What changed in this filing

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Item 1. Financial Statements

2022-08-03 compared with 2022-05-04 · 156 added, 125 removed, 445 unchanged (39% of the section changed)

3 unchanged sentences

(in thousands, except per share data)

March 31, 2022

June 30, 2022

December 31, 2021

27 unchanged sentences

10,000 shares authorized, no shares issued

and outstanding at March 31, 2022 and December 31, 2021

and outstanding at June 30, 2022 and December 31, 2021

Common stock;

$ 0.0001 par value;

100,000 shares authorized at March 31, 2022

100,000 shares authorized at June 30, 2022

and December 31, 2021;

43,171 and 42,831 shares issued and outstanding at

March 31, 2022 and December 31, 2021, respectively

June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

7 unchanged sentences

(in thousands, except per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

License and royalty revenue

14 unchanged sentences

Income Tax Benefit (Expense)

Other Comprehensive Loss

Unrealized loss on available-for-sale securities, net

Total other comprehensive loss

Other Comprehensive Income (Loss)

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

Total other comprehensive income (loss)

Comprehensive loss

5 unchanged sentences

(in thousands)

Three Months Ended March 31, 2022

Three Months Ended June 30, 2022

Comprehensive

Stockholders’

Balances at March 31, 2022

Vesting of restricted stock units, net of tax

Exercise of stock options, net of tax

Stock-based compensation expense

Unrealized loss on available-for-sale securities, net

Balances at June 30, 2022

Three Months Ended June 30, 2021

Comprehensive

Stockholders’

Balances at March 31, 2021

Exercise of stock options

Stock-based compensation expense

Unrealized gain on available-for-sale securities, net

Balances at June 30, 2021

Six Months Ended June 30, 2022

Comprehensive

Stockholders’

Balances at December 31, 2021

5 unchanged sentences

Unrealized loss on available-for-sale securities, net

Balances at March 31, 2022

Three Months Ended March 31, 2021

Balances at June 30, 2022

Six Months Ended June 30, 2021

Comprehensive

8 unchanged sentences

Unrealized loss on available-for-sale securities, net

Balances at March 31, 2021

Balances at June 30, 2021

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

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

4 unchanged sentences

Net amortization of premiums on marketable debt securities

Net gains on investments

Net loss (gain) on investments

Imputed interest income from licensing

8 unchanged sentences

Accrued expenses and other current liabilities

Deferred revenue

Operating lease liabilities

28 unchanged sentences

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.

As of June 30, 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 of June 30, 2022, the Company had generated an accumulated deficit of $ 306.1 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.

As of June 30, 2022, the Company had cash, cash equivalents and marketable securities of $ 682.0 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

20 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):

Three Months Ended March 31,

June 30, 2022

June 30, 2021

Cash and cash equivalents

40 unchanged sentences

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.

The accompanying consolidated statement of cash flows for the six months ended June 30, 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 $9.1 million as compared to the previously issued interim financial statements for the period ended June 30, 2021.

Marketable Securities

1 unchanged sentence

Amortized Cost

March 31, 2022

June 30, 2022

government and agency securities

6 unchanged sentences

Corporate bonds

As of March 31, 2022 and December 31, 2021, no available-for-sale debt securities had remaining maturities greater than three years.

As of June 30, 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.

As of June 30, 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,

Unrealized loss before reclassifications

Realized gains reclassified to investment income

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

Three Months Ended June 30,

Six Months Ended June 30,

Unrealized gain (loss) before reclassifications

Realized losses (gains) reclassified to investment income

Income tax expense

Unrealized loss on available-for-sale securities, net

Unrealized gain (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

March 31, 2022

June 30, 2022

government and agency securities

7 unchanged sentences

Corporate bonds

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.

As of June 30, 2022, available-for-sale debt securities held by the Company which were in an unrealized loss position consisted of 138 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.

The Company did no t record an allowance for credit losses on its available-for-sale debt securities as of June 30, 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 and six months ended June 30, 2022 and 2021.

Fair Value of Financial Instruments

1 unchanged sentence

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

March 31, 2022

June 30, 2022

Cash equivalents:

18 unchanged sentences

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.

Accounts receivable which contain non-current portions and certain non-current payables reported as other liabilities are recorded at their present values using a discount rate that is based on prevailing market rates on the date the amounts were 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 June 30, 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.

3 unchanged sentences

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.

As of June 30, 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 and six months ended June 30, 2022 and 2021.

Property and Equipment, Net

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

March 31, 2022

June 30, 2022

December 31, 2021

8 unchanged sentences

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.

Under the agreement, HCR purchased the Company’s rights to a capped amount of Zolgensma royalty payments under the Company’s license agreement (the Novartis License) 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.

Beginning upon the effective date of the Royalty Purchase Payment, Zolgensma royalty payments, up to a specified threshold, shall 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 Royalty Purchase 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 Novartis License.

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;

2 unchanged sentences

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.

The total amount of royalty payments received by HCR under the Royalty Purchase 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 Novartis License, 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 %.

As of June 30, 2022, the estimated effective interest rate under the Royalty Purchase Agreement was 17.0 %.

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.

6 unchanged sentences

Interest expense recognized

Balance at March 31, 2022

Balance at June 30, 2022

Current portion of liability related to sale of future royalties

3 unchanged sentences

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.

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 was 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 the 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 Penn License.

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.

2 unchanged sentences

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 Company recognized a charge of $ 9.2 million as cost of revenues upon the execution of Penn Letter Agreement in March 2022, 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.

In addition to other amounts payable under the Penn License, as of June 30, 2022, the Company had recorded a total of $ 9.6 million payable to Penn under the Penn Letter Agreement, net of present value discount, of which $ 2.1 million was included in accrued expenses and other current liabilities and $ 7.6 million was included in other liabilities on the consolidated balance sheet.

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.

As of June 30, 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.

4 unchanged sentences

License and royalty revenue consisted of the following (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Zolgensma royalties

1 unchanged sentence

Total license and royalty revenue

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.

Outstanding 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.

As of June 30, 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 $ 1.57 billion, including (i) $ 537.8 million upon the commencement of various stages of clinical trials, (ii) $ 19.0 million upon the submission of regulatory approval filings, (iii) $ 136.0 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.

2 unchanged sentences

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,

Three Months Ended June 30,

Six Months Ended June 30,

Accounts receivable, net, current and non-current:

10 unchanged sentences

Performance obligations satisfied in previous periods

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 accounts receivable during the periods presented consisted primarily of royalties on net sales of Zolgensma and receivables recorded in relation to new licenses granted by the Company, development milestones achieved by licensees, the performance of research and development services by the Company, and amounts billed to collaborators for reimbursement of collaboration activities.

Deductions to accounts receivable during the periods presented consisted primarily of amounts collected from licensees and collaborators.

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.

Deductions to contract assets during the periods presented consisted of amounts billed to licensees for the achievement of development milestones previously deemed probable of achievement and the billing of amounts recognized as revenue for the performance of research and development services for which payment is no longer conditional.

Contract assets recorded as of December 31, 2021 are included in other current assets on the consolidated balance sheet.

The Company did not record any contract assets as of June 30, 2022.

As of June 30, 2022, the Company had recorded deferred revenue of $ 6.6 million which represents consideration received or unconditionally due 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 a material right 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.

As of June 30, 2022, the aggregate transaction price of the Company’s license agreements allocated to performance obligations not yet satisfied, or partially satisfied, was $ 7.8 million, which is expected to be satisfied over a period of approximately 3 years.

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.

2 unchanged sentences

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

March 31, 2022

June 30, 2022

December 31, 2021

7 unchanged sentences

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 three months ended March 31, 2022 (in thousands):

The following table presents the changes in the allowance for credit losses related to accounts receivable and contract assets for the six months ended June 30, 2022 (in thousands):

Allowance for Credit Losses

4 unchanged sentences

Changes in present value discount of receivables

Balance at March 31, 2022

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.

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.

Balance at June 30, 2022

The Company’s allowance for credit losses as of June 30, 2022 and December 31, 2021 was related solely to accounts receivable from Abeona Therapeutics Inc.

Please refer to the section below, Settlement Agreement with Abeona Therapeutics, 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 and six months ended June 30, 2021, respectively, and was related solely to changes in estimates regarding the collectability of the accounts receivable due from Abeona.

No provision for credit losses was recorded for the three and six months ended June 30, 2022.

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,

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

Under the Novartis 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 Novartis 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 Novartis License (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Zolgensma royalties

Other license revenue

Total license and royalty revenue

Interest income from licensing

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

Company to estimate royalty revenue for periods of net sales which have not yet been reported to the Company.

As of June 30, 2022 and December 31, 2021, the Company had recorded total accounts receivable of $ 27.9 million and $ 26.6 million, respectively, from Novartis Gene Therapies under the Novartis License, which consisted primarily of Zolgensma royalties receivable.

The Zolgensma royalties receivable recorded as of June 30, 2022 included $ 14.9 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 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.

2 unchanged sentences

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.

Abeona failed to make this payment, and in April 2020, the Company delivered to Abeona a notice of its breach of the November 2018 License and written demand for payment.

Upon expiration of the applicable cure period in May 2020, the November 2018 License 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.

9 unchanged sentences

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.

As of June 30, 2022 and December 31, 2021, the Company had recorded gross accounts receivable of $ 9.0 million and $ 8.8 million, respectively, from Abeona under the Settlement Agreement.

The gross accounts receivable of $ 9.0 million as of June 30, 2022 consisted of current accounts receivable of $ 5.0 million for the payment due in November 2022, and non-current accounts receivable of $ 4.0 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.

As a result of its analysis, the Company recorded an allowance for credit losses of $ 4.0 million and $ 3.8 million as of June 30, 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 and six months ended June 30, 2021, respectively, as a result of changes in estimates regarding the allowance during the periods.

No provision for credit losses was recorded for the three and six months ended June 30, 2022.

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.

Collaboration Agreements

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).

(AbbVie), a subsidiary of AbbVie Inc., to jointly develop and commercialize RGX-314, the Company’s product candidate for the treatment of wet age-related macular degeneration (wet AMD), diabetic retinopathy (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

development of RGX-314 in specified markets 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 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.

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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.

As of June 30, 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.

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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.

There were no changes in the transaction price of the AbbVie Collaboration Agreement, and no revenue was recognized, during the three and six months ended June 30, 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.

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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.

The Company recognized the following amounts under the AbbVie Collaboration Agreement (in thousands):

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 June 30 , 2022 and December 31, 2021, the Company had recorded $ 5.1 million and $ 5.9 million, respectively, due from AbbVie for net reimbursement of costs incurred for activities performed under AbbVie Collaboration Agreement , which is included in accounts receivable and other current assets on the consolidated balance sheets.

The Company recognized the following amounts under the AbbVie Collaboration Agreement for the three and six months ended June 30, 2022 (in thousands):

Three Months Ended

March 31, 2022

Net cost reimbursement from AbbVie for collaboration activities included in:

Six Months Ended

June 30, 2022

Net cost reimbursement to (from) AbbVie included in:

Research and development expense

General and administrative expense

Total net cost reimbursement from AbbVie

Total net cost reimbursement to (from) AbbVie

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.

As of June 30, 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 2,692,656 remained available for future grants under the 2015 Plan.

Stock-based Compensation Expense

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Stock options

1 unchanged sentence

Employee stock purchase plan

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.

As of June 30, 2022, the Company had $ 79.2 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 2.5 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,

Three Months Ended June 30,

Six Months Ended June 30,

Research and development

4 unchanged sentences

Cancelled or forfeited

Outstanding at March 31, 2022

Exercisable at March 31, 2022

Vested and expected to vest at March 31, 2022

Outstanding at June 30, 2022

Exercisable at June 30, 2022

Vested and expected to vest at June 30, 2022

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

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

The weighted-average grant date fair value per share of options granted during the six months ended June 30, 2022 was $ 19.59 .

During the six months ended June 30, 2022, the total number of stock options exercised was 263,002 , resulting in total proceeds of $ 1.8 million.

The total intrinsic value of options exercised during the six months ended June 30, 2022 was $ 5.7 million.

Restricted Stock Units

2 unchanged sentences

Unvested balance at December 31, 2021

Unvested balance at March 31, 2022

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.

Unvested balance at June 30, 2022

The total intrinsic value of restricted stock units vested during the six months ended June 30, 2022 was $ 2.1 million.

No restricted stock units vested during the six months ended June 30, 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.

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.

As of June 30, 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 six months ended June 30, 2022, 22,373 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 as of June 30, 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.

Accordingly, the Company provided a full valuation allowance for its net deferred tax assets as of June 30, 2022 and December 31, 2021.

Related Party Transactions

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.

Since 2016, the Company was 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 paid 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.

Effective August 2020, the agreement was further amended to extend the term of the agreement.

In December 2021, the Company provided notice of termination of the agreement to FOXKISER, and the agreement was terminated effective June 2022.

Expenses incurred under the agreement with FOXKISER were $ 1.2 million and $ 2.4 million for the three and six months ended June 30, 2022, respectively, and $ 1.2 million and $ 2.4 million for the three and six months ended June 30, 2021, 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, 2022 and 2021, common stock equivalents were excluded from the calculation of diluted net loss per share as their effect would be anti-dilutive.

Since the Company incurred net losses for the three and six months ended June 30, 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,

Three and Six Months Ended June 30,

Stock options issued and outstanding

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

March 31, 2022

June 30, 2022

December 31, 2021

Accrued income taxes payable

Accrued external research and development expenses

Accrued sublicense fees and royalties

Accrued external research and development expenses

Accrued personnel costs

Accrued purchases of property and equipment

Accrued external general and administrative expenses

Accrued purchases of property and equipment

Accrued income taxes payable

Other accrued expenses and current liabilities

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.

Purchases of property and equipment included in accounts payable and accrued expenses and other current liabilities were $ 2.4 million as of June 30, 2022, a net decrease of $ 7.7 million from December 31, 2021, and $ 13.0 million as of June 30, 2021, a net increase of $ 3.5 million from December 31, 2020.

Proceeds due to the Company for sales of non-marketable equity securities included in other current assets as of June 30, 2022 were $ 0.6 million.

No such amounts were recorded as of June 30, 2021.

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