REGENXBIO Inc. 10-Q

Item 1. Financial Statements. REGENXBIO INC. CONSOLIDATED BALANCE SHEETS (unaudited) (in thousands, except per share data) March 31, 2022 December 31, 2021 Assets Current assets Cash and cash equivalents $ 191,873 $ 345,209 Marketable securities 202,261 112,230 Accounts receivable, net 27,022 32,439 Prepaid expenses 18,542 18,752 Other current assets 7,179 10,196 Total current assets 446,877 518,826 Marketable securities 370,659 391,907 Accounts receivable, net 2,084 2,262 Property and equipment, net 135,264 131,547 Operating lease right-of-use assets 59,925 60,904 Restricted cash 2,030 2,030 Other assets 8,529 6,428 Total assets $ 1,025,368 $ 1,113,904 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 24,708 $ 11,387 Accrued expenses and other current liabilities 48,423 76,111 Deferred revenue 3,333 3,333 Operating lease liabilities 2,121 1,752 Liability related to sale of future royalties 41,352 37,889 Total current liabilities 119,937 130,472 Operating lease liabilities 85,568 84,929 Liability related to sale of future royalties 122,514 133,460 Other liabilities 7,680 745 Total liabilities 335,699 349,606 Stockholders’ equity Preferred stock; $ 0.000 1 par value; 10,000 shares authorized, no shares issued and outstanding at March 31, 2022 and December 31, 2021 — — Common stock; $ 0.0001 par value; 100,000 shares authorized at March 31, 2022 and December 31, 2021; 42,982 and 42,831 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively 4 4 Additional paid-in capital 939,570 928,095 Accumulated other comprehensive loss ( 11,950 ) ( 2,569 ) Accumulated deficit ( 237,955 ) ( 161,232 ) Total stockholders’ equity 689,669 764,298 Total liabilities and stockholders’ equity $ 1,025,368 $ 1,113,904 The accompanying notes are an integral part of these unaudited consolidated financial statements. 3 Table of Contents REGENXBIO INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (unaudited) (in thousands, except per share data) Three Months Ended March 31, 2022 2021 Revenues License and royalty revenue $ 22,218 $ 18,884 Total revenues 22,218 18,884 Operating Expenses Cost of revenues 15,717 4,851 Research and development 55,627 39,722 General and administrative 22,318 17,838 Credit losses and other 83 515 Total operating expenses 93,745 62,926 Loss from operations ( 71,527 ) ( 44,042 ) Other Income (Expense) Interest income from licensing 94 29 Investment income 799 580 Interest expense ( 6,130 ) ( 6,702 ) Total other income (expense) ( 5,237 ) ( 6,093 ) Loss before income taxes ( 76,764 ) ( 50,135 ) Income Tax Benefit (Expense) 41 ( 4 ) Net loss $ ( 76,723 ) $ ( 50,139 ) Other Comprehensive Loss Unrealized loss on available-for-sale securities, net ( 9,381 ) ( 1,008 ) Total other comprehensive loss ( 9,381 ) ( 1,008 ) Comprehensive loss $ ( 86,104 ) $ ( 51,147 ) Net loss per share, basic and diluted $ ( 1.79 ) $ ( 1.20 ) Weighted-average common shares outstanding, basic and diluted 42,944 41,819 The accompanying notes are an integral part of these unaudited consolidated financial statements. 4 Table of Contents REGENXBIO INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited) (in thousands) Three Months Ended March 31, 2022 Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders’ Shares Amount Capital Loss Deficit Equity Balances at December 31, 2021 42,831 $ 4 $ 928,095 $ ( 2,569 ) $ ( 161,232 ) $ 764,298 Vesting of restricted stock units, net of tax 52 — ( 284 ) — — ( 284 ) Exercise of stock options, net of tax 76 — 337 — — 337 Issuance of common stock under employee stock purchase plan 22 — 622 — — 622 Stock-based compensation expense — — 10,800 — — 10,800 Unrealized loss on available-for-sale securities, net — — — ( 9,381 ) — ( 9,381 ) Net loss — — — — ( 76,723 ) ( 76,723 ) Balances at March 31, 2022 42,982 $ 4 $ 939,570 $ ( 11,950 ) $ ( 237,955 ) $ 689,669 Three Months Ended March 31, 2021 Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders’ Shares Amount Capital Loss Deficit Equity Balances at December 31, 2020 37,476 $ 4 $ 667,181 $ ( 360 ) $ ( 289,072 ) $ 377,753 Issuance of common stock upon public offering, net of transaction costs of $ 14,194 4,899 — 216,059 — — 216,059 Exercise of stock options 111 — 1,292 — — 1,292 Issuance of common stock under employee stock purchase plan 19 — 627 — — 627 Stock-based compensation expense — — 9,920 — — 9,920 Unrealized loss on available-for-sale securities, net — — — ( 1,008 ) — ( 1,008 ) Net loss — — — — ( 50,139 ) ( 50,139 ) Balances at March 31, 2021 42,505 $ 4 $ 895,079 $ ( 1,368 ) $ ( 339,211 ) $ 554,504 The accompanying notes are an integral part of these unaudited consolidated financial statements. 5 Table of Contents REGENXBIO INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands) Three Months Ended March 31, 2022 2021 Cash flows from operating activities Net loss $ ( 76,723 ) $ ( 50,139 ) Adjustments to reconcile net loss to net cash used in operating activities Stock-based compensation expense 10,800 9,920 Depreciation and amortization 2,591 1,929 Provision for credit losses — 565 Net amortization of premiums on marketable debt securities 1,460 1,288 Net gains on investments — ( 7 ) Imputed interest income from licensing ( 94 ) ( 29 ) Non-cash interest expense 54 3,786 Other non-cash adjustments ( 43 ) ( 154 ) Changes in operating assets and liabilities Accounts receivable 5,689 1,618 Prepaid expenses 210 ( 3,334 ) Other current assets 3,042 ( 873 ) Operating lease right-of-use assets 979 1,232 Other assets ( 2,101 ) ( 3,789 ) Accounts payable 16,755 278 Accrued expenses and other current liabilities ( 26,473 ) ( 10,544 ) Operating lease liabilities 1,008 4,244 Other liabilities 6,935 ( 38 ) Net cash used in operating activities ( 55,911 ) ( 44,047 ) Cash flows from investing activities Purchases of marketable debt securities ( 129,486 ) ( 233,627 ) Maturities of marketable debt securities 49,862 50,465 Purchases of property and equipment ( 10,967 ) ( 31,021 ) Net cash used in investing activities ( 90,591 ) ( 214,183 ) Cash flows from financing activities Proceeds from exercise of stock options 337 1,292 Taxes paid related to net settlement of stock-based awards ( 284 ) — Proceeds from issuance of common stock under employee stock purchase plan 622 627 Proceeds from public offering of common stock, net of underwriting discounts and commissions — 216,438 Issuance costs for public offering of common stock — ( 251 ) Repayments under liability related to sale of future royalties, net of imputed interest ( 7,509 ) ( 6,555 ) Transaction costs for sale of future royalties — ( 265 ) Net cash provided by (used in) financing activities ( 6,834 ) 211,286 Net decrease in cash and cash equivalents and restricted cash ( 153,336 ) ( 46,944 ) Cash and cash equivalents and restricted cash Beginning of period 347,239 339,756 End of period $ 193,903 $ 292,812 The accompanying notes are an integral part of these unaudited consolidated financial statements. 6 Table of Contents REGENXBIO INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Nature of Business REGENXBIO Inc. (the Company) is a clinical-stage biotechnology company seeking to improve lives through the curative potential of gene therapy. 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, 2022, 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 a number of licensed products. Additionally, the Company has licensed intellectual property rights to collaborators for the joint development and commercialization of certain product candidates. The Company was formed in 2008 in the State of Delaware and is headquartered in Rockville, Maryland. As of March 31, 2022, the Company had generated an accumulated deficit of $ 238.0 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, 2022, the Company had cash, cash equivalents and marketable securities of $ 764.8 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. 2. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation 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, 2021 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 1, 2022. 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. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year, any other interim periods, or any future year or period. These interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2021, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates 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 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, accrued research and development expenses and other accrued liabilities, stock-based compensation expense, interest expense under the liability related to the sale of future royalties, income taxes and the fair value of financial instruments. 7 Table of Contents 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 remains 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. Restricted Cash Restricted cash includes money market mutual funds and other deposits used to collateralize irrevocable letters of credit required under the Company’s lease agreements and other certain agreements. 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): Three Months Ended March 31, 2022 2021 Cash and cash equivalents $ 191,873 $ 291,482 Restricted cash 2,030 1,330 Total cash and cash equivalents and restricted cash $ 193,903 $ 292,812 Accounts Receivable Accounts receivable primarily consist of consideration due to the Company resulting from its license agreements with customers. Accounts receivable include amounts invoiced to licensees as well as rights to consideration which have not yet been invoiced, including unbilled royalties, and for which payment is conditional solely upon the passage of time. If a licensee elects to terminate a license prior to the end of the license term, the licensed intellectual property is returned to the Company and any accounts receivable from the licensee which are not contractually payable to the Company are charged off as a reduction of license revenue in the period of the termination. Accounts receivable which are not expected to be received by the Company within 12 months from the reporting date are stated net of a discount to present value and recorded as non-current assets on the consolidated balance sheets. The present value discount is recognized as a reduction of revenue in the period in which the accounts receivable are initially recorded and is accreted as interest income from licensing over the term of the receivables. Accounts receivable are stated net of an allowance for credit losses, if deemed necessary based on the Company’s evaluation of collectability and potential credit losses. 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 credit losses is recorded against accounts receivable such that the carrying value of accounts receivable reflects the net amount expected to be collected. Accounts receivable balances are written off against the allowance for credit losses when the potential for collectability is considered remote. Please refer to Note 8 for further information regarding the allowance for credit losses related to accounts receivable. Fair Value of Financial Instruments The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures , establishes a hierarchy of inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below: • Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. • Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly. • Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable. 8 Table of Contents To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The fair values of the Company’s Level 2 instruments are based on quoted market prices or broker or dealer quotations for similar assets. These investments are initially valued at the transaction price and subsequently valued utilizing third party pricing providers or other market observable data. Please refer to Note 4 for further information on the fair value measurement of the Company’s financial instruments. 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. Correction of Previously Issued Financial Statements During the quarter ended December 31, 2021, the Company identified an immaterial error in the presentation of payments made under the liability related to the sale of future royalties in the consolidated statements of cash flows for the three months ended March 31, 2021, six months ended June 30, 2021 and nine months ended September 30, 2021. Payments made under the liability related to the sale of future royalties were presented as cash outflows from financing activities in the interim financial statements for these periods. Upon further review, the Company determined that the amount of these payments attributable to imputed interest expense should be presented as cash outflows from operating activities, and only the amount attributable to principal repayments should be presented as cash outflows from financing activities. The amounts previously reported as cash outflows from financing activities which should have been reported as cash outflows from operating activities were $ 2.9 million for the three months ended March 31, 2021, $ 9.1 million for the six months ended June 30, 2021 and $ 15.3 million for the nine months ended September 30, 2021. The Company evaluated the materiality of these errors from both a quantitative and qualitative perspective and concluded that they were immaterial to the aforementioned previously issued interim financial statements taken as a whole. The error in presentation did not have an impact on the financial statements for any periods prior to 2021, and did not have an impact on the previously reported assets, liabilities, stockholders’ equity or results of operations for the interim periods ended March 31, 2021, June 30, 2021 and September 30, 2021. Although the Company determined the error was not material to its previously issued interim financial statements for 2021, the Company is revising the previously issued interim financial statements to correct for such error, which revision has been effected in the accompanying consolidated statement of cash flows for the three months ended March 31, 2021, and will be effected in connection with its future filings of Form 10-Q for the interim periods ended June 30, 2022 and September 30, 2022. The accompanying consolidated statement of cash flows for the three months ended March 31, 2021 reflects the as corrected impact of correcting the error, resulting in an increase in net cash used in operating activities and a corresponding increase in net cash provided by financing activities of $ 2.9 million as compared to the previously issued interim financial statements for the period ended March 31, 2021. 3. Marketable Securities The following tables present a summary of the Company’s marketable securities, which consist solely of available-for-sale debt securities (in thousands): Amortized Cost Unrealized Gains Unrealized Losses Fair Value March 31, 2022 U.S. government and agency securities $ 175,578 $ — $ ( 2,041 ) $ 173,537 Certificates of deposit 3,664 — ( 73 ) 3,591 Corporate bonds 404,768 6 ( 8,982 ) 395,792 $ 584,010 $ 6 $ ( 11,096 ) $ 572,920 9 Table of Contents Amortized Cost Unrealized Gains Unrealized Losses Fair Value December 31, 2021 U.S. government and agency securities $ 60,118 $ — $ ( 229 ) $ 59,889 Certificates of deposit 2,936 2 ( 11 ) 2,927 Corporate bonds 442,792 62 ( 1,533 ) 441,321 $ 505,846 $ 64 $ ( 1,773 ) $ 504,137 As of March 31, 2022 and December 31, 2021, 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, 2022 and December 31, 2021, the balance in 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 . 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, 2022 2021 Unrealized loss before reclassifications $ ( 9,381 ) $ ( 1,001 ) Realized gains reclassified to investment income — ( 7 ) Income tax expense — — Unrealized loss on available-for-sale securities, net $ ( 9,381 ) $ ( 1,008 ) 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): Less than 12 Months 12 Months or Greater Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses March 31, 2022 U.S. government and agency securities $ 173,537 $ ( 2,041 ) $ — $ — $ 173,537 $ ( 2,041 ) Certificates of deposit 3,591 ( 73 ) — — 3,591 ( 73 ) Corporate bonds 318,265 ( 7,503 ) 72,721 ( 1,479 ) 390,986 ( 8,982 ) $ 495,393 $ ( 9,617 ) $ 72,721 $ ( 1,479 ) $ 568,114 $ ( 11,096 ) Less than 12 Months 12 Months or Greater Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses December 31, 2021 U.S. government and agency securities $ 59,889 $ ( 229 ) $ — $ — $ 59,889 $ ( 229 ) Certificates of deposit 2,195 ( 11 ) — — 2,195 ( 11 ) Corporate bonds 385,115 ( 1,533 ) — — 385,115 ( 1,533 ) $ 447,199 $ ( 1,773 ) $ — $ — $ 447,199 $ ( 1,773 ) As of March 31, 2022, available-for-sale debt securities held by the Company which were in an unrealized loss position consisted of 132 investment grade security positions. The Company has the intent and ability to hold such securities until recovery, and based on 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 record an allowance for credit losses on its available-for-sale debt securities as of March 31, 2022 or December 31, 2021. The Company did no t recognize any impairment or credit losses on available-for-sale debt securities during the three months ended March 31, 2022 and 2021. 10 Table of Contents 4. Fair Value of Financial Instruments Financial instruments reported at fair value on a recurring basis include cash equivalents and marketable securities. The following tables present the fair value of cash equivalents and marketable securities in accordance with the hierarchy discussed in Note 2 (in thousands): Quoted Significant prices other Significant in active observable unobservable markets inputs inputs (Level 1) (Level 2) (Level 3) Total March 31, 2022 Cash equivalents: Money market mutual funds $ — $ 124,116 $ — $ 124,116 Total cash equivalents — 124,116 — 124,116 Marketable securities: U.S. government and agency securities — 173,537 — 173,537 Certificates of deposit — 3,591 — 3,591 Corporate bonds — 395,792 — 395,792 Total marketable securities — 572,920 — 572,920 Total cash equivalents and marketable securities $ — $ 697,036 $ — $ 697,036 Quoted Significant prices other Significant in active observable unobservable markets inputs inputs (Level 1) (Level 2) (Level 3) Total December 31, 2021 Cash equivalents: Money market mutual funds $ — $ 236,340 $ — $ 236,340 Total cash equivalents — 236,340 — 236,340 Marketable securities: U.S. government and agency securities — 59,889 — 59,889 Certificates of deposit — 2,927 — 2,927 Corporate bonds — 441,321 — 441,321 Total marketable securities — 504,137 — 504,137 Total cash equivalents and marketable securities $ — $ 740,477 $ — $ 740,477 Management estimates that the carrying values of its current accounts receivable, other current assets, accounts payable, 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. Certain non-current payables reported as other liabilities on the consolidated balance sheets are recorded at their present values using a discount rate that is based on prevailing market rates and the credit profile of the Company 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 materially different from those that would be used as of March 31, 2022 to determine the present value of these receivables and liabilities. Accordingly, management estimates that the carrying values of its non-current accounts receivable and other liabilities approximate the fair value of those instruments. Management estimates that the carrying value of the liability related to the sale of future royalties approximates fair value. As discussed in Note 6, the carrying value of the liability related to the sale of future royalties is based on the Company’s estimate of future royalties expected to be paid to HCR over the life of the arrangement, which are considered Level 3 inputs. Non-marketable Equity Securities 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, 2022 and December 31, 2021, 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, 2022 and 2021. 11 Table of Contents 5. Property and Equipment, Net Property and equipment, net consists of the following (in thousands): March 31, 2022 December 31, 2021 Laboratory and manufacturing equipment $ 61,043 $ 56,976 Computer equipment and software 4,545 4,268 Furniture and fixtures 6,839 6,804 Leasehold improvements 94,462 92,535 Total property and equipment 166,889 160,583 Accumulated depreciation and amortization ( 31,625 ) ( 29,036 ) Property and equipment, net $ 135,264 $ 131,547 6. 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 no obligation to repay any amounts to HCR if total future Zolgensma royalty payments are not sufficient to achieve the applicable Cap Amount prior to the termination of the license agreement with Novartis Gene Therapies. 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 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 interest expense under the Royalty Purchase Agreement based on its estimate of future royalty payments to be received by HCR. As of March 31, 2022, the estimated effective interest rate under the agreement was 14.8 %. 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. 12 Table of Contents 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): Liability Related to Sale of Future Royalties Balance at December 31, 2021 $ 171,349 Zolgensma royalties paid to HCR ( 13,586 ) Interest expense recognized 6,103 Balance at March 31, 2022 163,866 Current portion of liability related to sale of future royalties ( 41,352 ) Liability related to sale of future royalties, non-current $ 122,514 7. Commitments and Contingencies The Trustees of the University of Pennsylvania In February 2009, the Company entered into a license agreement, which has been amended from time to time, with The Trustees of the University of Pennsylvania (together with the University of Pennsylvania, Penn) (the Penn License) for exclusive, worldwide rights to certain patents owned by Penn underlying the Company’s NAV Technology Platform, as well as exclusive rights to certain data, results and other information. In March 2022, the Company and Penn entered into a letter agreement (the Penn Letter Agreement) pursuant to which the Company will pay to Penn a total of $ 20.0 million, consisting of (i) $ 8.0 million to satisfy payment of any sublicense fees due or owed in the future under the Penn License as a result of the Company’s collaboration and license agreement with AbbVie Global Enterprises Ltd., which is payable within 30 days of the effective date of the Penn Letter Agreement, and (ii) $ 12.0 million to satisfy any other past or future obligations of the Company to pay sublicense fees under the Penn License, which is payable in four equal annual installments of $ 3.0 million beginning on first anniversary of the effective date of the Penn Letter Agreement. The Penn Letter Agreement amended the Penn License to remove the Company’s obligations to pay sublicense fees under the license agreement. The Company will continue to be obligated to pay Penn royalties on net sales of licensed products, milestone fees and reimbursement of certain patent maintenance costs in accordance with the Penn License. In connection with the execution of the Penn Letter Agreement, the Company’s royalty obligations under its March 2009 license agreement with GlaxoSmithKline LLC (GSK) (the GSK License) were assigned by GSK to Penn. Beginning upon the effective date of the Penn Letter Agreement in March 2022, any royalties payable by the Company under the GSK License will be paid to Penn rather than GSK. The Company will continue to be obligated to pay GSK sublicense fees and reimbursement of certain patent maintenance costs in accordance with the GSK License. The Company recognized a charge of $ 9.2 million as cost of revenues during the three months ended March 31, 2022 related to the execution of Penn Letter Agreement, which consisted of $ 17.3 million representing the present value of the $ 20.0 million payable under the Penn Letter Agreement, less $ 8.1 million in sublicense fees previously recognized as expense by the Company in prior periods and accrued as liabilities prior to the effectiveness of the Penn Letter Agreement. The present value discount is accreted as interest expense over the contractual payment period using the effective interest method. In addition to other amounts payable under the Penn License, as of March 31, 2022, the Company had recorded a total of $ 17.4 million payable to Penn under the Penn Letter Agreement, net of present value discount, of which $ 10.0 million was included in accounts payable and accrued expenses and other current liabilities and $ 7.4 million was included in other liabilities on the consolidated balance sheet. 13 Table of Contents 8. License and Collaboration Agreements License and Royalty Revenue As of March 31, 2022, the Company’s NAV Technology Platform was being applied by NAV Technology Licensees in one commercially available product, Zolgensma, and in the development of a number of licensed products. Additionally, the Company has licensed intellectual property rights to collaborators for the joint development of certain product candidates. Consideration to the Company under its license agreements may include: (i) up-front and annual fees, (ii) milestone payments based on the achievement of certain development and sales-based milestones, (iii) sublicense fees, (iv) royalties on sales of licensed products and (v) other consideration payable upon optional goods and services purchased by licensees. Sublicense fees vary by license and range from a mid-single digit percentage to a low-double digit percentage of license fees received by licensees as a result of sublicenses. Royalties on net sales of commercialized products vary by license and range from a mid-single digit percentage to a low double-digit percentage of net sales by licensees. License and royalty revenue consisted of the following (in thousands): Three Months Ended March 31, 2022 2021 Zolgensma royalties $ 21,539 $ 18,263 Other license and royalty revenue 679 621 Total license and royalty revenue $ 22,218 $ 18,884 Development milestone payments are evaluated each reporting period and are only included in the transaction price of each license and recognized as license revenue to the extent the milestones are considered probable of achievement. 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, 2022, 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 $ 1.58 billion, including (i) $ 537.8 million upon the commencement of various stages of clinical trials, (ii) $ 21.0 million upon the submission of regulatory approval filings, (iii) $ 141.0 million upon the approval of commercial products by regulatory agencies and (iv) $ 877.0 million upon the achievement of specified sales targets for licensed products, including milestones payable upon the first commercial sales of 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 these milestones 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. 14 Table of Contents 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, 2022 2021 Accounts receivable, net, current and non-current: Balance, beginning of period $ 34,701 $ 46,266 Additions 28,057 18,718 Deductions ( 33,652 ) ( 21,086 ) Balance, end of period $ 29,106 $ 43,898 Contract assets: Balance, beginning of period $ 1,074 $ 350 Additions 602 649 Deductions ( 550 ) ( 350 ) Balance, end of period $ 1,126 $ 649 Deferred revenue, current and non-current: Balance, beginning of period $ 3,333 $ 4,232 Additions — — Deductions — ( 108 ) Balance, end of period $ 3,333 $ 4,124 Revenue recognized during the period from: Amounts included in deferred revenue at beginning of period $ — $ 108 Performance obligations satisfied in previous periods $ 21,541 $ 18,651 Additions to accounts receivable during the periods presented consisted primarily of royalties on net sales of Zolgensma and the achievement of development milestones by licensees 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 of development milestones deemed probable of achievement by licensees during the period and revenue recognized from research and development services performed by the Company for which payment by the licensee is not unconditional. Deductions to contract assets during the periods presented consisted of the achievement of development milestones by licensees and billing of the associated milestone payments by the Company. Contract assets as of March 31, 2022 and December 31, 2021 are included in other current assets on the consolidated balance sheets. As of March 31, 2022, 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 consisted of (i) options granted to licensees that provide material rights to 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 royalties and 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. 15 Table of Contents Accounts Receivable, Contract Assets and the Allowance for Credit Losses Accounts receivable, net consisted of the following (in thousands): March 31, 2022 December 31, 2021 Current accounts receivable: Billed to customers $ 440 $ 365 Unbilled 26,582 32,074 Allowance for credit losses — — Current accounts receivable, net 27,022 32,439 Non-current accounts receivable: Unbilled 5,937 6,020 Allowance for credit losses ( 3,853 ) ( 3,758 ) Non-current accounts receivable, net 2,084 2,262 Total accounts receivable, net $ 29,106 $ 34,701 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, 2022 (in thousands): Allowance for Credit Losses Accounts Receivable Contract Assets Balance at December 31, 2021 $ 3,758 $ — Provision for credit losses — — Changes in present value discount of receivables 95 — Write-offs — — Balance at March 31, 2022 $ 3,853 $ — The Company’s allowance for credit losses as of March 31, 2022 and December 31, 2021 was related solely to accounts receivable from Abeona Therapeutics Inc. (Abeona). 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 was zero and $ 0.6 million for the three months ended March 31, 2022 and 2021, respectively, and was related solely to changes in estimates regarding the collectability of the accounts receivable due from Abeona. Zolgensma License with Novartis Gene Therapies 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, 2022 2021 Zolgensma royalties $ 21,539 $ 18,263 Total license and royalty revenue $ 21,539 $ 18,263 Interest income from licensing $ 5 $ 6 As of March 31, 2022 and December 31, 2021, the Company had recorded total accounts receivable of $ 21.0 million and $ 26.6 million, respectively, from Novartis Gene Therapies under the March 2014 License, which consisted primarily of Zolgensma royalties receivable. The Zolgensma royalties receivable recorded as of March 31, 2022 included $ 14.3 million expected to be paid to HCR in accordance with the Royalty Purchase Agreement discussed in Note 6. The Company recognizes royalty revenue from net sales of Zolgensma in the period in which the underlying products are sold by Novartis Gene Therapies, which in certain cases may require the 16 Table of Contents Company to estimate royalty revenue for periods of net sales which have not yet been reported to the Company. Estimated royalties are reconciled to actual amounts reported in subsequent periods and royalty revenues are adjusted, as necessary. Settlement Agreement with Abeona Therapeutics In November 2018, the Company entered into a license agreement with Abeona (as amended, the November 2018 License) for the treatment 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. Abeona failed to make this payment, and in April 2020, the Company delivered to Abeona a notice of its breach of the license agreement and written demand for payment. Upon expiration of the applicable cure period in May 2020, the license agreement terminated. As a result of the termination, Abeona was required to pay an additional $ 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. Unpaid balances due under the November 2018 License accrue interest at 1.5 % per month. In May 2020, after 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 disputed Abeona’s claim and filed a counterclaim in arbitration demanding payment of the $ 28.0 million of unpaid fees from Abeona, plus accrued interest. A binding arbitration was held in March 2021, and the arbitration tribunal issued its ruling in July 2021, which denied Abeona’s claim and upheld the Company’s counterclaim. The arbitration tribunal’s ruling, which was subsequently amended to reflect a minor adjustment in the computation of accrued interest, awarded the Company a total of $ 33.6 million in damages and accrued interest payable by Abeona. Subsequent to the arbitration tribunal’s ruling in July 2021, Abeona filed an additional claim in a second arbitration to enforce a purported settlement relating to the unpaid fees, which the Company disputed. In November 2021, the Company and Abeona entered into a settlement agreement and mutual release (the Settlement Agreement) to resolve all arbitration and legal proceedings and mutually release each party from any and all claims under the November 2018 License. Pursuant to the Settlement Agreement, Abeona will pay the Company a total of $ 30.0 million as follows: (i) $ 20.0 million which was paid in November 2021, (ii) $ 5.0 million payable in November 2022, which is fully secured by an irrevocable standby letter of credit issued to the Company by a reputable U.S. financial institution, and (iii) $ 5.0 million payable on the earlier of the third anniversary of the Settlement Agreement in November 2024 or the closing of a specified type of transaction by Abeona. As of March 31, 2022 and December 31, 2021, the Company had recorded gross accounts receivable of $ 8.9 million and $ 8.8 million, respectively, from Abeona under the Settlement Agreement. The gross accounts receivable of $ 8.9 million as of March 31, 2022 consisted of current accounts receivable of $ 5.0 million for the payment due in November 2022, and non-current accounts receivable of $ 3.9 million for the present value of the $ 5.0 million payment due by November 2024. While the Company anticipates taking appropriate measures to enforce the full collection of all amounts due from Abeona under the Settlement Agreement, the Company assessed the collectability of the accounts receivable 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 the contractual obligations of the Settlement Agreement. As a result of its analysis, the Company recorded an allowance for credit losses of $ 3.9 million and $ 3.8 million as of March 31, 2022 and December 31, 2021, respectively, related to the non-current accounts receivable due from Abeona. The Company recorded a provision for credit losses of zero and $ 0.6 million for the three months ended March 31, 2022 and 2021, respectively, as a result of changes in estimates regarding the allowance during the periods. The present value discount of the non-current accounts receivable from Abeona is accreted as interest income from licensing through the contractual due date using the effective interest method. The Company has elected to record increases in the allowance for credit losses associated with the accretion of the present value discount of the receivable as a reduction of the associated interest income, resulting in no interest income recognized during the periods related to the accretion of the present value discount on the non-current receivable from Abeona. AbbVie Collaboration and License Agreement In September 2021, the Company entered into a collaboration and license agreement with AbbVie Global Enterprises Ltd. (AbbVie), a subsidiary of AbbVie Inc., to jointly develop and commercialize RGX-314, the Company’s product candidate for the treatment of wet AMD, DR and other chronic retinal diseases (the AbbVie Collaboration Agreement). The AbbVie Collaboration Agreement became effective in November 2021. Pursuant to the AbbVie Collaboration Agreement, the Company granted AbbVie a co-exclusive license to develop and commercialize RGX-314 in the United States and an exclusive license to develop and commercialize RGX-314 outside the United States. The Company and AbbVie will collaborate to develop RGX-314 in the United States, and AbbVie will be responsible for the 17 Table of Contents development of RGX-314 in specified markets outside the United States. Through December 31, 2022, the Company will be responsible for development expenses for certain ongoing trials of RGX-314 and the parties will share additional development expenses related to RGX-314. Beginning on January 1, 2023, AbbVie will be responsible for the majority of all RGX-314 development expenses. The Company will lead the manufacturing of RGX-314 for clinical development and U.S. commercial supply, and AbbVie will lead the manufacturing of RGX-314 for commercial supply outside the United States. Manufacturing expenses will be allocated between the parties in accordance with the terms of the AbbVie Collaboration Agreement and supply agreements determined in accordance with the agreement. If requested by AbbVie, the Company will manufacture up to a specified portion of RGX-314 for commercial supply outside the United States at a price specified in the agreement. AbbVie will lead the commercialization of RGX-314 globally, and the Company will participate in U.S. commercialization efforts as provided under a commercialization plan determined in accordance with the agreement. The Company and AbbVie will share equally in the net profits and net losses associated with the commercialization of RGX-314 in the United States. Outside the United States, AbbVie will be responsible, at its sole cost, for the commercialization of RGX-314. In consideration for the rights granted under the AbbVie Collaboration Agreement, AbbVie paid the Company an up-front fee of $ 370.0 million upon the effective date of the agreement in November 2021, and is required to pay to the Company up to $ 1.38 billion upon the achievement of specified development and sales-based milestones, of which $ 562.5 million are based on development milestones and $ 820.0 million are sales-based milestones. AbbVie is also required to pay to the Company tiered royalties on net sales of RGX-314 outside the United States at percentages in the mid-teens to low twenties, subject to specified offsets and reductions. The Company applied the requirements of Topic 606 to the AbbVie Collaboration Agreement for the units of account in which AbbVie was deemed to be a customer. The Company determined that there is only one material performance obligation under the agreement for the delivery of the intellectual property license to develop and commercialize RGX-314 globally. The intellectual property licensed to AbbVie includes the rights to certain patents, data, know-how and other rights developed and owned by the Company, as well as other intellectual property rights exclusively licensed by the Company from various third parties. As of March 31, 2022 and December 31, 2021, the transaction price of the AbbVie Collaboration Agreement was $ 370.0 million, which consisted solely of the up-front payment received in November 2021. The $370.0 million transaction price was fully recognized as revenue upon the delivery of the license to AbbVie in November 2021. Variable consideration under the AbbVie Collaboration Agreement, which has been excluded from the transaction price, includes $ 562.5 million in payments for development milestones that have not yet been achieved and were not considered probable of achievement. Additionally, the transaction price excludes sales-based milestone payments of $ 820.0 million and royalties on net sales of RGX-314 outside the United States. Development milestones will be added to the transaction price and recognized as revenue upon achievement, or if deemed probable of achievement. In accordance with the sale- or usage-based royalty exception under Topic 606, royalties on net sales and sales-based milestones will be recognized as revenue in the period the underlying sales occur or milestones are achieved. There were no changes in the transaction price of the AbbVie Collaboration Agreement, and no revenue was recognized, during the three months ended March 31, 2022. The Company applied the requirements of Topic 808 to the AbbVie Collaboration Agreement for the units of account which were deemed to be a collaborative arrangement. Both the Company and AbbVie will perform various activities related to the development, manufacturing and commercialization of RGX-314 in the United States. Development costs are shared between the parties in accordance with the terms of the AbbVie Collaboration Agreement, and the parties will share equally in the net profits and losses derived from sales of RGX-314 in the United States. The Company accounts for payments to and from AbbVie for the sharing of development and commercialization costs in accordance with its accounting policy for collaborative arrangements. Amounts owed to AbbVie for the Company’s share of development costs or commercialization costs incurred by AbbVie are recorded as research and development expense or general and administrative expense, respectively, in the period the costs are incurred. Amounts owed to the Company for AbbVie’s share of development costs or commercialization costs incurred by the Company are recorded as a reduction of research and development expense or general and administrative expense, respectively, in the period the costs are incurred. At the end of each reporting period, the Company records a net amount due to or from AbbVie as a result of the cost-sharing arrangement. As of March 31, 2022 and December 31, 2021, the Company had recorded $ 3.1 million and $ 5.9 million, respectively, due from AbbVie for reimbursement of costs incurred for activities performed under AbbVie Collaboration Agreement, which is included in other current assets on the consolidated balance sheets. 18 Table of Contents The Company recognized the following amounts under the AbbVie Collaboration Agreement (in thousands): Three Months Ended March 31, 2022 Net cost reimbursement from AbbVie for collaboration activities included in: Research and development expense $ 2,882 General and administrative expense 92 Total net cost reimbursement from AbbVie $ 2,974 9. Stock-based Compensation In January 2022, the Board of Directors authorized an additional 1,713,246 shares to be issued under the 2015 Equity Incentive Plan (the 2015 Plan). As of March 31, 2022, the total number of shares of common stock authorized for issuance under the 2015 Plan and the 2014 Stock Plan (the 2014 Plan) was 15,625,200 , of which 2,693,341 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, 2022 2021 Stock options $ 9,267 $ 9,015 Restricted stock units 1,254 679 Employee stock purchase plan 279 226 $ 10,800 $ 9,920 As of March 31, 2022, the Company had $ 88.9 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 2.7 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, 2022 2021 Research and development $ 5,670 $ 5,031 General and administrative 5,130 4,889 $ 10,800 $ 9,920 Stock Options The following table summarizes stock option activity under the 2014 Plan and 2015 Plan (in thousands, except per share data): Weighted- average Weighted- Remaining average Contractual Aggregate Exercise Life Intrinsic Shares Price (Years) Value (a) Outstanding at December 31, 2021 7,126 $ 34.16 6.8 $ 41,128 Granted 1,224 $ 33.93 Exercised ( 80 ) $ 4.61 Cancelled or forfeited ( 98 ) $ 38.57 Outstanding at March 31, 2022 8,172 $ 34.37 7.1 $ 40,352 Exercisable at March 31, 2022 5,028 $ 31.52 6.0 $ 39,522 Vested and expected to vest at March 31, 2022 8,172 $ 34.37 7.1 $ 40,352 (a) 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. 19 Table of Contents The weighted-average grant date fair value per share of options granted during the three months ended March 31, 2022 was $ 20.37 . During the three months ended March 31, 2022, the total number of stock options exercised was 80,123 , resulting in total proceeds of $ 0.4 million. The total intrinsic value of options exercised during the three months ended March 31, 2022 was $ 1.8 million. Restricted Stock Units The following table summarizes restricted stock unit activity under the 2015 Plan (in thousands, except per share data): Weighted-average Grant Date Shares Fair Value Unvested balance at December 31, 2021 277 $ 43.62 Granted 265 $ 33.92 Vested ( 61 ) $ 44.94 Forfeited ( 10 ) $ 38.80 Unvested balance at March 31, 2022 471 $ 38.10 The total intrinsic value of restricted stock units vested during the three months ended March 31, 2022 was $ 2.0 million. No restricted stock units vested during the three months ended March 31, 2021. Employee Stock Purchase Plan In January 2022, the Board of Directors authorized an additional 428,311 shares to be issued under the 2015 ESPP. As of March 31, 2022, the total number of shares of common stock authorized for issuance under the 2015 ESPP was 1,426,994 , of which 1,175,112 remained available for future issuance. During the three months ended March 31, 2022, 22,373 shares of common stock were issued under the 2015 ESPP. 10. Income Taxes The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets as of March 31, 2022 and December 31, 2021. Based on the Company’s history of operating losses, and other relevant facts and circumstances, the Company concluded that it was 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, 2022 and December 31, 2021. 11. Related Party Transactions FOXKISER LLP Since 2016, the Company has been party to professional services agreements with FOXKISER LLP (FOXKISER), an affiliate of certain stockholders of the Company and an affiliate of a member of the Company’s Board of Directors, pursuant to which the Company pays a fixed monthly fee in consideration for certain strategic services provided by FOXKISER. 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 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’ advanced written notice. In December 2021, the Company provided notice of termination of the agreement to FOXKISER, with such termination to be effective in June 2022. Expenses incurred under the agreement with FOXKISER were $ 1.2 million and $ 1.2 million for the three months ended March 31, 2022 and 2021, respectively, and were recorded as research and development expenses in the consolidated statements of operations and comprehensive loss. 20 Table of Contents 12. Net Loss Per Share Since the Company incurred net losses for the three months ended March 31, 2022 and 2021, 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, 2022 2021 Stock options issued and outstanding 8,172 7,346 Unvested restricted stock units outstanding 471 254 Employee stock purchase plan 37 30 8,680 7,630 13. Supplemental Disclosures Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following (in thousands): March 31, 2022 December 31, 2021 Accrued income taxes payable $ 12,672 $ 11,325 Accrued external research and development expenses 10,855 11,783 Accrued sublicense fees and royalties 9,057 23,483 Accrued personnel costs 7,852 19,849 Accrued purchases of property and equipment 4,042 5,285 Accrued external general and administrative expenses 3,607 3,642 Other accrued expenses and current liabilities 338 744 $ 48,423 $ 76,111 Supplemental Disclosures of Non-cash Investing and Financing Activities Purchases of property and equipment included in accounts payable and accrued expenses and other current liabilities were $ 5.4 million as of March 31, 2022, a net decrease of $ 4.7 million from December 31, 2021, and $ 13.3 million as of March 31, 2021, a net increase of $ 3.8 million from December 31, 2020. Proceeds due to the Company for sales of non-marketable equity securities included in other current assets as of March 31, 2022 were $ 0.6 million. No such amounts were recorded as of March 31, 2021. 21 Table of Contents