What changed in this filing

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Item 1. Financial Statements

2021-05-05 compared with 2020-11-04 · 189 added, 326 removed, 304 unchanged (63% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

September 30, 2020

March 31, 2021

December 31, 2020

17 unchanged sentences

Operating lease liabilities

Liability related to sale of future royalties

Total current liabilities

1 unchanged sentence

Operating lease liabilities

Liability related to sale of future royalties

Other liabilities

4 unchanged sentences

10,000 shares authorized, and no shares issued

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

and outstanding at March 31, 2021 and December 31, 2020

Common stock;

$ 0.0001 par value;

100,000 shares authorized at September 30, 2020

100,000 shares authorized at March 31, 2021

and December 31, 2020;

42,505 and 37,476 shares issued and outstanding at

September 30, 2020 and December 31, 2019, respectively

March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital

Accumulated other comprehensive income

Accumulated other comprehensive loss

Accumulated deficit

3 unchanged sentences

REGENXBIO INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

License and royalty revenue

6 unchanged sentences

Total operating expenses

Income (loss) from operations

Other Income (Loss)

Loss from operations

Other Income (Expense)

Interest income from licensing

Investment income (loss)

Total other income (loss)

Income (loss) before income taxes

Income Tax Benefit

Net income (loss)

Other Comprehensive Income (Loss)

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

Total other comprehensive income (loss)

Comprehensive income (loss)

Net income (loss) per share:

Weighted-average common shares outstanding:

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

REGENXBIO INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

Three Months Ended September 30, 2020

Comprehensive

Stockholders’

Balances at June 30, 2020

Exercise of stock options

Issuance of common stock under employee

stock purchase plan

Stock-based compensation expense

Unrealized loss on available-for-sale securities, net

Balances at September 30, 2020

Three Months Ended September 30, 2019

Comprehensive

Stockholders’

Balances at June 30, 2019

Exercise of stock options

Issuance of common stock under employee

stock purchase plan

Stock-based compensation expense

Interest expense

Total other income (expense)

Loss before income taxes

Income Tax Expense

Other Comprehensive Loss

Unrealized loss on available-for-sale securities, net

Balances at September 30, 2019

Total other comprehensive loss

Comprehensive loss

Net loss per share, basic and diluted

Weighted-average common shares outstanding, basic and diluted

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

2 unchanged sentences

(in thousands)

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

Comprehensive

1 unchanged sentence

Balances at December 31, 2020

Issuance of common stock upon public offering,

net of transaction costs of $ 14,194

Exercise of stock options

2 unchanged sentences

Stock-based compensation expense

Unrealized gain on available-for-sale securities, net

Balances at September 30, 2020

Nine Months Ended September 30, 2019

Unrealized loss on available-for-sale securities, net

Balances at March 31, 2021

Three Months Ended March 31, 2020

Comprehensive

2 unchanged sentences

Balances at December 31, 2019

Adoption of ASU 2016-02 (Topic 842)

Adoption of ASU 2018-02

Exercise of stock options

2 unchanged sentences

Stock-based compensation expense

Unrealized gain on available-for-sale securities, net

Balances at September 30, 2019

Unrealized loss on available-for-sale securities, net

Balances at March 31, 2020

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

2 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities

3 unchanged sentences

Provision for credit losses

Net amortization of premiums (accretion of discounts) on marketable

debt securities

Net amortization of premiums on marketable securities

Net realized and unrealized losses (gains) on marketable securities

Imputed interest income from licensing

Non-cash interest expense

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

Purchases of property and equipment

Net cash provided by investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities

1 unchanged sentence

Proceeds from issuance of common stock under employee stock purchase plan

Proceeds from public offering of common stock, net of underwriting discounts

and commissions

Issuance costs for public offerings of common stock

Repayments under liability related to sale of future royalties

Transaction costs for sale of future royalties

Net cash provided by financing activities

Net increase in cash and cash equivalents and restricted cash

Net decrease in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash

3 unchanged sentences

Additions to property and equipment through accounts payable and accrued expenses

Non-cash additions to property and equipment through tenant improvement allowance

Non-cash consideration received for licenses granted

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

4 unchanged sentences

(the Company) is a clinical-stage biotechnology company seeking to improve lives through the curative potential of gene therapy.

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.

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 has developed a broad pipeline of gene therapy product candidates using its proprietary adeno-associated virus (AAV) gene delivery platform (NAV Technology Platform), which consists of exclusive rights to over 100 novel AAV vectors, including AAV7, AAV8, AAV9 and AAVrh10.

In addition to its internal product development efforts, the Company also selectively licenses the NAV® Technology Platform to other leading biotechnology and pharmaceutical companies (NAV Technology Licensees).

As of March 31, 2021, the NAV Technology Platform was being applied by NAV Technology Licensees in one commercially available product, Zolgensma®, and in the preclinical and clinical development of more than 20 licensed products.

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

Liquidity and Risks

As of September 30, 2020, the Company had generated an accumulated deficit of $ 242.8 million since inception.

As of March 31, 2021, the Company had generated an accumulated deficit of $ 339.2 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 September 30, 2020, the Company had cash, cash equivalents and marketable securities of $ 289.8 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.

As of March 31, 2021, the Company had cash, cash equivalents and marketable securities of $ 656.5 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.

Summary of Significant Accounting Policies

1 unchanged sentence

The accompanying consolidated financial statements are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP).

The interim unaudited consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements as of and for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on February 26, 2020.

The interim unaudited consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements as of and for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on March 1, 2021.

Certain information and footnote disclosures required by GAAP which are normally included in the Company’s annual consolidated financial statements have been omitted pursuant to SEC rules and regulations for interim reporting.

5 unchanged sentences

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes.

Actual results could differ materially from those estimates.

Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these consolidated financial statements.

Management must apply significant judgment in this process.

In addition, other factors may affect estimates, including:

expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates and whether historical trends are expected to be representative of future trends.

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.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities for the periods presented.

Management bases its estimates on historical experience and on various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities, and other reported amounts, that are not readily apparent from other sources.

Actual results may differ materially from these estimates.

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

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

license and royalty revenue, the allowance for credit losses, accrued research and development expenses and other accrued liabilities, stock-based compensation expense, non-cash interest expense, income taxes and the fair value of financial instruments.

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

7 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):

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Cash and cash equivalents

12 unchanged sentences

Please refer to Note 8 for further information regarding the allowance for credit losses related to accounts receivable.

Marketable Securities

Marketable securities consist of available-for-sale debt securities and equity securities and are carried at fair value.

Marketable debt securities with remaining maturity dates exceeding 12 months which are not intended to be sold prior to maturity for use in current operations are classified as non-current assets.

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 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 .

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 .

If the Company does not have the intent and ability to hold the security until recovery of the unrealized loss, the difference between the fair value and amortized cost basis of the security is charged to results of operations resulting in a new amortized cost basis of the security.

If the Company has the intent and ability to hold the security until recovery of the unrealized loss, the security is evaluated for potential credit losses.

If a credit loss is deemed to exist, the credit loss is recognized in results of operations and an allowance for credit losses is recorded against the amortized cost basis of the security.

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 September 30, 2020.

Fair Value of Financial Instruments

14 unchanged sentences

Please refer to Note 4 for further information on the fair value measurement of the Company’s financial instruments.

Net Income (Loss) Per Share

Basic net income (loss) per share is calculated by dividing net income (loss) applicable to common stockholders by the weighted-average common shares outstanding during the period, without consideration for common stock equivalents.

Diluted net income (loss) per share is calculated by adjusting the weighted-average common shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method.

Contingently convertible shares in which conversion is based on non-market-priced contingencies are excluded from the calculations of both basic and diluted net income (loss) per share until the contingency has been fully met.

For purposes of the diluted net income (loss) per share calculation, common stock equivalents are excluded from the calculation of diluted net income (loss) per share if their effect would be anti-dilutive.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , which amends the accounting for credit losses for most financial assets and certain other instruments.

The standard requires that entities holding financial assets that are not accounted for at fair value through net income be presented at the net amount expected to be collected by recording an allowance for credit losses.

The allowance for credit losses will be a valuation account that will be deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset.

The standard also amends the impairment model for available-for-sale debt securities, requiring credit losses on impaired debt securities to be included in results of operations.

The Company adopted this standard effective January 1, 2020 using a modified retrospective transition method, which requires a cumulative-effect adjustment, if any, to opening accumulated deficit on the adoption date.

The adoption of this standard primarily impacts the Company’s methodology used to assess credit losses on its accounts receivable, contract assets and available-for-sale debt securities.

Based on the composition of the Company’s accounts receivable, contract assets and available-for-sale debt securities, the adoption of this standard required no cumulative-effect adjustments and did not have a material impact on the Company’s financial position or results of operations.

Please refer to the significant accounting policies above for a description of the Company’s accounting policies for accounts receivable and marketable securities upon the adoption of this standard.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement , which modifies certain disclosure requirements regarding fair value measurements.

The Company adopted this standard effective January 1, 2020.

The adoption of this standard did not have a material impact on the Company’s financial statement disclosures.

In August 2018, the FASB issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract .

The standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license).

The Company adopted this standard effective January 1, 2020 on a prospective basis.

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 and nine months ended September 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.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes , which simplifies the current accounting for income taxes.

Among other changes, the standard removes the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items such as other comprehensive income.

The Company early adopted this standard effective January 1, 2020, with certain aspects of the standard applied using the modified retrospective transition method and other aspects of the standard applied on a prospective basis.

The adoption of this standard required no cumulative-effect adjustments and did not have a material impact on the Company’s financial position or results of operations.

Net Loss Per Share

Basic net loss per share is calculated by dividing net loss applicable to common stockholders by the weighted-average common shares outstanding during the period, without consideration for common stock equivalents.

Diluted net loss per share is calculated by adjusting the weighted-average common shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method.

Contingently convertible shares in which conversion is based on non-market-priced contingencies are excluded from the calculations of both basic and diluted net loss per share until the contingency has been fully met.

For purposes of the diluted net loss per share calculation, common stock equivalents are excluded from the calculation of diluted net loss per share if their effect would be anti-dilutive.

Marketable Securities

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):

September 30, 2020

Amortized Cost

March 31, 2021

government and federal agency securities

1 unchanged sentence

Corporate bonds

Equity securities

Municipal securities

Amortized Cost

December 31, 2020

2 unchanged sentences

Corporate bonds

Equity securities

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

Municipal securities

As of March 31, 2021 and December 31, 2020, 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 September 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 nine months ended September 30, 2020, the Company recognized net unrealized gains (losses) on available-for-sale debt securities of $( 0.5 ) million and $ 0.1 million, respectively, and income tax expense of zero in other comprehensive income (loss) for the period.

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

During the three and nine months ended September 30, 2019, the Company recognized net unrealized gains (losses) on available-for-sale debt securities of $( 0.1 ) million and $ 1.7 million, respectively, and income tax benefit (expense) of less than $ 0.1 million and $( 0.6 ) million, respectively, in other comprehensive income (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 and nine months ended September 30, 2019, which were reclassified out of accumulated other comprehensive income during the period and were included in investment income (loss) in the consolidated statements of operations and comprehensive income (loss).

As of March 31, 2021 and December 31, 2020, the balance in the Company’s accumulated other comprehensive loss consisted solely of unrealized gains and losses on available-for-sale debt securities, net of reclassification adjustments for realized gains and losses and income tax effects.

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 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 loss on available-for-sale securities, net, as presented in the statements of operations and comprehensive loss consisted of the following (in thousands):

Three Months Ended March 31,

Unrealized loss before reclassifications

Realized gains reclassified to investment income

Income tax expense

Unrealized loss on available-for-sale securities, net

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

September 30, 2020

March 31, 2021

government and federal

agency securities

Corporate bonds

2 unchanged sentences

December 31, 2020

government and federal

agency securities

Corporate bonds

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

As of March 31, 2021, available-for-sale debt securities held by the Company which were in an unrealized loss position consisted of 49 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 did not identify 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 and nine months ended September 30, 2020.

Marketable equity securities held by the Company as of September 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.

Prevail completed its initial public offering (IPO) in June 2019.

Prior to Prevail’s IPO, the securities were accounted for as non-marketable equity securities without a readily determinable fair value and had a carrying value of $ 0.4 million.

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

During the three and nine months ended September 30 , 2020, the Company recognized net realized and unrealized losses of $ 7.5 million and $ 8.3 million, respectively, related to its marketable equity securities of Prevail .

During the three and nine months ended September 30, 2019, the Company recognized unrealized gains (losses) of $ ( 2.2 ) million and $ 29.4 million , respectively, and did no t recognize any realized gains or losses related to its marketable equity securities of Prevail.

The Company did no t record an allowance for credit losses on its available-for-sale debt securities as of March 31, 2021 or December 31, 2020.

The Company did no t recognize any impairment or credit losses on available-for-sale debt securities during the three months ended March 31, 2021 and 2020.

During the three months ended March 31, 2020, the Company recognized total net realized and unrealized losses of $ 5.1 million related to its marketable equity securities of Prevail Therapeutics Inc.

(Prevail), which were acquired as consideration for a license to the NAV Technology Platform granted to Prevail in August 2017.

As of December 31, 2020, the Company had sold all of its Prevail equity securities.

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):

September 30, 2020

March 31, 2021

Cash equivalents:

5 unchanged sentences

Corporate bonds

Equity securities

Municipal securities

Total marketable securities

8 unchanged sentences

Corporate bonds

Equity securities

Municipal securities

Total marketable securities

2 unchanged sentences

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 September 30, 2020 to determine the present value of the receivables.

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 materially different from those that would be used as of March 31, 2021 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 September 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 nine months ended September 30, 2020 and 2019.

As of March 31, 2021 and December 31, 2020, non-marketable equity securities had a carrying value of $ 1.1 million and were included in other assets on the consolidated balance sheets.

The Company did not identify any observable price changes or changes in circumstances that would have had an adverse effect on the fair value of the securities as of March 31, 2021 or December 31, 2020.

No remeasurements or impairment losses were recorded on non-marketable equity securities during the three months ended March 31, 2021 and 2020.

Property and Equipment, Net

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

September 30, 2020

March 31, 2021

December 31, 2020

6 unchanged sentences

Property and equipment, net

9804 Medical Center Drive

In November 2018, the Company entered into an operating lease, as amended in April 2019 and November 2019, for approximately 177,000 square feet of office, laboratory and manufacturing facilities in a new building to be constructed at 9804 Medical Center Drive in Rockville, Maryland (the 9804 Medical Center Drive Lease).

The new facility will serve as the Company’s future corporate, research and manufacturing headquarters.

The initial construction of the building was performed by the landlord, and the lease commenced in September 2020 upon the delivery of leased premises to the Company to make additional improvements to the building.

Monthly payments under the lease begin in September 2021 and escalate annually in accordance with the lease agreement.

The lease expires in September 2036 , subject to extension and termination options held by the Company.

The Company has the option to extend the term of the lease for up to 10 additional years and the option to terminate the lease, with payment of an early termination fee, after 12 years from the delivery of the leased premises to the Company.

The Company’s extension and termination options under the 9804 Medical Center Drive Lease have been excluded from the measurement of the right-of-use assets and lease liabilities for the lease as they were not reasonably certain of exercise.

As required by the lease agreement, the Company has provided the landlord with an irrevocable letter of credit of $ 1.1 million which the landlord may draw upon in the event of any uncured default by the Company under the terms of the lease.

Pursuant to the 9804 Medical Center Drive Lease, the Company received a $ 19.5 million tenant improvement allowance from the landlord to perform improvements to the leased premises.

The tenant improvement allowance has been recorded as a reduction of the right-of-use assets for the lease and is amortized on a straight-line basis as a reduction of lease expense over the term of the lease.

As of September 30, 2020, the Company had unreimbursed amounts remaining under the tenant improvement allowance of $ 17.2 million, which were deemed in-substance lease payments and recorded as a reduction of the lease liability.

As of September 30, 2020, the Company had recorded property and equipment of $ 17.3 million related to the buildout of the facility at 9804 Medical Center Drive, which have not yet been placed in service.

The Company recorded the right-of-use assets and lease liabilities related to the 9804 Medical Center Drive Lease upon its commencement in September 2020.

As of September 30, 2020, the Company had recorded right-of-use assets of $ 50.6 million and lease liabilities of $ 52.5 million related to the 9804 Medical Center Drive Lease.

9712 Medical Center Drive

In March 2015, the Company entered into an operating lease for office space at 9712 Medical Center Drive in Rockville, Maryland (the 9712 Medical Center Drive Lease).

The lease term commenced in April 2015.

Monthly payments under the lease began in October 2015 and escalate annually in accordance with the lease agreement.

In September 2015, November 2015, July 2017 and April 2018, the Company amended the 9712 Medical Center Drive Lease to include additional office and laboratory space at 9714 Medical Center Drive, and ultimately extend the term of the lease to September 2021.

The Company had options to extend the term of the 9712 Medical Center Drive Lease for up to six additional years.

Additionally, upon the commencement of the 9804 Medical Center Drive Lease in September 2020, the Company had the option to terminate the 9712 Medical Center Drive Lease with six months’ notice.

The Company’s extension and termination options under the 9712 Medical Center Drive Lease were excluded from the measurement of the right-of-use assets and lease liabilities for the lease as they were not reasonably certain of exercise.

The Company received a $ 0.4 million tenant improvement allowance from the landlord which has been recorded as a reduction of the right-of-use assets for the lease and is amortized on a straight-line basis as a reduction of lease expense over the term of the lease.

In October 2020, the Company amended the 9712 Medical Center Drive Lease to extend the term of the lease to February 2027.

Pursuant to the amendment, the Company has an option to extend the term of the lease for three additional years, as well as an option to extend the lease term to be coterminous with the 9804 Medical Center Drive Lease, which expires in September 2036.

Total additional lease payments under the 9712 Medical Center Drive Lease as a result of the October 2020 amendment were $ 8.8 million, excluding any lease payments contingent upon the Company’s option to extend the term of the lease.

9600 Blackwell Road

In January 2016, the Company entered into an operating lease for its corporate headquarters at 9600 Blackwell Road in Rockville, Maryland (the Blackwell Road Lease).

The lease commenced in February 2016 and expires in September 2023 .

In November 2017, the Blackwell Road Lease was amended to include additional office space for the remainder of the lease term.

Monthly payments under the lease began in September 2016 and escalate annually in accordance with the lease agreement.

The Company received a $ 0.8 million tenant improvement allowance from the landlord which has been recorded as a reduction of the right-of-use assets for the lease and is amortized on a straight-line basis as a reduction of lease expense over the term of the lease.

The Company had an option to extend the term of the Blackwell Road Lease for up to five additional years and the option to terminate the lease, with payment of an early termination fee, after 67 months from the lease commencement date.

During the three months ended September 30, 2020, the Company reassessed the term of the Blackwell Road Lease and determined that as of September 30, 2020, it was reasonably certain that the Company will exercise its termination option under the lease.

Accordingly, the measurement of the right-of-use assets and lease liabilities for the Blackwell Road Lease were reduced by $ 0.7 million during the three months ended September 30, 2020, to reflect the payment of the early termination fee and the revised lease term through September 2021.

In November 2020, the Company exercised its termination option under the Blackwell Road Lease.

As a result of the termination, the lease will expire in September 2021 and the Company is obligated to pay an early termination fee of $ 0.4 million.

400 Madison Avenue

In May 2016, the Company entered into an operating lease for office space at 400 Madison Avenue in New York, New York (the 400 Madison Lease).

The lease commenced in July 2016 and monthly payments under the lease began in October 2016 and escalate annually in accordance with the lease agreement.

In May 2019, the 400 Madison Lease was amended to include additional office space and extend the term of the lease from October 2020 to April 2027.

The Company received a $ 0.7 million tenant improvement allowance from the landlord which has been recorded as a reduction of the right-of-use assets for the lease and is amortized on a straight-line basis as a reduction of lease expense over the term of the lease.

As required by the lease agreement, the Company has provided the landlord with an irrevocable letter of credit of $ 0.2 million which the landlord may draw upon in the event of any uncured default by the Company under the terms of the lease.

The Company leases additional office and laboratory facilities, laboratory equipment and other equipment under operating leases with various expiration dates through 2028 , including leases which have been executed but have not yet commenced.

Operating Lease Information

All of the Company’s leases are classified as operating leases.

The following table summarizes the Company’s lease costs and supplemental cash flow information related to its operating leases (in thousands):

Liability Related to Sale of Future Royalties

In December 2020, the Company entered into a royalty purchase agreement (the Royalty Purchase Agreement) with entities managed by Healthcare Royalty Management, LLC (collectively, HCR).

Under the agreement, HCR purchased the Company’s rights to a capped amount of Zolgensma royalty payments under the Company’s license agreement with Novartis Gene Therapies, Inc.

(formerly AveXis, Inc.) (Novartis Gene Therapies), including $ 4.0 million of royalty payments received by the Company in the fourth quarter of 2020 (the Pledged Royalties).

In consideration for these rights, HCR paid the Company $ 200.0 million (the Purchase Price), less $4.0 million representing the payment of the Pledged Royalties to HCR.

Beginning upon the effective date of the agreement, Zolgensma royalty payments, up to a specified threshold, will be paid to HCR, net of upstream royalties payable by the Company to certain licensors in accordance with existing license agreements.

Pursuant to the Royalty Purchase Agreement, the total amount of royalty payments to be received by HCR under the agreement is subject to an increasing cap (the Cap Amount) equal to (i) $ 260.0 million applicable for the period from the effective date of the agreement through November 7, 2024, and (ii) $ 300.0 million applicable for the period from November 8, 2024 through the effective date of termination of the license agreement with Novartis Gene Therapies.

If, on or prior to the defined dates for each Cap Amount, the total amount of royalty payments received by HCR equals or exceeds the Cap Amount applicable to such date, the Royalty Purchase Agreement will automatically terminate and all rights to the Zolgensma royalty payments will revert back to the Company.

The Company has a call option to repurchase its rights to the purchased royalties from HCR for a repurchase price equal to, as of the option exercise date, $ 300.0 million minus the total amount of royalty payments received by HCR;

provided, however, that with respect to a call option exercised on or before November 7, 2024, in the event that the then applicable Cap Amount minus the total amount of royalty payments received by HCR is less than $ 1.0 million, the repurchase price shall equal such difference.

The proceeds received from HCR of $ 196.0 million were recorded as a liability, net of transaction costs of $ 3.5 million, which is amortized over the estimated life of the arrangement using the effective interest method.

In order to determine the amortization of the liability, the Company is required to estimate the total amount of future royalty payments to be received by HCR, subject to the Cap Amount, over the life of the arrangement.

The total amount of royalty payments received by HCR under the agreement, less the net proceeds received by the Company of $ 192.5 million, is recorded as non-cash interest expense over the life of the arrangement using the effective interest method.

Due to its continuing involvement in the underlying license agreement with Novartis Gene Therapies, the Company continues to recognize royalty revenue on net sales of Zolgensma and records the royalty payments to HCR as a reduction of the liability when paid.

As such payments are made to HCR, the balance of the liability will be effectively repaid over the life of the Royalty Purchase Agreement.

The Company estimates the effective interest rate used to record non-cash interest expense under the Royalty Purchase Agreement based on its estimate of future royalty payments to be received by HCR.

As of March 31, 2021, the estimated effective interest rate under the agreement was 13.9 %.

Over the life of the arrangement, the actual effective interest rate will be affected by the amount and timing of the royalty payments received by HCR and changes in the Company’s forecasted royalties.

At each reporting date, the Company reassesses its estimate of total future royalty payments to be received by HCR at the applicable Cap Amount, and prospectively adjusts the effective interest rate and amortization of the liability, as necessary.

The following table presents the changes in the liability related to the sale of future royalties under the Royalty Purchase Agreement with HCR (in thousands):

Three Months Ended

Nine Months Ended

September 30, 2020

Operating lease cost

Variable lease cost

Total lease cost

Cash paid for amounts included in operating lease liabilities

Right-of-use assets acquired through operating lease liabilities

Right-of-use assets acquired through operating lease liabilities for the three and nine months ended September 30, 2020 include a reduction of $ 0.7 million related to the Company’s change in estimate regarding the exercise of its termination rights under the Blackwell Road Lease.

Short-term lease expense for the three and nine months ended September 30, 2020 was not material and is included in operating lease cost in the table above.

Variable lease cost under the Company’s operating leases includes items such as common area maintenance, utilities, taxes and other charges.

The weighted-average remaining lease term and weighted-average discount rate of the Company’s operating leases were as follows:

September 30, 2020

Weighted-average remaining lease term (years)

Weighted-average discount rate

The following table presents a reconciliation of the undiscounted future minimum lease payments remaining the Company’s operating leases to the amounts reported as operating lease liabilities on the consolidated balance sheet as of September 30, 2020 (in thousands):

September 30, 2020

Undiscounted future minimum lease payments:

2020 (remainder of year)

Total undiscounted future minimum lease payments

Amount representing imputed interest

Tenant improvement allowance not yet received

Total operating lease liabilities

Current portion of operating lease liabilities

Operating lease liabilities, non-current

The table above excludes future minimum lease payments for leases which were executed but had not yet commenced as of September 30, 2020, the total of which were not material.

March 31, 2021

Liability related to sale of future royalties, beginning balance

Zolgensma royalties paid to HCR

Non-cash interest expense

Liability related to sale of future royalties, ending balance

Current portion of liability related to sale of future royalties

Liability related to sale of future royalties, non-current

Capitalization

In January 2021, the Company completed a public offering of 4,899,000 shares of its common stock (inclusive of 639,000 shares pursuant to the full exercise by the underwriters of their option to purchase additional shares) at a price of $ 47.00 per share.

The aggregate net proceeds received by the Company from the offering, inclusive of the underwriters’ option exercise, were $ 216.1 million, net of underwriting discounts and commissions and offering expenses payable by the Company.

License and Royalty Revenue

As of September 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.

As of March 31, 2021, the Company’s NAV Technology Platform was being applied by NAV Technology Licensees in one commercially available product, Zolgensma, and in the development of more than 20 licensed products.

Consideration to the Company under its license agreements may include:

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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 September 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 $ 213.4 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) $ 57.0 million upon the achievement of specified sales targets for licensed products.

As of March 31, 2021, 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 $ 194.8 million, including (i) $ 23.3 million upon the commencement of various stages of clinical trials, (ii) $ 21.0 million upon the submission of regulatory approval filings, (iii) $ 93.5 million upon the approval of commercial products by regulatory agencies and (iv) $ 57.0 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.

The achievement of milestones by licensees is highly dependent on the successful development and commercialization of licensed products and it is at least reasonably possible that some or all of the milestone fees will not be realized by the Company.

Accounts Receivable, Contract Assets and Deferred Revenue

The following table presents changes in the balances of the Company’s receivables, contract assets and deferred revenue, as well as other information regarding revenue recognized during the periods presented (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Accounts receivable, current and non-current:

Changes in Accounts Receivable, Contract Assets and Deferred Revenue

The following table presents changes in the balances of the Company’s net accounts receivable, contract assets and deferred revenue, as well as other information regarding revenue recognized during the periods presented (in thousands):

Three Months Ended March 31,

Accounts receivable, net, current and non-current:

Balance, beginning of period

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Performance obligations satisfied in previous periods

Additions to accounts receivable during the periods presented consisted primarily of royalties on net sales of Zolgenmsa, billed and unbilled receivables recorded for the achievement of milestones by licensees during the period, receivables recorded related to new licenses granted by the Company, and interest income recognized related to significant financing components.

Deductions to accounts receivable during the periods presented primarily consisted of amounts collected from licensees and increases in the allowance for credit losses.

Additions to contract assets during the periods presented consisted of development milestones deemed probable of achievement by licensees during the periods.

Additions to accounts receivable during the periods presented consisted primarily of receivables recorded related to royalties on net sales of Zolgensma, new licenses granted by the Company, the achievement of development milestones by licensees and interest income from licensing recognized during the period.

Deductions to accounts receivable during the periods presented consisted primarily of amounts collected from licensees and increases in the allowance for credit losses, as discussed further below.

Additions to contract assets during the periods presented consisted primarily of development milestones deemed probable of achievement by licensees during the period.

Deductions to contract assets during the periods presented consisted of the achievement of such milestones and billing of the associated milestone payments by the Company.

As of March 31, 2021, the Company had recorded deferred revenue of $ 4.1 million which represents consideration received from licensees for performance obligations that have not yet been satisfied by the Company.

Unsatisfied performance obligations consisted of (i) options granted to licensees that provide material rights to the licensee to acquire additional licenses from the Company, which will be satisfied upon the exercise or expiration of the options and (ii) research and development services to be performed by the Company related to licensed products, which will be satisfied as the research and development services are performed.

Revenue recognized from performance obligations satisfied in previous periods was primarily attributable to Zolgensma royalty revenues as well as changes in the transaction prices of the Company’s license agreements.

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

Accounts Receivable, Contract Assets and the Allowance for Credit Losses

Accounts receivable, net consisted of the following (in thousands):

September 30, 2020

March 31, 2021

December 31, 2020

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Total accounts receivable, net

The following table presents the changes in the allowance for credit losses related to accounts receivable and contract assets for the nine months ended September 30, 2020 (in thousands):

The following table presents the changes in the allowance for credit losses related to accounts receivable and contract assets for the three months ended March 31, 2021 (in thousands):

Accounts Receivable

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Provision for credit losses

Balance at September 30, 2020

The Company’s allowance for credit losses as of September 30, 2020 was related solely to accounts receivable from Abeona Therapeutics Inc.

Balance at March 31, 2021

The Company’s allowance for credit losses as of March 31, 2021 and December 31, 2020 was related solely to accounts receivable from Abeona Therapeutics Inc.

Please refer to the section below, Abeona Therapeutics Inc., for further information regarding amounts due from Abeona and the associated allowance for credit losses.

The Company’s provision for credit losses for the three and nine months ended September 30, 2020 was $ 7.7 million and was related solely to changes in estimates regarding the allowance for credit losses associated with the accounts receivable from Abeona.

No provision for credit losses was recorded for the three or nine months ended September 30, 2019.

As of September 30, 2020, the Company had recorded deferred revenue of $ 4.3 million which represents consideration received from licensees for performance obligations that have not yet been satisfied by the Company.

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

Revenue recognized from performance obligations satisfied in previous periods was primarily attributable to royalty and sublicense revenues as well as changes in transaction prices of the Company’s license agreements during the periods.

AveXis March 2014 License

In March 2014, the Company entered into an exclusive license agreement, as amended in January 2018 (the March 2014 License) with AveXis, Inc.

Under the March 2014 License, the Company granted AveXis an exclusive, worldwide commercial license, with rights to sublicense, to the NAV Technology Platform, as well as other certain rights, for the treatment of spinal muscular atrophy (SMA) in humans by in vivo gene therapy.

AveXis launched commercial sales of Zolgensma, a licensed product under the March 2014 License, in the second quarter of 2019, upon which the Company began recognizing royalty revenue on net sales of the licensed product.

Pursuant to the March 2014 License, AveXis was obligated to pay a sales-based milestone fee of $ 80.0 million to the Company upon the achievement of $ 1.0 billion in cumulative net sales of licensed products.

AveXis achieved cumulative net sales of Zolgensma of $ 1.0 billion in third quarter of 2020, upon which the Company recognized revenue of $80.0 million related to the sales-based milestone fee.

The $ 80.0 milestone fee was recorded as accounts receivable as of September 30, 2020, and the Company received payment of the $ 80.0 million milestone fee from AveXis in October 2020.

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

Three Months Ended September 30,

Nine Months Ended September 30,

License revenue

The Company’s provision for credit losses for the three months ended March 31, 2021 was $ 0.6 million and was related solely to changes in estimates regarding the allowance for credit losses associated with the accounts receivable from Abeona.

No provision for credit losses was recorded for the three months ended March 31, 2020.

Novartis Gene Therapies, Inc.

In March 2014, the Company entered into an exclusive license agreement, as amended, (the March 2014 License) with Novartis Gene Therapies (formerly AveXis, Inc.).

Under the March 2014 License, the Company granted Novartis Gene Therapies an exclusive, worldwide commercial license, with rights to sublicense, to the NAV Technology Platform, as well as other certain rights, for the treatment of spinal muscular atrophy (SMA) in humans by in vivo gene therapy.

Novartis Gene Therapies launched commercial sales of Zolgensma, a licensed product under the March 2014 License, in the second quarter of 2019, upon which the Company began recognizing royalty revenue on net sales of the licensed product.

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

Three Months Ended March 31,

Royalties on net sales of Zolgensma

Achievement of sales-based milestone for Zolgensma

Total license and royalty revenue

Interest income from licensing

As of September 30, 2020, the Company had recorded total accounts receivable of $ 98.9 million from AveXis under the March 2014 License, of which $ 98.8 million were included in current assets and $ 0.1 million were included in non-current assets.

As of December 31, 2019, the Company had recorded total accounts receivable of $ 11.0 million 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.

As of March 31, 2021 and December 31, 2020, the Company had recorded total accounts receivable of $ 18.1 million and $ 19.6 million, respectively, from Novartis Gene Therapies under the March 2014 License, which consisted primarily of unbilled receivables for Zolgensma royalties.

Zolgensma royalties receivable as of March 31, 2021 included $ 13.2 million which was expected to be paid to HCR in accordance with the Royalty Purchase Agreement discussed in Note 6.

Abeona Therapeutics Inc.

In November 2018, the Company entered into a license agreement with Abeona, as amended in November 2019 (the November 2018 License), for the development and commercialization of various diseases using the NAV Technology Platform.

In November 2018, the Company entered into a license agreement with Abeona, as amended, (the November 2018 License), for the development and commercialization of various diseases using the NAV Technology Platform.

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.

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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 October 30, 2020, the Company had not received any portion of the $ 28.0 million in license fees due from Abeona under the license agreement.

As of April 30, 2021, 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.

During the three and nine months ended September 30, 2020, the Company recognized interest income from licensing of $ 1.3 million and $ 2.1 million, respectively, related to the unpaid license fees from Abeona under the November 2018 License.

Total accounts receivable from Abeona recorded as of September 30, 2020 was $ 30.1 million, consisting of the unpaid license fees and associated accrued interest.

In May 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.

Based on its evaluation of the merits of Abeona’s claims, the Company had not recorded any liabilities related these claims as of September 30, 2020, and the Company currently expects that its demand for payment in full will be upheld in arbitration.

The Company intends to enforce the full collection of all amounts due from Abeona upon completion of arbitration, which is currently scheduled to occur in March 2021.

However, the duration and outcome of arbitration and timing of payment from Abeona are unpredictable and uncertain at this time.

While the Company currently expects its demand for payment in full will be upheld in arbitration, the Company assessed the collectability of the $ 30.1 million due from Abeona as of September 30, 2020 as it relates to credit risk.

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

Based on its evaluation of the merits of Abeona’s claims, the Company did not record any liabilities related these claims as of March 31, 2021, and the Company currently expects that its demand for payment in full will be upheld in arbitration.

A binding arbitration was held in March 2021 and the arbitrators’ decision is pending.

The Company intends to enforce the full collection of all amounts due from Abeona;

however, the outcome of the arbitration and timing of payment from Abeona remain uncertain.

As of March 31, 2021 and December 31, 2020, the Company had recorded gross accounts receivable of $ 30.1 million from Abeona under the November 2018 License, which consisted of the $ 8.0 million fee due April 1, 2020, the $ 20.0 million fee due within 15 days of the termination of the license agreement in May 2020 and accrued interest on the outstanding balances.

While the Company currently expects its demand for payment in full will be upheld in arbitration and intends to enforce the full collection of all amounts due, the Company assessed the collectability of the $ 30.1 million due from Abeona as it relates to credit risk.

In performing this assessment, the Company evaluated Abeona’s credit profile and financial condition, as well its expectations regarding Abeona’s future cash flows and ability to satisfy this obligation upon the completion of arbitration in 2021.

Additionally, the Company considered Abeona’s continued failure to remit payment to the Company, as well as events which occurred during the three months ended September 30, 2020 impacting Abeona’s business and credit profile, specifically the departure of key members of Abeona’s management and board of directors and subsequent decline in market capitalization.

As a result of this analysis, the Company recorded an allowance for credit losses of $ 7.7 million as of September 30, 2020 related to the accounts receivable due from Abeona.

However, management intends to enforce the full collection of all amounts due from Abeona upon the completion of arbitration.

In accordance with the Company’s interest accrual policy, the Company will cease the recognition of interest income accrued under the license agreement subsequent to the recognition of the allowance for credit losses unless and until such amounts are deemed to be collectable.

As a result of its analyses, the Company recorded an allowance for credit losses of $ 8.2 million and $ 7.7 million as of March 31, 2021 and December 31, 2020, respectively, related to the accounts receivable due from Abeona.

The Company recorded a provision for credit losses of $ 0.6 million for the three months ended March 31, 2021 as a result of changes in estimates regarding the allowance during the period.

As of March 31, 2021 and December 31, 2020, the Company had recognized interest income from licensing of $ 2.1 million related to the unpaid license fees from Abeona under the November 2018 License, which is included in the gross accounts receivable balance of $ 30.1 million.

In accordance with its interest accrual policy, the Company ceased the recognition of interest income accrued under the license agreement subsequent to the recognition of the allowance for credit losses in the third quarter of 2020, and will continue to maintain the accounts receivable from Abeona on non-accrual status unless and until such amounts are deemed to be collectable.

However, the Company intends to enforce the full collection of all accrued interest contractually due from Abeona upon the completion of arbitration.

Stock-based Compensation

In January 2021, the Board of Directors authorized an additional 1,499,037 shares to be issued under the 2015 Equity Incentive Plan (the 2015 Plan).

As of September 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 2,321,306 remained available for future grants under the 2015 Plan.

As of March 31, 2021, the total number of shares of common stock authorized for issuance under the 2015 Plan and the 2014 Stock Plan (the 2014 Plan) was 13,911,954 , of which 2,447,174 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 September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Stock options

1 unchanged sentence

Employee stock purchase plan

As of September 30, 2020, the Company had $ 68.6 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 2.5 years.

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

Three Months Ended September 30,

Nine Months Ended September 30,

As of March 31, 2021, the Company had $ 93.8 million of unrecognized stock-based compensation expense related to stock options, restricted stock units and the 2015 Employee Stock Purchase Plan (the 2015 ESPP), which is expected to be recognized over a weighted-average period of 2.8 years.

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

Three Months Ended March 31,

Research and development

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Cancelled or forfeited

Outstanding at September 30, 2020

Exercisable at September 30, 2020

Vested and expected to vest at September 30, 2020

Outstanding at March 31, 2021

Exercisable at March 31, 2021

Vested and expected to vest at March 31, 2021

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 nine months ended September 30, 2020 was $ 24.08 .

During the nine months ended September 30, 2020, the total number of stock options exercised was 356,302 , resulting in total proceeds of $ 4.2 million.

The total intrinsic value of options exercised during the nine months ended September 30, 2020 was $ 9.4 million.

The weighted-average grant date fair value per share of options granted during the three months ended March 31, 2021 was $ 27.28 .

During the three months ended March 31, 2021, the total number of stock options exercised was 104,638 , resulting in total proceeds of $ 1.3 million.

The total intrinsic value of options exercised during the three months ended March 31, 2021 was $ 3.6 million.

Restricted Stock Units

The following table summarizes restricted stock unit activity under the 2015 Plan (in thousands, except per share data):

Unvested balance at December 31, 2020

Unvested balance at March 31, 2021

No restricted stock units vested during the three months ended March 31, 2021 and 2020.

Employee Stock Purchase Plan

In January 2021, the Board of Directors authorized an additional 374,759 shares to be issued under the 2015 ESPP.

As of September 30, 2020, the total number of shares of common stock authorized for issuance under the 2015 ESPP was 623,924 , of which 448,011 remained available for future issuance.

During the nine months ended September 30, 2020, 55,499 shares of common stock were issued under the 2015 ESPP.

As of March 31, 2021, the total number of shares of common stock authorized for issuance under the 2015 ESPP was 998,683 , of which 803,728 remained available for future issuance.

During the three months ended March 31, 2021, 19,042 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 three-year cumulative loss positions as of September 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 September 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.

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 nine months ended September 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 nine months ended September 30, 2020, or to the Company’s net deferred tax assets as of September 30, 2020.

Based on the Company’s history of operating losses, including three-year cumulative loss positions as of March 31, 2021 and December 31, 2020, 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 March 31, 2021 and December 31, 2020.

Related Party Transactions

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Effective January 2019, the Company entered into a new professional services agreement with FOXKISER with similar terms and conditions as the previous agreements.

The agreement was amended effective June 2019 to expand the scope of services provided and increase the monthly fee.

The agreement was amended effective June 2019 to expand the scope of the services provided and increase the monthly fee.

Effective August 2020, the agreement was further amended to extend the term of the agreement by two years through December 2022.

The agreement may be terminated by either party with six months’ advance written notice.

Expenses incurred under the agreements with FOXKISER for the three and nine months ended September 30, 2020 were $ 1.2 million and $ 3.6 million, respectively.

Expenses incurred under the agreements with FOXKISER for the three and nine months ended September 30, 2019 were $ 1.2 million and $ 2.9 million, respectively.

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

Net Income (Loss) Per Share

The computations of basic and diluted net income (loss) per share were as follows (in thousands, except per share data):

Three Months Ended September 30,

Nine Months Ended September 30,

Basic net income (loss) per share:

Net income (loss)

Shares used in computation:

Weighted-average common shares outstanding

Basic net income (loss) per share

Diluted net income (loss) per share:

Net income (loss)

Shares used in computation:

Weighted-average common shares outstanding

Stock options

Employee stock purchase plan

Weighted-average diluted common shares

Diluted net income (loss) per share

For periods in which the Company incurred net losses, common stock equivalents were excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive.

The agreement may be terminated by either party with six months’ advanced written notice.

Expenses incurred under the agreement with FOXKISER for the three months ended March 31, 2021 and 2020 were $ 1.2 million and $ 1.2 million, respectively, and 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, 2021 and 2020, 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 September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Stock options issued and outstanding

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

September 30, 2020

March 31, 2021

December 31, 2020

Accrued sublicense fees and royalties

Accrued purchases of property and equipment

Accrued personnel costs

Accrued external research and development expenses

Accrued sublicense fees and royalties

Accrued income taxes payable

Accrued external general and administrative expenses

Accrued purchases of property and equipment

Other accrued expenses and current liabilities

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