all amounts due from Abeona and, based on its evaluation of the merits of Abeona’s claims, the Company expects to receive payment in full upon the completion of arbitration.

However, the duration of the arbitration and timing of payment from Abeona are unpredictable.

In accordance with its interest accrual policy, the Company will continue to accrue interest income on the unpaid balance due from Abeona under the November 2018 License until payment has been received or is otherwise no longer expected to be collected.

Stock-based Compensation

In January 2020, the Board of Directors authorized an additional 1,479,696 shares to be issued under the 2015 Equity Incentive Plan (the 2015 Plan).

As of March 31, 2020, the total number of shares of common stock authorized for issuance under the 2015 Plan and the 2014 Stock Plan (the 2014 Plan) was 12,412,917 , of which 2,454,658 remained available for future grants under the 2015 Plan.

As of June 30, 2020, the total number of shares of common stock authorized for issuance under the 2015 Plan and the 2014 Stock Plan (the 2014 Plan) was 12,412,917 , of which 2,309,229 remained available for future grants under the 2015 Plan.

Stock-based Compensation Expense

The Company’s stock-based compensation expense by award type was as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Stock options

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Employee stock purchase plan

As of March 31, 2020, the Company had $ 82.4 million of unrecognized stock-based compensation expense related to stock options and the 2015 Employee Stock Purchase Plan (the 2015 ESPP), which is expected to be recognized over a weighted-average period of 2.9 years.

As of June 30, 2020, the Company had $ 77.3 million of unrecognized stock-based compensation expense related to stock options and the 2015 Employee Stock Purchase Plan (the 2015 ESPP), which is expected to be recognized over a weighted-average period of 2.7 years.

The Company has recorded aggregate stock-based compensation expense in the consolidated statements of operations and comprehensive loss as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Research and development

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Cancelled or forfeited

Outstanding at March 31, 2020

Exercisable at March 31, 2020

Vested and expected to vest at March 31, 2020

Outstanding at June 30, 2020

Exercisable at June 30, 2020

Vested and expected to vest at June 30, 2020

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of the common stock for the options that were in the money at the dates reported.

The weighted-average grant date fair value per share of options granted during the three months ended March 31, 2020 was $ 24.69 .

During the three months ended March 31, 2020, the total number of stock options exercised was 193,973 , resulting in total proceeds of $ 2.3 million.

The total intrinsic value of options exercised during the three months ended March 31, 2020 was $ 5.8 million.

The weighted-average grant date fair value per share of options granted during the six months ended June 30, 2020 was $ 24.35 .

During the six months ended June 30, 2020, the total number of stock options exercised was 281,468 , resulting in total proceeds of $ 4.0 million.

The total intrinsic value of options exercised during the six months ended June 30, 2020 was $ 7.5 million.

Employee Stock Purchase Plan

In January 2020, the Board of Directors authorized an additional 369,924 shares to be issued under the 2015 ESPP.

As of March 31, 2020, the total number of shares of common stock authorized for issuance under the 2015 ESPP was 623,924 , of which 486,068 remained available for future issuance.

During the three months ended March 31, 2020, 17,442 shares of common stock were issued under the 2015 ESPP.

As of June 30, 2020, the total number of shares of common stock authorized for issuance under the 2015 ESPP was 623,924 , of which 486,068 remained available for future issuance.

During the six months ended June 30, 2020, 17,442 shares of common stock were issued under the 2015 ESPP.

The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets.

Based on the Company’s history of operating losses, including a three-year cumulative loss position as of March 31, 2020 and December 31, 2019, the Company has concluded that it is more likely than not that the benefit of its deferred tax assets will not be realized.

Accordingly, the Company has provided a full valuation allowance for its net deferred tax assets as of March 31, 2020 and December 31, 2019.

Based on the Company’s history of operating losses, including a three-year cumulative loss position as of June 30, 2020 and December 31, 2019, the Company concluded that it is more likely than not that the benefit of its deferred tax assets will not be realized.

Accordingly, the Company provided a full valuation allowance for its net deferred tax assets as of June 30, 2020 and December 31, 2019.

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) was signed into law in March 2020.

The CARES Act (i) lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (the TCJA), (ii) allows corporate taxpayers to carryback net operating losses (NOLs) originating during 2018 through 2020 for up to five years, which was not previously allowed under the TCJA, (iii) eliminates the 80 % of taxable income limitations on NOL utilization imposed by the TCJA, allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 or 2020, and (iv) enacts various other changes to corporate taxation.

The enactment of the CARES Act did not result in any material adjustments to the Company’s income tax provision for the three months ended March 31, 2020, or to the Company’s net deferred tax assets as of March 31, 2020.

Also included in the CARES Act was a change to the TCJA related to qualified improvement property, retroactively allowing for a 15 -year recovery period and bonus depreciation.

As a result of this change, the Company recorded current income tax benefit of $ 0.5 million during the three and six months ended June 30, 2020 related to a reduction of state taxes associated with additional depreciation deductions allowed for the 2018 tax year.

Overall, the enactment of the CARES Act, including the change for qualified improvement property, did not result in any material adjustments to the Company’s income tax provision for the three and six months ended June 30, 2020, or to the Company’s net deferred tax assets as of June 30, 2020.

Related Party Transactions

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The agreement was amended effective June 2019 to expand the scope of services provided and increase the monthly fee, and the amended agreement expires in December 2020.

Expenses incurred under the agreements with FOXKISER for the three months ended March 31, 2020 and 2019 were $ 1.2 million and $ 0.8 million, respectively, and were recorded as research and development expenses in the consolidated statements of operations and comprehensive loss.

Expenses incurred under the agreements with FOXKISER for the three and six months ended June 30, 2020 were $ 1.2 million and $ 2.4 million, respectively.

Expenses incurred under the agreements with FOXKISER for the three and six months ended June 30, 2019 were $ 0.9 million and $ 1.7 million, respectively.

Expenses incurred under the agreements with FOXKISER were recorded as research and development expenses in the consolidated statements of operations and comprehensive loss.

Net Loss Per Share

Since the Company incurred net losses for the three months ended March 31, 2020 and 2019, common stock equivalents were excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive.

Since the Company incurred net losses for the three and six months ended June 30, 2020 and 2019, common stock equivalents were excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive.

Accordingly, basic and diluted net loss per share were the same for such periods.

The following potentially dilutive common stock equivalents outstanding at the end of the period were excluded from the computations of weighted-average diluted common shares for the periods indicated as their effects would be anti-dilutive (in thousands):

Three Months Ended March 31,

Three and Six Months Ended June 30,

Stock options issued and outstanding

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Accrued expenses and other current liabilities consist of the following (in thousands):

March 31, 2020

June 30, 2020

December 31, 2019

Accrued personnel costs

Accrued sublicense fees and royalties

Accrued external research and development expenses

Accrued sublicense fees and royalties

Accrued external general and administrative expenses

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements