Cartesian Therapeutics, Inc. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2021. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management concluded that, as of December 31, 2021, our internal control over financial reporting was effective. Inherent Limitations of Internal Controls While we believe we have a robust and efficient system of internal and disclosure controls and procedures, our management, including our Chief Executive Officer and Chief Financial Officer, recognize that it is impossible for our disclosure controls and procedures or our internal controls to prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all 70 Table of Contents control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act during the three months ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Attestation Report of the Registered Public Accounting Firm This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm due to an exemption established for “smaller reporting companies.” Item 9B. Other Information None. 71 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance Incorporated by reference from the information in our Proxy Statement for our 2022 Annual Meeting of Stockholders, which we will file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates. Item 11. Executive Compensation Incorporated by reference from the information in our Proxy Statement for our 2022 Annual Meeting of Stockholders, which we will file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Incorporated by reference from the information in our Proxy Statement for our 2022 Annual Meeting of Stockholders, which we will file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates. Item 13. Certain Relationships and Related Transactions, and Director Independence Incorporated by reference from the information in our Proxy Statement for our 2022 Annual Meeting of Stockholders, which we will file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates. Item 14. Principal Accountant Fees and Services Incorporated by reference from the information in our Proxy Statement for our 2022 Annual Meeting of Stockholders, which we will file with the SEC within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates. 72 Table of Contents PART IV Item 15. Exhibits, Financial Statement Schedules (a)(1) Financial Statements See the “Index to Consolidated Financial Statements” on page F-1 below for the list of financial statements filed as part of this report. (a)(2) Financial Statement Schedules All financial schedules have been omitted because the required information is either presented in the consolidated financial statements filed as part of this Annual Report on Form 10-K or the notes thereto or is not required. (a)(3) Exhibits The following is a list of exhibits filed as part of this Annual Report on Form 10-K. Incorporated by Reference Exhibit Number Exhibit Description Form File No. Exhibit Filing Date 3.1 Restated Certificate of Incorporation of Selecta Biosciences, Inc. 8-K 001-37798 3.1 6/29/2016 3.2 Amended and Restated By-laws of Selecta Biosciences, Inc. 8-K 001-37798 3.2 9/30/2021 4.1 Specimen Stock Certificate evidencing the shares of common stock S-1 333-211555 4.2 5/24/2016 4.2 Form of Warrant to Purchase Shares of Series D Preferred Stock, dated August 9, 2013 or July 25, 2014, issued by the Registrant to Oxford Finance LLC and Square One Bank, together with a schedule of warrant holders S-1 333-211555 4.5 5/24/2016 4.3 Form of Warrant to Purchase Shares of Series E Preferred Stock, dated December 31, 2015, issued by the Registrant to Oxford Finance LLC and Square One Bank, together with a schedule of warrant holders S-1 333-211555 4.6 5/24/2016 4.4 Common Stock Purchase Warrant, dated June 27, 2017, by and between the Registrant and Timothy Springer, Ph.D. 8-K 001-37798 4.1 6/28/2017 4.5 Registration Rights Agreement, dated December 23, 2019, by and among the Registrant and the Investors named therein 8-K 001-37798 10.2 12/26/2019 4.6 Registration Rights Agreement, dated as of June 11, 2020, by and between the Registrant and Swedish Orphan Biovitrum AB (Publ) 10-Q 001-37798 4.1 8/6/2020 4.7 Registration Rights Agreement, dated as of June 11, 2020, by and between the Registrant and Swedish Orphan Biovitrum AB (Publ), as amended on November 4, 2020 10-Q 001-37798 4.2 11/5/2020 4.8 Form of Common Stock Purchase Warrant, dated December 23, 2019 8-K 001-37798 4.1 12/26/2019 4.9 Form of Warrant to Purchase Stock, dated August 31, 2020, issued by Selecta Biosciences, Inc. to Oxford Finance LLC and Silicon Valley Bank, together with a schedule of warrants. 8-K 001-37798 4.1 9/3/2020 73 Table of Contents 4.10 Description of Securities — — — Filed herewith 10.1# 2016 Incentive Award Plan and form of award agreements thereunder S-1/A 333-211555 10.2 6/8/2016 10.2# 2016 Employee Stock Purchase Plan S-1/A 333-211555 10.3 6/8/2016 10.3# 2018 Employment Inducement Incentive Award Plan, amended and restated, and forms agreement thereunder S-8 333-230501 10.1 3/25/2019 10.4# 2008 Stock Incentive Plan and form of award agreements thereunder S-1/A 333-211555 10.1 6/20/2016 10.5# Non-Employee Director Compensation Program 10-Q 001-37798 10.2 11/10/2021 10.6# Form of Indemnification Agreement for Directors and Officers S-1 333-211555 10.5 5/24/2016 10.7(a)† Exclusive Patent License Agreement, dated as of November 25, 2008, by and between the Registrant and the Massachusetts Institute of Technology S-1 333-211555 10.7(a) 5/24/2016 10.7(b)† First Amendment to Exclusive Patent License Agreement, dated as of January 12, 2010, by and between the Registrant and the Massachusetts Institute of Technology S-1 333-211555 10.7(b) 5/24/2016 10.7(c)† Letter Agreement, dated as of November 27, 2012, by and among the Registrant, Massachusetts Institute of Technology and Sanofi S-1 333-211555 10.7(c) 5/24/2016 10.7(d)† Letter Amendment, dated as of November 27, 2012, by and between the Registrant and the Massachusetts Institute of Technology S-1 333-211555 10.7(d) 5/24/2016 10.7(e)† Second Amendment to Exclusive Patent License Agreement, dated as of August 29, 2013, by and between the Registrant and the Massachusetts Institute of Technology S-1 333-211555 10.7(e) 5/24/2016 10.7(f)† Third Amendment to Exclusive Patent License Agreement, entered into on November 21, 2016 and effective as of November 18, 2016, by and between the Massachusetts Institute of Technology and the Registrant 8-K/A 001-37798 10.3(a) 12/14/2016 10.7(g)† Letter Agreement, dated as of December 2, 2016, by and between the Massachusetts Institute of Technology and the Registrant 8-K/A 001-37798 10.3(b) 12/14/2016 10.7(h)† Letter Agreement, dated as of December 2, 2016, by and among Spark Therapeutics, Inc., the Massachusetts Institute of Technology and the Registrant 8-K/A 001-37798 10.3(c) 12/14/2016 10.7(i)† Fourth Amendment to Exclusive Patent License Agreement, entered into on December 13, 2019, by and between the Massachusetts Institute of Technology and the Registrant 10-K 001-37798 10.7(i) 3/12/2020 10.7(j)† Fifth Amendment to Exclusive Patent License Agreement, dated as of May 15, 2020, by and between the Registrant and the Massachusetts Institute of Technology 10-Q 001-37798 10.1 8/6/2020 10.8† Amended and Restated License Agreement, dated as of May 31, 2017, by and between the Registrant and Shenyang Sunshine Pharmaceutical Co., Ltd. 10-Q 001-37798 10.6 8/11/2017 10.9† Manufacturing Services Agreement, dated as of August 1, 2014, by and between the Registrant and Shenyang Sunshine Pharmaceutical Co., Ltd. S-1 333-211555 10.10 5/24/2016 74 Table of Contents 10.10 Lease Agreement by and between BRE-BMR Grove LLC and Selecta Biosciences, Inc. dated July 23, 2019 10-Q 001-37798 10.3 11/8/2019 10.11# Employment Agreement, dated as of September 25, 2018, by and between the Registrant and Carsten Brunn, Ph.D. 8-K 001-37798 10.2 9/27/2018 10.12# Employment Agreement, dated as of June 6, 2016, by and between the Registrant and Takashi Kei Kishimoto S-1/A 333-211555 10.18 6/8/2016 10.13# Employment Agreement, dated as of June 6, 2016, by and between the Registrant and Lloyd Johnston, Ph.D. S-1/A 333-211555 10.21 6/8/2016 10.14# Employment Agreement, dated as of July 31, 2020, by and between the Registrant and Peter G. Traber, M.D 10-Q 001-37798 10.1 11/5/2020 10.15# Employment Agreement, dated September 3, 2021, by and between Selecta Biosciences, Inc. and Kevin Tan 10-Q 001-37798 10.1 11/10/2021 10.16† Stock Purchase Agreement, dated as of December 2, 2016, by and between Spark Therapeutics, Inc. and the Registrant 8-K/A 001-37798 10.2 12/14/2016 10.17† Feasibility Study and License Agreement by and between Asklepios BioPharmaceutical, Inc. and Selecta Biosciences, Inc. dated August 6, 2019 10-Q 001-37798 10.2 11/8/2019 10.18† License and Development Agreement, dated as of June 11, 2020, by and between the Registrant and Swedish Orphan Biovitrum AB (Publ) 10-Q 001-37798 10.2 8/6/2020 10.19 Securities Purchase Agreement, dated June 26, 2017, by and between the Registrant and Timothy Springer, Ph.D. 8-K 001-37798 10.2 6/28/2017 10.20 Stock Purchase Agreement, dated August 19, 2019, by and among the Registrant and the Investors named therein 8-K 001-37798 10.1 8/20/2019 10.21(a) Loan and Security Agreement, dated August 31, 2020, between Selecta Biosciences, Inc., Oxford Finance LLC, as Collateral Agent and as a lender, and Silicon Valley Bank, as a lender. 8-K 001-37798 10.1.1 9/3/2020 10.21(b) First Amendment to Loan and Security Agreement, dated September 7, 2021, by and among Selecta Biosciences, Inc., Oxford Finance LLC, and Silicon Valley Bank 10-Q 001-37798 10.3 11/9/2021 21.1 Subsidiaries of Selecta Biosciences, Inc. S-1 333-211555 21.1 5/24/2016 23.1 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm — — — Filed herewith 31.1 Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 — — — Filed herewith 31.2 Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 — — — Filed herewith 32.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 — — — Furnished herewith 101.INS Inline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL Document — — — Filed herewith 75 Table of Contents 101.SCH Inline XBRL Taxonomy Extension Schema Document — — — Filed herewith 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document — — — Filed herewith 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document — — — Filed herewith 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document — — — Filed herewith 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document — — — Filed herewith 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) — — — Filed herewith # Indicates management contract or compensatory plan. † Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment pursuant to Rule 24h-2 under the Securities Exchange Act of 1934. Item 16. Form 10-K Summary None. 76 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SELECTA BIOSCIENCES, INC. Date: March 10, 2022 By: /s/ Carsten Brunn, Ph.D. Carsten Brunn, Ph.D. President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated. Signature Title Date /s/ Carsten Brunn, Ph.D. President and Chief Executive Officer, and Director March 10, 2022 Carsten Brunn, Ph.D. (Principal Executive Officer) /s/ Kevin Tan Chief Financial Officer March 10, 2022 Kevin Tan (Principal Financial and Accounting Officer) /s/ Carrie S. Cox Director March 10, 2022 Carrie S. Cox /s/ Göran A. Ando, M.D. Director March 10, 2022 Göran A. Ando, M.D. /s/ Timothy C. Barabe Director March 10, 2022 Timothy C. Barabe /s/ Nishan de Silva, M.D. Director March 10, 2022 Nishan de Silva, M.D. /s/ Scott D. Myers Director March 10, 2022 Scott D. Myers /s/ Aymeric Sallin Director March 10, 2022 Aymeric Sallin /s/ Timothy Springer, Ph.D. Director March 10, 2022 Timothy Springer, Ph.D. /s/ Patrick Zenner Director March 10, 2022 Patrick Zenner 77 Table of Contents Selecta Biosciences, Inc. and Subsidiaries Index to Consolidated Financial Statements Pages Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) F-2 Consolidated Balance Sheets at December 31, 2021 and 2020 F- 4 Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2021, 2020 and 2019 F- 5 Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 31, 2021, 2020 and 2019 F- 6 Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019 F- 7 Notes to Consolidated Financial Statements F- 8 F-1 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors of Selecta Biosciences, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Selecta Biosciences, Inc. (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue Recognition for License and Development Agreement with Swedish Orphan Biovitrum (“Sobi License Agreement”) Description of the Matter As discussed in Note 12 to the consolidated financial statements, the Company recognized $83.5 million in revenue under the Sobi License Agreement during the year ended December 31, 2021. The Company recognizes revenue for the Combined License Obligation using the output method, based on the proportion of cumulative supply shipped for use in the clinical trials to the Company’s estimate of the total supply required during the clinical trial period. Auditing management’s calculation of revenue recognized for the Combined License Obligation under the output method is especially challenging because the assessment of the proportion of cumulative supply shipped required a high degree of audit judgment due to the subjectivity in estimating the remaining supply necessary to satisfy the Combined License Obligation. F-2 Table of Contents How We Addressed the Matter in Our Audit To audit the Company’s revenue recognition for the Combined License Obligation, we performed audit procedures that included, among others, testing the reasonableness of the Company’s estimate of the total supply required during the clinical trial period as well as testing the accuracy and completeness of the underlying data used in those estimates. We corroborated management estimates and judgments by reviewing the clinical plans and evaluating the accuracy of the prior period estimates and judgments. We also discussed the estimate of the total supply required during the clinical trial period with the Company’s research and development personnel that oversee the activity related to the Sobi License Agreement. Additionally, we performed an independent sensitivity analysis to evaluate the impact on revenues of changes in management’s estimate of remaining supply required to satisfy the Combined License Obligation. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2009. Boston, Massachusetts March 10, 2022 F-3 Table of Contents Selecta Biosciences, Inc. and Subsidiaries Consolidated Balance Sheets (Amounts in thousands, except share data and par value) December 31, December 31, 2021 2020 Assets Current assets: Cash and cash equivalents $ 114,057 $ 138,685 Marketable securities 13,998 — Accounts receivable 9,914 7,224 Prepaid expenses and other current assets 6,474 5,434 Total current assets 144,443 151,343 Non-current assets: Property and equipment, net 2,142 1,395 Right-of-use asset, net 9,829 10,948 Long-term restricted cash 1,379 1,379 Investments 2,000 — Other assets 90 370 Total assets $ 159,883 $ 165,435 Liabilities and stockholders’ equity (deficit) Current liabilities: Accounts payable $ 224 $ 443 Accrued expenses 10,533 8,146 Loan payable 5,961 — Lease liability 1,049 908 Income taxes payable 601 — Deferred revenue 53,883 72,050 Total current liabilities 72,251 81,547 Non-current liabilities: Loan payable, net of current portion 19,673 24,793 Lease liability, net of current portion 8,598 9,647 Deferred revenue 11,417 38,746 Warrant liabilities 25,423 28,708 Total liabilities 137,362 183,441 Commitments and contingencies (Note 17) Stockholders’ equity (deficit): Preferred stock, $ 0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding at December 31, 2021 and December 31, 2020 — — Common stock, $ 0.0001 par value; 200,000,000 shares authorized; 123,622,965 and 108,071,249 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively 12 11 Additional paid-in capital 457,391 391,175 Accumulated deficit ( 430,316 ) ( 404,629 ) Accumulated other comprehensive loss ( 4,566 ) ( 4,563 ) Total stockholders’ equity (deficit) 22,521 ( 18,006 ) Total liabilities and stockholders’ equity (deficit) $ 159,883 $ 165,435 The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of Contents Selecta Biosciences, Inc. and Subsidiaries Consolidated Statements of Operations and Comprehensive Loss (Amounts in thousands, except share and per share data) Year Ended December 31, 2021 2020 2019 Collaboration and license revenue $ 85,077 $ 16,597 $ 6,677 Operating expenses: Research and development 68,736 54,505 42,743 General and administrative 20,938 18,913 16,389 Total operating expenses 89,674 73,418 59,132 Operating loss ( 4,597 ) ( 56,821 ) ( 52,455 ) Investment income 44 260 834 Loss on extinguishment of debt — ( 461 ) — Foreign currency transaction gain (loss), net — 56 ( 47 ) Interest expense ( 2,844 ) ( 1,556 ) ( 1,519 ) Change in fair value of warrant liabilities ( 2,339 ) ( 10,443 ) ( 857 ) Other income (expense), net 15 89 ( 1,306 ) Loss before income taxes ( 9,721 ) ( 68,876 ) ( 55,350 ) Income tax expense ( 15,966 ) — — Net loss ( 25,687 ) ( 68,876 ) ( 55,350 ) Other comprehensive income (loss): Foreign currency translation adjustment ( 2 ) ( 40 ) 34 Unrealized loss on marketable securities ( 1 ) — — Total comprehensive loss $ ( 25,690 ) $ ( 68,916 ) $ ( 55,316 ) Net loss per share: Basic and diluted $ ( 0.22 ) $ ( 0.68 ) $ ( 1.22 ) Weighted average common shares outstanding: Basic and diluted 114,328,798 101,202,176 45,548,511 The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of Contents Selecta Biosciences, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (Amounts in thousands, except share data) Accumulated Additional other Stockholders’ Common stock paid-in Accumulated comprehensive Equity Shares Amount capital deficit loss (Deficit) Balance at December 31, 2018 22,471,776 $ 3 $ 279,539 $ ( 280,403 ) $ ( 4,557 ) $ ( 5,418 ) Issuance of common stock under Employee Stock Purchase Plan 17,205 — 28 — — 28 Issuance of common stock upon exercise of options 125,600 — 150 — — 150 Issuance of vested restricted stock units 93,750 — — — — — Issuance of common stock, net 22,188,706 2 30,940 — — 30,942 Issuance of common stock through at-the-market offering, net 615,453 — 1,006 — — 1,006 Issuance of common stock through private placement 3,178,174 — 5,715 — — 5,715 Issuance of common stock, pre-funded warrants and warrants through private placement 37,634,883 4 26,125 — — 26,129 Stock-based compensation expense — — 5,161 — — 5,161 Currency translation adjustment — — — — 34 34 Net loss — — — ( 55,350 ) — ( 55,350 ) Balance at December 31, 2019 86,325,547 $ 9 $ 348,664 $ ( 335,753 ) $ ( 4,523 ) $ 8,397 Issuance of common stock under Employee Stock Purchase Plan 110,212 — 184 — — 184 Issuance of common stock upon exercise of options 76,128 — 193 — — 193 Issuance of vested restricted stock units 93,750 — — — — — Issuance of common stock through at-the-market offering, net 1,069,486 — 2,108 — — 2,108 Issuance of common stock through private placement 5,416,390 — 10,268 — — 10,268 Issuance of common stock upon exercise of pre-funded warrants 8,342,128 1 — — — 1 Issuance of common stock upon exercise of warrants 6,637,608 1 24,262 — — 24,263 Other financing fees — — ( 370 ) — — ( 370 ) Issuance of common warrants with long-term debt, net — — 444 — — 444 Stock-based compensation expense — — 5,422 — — 5,422 Currency translation adjustment — — — — ( 40 ) ( 40 ) Net loss — — — ( 68,876 ) — ( 68,876 ) Balance at December 31, 2020 108,071,249 $ 11 $ 391,175 $ ( 404,629 ) $ ( 4,563 ) $ ( 18,006 ) Issuance of common stock under Employee Stock Purchase Plan 58,794 — 161 — — 161 Issuance of common stock upon exercise of options 447,492 — 778 — — 778 Issuance of vested restricted stock units 201,250 — — — — — Issuance of common stock through at-the-market offering, net 13,767,511 1 51,933 — — 51,934 Issuance of common stock upon exercise of warrants 1,076,669 — 5,624 — — 5,624 Stock-based compensation expense — — 7,720 — — 7,720 Currency translation adjustment — — — — ( 2 ) ( 2 ) Unrealized loss on marketable securities — — — — ( 1 ) ( 1 ) Net loss — — — ( 25,687 ) — ( 25,687 ) Balance at December 31, 2021 123,622,965 $ 12 $ 457,391 $ ( 430,316 ) $ ( 4,566 ) $ 22,521 The accompanying notes are an integral part of these consolidated financial statements. F-6 Table of Contents Selecta Biosciences, Inc. and Subsidiaries Consolidated Statements of Cash Flows Year Ended December 31, 2021 2020 2019 Cash flows from operating activities (Amounts in thousands) Net loss $ ( 25,687 ) $ ( 68,876 ) $ ( 55,350 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,252 734 726 Amortization of premiums and discounts on marketable securities 57 — ( 154 ) Non-cash lease expense 1,119 1,127 1,301 Loss on disposal of property and equipment — ( 52 ) 104 Stock-based compensation expense 7,720 5,422 5,161 Non-cash interest expense 1,012 620 402 Warrant liabilities revaluation 2,339 10,443 857 Loss on extinguishment of debt — 461 — Net realized losses on marketable securities — — ( 1 ) Changes in operating assets and liabilities: Accounts receivable ( 2,690 ) ( 2,224 ) ( 5,000 ) Prepaid expenses, deposits and other assets ( 1,451 ) ( 4,418 ) 3,179 Accounts payable ( 219 ) ( 57 ) ( 600 ) Income taxes payable 601 — — Deferred revenue ( 45,496 ) 94,462 337 Accrued expenses and other liabilities 1,061 ( 2,761 ) ( 2,397 ) Net cash (used in) provided by operating activities ( 60,382 ) 34,881 ( 51,435 ) Cash flows from investing activities Proceeds from maturities of marketable securities 16,400 — 16,350 Payment made for investments ( 2,000 ) — — Purchases of marketable securities ( 30,455 ) — ( 18,188 ) Sales of marketable securities — — 1,992 Purchases of property and equipment ( 1,085 ) ( 815 ) ( 47 ) Proceeds from the sale of property and equipment — 74 122 Net cash used in investing activities ( 17,140 ) ( 741 ) 229 Cash flows from financing activities Proceeds from issuance of long-term debt, net of expenses — 24,736 — Repayments of principal on outstanding debt — ( 19,313 ) ( 2,800 ) Net proceeds from issuance of common stock — — 30,942 Net proceeds from issuance of common stock- at-the-market offering 51,958 2,108 1,006 Net proceeds from issuance of common stock- private placement — 10,268 5,715 Issuance costs paid for December 2019 financing — ( 4,381 ) — Other financing fees — ( 343 ) — Proceeds from exercise of pre-funded and common warrants — 979 70,000 Proceeds from exercise of stock options 778 193 150 Proceeds from issuance of common stock under Employee Stock Purchase Plan 161 184 28 Net cash provided by financing activities 52,897 14,431 105,041 Effect of exchange rate changes on cash ( 3 ) ( 58 ) 34 Net change in cash, cash equivalents, and restricted cash ( 24,628 ) 48,513 53,869 Cash, cash equivalents, and restricted cash at beginning of period 140,064 91,551 37,682 Cash, cash equivalents, and restricted cash at end of period $ 115,436 $ 140,064 $ 91,551 Supplement cash flow information Cash paid for interest $ 2,002 $ 1,018 $ 1,223 Noncash investing and financing activities Cashless warrant exercise $ 5,624 $ 21,790 $ — Reclassification of warrant liability to equity upon exercise of warrants $ — $ 1,494 $ — Fair value of warrants issued in connection with issuance of long-term debt $ — $ 444 $ — Purchase of property and equipment not yet paid $ 224 $ 4 $ — Equity offering costs in accrued liabilities $ 24 $ 27 $ 4,381 Unrealized loss on marketable securities $ ( 1 ) $ — $ — Debt issuance costs in accrued liabilities $ — $ 2 $ — The accompanying notes are an integral part of these consolidated financial statements . F-7 Table of Contents Selecta Biosciences, Inc. and Subsidiaries Notes to Consolidated Financial Statements 1. Description of the Business Selecta Biosciences, Inc., or the Company, was incorporated in Delaware on December 10, 2007, and is based in Watertown, Massachusetts. The Company is a clinical-stage biopharmaceutical company. The Company’s ImmTOR® platform encapsulates rapamycin, also known as sirolimus, an FDA approved immunomodulator, in biodegradable nanoparticles ImmTOR is designed to induce antigen-specific immune tolerance. The Company believes, by combining ImmTOR with antigens of interest, the Company’s precision immune tolerance platform has the potential to restore self-tolerance to auto-antigens in autoimmune diseases, amplify the efficacy of biologics (including gene therapies) and mitigate the formation of anti-drug antibodies, or ADAs, against biologic drugs. Since inception, the Company has devoted its efforts principally to research and development of its technology and product candidates, recruiting management and technical staff, acquiring operating assets, and raising capital. The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities. The Company’s product candidates are in development. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees and consultants. Liquidity and Management’s Plan The future success of the Company is dependent on its ability to develop its product candidates and ultimately upon its ability to attain and sustain profitable operations. The Company is subject to a number of risks similar to other early-stage life science companies, including, but not limited to, successful development of its product candidates, raising additional capital with favorable terms, protection of proprietary technology and market acceptance of any approved future products. The successful development of product candidates requires substantial working capital, which may not be available to the Company on favorable terms or at all. To date, the Company has financed its operations primarily through the initial public offering of its common stock, private placements of its common stock, issuances of common and preferred stock, debt, research grants, research collaborations and licenses. The Company currently has no source of product revenue, and it does not expect to generate product revenue for the foreseeable future. To date, the Company’s revenue has primarily been from collaboration agreements. The Company has devoted substantially all of its financial resources and efforts to developing its ImmTOR platform, identifying potential product candidates and conducting preclinical studies and clinical trials. The Company is in the early stages of development of its product candidates, and it has not completed development of any ImmTOR-enabled therapies. As of December 31, 2021, the Company’s cash, cash equivalents, restricted cash and marketable securities were $ 129.4 million, of which $ 1.4 million was restricted cash related to lease commitments and $ 0.3 million was held by its Russian subsidiary designated solely for use in its operations. The Company believes the cash, cash equivalents, restricted cash and marketable securities as of December 31, 2021 will enable it to fund its current planned operations for at least the next twelve months from the date of issuance of these financial statements, though it may realize additional cash resources upon the achievement of certain contingent collaboration milestones or it may pursue additional cash resources through public or private equity or debt financings or by establishing collaborations with other companies. Management’s expectations with respect to its ability to fund current and long term planned operations are based on estimates that are subject to risks and uncertainties. If actual results are different from management’s estimates, the Company may need to seek additional strategic or financing opportunities sooner than would otherwise be expected. However, there is no guarantee that any collaboration milestones will be achieved or that any of these strategic or financing opportunities will be executed on favorable terms, and some could be dilutive to existing stockholders. If the Company is unable to obtain additional funding on a timely basis, it may be forced to significantly curtail, delay, or discontinue one or more of its planned research or development programs or be unable to expand its operations or otherwise capitalize on its commercialization of its product candidates. As of December 31, 2021, the Company had an accumulated deficit of $ 430.3 million. The Company anticipates operating losses to continue for the F-8 Table of Contents foreseeable future due to, among other things, costs related to research and development of its product candidates and its administrative organization. At this time, any impact of COVID-19 on the Company’s business, revenues, results of operations and financial condition will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the pandemic, the emergence of new virus variants, travel restrictions and social distancing in the United States and other countries, business closures or disruptions, supply chain disruptions, the ultimate impact on financial markets and the global economy, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. Guarantees and Indemnifications As permitted under Delaware law, the Company indemnifies its officers, directors, consultants and employees for certain events or occurrences that happen by reason of the relationship with, or position held at, the Company. Through December 31, 2021, the Company had not experienced any losses related to these indemnification obligations, and no claims were outstanding. The Company does not expect significant claims related to these indemnification obligations and, consequently, concluded that the fair value of these obligations is negligible, and no related reserves were established. 2. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Selecta (RUS), LLC, or Selecta (RUS), a Russian limited liability corporation, and Selecta Biosciences Security Corporation, a Massachusetts securities corporation. All significant intercompany accounts and transactions have been eliminated. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s management considers many factors in selecting appropriate financial accounting policies and controls, and bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. In preparing these consolidated financial statements, management used significant estimates in the following areas, among others: revenue recognition, and estimating accrued research and development expenses. The Company assesses the above estimates on an ongoing basis; however, actual results could materially differ from those estimates. Segment Information The Company views its operations and manages its business in one operating segment, the research and development of nanoparticle immunomodulatory drugs for the treatment and prevention of human diseases. Cash Equivalents, Restricted Cash, Marketable Securities and Investments Cash equivalents include all highly liquid investments maturing within 90 days from the date of purchase. Marketable securities consist of securities with remaining maturities greater than 90 days when purchased. The Company classifies these marketable securities as available-for-sale and records them at fair value in the accompanying consolidated balance sheets. Marketable securities with less than one year until maturity are classified as short term, while marketable securities with maturities greater than one year are classified as long term. Unrealized gains or losses are included in accumulated other comprehensive income (loss). Premiums or discounts from par value are amortized to investment income over the life of the underlying investment. Although available to be sold to meet operating needs or otherwise, securities are generally held through maturity. The cost of securities sold is determined based on the specific identification method for purposes of recording realized gains and losses. We also invest in equity securities of companies whose securities are not publicly traded and where fair value is not readily available. These investments are recorded using cost minus impairment adjusted for changes in observable prices, depending on our ownership percentage and other factors that suggest we have significant influence. We monitor these investments to evaluate whether any increase or decline in their value has occurred, based on the implied value of recent company financings, public market prices of comparable companies and general market conditions. These investments are included in investments and other assets in our consolidated balance sheets. Concentrations of Credit Risk and Off-Balance Sheet Risk Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents, short-term deposits and marketable securities, investments, and accounts receivable. Cash and cash equivalents are deposited with federally insured financial institutions in the United States and may, at times, exceed federally insured limits. F-9 Table of Contents Management believes that the financial institutions that hold the Company’s deposits are financially creditworthy and, accordingly, minimal risk exists with respect to those balances. The Company also maintains cash in Russian bank accounts in denominations of both Russian rubles and U.S. dollars. As of December 31, 2021, the Company maintained approximately $ 0.3 million in Russian bank accounts, all of which was held in U.S. dollars. Fair Value of Financial Instruments The Company’s financial instruments consist mainly of cash equivalents, restricted cash, accounts payable, loans payable, marketable securities, investments and common warrants. The carrying amounts of cash equivalents, restricted cash, accounts receivable, and accounts payable approximate their estimated fair value due to their short-term maturities. Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level hierarchy is used to prioritize the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements), and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1 —Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 —Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 —Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. To the extent that a 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 value of warrant liabilities is determined using Level 3 inputs. Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may change for many instruments. This condition could cause an instrument to be reclassified within levels in the fair value hierarchy. The carrying amounts reflected in our consolidated balance sheet for investments approximate fair value, and are assessed for impairment quarterly. Property and Equipment Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the respective assets, generally seven years for furniture and fixtures, five years for laboratory equipment, software and office equipment and three years for computer equipment. Leasehold improvements are amortized over their useful life or the life of the lease, whichever is shorter. Major additions and betterments are capitalized. Maintenance and repairs, which do not improve or extend the life of the respective assets, are charged to operations as incurred. Costs incurred for construction in progress are recorded as assets and are not amortized until the construction is substantially complete and the assets are ready for their intended use. Impairment of Long-Lived Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. In order to determine if assets have been impaired, assets are tested at the lowest level for which identifiable independent cash flows are available, which is at the entity level (“asset group”). An impairment loss is recognized when the sum of projected undiscounted cash flows is less than the carrying value of the asset group. The measurement of the impairment loss to be recognized is based on the difference between the fair value and the carrying value of the asset group. Based on management’s evaluation, the fair value of the asset group, measured as the market capitalization of the Company exceeds its carrying value. Debt Issuance Costs Debt issuance costs and fees paid to lenders are classified as a debt discount and are recorded as a direct deduction from the face amount of the related debt. Debt issuance costs are amortized over the term of the related debt using the effective interest method and recorded as interest expense. F-10 Table of Contents Accumulated Other Comprehensive Income (Loss) Comprehensive income (loss) is defined as the change in the equity of a business entity during a period from transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Comprehensive income (loss) consists of: (i) all components of net loss and (ii) all components of comprehensive loss other than net loss, referred to as other comprehensive loss. Other comprehensive loss is comprised of unrealized gains and losses on debt securities and foreign currency translation adjustments. Revenue Recognition Revenue is recognized when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. Pursuant to ASC Topic 606, Revenue from Contracts with Customers (ASC 606) , a customer is a party that has contracted with an entity to obtain goods or services that are an output of the entity’s ordinary activities in exchange for consideration. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract, including whether they are distinct in the context of the contract; (iii) determine the transaction price, including the constraint on variable consideration; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. If a promised good or service is not distinct, it is combined with other performance obligations. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. For example, certain performance obligations associated with Swedish Orphan Biovitrum, or Sobi, Asklepios Biopharmaceutical, Inc., or AskBio, Sarepta Therapeutics, Inc., or Sarepta, and Takeda Pharmaceuticals USA, Inc., or Takeda, (see Note 12) will be satisfied over time, and revenue will be recognized using the output method, based on the proportion of actual deliveries to the total expected deliveries over the initial term. Collaboration and License Revenue: The Company currently generates its revenue through collaboration and license agreements with strategic collaborators for the development and commercialization of product candidates. Collaboration and license agreements with customers are generally accounted for in accordance with ASC 606. The Company analyzes collaboration arrangements by first assessing whether they are within the scope of ASC Topic 808, Collaborative Arrangements (ASC 808 ), and evaluates whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards that are dependent on the commercial success of such activities. Collaboration agreements with customers that are not within the scope of ASC 808 are accounted for in accordance with ASC 606. To the extent the collaboration agreement is within the scope of ASC 808, the Company also assesses whether any aspects of the agreement are within the scope of other accounting literature (specifically ASC 606). If the Company concludes that some or all aspects of the agreement are distinct and represent a transaction with a customer, the Company accounts for those aspects of the arrangement within the scope of ASC 606. The Company recognizes the shared costs incurred that are not within the scope of other accounting literature as a component of the related expense in the period incurred by analogy to ASC Topic 730, Research and Development (ASC 730) , and records reimbursements from counterparties as an offset to the related costs. In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under the agreements in accordance with ASC 606, the Company performs the five steps above. As part of the accounting for the arrangement, the Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. The Company uses key assumptions to determine the stand-alone selling price, which may include market conditions, reimbursement rates for personnel costs, development timelines and probabilities of regulatory success. The terms of the Company’s arrangements typically include one or more of the following: (i) upfront fees; (ii) milestone payments related to the achievement of development, regulatory, or commercial goals; (iii) royalties on net sales of licensed products; (iv) reimbursements or cost-sharing of research and development (R&D) expenses; and (v) profit/loss sharing arising from co-promotion arrangements. Licenses of Intellectual Property: If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. If not distinct, the license is combined with other performance obligations in the contract. For licenses that are combined with other performance obligations, the Company assesses the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Optional F-11 Table of Contents licenses are evaluated to determine if they are issued at a discount, and therefore, represent material rights and accounted for as separate performance obligations. Milestone Payments: At the inception of each arrangement that includes developmental and regulatory milestone payments, the Company evaluates whether the achievement of each milestone specifically relates to the Company’s efforts to satisfy a performance obligation or transfer a distinct good or service within a performance obligation. If the achievement of a milestone is considered a direct result of the Company’s efforts to satisfy a performance obligation or transfer a distinct good or service and the receipt of the payment is based upon the achievement of the milestone, the associated milestone value is allocated to that distinct good or service. If the milestone payment is not specifically related to the Company’s effort to satisfy a performance obligation or transfer a distinct good or service, the amount is allocated to all performance obligations using the relative standalone selling price method. The Company also evaluates the milestone to determine whether they are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price to be allocated, otherwise, such amounts are constrained and excluded from the transaction price. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the transaction price. Any such adjustments to the transaction price are allocated to the performance obligations on the same basis as at contract inception. Amounts allocated to a satisfied performance obligation shall be recognized as revenue, or as a reduction of revenue, in the period in which the transaction price changes. Manufacturing Supply Services: Arrangements that include a promise for future supply of drug substance or drug product for either clinical development or commercial supply at the customer’s discretion are evaluated to determine if they are distinct and optional. For optional services that are distinct, the Company assesses if they are priced at a discount, and therefore, provide a material right to the licensee to be accounted for as separate performance obligations. Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied) in accordance with the royalty recognition constraint. Research and Development Costs Costs incurred in the research and development of the Company’s products are expensed as incurred. Research and development expenses include costs incurred in performing research and development activities, including salaries and benefits, stock-based compensation expenses, facilities cost, overhead costs, contract services, supplies and other outside costs. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. Clinical Trial Costs Clinical trial expenses are a significant component of research and development expenses, and the Company outsources a significant portion of these costs to third parties. Third party clinical trial expenses include patient costs, clinical research organization costs and costs for data management. The accrual for site and patient costs includes inputs such as estimates of patient enrollment, patient cycles incurred, clinical site activations, and other pass-through costs. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected on the consolidated balance sheets as a prepaid asset or accrued clinical trial cost. These third party agreements are generally cancellable, and related costs are recorded as research and development expenses as incurred. Non-refundable advance clinical payments for goods or services that will be used or rendered for future R&D activities are recorded as a prepaid asset and recognized as expense as the related goods are delivered or the related services are performed. The Company also records accruals for estimated ongoing clinical research and development costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates may be made in determining the accrued balances at the end of any reporting period. Actual results could differ from the estimates made by the Company. The historical clinical accrual estimates made by the Company have not been materially different from the actual costs. In June 2020, the Company and Sobi entered into a license and development agreement, or the Sobi License. Pursuant to the Sobi License, clinical trial costs incurred to complete development of SEL-212, including but not limited to costs incurred while conducting and completing the Phase 3 DISSOLVE trials, will be reimbursed by Sobi. These costs, when reimbursed, will be recognized as revenue consistent with the revenue recognition methodology disclosed in Note 12. The reimbursable costs exclude any costs of additional development activities required that are related to ImmTOR and that are unrelated to SEL-212. F-12 Table of Contents Income Taxes The Company provides deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the Company’s financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. A valuation allowance is provided to reduce the deferred tax assets to the amount that will more-likely-than-not be realized. The Company determines whether it is more likely than not that a tax position will be sustained upon examination. If it is not more-likely-than-not that a position will be sustained, none of the benefit attributable to the position is recognized. The tax benefit to be recognized for any tax position that meets the more-likely-than-not recognition threshold is calculated as the largest amount that is more than 50% likely of being realized upon resolution of the contingency. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes. To date, the Company has not incurred interest and penalties related to uncertain tax positions. Warrants The Company determines the accounting classification of warrants that are issued, as either liability or equity, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity , and then in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock . Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the issuer to settle the warrants or the underlying shares by paying cash or other assets, or must or may require settlement by issuing variable number of shares. If warrants do not meet liability classification under ASC 480-10, the Company assesses the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815-40, in order to conclude equity classification, the Company assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815-40 or other applicable GAAP. After all relevant assessments are made, the Company concludes whether the warrants are classified as liability or equity. Liability classified warrants are required to be accounted for at fair value both on the date of issuance and on subsequent accounting period ending dates, with all changes in fair value after the issuance date recorded in the statements of operations as a gain or loss. Equity classified warrants are accounted for at fair value on the issuance date with no changes in fair value recognized after the issuance date. Stock-Based Compensation The Company accounts for all stock-based compensation granted to employees and non-employees using a fair value method. Stock-based compensation is measured at the grant date fair value and is recognized over the requisite service period of the awards, usually the vesting period, on a straight-line basis, net of estimated forfeitures. To the extent that actual forfeitures differ from the Company’s estimates, the differences are recorded as a cumulative adjustment in the period the estimates were adjusted. Stock-based compensation expense recognized in the consolidated financial statements is based on awards that ultimately vest. Net Loss Per Share The Company calculates basic net loss per share by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income per share is calculated by dividing the net income attributable to common stockholders by the weighted-average number of common equivalent shares outstanding for the period, including any dilutive effect from outstanding stock options, restricted stock units, warrants to purchase common stock, and employee stock purchase plan stock using the treasury stock method. Given that the Company recorded a net loss for each of the periods presented, there is no difference between basic and diluted net loss per share since the effect of common stock equivalents would be anti-dilutive and are, therefore, excluded from the diluted net loss per share calculation. Contingent Liabilities The Company accounts for its contingent liabilities in accordance with ASC No. 450, Contingencies . A provision is recorded when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. With respect to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings, advice of legal counsel and other information and events pertaining to a particular matter. Leases The Company accounts for its leases in accordance with ASC Topic 842, Leases (ASC 842) , and determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Most leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and, if applicable, long-term lease liabilities. The Company elected not to recognize leases with an original term less than one year on its balance sheet. Operating lease right-of- F-13 Table of Contents use (ROU) assets and their corresponding lease liabilities are recorded based on the present value of lease payments over the expected remaining lease term. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rates, which are the rates incurred to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. In accordance with the guidance in ASC 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Then the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on fair values to the lease components and non-lease components. Although separation of lease and non-lease components is required, the Company elected the practical expedient to not separate lease and non-lease components. The lease component results in an operating right-of-use asset being recorded on the balance sheet and amortized on a straight-line basis as lease expense. Right-of-use assets and operating lease liabilities are remeasured upon certain modifications to leases using the present value of remaining lease payments and estimated incremental borrowing rate upon lease modification. The Company enters into lease agreements with terms generally ranging from 2 - 8 years. Some of the Company’s lease agreements include Company options to either extend and/or early terminate the lease, the costs of which are included in its operating lease liabilities to the extent that such options are reasonably certain of being exercised. Leases with renewal options allow the Company to extend the lease term typically between 1 and 5 years. When determining the lease term, renewal options reasonably certain of being exercised are included in the lease term. When determining if a renewal option is reasonably certain of being exercised, the Company considers several economic factors, including but not limited to, the significance of leasehold improvements incurred on the property, whether the asset is difficult to replace, underlying contractual obligations, or specific characteristics unique to that particular lease that would make it reasonably certain that the Company would exercise such option. Renewal and termination options were generally not included in the lease term for the Company’s existing operating leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Recent Accounting Pronouncements Recently Adopted In October 2020, the FASB issued ASU 2020-10, Codification Improvements , which updates various codification topics by clarifying or improving disclosure requirements to align with the SEC’s regulations. The Company adopted the new standard effective January 1, 2021, and there was no impact on its consolidated financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The Company adopted the new standard effective January 1, 2021, and there was no impact on its consolidated financial statements. Not Yet Adopted In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options . ASU 2021-04 provides guidance as to how entities should account for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (i.e., a warrant) that remains equity-classified after modification or exchange as an exchange of the original instrument for a new instrument. An entity should apply the guidance provided in ASU 2021-04 prospectively to modifications or exchanges occurring on or after the effective date. This new standard will be effective for us for fiscal years beginning after December 15, 2021 including interim periods within those fiscal years. The adoption of ASU 2021-04 is not expected to have an impact on the Company’s financial position or results of operations upon adoption. In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) . ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. This new standard will be effective for smaller reporting companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company is assessing the impact this standard will have on its consolidated financial statements and disclosures. In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments . Subsequently, in November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses . ASU 2016-13 requires entities to measure all expected credit losses for most financial assets held at the reporting date based on an expected loss model which includes historical experience, current conditions, and reasonable and supportable forecasts. ASU 2016-13 also requires enhanced disclosures to help financial F-14 Table of Contents statement users better understand significant estimates and judgments used in estimating credit losses. This ASU is effective for smaller reporting companies for fiscal years beginning after December 15, 2022, with early adoption permitted. The adoption of ASU 2016-13 is not expected to have an impact on the Company’s financial position or results of operations upon adoption. 3. Marketable Securities and Investments The following table summarizes the marketable securities held as of December 31, 2021 (in thousands): Amortized cost Unrealized gains Unrealized losses Fair value December 31, 2021 Corporate bonds $ 2,007 $ — $ ( 1 ) $ 2,006 Commercial paper 11,992 — — 11,992 Total $ 13,999 $ — $ ( 1 ) $ 13,998 All marketable securities held at December 31, 2021 had maturities of less than 12 months when purchased and are classified as short-term marketable securities on the accompanying consolidated balance sheet. During the year ended December 31, 2021, there were no marketable securities adjusted for other than temporary declines in fair value. The Company does not intend to sell its investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity. As of December 31, 2021, the Company has a $ 2.0 million investment in Cyrus pursuant to the Cyrus Agreement. The Company’s maximum exposure to loss related to this variable interest entity is limited to the carrying value of the investment. See Note 14 for details. As of December 31, 2020, the Company held no marketable securities or investments. 4. Net Loss Per Share The Company has reported a net loss for the years ended December 31, 2021, 2020 and 2019. The Company used the treasury stock method to determine the number of dilutive shares. The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per-share data): Year Ended December 31, 2021 2020 2019 Numerator: Net loss $ ( 25,687 ) $ ( 68,876 ) $ ( 55,350 ) Denominator: Weighted-average common shares outstanding - basic and diluted 114,328,798 101,202,176 45,548,511 Net loss per share: Basic and diluted $ ( 0.22 ) $ ( 0.68 ) $ ( 1.22 ) The following table represents the potential dilutive common shares excluded from the computation of the diluted net loss per share for all periods presented, as the effect would have been anti-dilutive: Year Ended December 31, 2021 2020 2019 Options, RSUs and ESPP shares 11,492,002 7,909,583 7,002,527 Warrants to purchase common stock 10,735,980 12,378,016 23,084,120 Total 22,227,982 20,287,599 30,086,647 F-15 Table of Contents 5. Fair Value Measurements The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2021 and 2020 (in thousands): December 31, 2021 Total Level 1 Level 2 Level 3 Assets: Money market funds (included in cash equivalents) $ 66,563 $ 66,563 $ — $ — Marketable securities: Corporate bonds 2,006 — 2,006 — Commercial paper 11,992 — 11,992 — Total assets $ 80,561 $ 66,563 $ 13,998 $ — Liabilities: Warrant liabilities $ 25,423 $ — $ — $ 25,423 Total liabilities $ 25,423 $ — $ — $ 25,423 December 31, 2020 Total Level 1 Level 2 Level 3 Assets: Money market funds (included in cash equivalents) $ 80,576 $ 80,576 $ — $ — Total assets $ 80,576 $ 80,576 $ — $ — Liabilities: Warrant liabilities $ 28,708 $ — $ — $ 28,708 Total liabilities $ 28,708 $ — $ — $ 28,708 There were no transfers within the fair value hierarchy during the years ended December 31, 2021 or 2020. Cash, Cash Equivalents, and Restricted Cash As of December 31, 2021 and 2020, the money market funds were classified as cash and cash equivalents on the accompanying consolidated balance sheets as they mature within 90 days from the date of purchase. As of December 31, 2021, the Company had restricted cash balances relating to a secured letter of credit in connection with its lease for the Company’s headquarters (see Note 8 included elsewhere in this Annual Report). The Company’s consolidated statement of cash flows includes the following as of December 31, 2021, 2020 and 2019 (in thousands): Year Ended December 31, 2021 2020 2019 Cash and cash equivalents $ 114,057 $ 138,685 $ 89,893 Short-term restricted cash — — 279 Long-term restricted cash 1,379 1,379 1,379 Total cash, cash equivalents, and restricted cash $ 115,436 $ 140,064 $ 91,551 Marketable Securities As of December 31, 2021, marketable securities classified as Level 2 within the valuation hierarchy consist of corporate bonds and commercial paper. Marketable securities represent holdings of available-for-sale marketable debt securities in accordance with the Company’s investment policy. The Company estimates the fair value of these marketable securities by taking into consideration valuations that include market pricing based on real-time trade data for the same or similar securities, and other observable inputs. The amortized cost of available-for-sale debt securities is adjusted for amortization of premiums and accretion of discounts to the earliest call date for premiums or to maturity for discounts. Loans Payable At December 31, 2021, in light of the recent issuance of the Term A Loan under the 2020 Term Loan, the Company believes the carrying value approximates the fair value of the loan. F-16 Table of Contents Common Warrants In December 2019, the Company issued common warrants in connection with a private placement of common shares. Pursuant to the terms of the common warrants, the Company could be required to settle the common warrants in cash in the event of certain acquisitions of the Company and, as a result, the common warrants are required to be measured at fair value and reported as a liability on the balance sheet. The Company recorded the fair value of the common warrants upon issuance using the Black-Scholes valuation model and is required to revalue the common warrants at each reporting date with any changes in fair value recorded in the statement of operations and comprehensive loss. The valuation of the common warrants is considered Level 3 of the fair value hierarchy due to the need to use assumptions in the valuation that are both significant to the fair value measurement and unobservable including the volatility rate and the estimated term of the warrants. Generally, increases (decreases) in the fair value of the underlying stock and estimated term would result in a directionally similar impact to the fair value measurement. The changes in the fair values of the Level 3 warrant liability are reflected in the statement of operations and comprehensive loss for the years ended December 31, 2021, 2020 and 2019. The estimated fair value of warrants is determined using the following inputs to the Black-Scholes simulation valuation: Estimated fair value of the underlying stock . The Company estimates the fair value of the common stock based on the closing stock price at the end of each reporting period. Risk-free interest rate . The risk-free interest rate is based on the U.S. Treasury at the valuation date commensurate with the expected remaining life assumption. Dividend rate . The dividend rate is based on the historical rate, which the Company anticipates will remain at zero. Expected life . The expected life of the warrants is assumed to be equivalent to their remaining contractual term which expires on December 23, 2024. Volatility . The Company estimates stock price volatility based on the Company’s historical volatility and the historical volatility of peer companies for a period of time commensurate with the expected remaining life of the warrants. A summary of the Black-Scholes pricing model assumptions used to record the fair value of the warrant liability is as follows: December 31, 2021 2020 Risk-free interest rate 0.97 % 0.36 % Dividend yield — — Expected life (in years) 2.98 3.98 Expected volatility 96.10 % 98.63 % Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis The following table reflects a roll-forward of fair value for the Company’s Level 3 warrant liabilities (see Note 10), for the year ended December 31, 2021 (in thousands): Warrant liabilities Fair value as of December 31, 2020 $ 28,708 Exercises ( 5,624 ) Change in fair value 2,339 Fair value as of December 31, 2021 $ 25,423 F-17 Table of Contents 6. Property and Equipment Property and equipment consists of the following (in thousands): December 31, 2021 2020 Laboratory equipment $ 5,134 $ 4,427 Computer equipment and software 731 532 Leasehold improvements 45 38 Furniture and fixtures 332 327 Office equipment 163 163 Construction in process 534 163 Total property and equipment 6,939 5,650 Less accumulated depreciation ( 4,797 ) ( 4,255 ) Property and equipment, net $ 2,142 $ 1,395 Depreciation expense was $ 0.6 million, $ 0.6 million and $ 0.7 million for the years ended December 31, 2021, 2020 and 2019, respectively. 7. Accrued Expenses Accrued expenses consist of the following (in thousands): December 31, 2021 2020 Payroll and employee related expenses $ 3,179 $ 3,049 Collaboration and licensing — 1,350 Accrued patent fees 309 534 Accrued external research and development costs 4,339 2,029 Accrued professional and consulting services 815 798 Accrued interest 170 170 Other 1,721 216 Accrued expenses $ 10,533 $ 8,146 Other accrued expenses as of December 31, 2021 include a $ 0.9 million estimated liability for plaintiff’s litigation relating to the two lawsuits described further within Note 17. 8. Leases 65 Grove Street Lease In July 2019, the Company entered into a lease for 25,078 square feet of laboratory and office space located at 65 Grove Street, Watertown, Massachusetts, or the Headquarters Lease. As part of the Headquarters Lease, the Company incurred $ 0.8 million in non-reimbursable construction costs. The lease began in March 2020, when the Company took control of the office space, and the lease term is 8 years. The discount rate of 8.9 % was determined based on the Company’s incremental borrowing rate adjusted for the lease term, including any reasonably certain renewal periods. In connection with the Headquarters Lease, the Company secured a letter of credit from Silicon Valley Bank, or SVB, for $ 1.4 million, recognized as long-term restricted cash, as of December 31, 2021 and 2020, respectively, which automatically renews each year. Moscow, Russia Lease The Company has a month-to-month facility agreement for its Moscow, Russia office. Rent expense is recognized as incurred. Rent expense for the years ended December 31, 2021, 2020 and 2019 was $ 2.9 million, $ 2.7 million, and $ 2.1 million, respectively. For the years ended December 31, 2021, 2020 and 2019, the components of lease costs were as follows (in thousands): F-18 Table of Contents Year Ended December 31, 2021 2020 2019 Operating lease cost 2,023 2,096 1,365 Variable lease cost 834 624 828 Short-term lease cost 10 10 16 Total lease cost $ 2,867 $ 2,730 $ 2,209 The maturity of the Company’s operating lease liabilities as of December 31, 2021 were as follows (in thousands): December 31, 2021 2022 1,866 2023 1,922 2024 1,980 2025 2,039 2026 2,101 Thereafter 2,844 Total future minimum lease payments 12,752 Less imputed interest 3,105 Total operating lease liabilities $ 9,647 The supplemental disclosure for the statement of cash flows related to operating leases were as follows (in thousands): December 31, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: $ 1,812 $ 2,523 Other than the initial recording of the right-of-use asset and lease liability for the Headquarters Lease in 2020, which was non-cash, the changes in the Company’s right-of-use asset and lease liability for the years ended December 31, 2021 and 2020 are reflected in the non-cash lease expense and accrued expenses and other liabilities, respectively, in the consolidated statements of cash flows. The following summarizes additional information related to operating leases: December 31, 2021 2020 Weighted-average remaining lease term 6.4 years 7.4 years Weighted-average discount rate 8.9 % 8.9 % 9. Debt 2020 Term Loan On August 31, 2020, the Company entered into a term loan of up to $ 35.0 million, or the 2020 Term Loan, consisting of term loans in an aggregate amount of $ 25.0 million, or the Term A Loan, and term loans in an aggregate amount of $ 10.0 million, or the Term B Loan, governed by a loan and security agreement, or the Loan Agreement, between the Company and Oxford Finance LLC, or Oxford, as Collateral Agent and a Lender, and SVB, as a Lender. The Term A Loan was funded in full on August 31, 2020, or the Funding Date. The second draw period expired on September 30, 2021 and the Term B Loan is no longer available to be drawn by the Company in the future. The 2020 Term Loan will mature on August 1, 2025. Each advance under the Term Loan accrues interest at a floating per annum rate equal to the greater of (a) 7.90 %, and (b) the lesser of (x) the sum of (i) the prime rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, and (ii) 4.65 % and (y) 10.00 %. The Term Loan provides for interest-only payments on a monthly basis until April 1, 2022. Thereafter, amortization payments will be payable monthly in equal installments of principal and interest to fully amortize the outstanding principal over the remaining term of the loan, subject to recalculation upon a change in the prime rate. The Company may prepay the Term Loan in full but not in part provided that the Company (i) provides ten days’ prior written notice to Collateral Agent, (ii) pays on the date of such prepayment (A) all outstanding principal plus accrued and unpaid interest, and (B) a prepayment fee of between 3.0 % and 1.0 % of the aggregate original principal amount advanced by the lender depending on the F-19 Table of Contents timing of the prepayment. Amounts outstanding during an event of default are payable upon SVB’s demand and shall accrue interest at an additional rate of 5.0 % per annum of the past due amount outstanding. At the end of the loan term (whether at maturity, by prepayment in full or otherwise), the Company shall make a final payment to the lender in the amount of 9.0 % of the aggregate original principal amount advanced by the lender. The final payment fee totaling $ 2.3 million is recorded as a loan discount. The Term Loan is secured by a lien on substantially all of the assets of the Company, other than intellectual property, provided that such lien on substantially all assets includes any rights to payments and proceeds from the sale, licensing or disposition of intellectual property. The Company has also granted the Collateral Agent a negative pledge with respect to its intellectual property. The Loan Agreement contains customary covenants and representations, including but not limited to financial reporting obligations and limitations on dividends, indebtedness, collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and subsidiaries. The Loan Agreement also contains other customary provisions, such as expense reimbursement, non-disclosure obligations as well as indemnification rights for the benefit of the Collateral Agent. The events of default under the Loan Agreement include, but are not limited to, the Company’s failure to make any payments of principal or interest under the Loan Agreement or other transaction documents, the Company’s breach or default in the performance of any covenant under the Loan Agreement or other transaction documents, the occurrence of a material adverse change, the Company making a false or misleading representation or warranty in any material respect under the Loan Agreement, the Company’s insolvency or bankruptcy, any attachment or judgment on the Company’s assets of at least $ 0.5 million, or the occurrence of any default under any agreement or obligation of the Company involving indebtedness in excess of $ 0.5 million. If an event of default occurs, the Collateral Agent is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement. The Company incurred $ 0.4 million in debt issuance costs in connection with the closing of the 2020 Term Loan. Debt issuance costs are presented in the consolidated balance sheet as a direct deduction from the associated liability and amortized to interest expense over the term of the related debt. The Company assessed all terms and features of the 2020 Term Loan to identify any potential embedded features that would require bifurcation. As part of this analysis, the Company assessed the economic characteristics and risks of the 2020 Term Loan, including any put, call, and contingent features. The Company determined that the interest rate collar and prepayment call option did not require bifurcation; whereas the contingent put option and default (contingent) interest rate feature met bifurcation criteria resulting in immaterial amounts. Warrants On August 31, 2020, in connection with the 2020 Term A Loan, the Company issued warrants to the Lenders to purchase an aggregate of 196,850 shares of its common stock at an exercise price equal to $ 2.54 per share. In accordance with ASC 815-40, these warrants are classified as permanent equity in the accompanying consolidated balance sheets and will expire ten years from the date of issuance. The initial grant date fair value of the warrants was $ 0.4 million as determined by the Black-Scholes valuation model and recorded to stockholders' equity, with the SVB portion allocated to the reacquisition price of the 2017 Term Loan and the Oxford fair value portion as a loan discount to the Term A Loan. Payoff On the Funding Date, the Company entered into a payoff letter with SVB, pursuant to which the Company utilized $ 13.7 million of the 2020 Term Loan to pay off all outstanding obligations under the previous term loan, consisting of the principal payment, final prepayment and accrued interest. During the year ended December 31, 2020, the Company recognized a loss on extinguishment of debt in the amount of $ 0.5 million determined as the difference between the reacquisition price and carrying value at August 31, 2020. As of December 31, 2021 and 2020, the outstanding principal balance under the 2020 Term Loan was $ 25.0 million. Total 2020 Term Loan and unamortized debt discount balances as of December 31, 2021 are as follows (in thousands): Face value $ 25,000 Venture debt termination fee 2,250 Less: Debt discount ( 1,616 ) Less: Current portion of loan payable ( 5,961 ) Loan payable, net of current portion $ 19,673 F-20 Table of Contents Future minimum principal payments on the 2020 Term Loan as of December 31, 2021 are as follows (in thousands): Year ended: 2022 $ 5,488 2023 7,317 2024 7,317 2025 4,878 Total minimum principal payments $ 25,000 During the years ended December 31, 2021, 2020 and 2019, the Company recognized $ 2.8 million, $ 1.6 million and $ 1.5 million respectively of interest expense related to the 2020 and 2017 Term Loans. 10. Equity Equity Financings “At-the-Market” Offerings 2017 Sales Agreement and August 2020 Shelf Registration Statement In August 2017, the Company entered into a sales agreement, or the 2017 Sales Agreement, with Jefferies LLC, as sales agent, to sell shares of its common stock with an aggregate value of up to $ 50.0 million in an “at the market offering.” On August 6, 2020, concurrent with the filing of the updated shelf registration statement, the Company entered into a sales agreement, or the 2020 Sales Agreement with Jefferies LLC, as sales agent, pursuant to which the Company may, from time to time, issue and sell common stock with an aggregate value of up to $ 50.0 million in an “at the market offering.” The 2017 Sales Agreement terminated pursuant to its terms in August 2020. On August 6, 2020, the Company filed an updated universal shelf registration statement on Form S-3 (Reg. No. 333-241692) with the SEC to sell an aggregate amount of up to $ 200.0 million of certain of its securities. The shelf registration statement was declared effective by the SEC on August 14, 2020. On October 8, 2021, the Company delivered notice to Jefferies LLC that the Company was terminating the 2020 Sales Agreement, with effect as of October 19, 2021. 2021 Sales Agreement On October 25, 2021, the Company entered into a Sales Agreement, or the 2021 Sales Agreement, with SVB Leerink LLC to sell shares of the Company’s common stock, from time to time, through an “at the market” equity offering program under which SVB Leerink will act as sales agent. The shares of common stock sold pursuant to the 2021 Sales Agreement will be issued pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-241692), filed on August 6, 2020 with the Securities and Exchange Commission and related prospectus supplement, filed on October 25, 2021 with the SEC, for aggregate gross sales proceeds of up to $ 75.0 million. During the year ended December 31, 2021, the Company sold 13,767,511 shares of its common stock pursuant to the 2021 and 2020 Sales Agreement for aggregate net proceeds of $ 51.9 million, after deducting commissions and other transaction costs. During the year ended December 31, 2020, the Company sold 1,069,486 shares of its common stock pursuant to the 2020 and 2017 Sales Agreements for aggregate net proceeds of $ 2.1 million, after deducting commissions and other transaction costs. June 2020 Sobi Stock Purchase On June 11, 2020, the Company entered into a stock purchase agreement with Sobi, pursuant to which the Company sold an aggregate of 5,416,390 shares of its common stock at a purchase price equal to $ 4.6156 per share, which represented 120 % of the 10-day volume-weighted average price of the Company’s common stock prior to signing, for aggregate gross proceeds of $ 25.0 million, or the Sobi Private Placement. The closing of the Sobi Private Placement occurred on July 31, 2020. In accordance with ASC 815, this forward sale treatment qualified as equity classification as the shares are not within the scope of ASC 480. The gross proceeds of $ 25.0 million were determined to include a premium to the fair value of the Company’s shares as of July 28, 2020 of approximately $ 14.5 million. As a result, such amount was included in the transaction price for revenue recognition of the Sobi License. See Note 12 for details. Also on June 11, 2020, the Company entered into a registration rights agreement (as amended by that certain letter agreement, dated as of November 4, 2020, the “Sobi Registration Rights Agreement”) with Sobi, pursuant to which the Company agreed to prepare and file a registration statement with respect to the resale of the shares of common stock acquired in the Sobi Private Placement. The Company will be required to file this resale registration statement within 30 days following receipt by the Company of a written request from Sobi to file such resale registration statement, and to have the registration statement declared effective within ten (10) Business Days after the SEC informs the Company that no review of such resale registration statement will be made or that the SEC has no further comments on such resale registration statement. F-21 Table of Contents December 2019 Financing On December 18, 2019, the Company entered into a securities purchase agreement, or the 2019 Purchase Agreement, with a group of institutional investors and certain members of the Board of Directors. Pursuant to the 2019 Purchase Agreement, the Company sold an aggregate of 37,634,883 shares of its common stock at a purchase price of $ 1.46 per share, warrants to purchase an aggregate of 22,988,501 shares of common stock at a purchase price of $ 0.125 per share underlying each common warrant, and pre-funded warrants to purchase an aggregate of 8,342,128 shares of common stock at a purchase price of $ 1.46 per share, all with five year terms, or the 2019 PIPE. The closing of the 2019 PIPE occurred on December 23, 2019. The exercise price of the pre-funded warrants is $ 0.0001 per share and the exercise price for the common warrants is $ 1.46 per share. In the event of a certain sale of the Company, the terms of the common warrants require us to make a payment to such common warrant holders based on a Black-Scholes valuation (using variables as specified in the warrants). This provision does not apply to the pre-funded warrants. Therefore, the Company is required to account for the common warrants as liabilities and record them at fair value, while the pre-funded warrants met the criteria to be classified as permanent equity. The Company recorded the fair value of the common warrants of $ 40.7 million upon issuance using the Black-Scholes valuation model. Issuance costs were allocated between the equity component with an offset to additional paid-in capital and the liability component recorded as expense on a relative fair value basis. Total net proceeds from the equity offering was $ 65.6 million, after deducting transaction costs and commissions of $ 4.4 million. The common warrants were revalued as of December 31, 2021 at $ 25.4 million. During the years ended December 31, 2021, 2020 and 2019, the Company recorded a decrease in the fair value of the warrants of $ 2.3 million, $ 10.4 million, and $ 0.9 million, respectively, in the consolidated statements of operations and comprehensive loss. June 2017 Financing In June 2017, the Company entered into a securities purchase agreement, or the Institutional Purchase Agreement with a select group of institutional investors, or the Institutional Investors and a securities purchase agreement with Timothy A. Springer, Ph.D., a member of the board of directors, or the Springer Purchase Agreement, for a private placement of the Company’s securities, or the 2017 PIPE. Pursuant to the Institutional Purchase Agreement, the Company sold an aggregate of 2,750,000 shares of its common stock at a purchase price equal to $ 16.00 per share. Pursuant to the Springer Purchase Agreement, the Company sold to Dr. Springer an aggregate of 338,791 shares of common stock at a purchase price equal to $ 17.71 per share, which was equal to the most recent consolidated closing bid price on the Nasdaq Stock Market on June 23, 2017, and warrants to purchase up to 79,130 shares of common stock, or the Warrant Shares, exercisable at $ 17.71 per Warrant Share, and with a term of five years . The purchase price for each warrant was equal to $ 0.125 for each Warrant Share, consistent with Nasdaq Stock Market requirements for an “at the market” offering. Under the terms of the Common Stock Purchase Warrant, the warrants can be settled in unregistered shares. The Warrant Shares qualify for equity classification. The fair value of the allocated proceeds was determined on the relative fair value basis. After deducting for placement agent fees and offering expenses, the aggregate net proceeds from the 2017 PIPE were approximately $ 47.1 million. Warrants During the year ended December 31, 2021, warrant holders exercised 1,642,036 common warrants on a cashless basis and received 1,076,669 shares of common stock. Number of Warrants Equity classified Liability classified Total Weighted average exercise price Outstanding at December 31, 2019 8,437,747 22,988,501 31,426,248 $ 1.12 Exercises ( 8,342,128 ) ( 10,902,954 ) ( 19,245,082 ) 0.83 Issuance 196,850 — 196,850 2.54 Outstanding at December 31, 2020 292,469 12,085,547 12,378,016 $ 1.60 Exercises — ( 1,642,036 ) ( 1,642,036 ) 1.46 Outstanding at December 31, 2021 292,469 10,443,511 10,735,980 $ 1.62 Common Stock As of December 31, 2021, the Company had 200,000,000 shares of common stock authorized for issuance, $ 0.0001 par value per share, with 123,622,965 shares issued and outstanding. The voting, dividend and liquidation rights of the common stockholders are subject to and qualified by the rights, powers and preferences of the preferred stock. The common stock has the following characteristics: F-22 Table of Contents Voting The common stockholders are entitled to one vote for each share of common stock held with respect to all matters voted on by the stockholders of the Company. Dividends The common stockholders are entitled to receive dividends, if and when declared by the Board of Directors. Through December 31, 2021, no dividends have been declared or paid on common stock. Liquidation Upon liquidation of the Company, the common stockholders are entitled to receive all assets of the Company available for distribution to such stockholders. Reserved Shares The Company has authorized shares of common stock for future issuance as follows: As of December 31, 2021 December 31, 2020 Exercise of warrants 10,735,980 12,378,016 Shares available for future stock incentive awards 6,039,564 4,916,374 Unvested restricted stock units 394,450 87,500 Outstanding common stock options 11,039,873 7,775,249 Total 28,209,867 25,157,139 11. Stock Incentive Plans The Company maintains the 2008 Stock Incentive Plan, or the 2008 Plan, for employees, consultants, advisors, and directors. The 2008 Plan provided for the granting of incentive and non-qualified stock option and restricted stock awards as determined by the Board. In June 2016, the Company’s stockholders approved the 2016 Incentive Award Plan, or the 2016 Plan, which authorized 1,210,256 shares of common stock for future issuance under the 2016 Plan and the Company ceased granting awards under the 2008 Plan. Upon the effective date of the 2016 Plan, awards issued under the 2008 Plan remain subject to the terms of the 2008 Plan. Awards granted under the 2008 Plan that expire, lapse or terminate become available under the 2016 Plan as shares available for future grants. Additionally, pursuant to the terms of the 2016 Plan, the Board is authorized to grant awards with respect to common stock, and may delegate to a committee of one or more members of the Board or executive officers of the Company the authority to grant options and restricted stock units. On December 9, 2020, the Board established a Stock Option Committee authorized to grant awards to certain employees and consultants subject to conditions and limitations within the 2016 Plan. In January 2021 and 2020, the number of shares of common stock that may be issued under the 2016 Plan was increased by 4,322,850 and 3,453,022 shares, respectively. As of December 31, 2021, 1,925,537 shares remain available for future issuance under the 2016 Plan. In September 2018, the Company’s 2018 Employment Inducement Incentive Award Plan, or the 2018 Inducement Incentive Award Plan was adopted by the Board without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Stock Market LLC listing rules, which authorized 1,175,000 shares of its common stock for issuance. In March 2019, the Board approved the amendment and restatement of the 2018 Inducement Incentive Award Plan to reserve an additional 2,000,000 shares of the Company’s common stock for issuance thereunder. As of December 31, 2021, there are 1,591,661 shares available for future grant under the 2018 Inducement Incentive Award Plan. F-23 Table of Contents Stock-Based Compensation Expense Stock-based compensation expense by classification included within the consolidated statements of operations and comprehensive loss was as follows (in thousands): Year Ended December 31, 2021 2020 2019 Research and development $ 3,204 $ 2,271 $ 2,079 General and administrative 4,516 3,151 3,082 Total stock-based compensation expense $ 7,720 $ 5,422 $ 5,161 Stock Options The estimated grant date fair values of employee stock option awards granted under the 2016 Plan and the 2018 Inducement Incentive Award Plan were calculated using the Black-Scholes option pricing model, based on the following weighted-average assumptions: Year Ended December 31, 2021 2020 2019 Risk-free interest rate 0.79 % 1.11 % 1.86 % Dividend yield — — — Expected term 6.03 6.04 5.94 Expected volatility 95.04 % 91.00 % 87.66 % Weighted-average fair value of common stock $ 3.58 $ 2.49 $ 2.01 The weighted average grant date fair value of stock options granted to employees during the years ended December 31, 2021, 2020 and 2019 was $ 2.73 , $ 1.86 , and $ 1.47 respectively. As of December 31, 2021 and 2020, total unrecognized compensation expense related to unvested employee stock options was $ 11.5 million and $ 8.0 million, respectively, which is expected to be recognized over a weighted average period of 2.7 years and 2.3 years, respectively. The following table summarizes the stock option activity under the 2008 Plan, 2016 Plan, and 2018 Inducement Incentive Award Plan: Weighted-average remaining Aggregate Number of Weighted-average contractual term intrinsic value options exercise price ($) (in years) (in thousands) Employees Outstanding at December 31, 2020 7,302,176 $ 3.98 8.43 $ 4,456 Granted 4,625,611 $ 3.58 Exercised ( 398,754 ) $ 1.72 Forfeited ( 912,233 ) $ 2.84 Outstanding at December 31, 2021 10,616,800 $ 3.99 8.19 $ 4,982 Vested at December 31, 2021 4,459,309 $ 4.72 7.23 $ 3,149 Vested and expected to vest at December 31, 2021 9,917,248 $ 4.03 8.13 $ 4,796 Non-employee consultants Outstanding at December 31, 2020 473,073 $ 5.89 5.23 $ 86 Exercised ( 50,000 ) $ 2.04 Outstanding at December 31, 2021 423,073 $ 6.34 3.85 $ 42 Vested at December 31, 2021 423,073 $ 6.34 3.85 $ 42 Vested and expected to vest at December 31, 2021 423,073 $ 6.34 3.85 $ 42 F-24 Table of Contents Restricted Stock Units During the year ended December 31, 2021, the Company granted 407,700 restricted stock awards with a weighted average fair value of $ 3.11 per share based on the closing price of the Company’s common stock on the date of grant to employees under the 2016 Plan, which will vest over a four year term. Forfeitures are estimated at the time of grant and are adjusted, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company has estimated a forfeiture rate of 10 % for restricted stock awards to employees based on historical attrition trends. In addition, the Company awarded 197,500 restricted stock units to executives under the 2016 Plan. These restricted stock units vested in two equal installments on the dates applicable performance conditions were achieved during the year ended December 31, 2021. Unrecognized compensation expense for all restricted stock units was $ 0.9 million as of December 31, 2021, which is expected to be recognized over a weighted average period of 2.7 years. The following table summarizes the Company’s restricted stock units under the 2016 Plan and 2018 Inducement Incentive Award Plan: Number of shares Weighted average grant date fair value ($) Unvested at December 31, 2020 87,500 $ 6.03 Granted 605,200 2.10 Vested ( 201,250 ) 1.31 Forfeited ( 97,000 ) 1.76 Unvested at December 31, 2021 394,450 $ 3.45 Employee Stock Purchase Plan In June 2016, the Company approved the 2016 Employee Stock Purchase Plan, or the ESPP, which authorized 173,076 shares of common stock for future issuance under the ESPP to participating employees. In January 2021 and 2020, the number of shares of common stock authorized for issuance under the ESPP was increased by 1,080,711 shares and 863,254 shares, respectively. During the year ended December 31, 2021, the Company issued 58,794 shares of common stock under the ESPP. As of December 31, 2021, 2,522,366 shares remain available for future issuance under the ESPP. For each of the years ended December 31, 2021 and 2020, the Company recognized $ 0.1 million of stock-based compensation expense under the ESPP, respectively. 12. Revenue Arrangements Takeda Pharmaceuticals USA, Inc. License and Development Agreement On October 1, 2021, the Company entered into a License Agreement, or the Takeda Agreement, with Takeda. Under the Takeda Agreement, the Company granted Takeda an exclusive license to the Company’s ImmTOR technology initially for two specified disease indications within the field of lysosomal storage disorders. Takeda paid a $ 3.0 million upfront payment to the Company upon signing of the Takeda Agreement, and the Company is entitled to receive up to $ 1.124 billion in future additional payments over the course of the partnership that are contingent on the achievement of development or commercial milestones or Takeda’s election to continue its activities at specified development stages. The Company is also eligible for tiered royalties on future commercial sales of any licensed products. Pursuant to the Takeda Agreement, the Company determined the Takeda Agreement represents a service arrangement under the scope of ASC 606, and given the reversion of the rights under the Takeda Agreement represents a penalty in substance for a termination by Takeda, the contract term would remain the stated term of the Takeda Agreement. The Company determined that the research license, the licensed know-how, and the manufactured supply and delivery of materials represent a single promise and performance obligation to be transferred to Takeda over time due to the nature of the promises in the contract. The delivery of the manufactured supply is the predominant promise within the arrangement, as it is essential to the utility of the licensed intellectual property. The material to be supplied by the Company to Takeda is unique to the Company and cannot be obtained by other vendors. As such, consideration in the initial transaction price will be allocated to the single performance obligation and the recognition period would not extend beyond the initial contractual period. The Company will recognize the revenue associated with the upfront payment and combined single performance obligation utilizing the output method over the term that manufactured supply is delivered to Takeda. F-25 Table of Contents In determining the transaction price, the Company concluded the payment associated with all the performance milestones will be fully constrained and only be included in the transaction price when the respective milestone is deemed probable of achievement. Each of these variable consideration items were evaluated under the most likely amount method to determine whether such amounts were probable of occurrence, or whether such amounts should be constrained until they become probable. As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt and timing of such study milestones is outside the control of the Company and probability of success criteria is estimated. The Company will re-evaluate the transaction price in each reporting period, as uncertain events are resolved, or as other changes in circumstances occur. Takeda has the right to exercise covenant release rights on a field-by-field basis. If Takeda exercises its covenant release rights, we could receive exercise payments per indication and would be entitled to significant development and commercial milestone payments and tiered royalties on commercial sales. The Company determined that a significant financing component does not exist in its arrangement with Takeda. The Company also determined the options to negotiate additional fields, pursue other products, enter into a supply agreement explore additional fields, and pursue additional development under the initial fields do not represent material rights under the agreement. Takeda has the right to terminate the Takeda Agreement in its entirety or on a field-by-field basis, upon 90 days’ written notice to the Company. As of December 31, 2021, the Company recorded $ 1.0 million and $ 1.0 million, as a short-term and long-term contract liabilities, respectively, representing deferred revenue associated with this agreement. Revenue of $ 1.0 million related to the Takeda Agreement was recognized during the year ended December 31, 2021. Swedish Orphan Biovitrum License and Development Agreement On June 11, 2020, the Company and Sobi entered into the Sobi License. Pursuant to the Sobi License, the Company has agreed to grant Sobi an exclusive, worldwide (except as to Greater China) license to develop, manufacture and commercialize the Company’s SEL-212 drug candidate, which is currently in development for the treatment of chronic refractory gout. The SEL-212 drug candidate is a pharmaceutical composition containing a combination of SEL-037, or the Compound, and ImmTOR. Pursuant to the Sobi License, in consideration of the license, Sobi agreed to pay the Company a one-time, upfront payment of $ 75.0 million. Sobi has also agreed to make milestone payments totaling up to $ 630.0 million to the Company upon the achievement of various development and regulatory milestones and, if commercialized, sales thresholds for annual net sales of SEL-212, and tiered royalty payments ranging from the low double digits on the lowest sales tier to the high teens on the highest sales tier. Pursuant to the Sobi License, the Company has agreed to supply (at cost) quantities of the Compound and ImmTOR as necessary for completion of the two Phase 3 clinical trials of SEL-212 (DISSOLVE I and DISSOLVE II) and a 6-month placebo extension. The Company is required to supply quantities of the Compound until all rights to the Compound and any materials needed to manufacture the Compound are transferred to Sobi. Sobi has agreed to reimburse the Company for all budgeted costs incurred to complete development of SEL-212, including but not limited to costs incurred while conducting and completing the Phase 3 DISSOLVE trials, except for any costs of additional development activities required that are related to ImmTOR and that are unrelated to SEL-212. Sobi will have control and responsibility over all regulatory filings, including any investigational drug applications (IND), biologics license applications (BLA), and marketing authorization applications (MAA) relating to the licensed product. The transactions contemplated by the Sobi License were consummated on July 28, 2020 following the expiration or termination of the required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Sobi may terminate the Sobi License for any reason upon 180 days’ written notice to the Company, whereby all rights granted under the Sobi License would revert back to the Company. In addition, if Sobi were to terminate the Sobi License, the Company has the option to obtain a license to all patents and know-how necessary to exploit SEL-212 in existence as of the termination date from Sobi in return for making an equitable royalty payment to Sobi. Additionally, on June 11, 2020, the Company entered into the Sobi Purchase Agreement in connection with the Sobi License. The closing of the Sobi Private Placement occurred on July 31, 2020, following the closing of the transactions contemplated under the Sobi License. See Note 10 for details. The Company determined that the Sobi License represents a service arrangement under the scope of ASC 606. In addition, given the Sobi License and Sobi Purchase Agreement were executed contemporaneously and negotiated as a package with a single commercial objective, the Company will account for the two agreements as a single contract. The term of the Sobi License commenced upon the effective date of July 28, 2020 and will continue on a product-by-product basis until the royalty terms for each country have expired. The royalty term for a given product begins upon the first commercial sale of the product in a country and ends at the later of ten years from the first commercial sale, expiration of the last valid patent claim covering the product and expiration of all regulatory exclusivity periods for the product in a country. Given the reversion of the rights under the Sobi License represents a penalty in substance for a termination by Sobi, the contract term would remain the stated term of the Sobi License. F-26 Table of Contents The Company determined that the Sobi License contains three distinct performance obligations due to the nature of the promises in the contract, which includes conducting the Phase 3 DISSOLVE trials, Sobi’s option to set-up a second source supplier, and a combined obligation comprised of the delivery of the license to SEL-212, transfer of the know-how and the manufacturing and delivery of SEL-212 supply for development, or the Combined License Obligation. As the set-up of a second source supplier is optional for Sobi and the Company will be reimbursed at cost for its efforts in the subsequent set-up and technology transfer, the option for this future service was determined to be at a significant and incremental discount to its standalone selling price and treated as a material right in the arrangement, namely a distinct performance obligation. In determining the transaction price, the Company concluded the upfront payment of $ 75.0 million and the $ 5.0 million development milestone associated with the dosing of the first patient in the Phase 3 DISSOLVE trials will be included in the transaction price. All other development milestones will be fully constrained and only be included in the transaction price when the respective milestone is deemed probable of achievement. Each of these variable consideration items was evaluated under the most likely amount method to determine whether such amounts were probable of occurrence, or whether such amounts should be constrained until they become probable. As part of the evaluation of the constraint, the Company considered numerous factors, including that receipt of such milestones is outside the control of the Company and probability of success criteria is estimated. The Company will re-evaluate the transaction price in each reporting period, as uncertain events are resolved. In accordance with ASC 606, the Company will only recognize revenue associated with sales-based milestones and royalties when the subsequent sales thresholds are reached and underlying sales occur, respectively. In connection with the Sobi Purchase Agreement, the Company determined that the gross proceeds of $ 25.0 million from the Sobi Private Placement included a premium to the fair value of the Company’s shares as of July 28, 2020 equal to approximately $ 14.5 million. The premium amount will be included in the transaction price for revenue recognition. The Company will estimate and include in the transaction price the total reimbursements to be received from Sobi for both the manufacturing and delivery of the Compound and ImmTOR as well as conducting the Phase 3 DISSOLVE trials. The Company determined that a significant financing component does not exist in its arrangement with Sobi. The Company allocated the transaction price based on the relative standalone selling prices of the three distinct performance obligations. The Company estimated the standalone selling price of conducting the Phase 3 DISSOLVE trials by forecasting its anticipated costs and applying a margin reflective of the industry. The Company must determine the standalone selling price of the second source supplier option by determining the discount given to Sobi multiplied by the likelihood that Sobi will exercise the option in the future. Similar to the Phase 3 program estimate, the Company estimated the discount of the option by forecasting the set-up costs and applying a margin that is reflective of the industry. As the Company will be providing the set-up and technology transfer services and the future supply at cost, the discount of the option is equal to the margin amount. The Company considered discussions with Sobi as well as probability of regulatory success of SEL-212 in determining the likelihood of exercise. The Company estimated the standalone selling price of the Combined License Obligation by utilizing a discounted cash flow model. The Company determined that the delivery of the supply to Sobi best represents the pattern of delivery of the Combined License Obligation as the supply is essential to the utility of the license and know-how. The Company will recognize the revenue allocated to the Combined License Obligation by utilizing the output method. The Company estimated the total supply of the Compound and ImmTOR to be required during the clinical trial period and will recognize revenue as this supply is shipped for use in the clinical trials. The Company will recognize the revenue allocated to the conducting of the Phase 3 DISSOLVE trials obligation by utilizing the input method. The Company estimated the total budgeted costs to be incurred over the Phase 3 DISSOLVE trials and will recognize revenue as these costs are incurred. The Company’s costs best represent the pattern of transfer as these will capture all performance of the trials completed to date and can be readily measured. The Company will recognize the revenue allocated to the second source supplier option when the future services and goods are transferred. As of December 31, 2021 and 2020, the Company recorded $ 37.5 million and $ 68.3 million, respectively, as a short-term contract liability and $ 5.1 million and $ 24.2 million, respectively, as a long-term contract liability, representing deferred revenue associated with this agreement. In addition, as of December 31, 2021 the Company has recorded $ 0.7 million of contract assets related to incremental costs that would not have been incurred if the Sobi License had not been obtained, of which $ 0.6 million is presented in prepaid expenses and other current assets and less than $ 0.1 million is presented in other assets in the accompanying consolidated balance sheets. Amortization of contract assets was $ 0.7 million for the year ended December 31, 2021. As of December 31, 2021 and 2020, the Company recorded a total outstanding receivable of $ 9.9 million and $ 6.9 million, respectively, representing billings for the Phase 3 DISSOLVE program that are subject to reimbursement by Sobi. Revenue of $ 83.5 million and $ 16.6 million related to the Sobi License was recognized during the years ended December 31, 2021 and 2020, respectively. F-27 Table of Contents Sarepta Therapeutics, Inc. Research License and Option Agreement In June 2020, the Company and Sarepta entered into a Research License and Option Agreement, or the Sarepta Agreement. Pursuant to the Sarepta Agreement, the Company agreed to grant Sarepta a license under the Company’s intellectual property rights covering the Company’s antigen-specific biodegradable nanoparticle encapsulating ImmTOR to research and evaluate ImmTOR in combination with Sarepta’s adeno-associated virus gene therapy technology, or gene editing technology, using viral or non-viral delivery, to treat Duchenne Muscular Dystrophy and certain Limb-Girdle Muscular Dystrophy subtypes, or the Indications. Sarepta will have an option term of 24 months during which it can opt-in to obtain an exclusive license to further develop and commercialize the Product to treat at least one Indication, with a potential to extend the option term for an additional fee. The Company will supply ImmTOR to Sarepta for clinical supply on a cost-plus basis. Sarepta paid a $ 2.0 million upfront payment to the Company upon signing of the Sarepta Agreement, and the Company is eligible to receive additional preclinical payments during the option term. If Sarepta opts-in to an exclusive license agreement, the Company could receive option exercise payments per Indication upon execution of the exclusive license, and the Company would be entitled to significant development and commercial milestone payments and tiered royalties ranging from the mid-to-high single digits based on net sales. Pursuant to the Sarepta Agreement, the Company determined the Sarepta Agreement represents a service arrangement under the scope of ASC 606, with a 24 month contract duration. Given the reversion of the rights under the Sarepta Agreement represents a penalty in substance for a termination by Sarepta, the contract term would remain the stated term of the Sarepta Agreement. The Company determined that the Sarepta Agreement and supply obligation including the delivery of the research license, the licensed know-how, the manufactured supply and delivery of materials represent a single promise and performance obligation to be transferred to Sarepta over time due to the nature of the promises in the contract. The delivery of the manufactured supply is the predominant promise within the arrangement, as it is essential to the utility of the licensed intellectual property. As such, consideration in the initial transaction price will be allocated to the single performance obligation based on the contractual price. In determining the transaction price, the Company concluded the payment associated with all the performance milestones will be fully constrained and only be included in the transaction price when the respective milestone is deemed probable of achievement. Each of these variable consideration items was evaluated under the most likely amount method to determine whether such amounts were probable of occurrence, or whether such amounts should be constrained until they become probable. As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt of such study milestones is outside the control of the Company and probability of success criteria is estimated. The Company also determined the option to enter into a future commercial license agreement and extend the term of the option does not represent a material right since it was not priced at an incremental discount. Sarepta may terminate the Sarepta Agreement for any reason upon 30 days’ written notice to the Company. The Sarepta Agreement contains other customary terms and conditions, including representations and warranties, covenants, termination, and indemnification obligations in favor of each party. During the year ended December 31, 2020, the Company and Sarepta entered into two amendments relating to an additional feasibility study. During the year ended December 31, 2021, the Company and Sarepta entered into a third amendment relating to the additional feasibility study. On April 13, 2021, the Company was notified by Sarepta of the achievement of the milestone event related to the completion of a non-clinical study for Duchenne muscular dystrophy and certain limb-girdle muscular dystrophies under the Sarepta Agreement. Accordingly, the Company received a milestone payment of $ 3.0 million during the three months ended June 30, 2021. As of December 31, 2021, two milestones remained constrained, and as of December 31, 2020, all milestones were constrained. The Company will re-evaluate the transaction price in each reporting period, as uncertain events are resolved. The Company will recognize the revenue associated with the upfront payment and combined single performance obligation utilizing the output method, over the 24 month term as the manufactured supply is delivered to Sarepta. As of December 31, 2021 and 2020, the Company recorded $ 4.6 million and $ 2.0 million, respectively, as a short-term contract liability representing deferred revenue associated with this agreement. Revenue of $ 0.4 million related to the Sarepta Agreement was recognized during the year ended December 31, 2021. De minimis revenue related to the Sarepta License Agreement was recognized during the year ended December 31, 2020. F-28 Table of Contents Asklepios Biopharmaceutical, Inc. License Agreement for Pompe Disease In December 2019, the Company and AskBio entered into a license agreement, or the AskBio License Agreement. Pursuant to the AskBio License Agreement, AskBio has exercised its option to exclusively license the Company’s intellectual property rights covering the Company’s ImmTOR platform to research, develop, and commercialize certain AAV gene therapy products utilizing ImmTOR, and targeting the GAA gene, or derivatives thereof, to treat Pompe Disease. Pursuant to the AskBio License Agreement and ancillary documents, AskBio agreed to pay to the Company upfront fees of an aggregate of $ 7.0 million. Assuming successful development and commercialization, the Company could receive up to an additional $ 237.0 million in development, regulatory, and sales milestone payments. If commercialized, the Company would be eligible to receive tiered royalties on global net sales at percentages ranging from mid-to-high single digits. Under the terms of the agreement, the Company will be eligible to receive these royalties commencing on the first commercial sale of the licensed product until the expiration of the later of (i) ten years after the first commercial sale and (ii) expiration of the last to expire valid claim on patents covering the licensed product. Pursuant to the AskBio License Agreement, the Company will supply AskBio with its ImmTOR platform, or the Supply Obligation, and AskBio will be responsible for all preclinical, clinical and commercial manufacture and supply of licensed products (other than ImmTOR) and carry out all other activities related to the research, development, and commercialization of licensed products at its sole expense, including all regulatory activities related thereto. The Company determined that the AskBio License Agreement and Supply Obligation represent a single promise and performance obligation. This is because AskBio cannot derive benefit from the license without the simultaneous transfer of the patent protected ImmTOR supply. Therefore, the License Obligation and Supply Obligation represent the only promise in the arrangement and are combined as a single performance obligation. In determining the transaction price, the Company concluded that the future development milestones, regulatory milestones, sales milestones, and sales royalties all represent variable consideration. Each of these variable consideration items was evaluated under the most likely amount method to determine whether such amounts were probable of occurrence, or whether such amounts should be constrained until they become probable. As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt of such milestones is outside the control of the Company. Consideration related to sales-based milestones as well as royalties on net sales upon commercialization by AskBio, will be recognized when the related sales occur, as they were determined to relate predominantly to the intellectual property granted to AskBio and, therefore, have also been excluded from the transaction price in accordance with the royalty recognition constraint. As of December 31, 2021 and 2020, all milestones were constrained. The Company will re-evaluate the transaction price in each reporting period, as uncertain events are resolved, or as other changes in circumstances occur. The total initial transaction price of the contract on the effective date was $ 7.0 million, comprised of a $ 2.0 million initial upfront payment upon agreement of terms, and a $ 5.0 million initial upfront execution fee. At each of December 31, 2021 and 2020, the Company recorded $ 1.7 million as short-term contract liability and $ 5.3 million as a long-term contract liability, representing deferred revenue associated with this agreement. Revenue will be recognized over the period in which the particles are delivered. No revenue related to the AskBio License Agreement was recognized during the years ended December 31, 2021 and 2020 as no deliveries were made during these periods. Spark Therapeutics, Inc. In December 2016, the Company entered into a license and option agreement, or the Spark License Agreement, with Spark pursuant to which the Company and Spark agreed to collaborate on the development of gene therapies for certain targets utilizing the ImmTOR platform. The Spark License Agreement provides Spark with certain exclusive, worldwide, royalty bearing licenses to the Company’s intellectual property, allowing Spark to develop and commercialize gene therapies in combination with ImmTOR for Factor VIII, an essential blood clotting protein relevant to the treatment of hemophilia A, the initial target. Pursuant to the Spark License Agreement, Spark made an upfront payment of $ 15.0 million. Additionally, in connection with the Spark License Agreement, the Company entered into a Stock Purchase Agreement with Spark. Pursuant to the Spark Purchase Agreement, Spark purchased a total of $ 15.0 million of the Company’s common stock including 197,238 shares for an aggregate purchase price of $ 5.0 million at the Initial Closing, 324,362 shares of common stock for an aggregate purchase price of $ 5.0 million on June 8, 2017, and 205,254 shares of common stock from the Company for an aggregate purchase price of $ 5.0 million on October 31, 2017. In June 2017, the Company and Spark entered into a letter agreement, or the Letter Agreement, pursuant to which the parties agreed that Spark and the Company agreed to reimburse Spark for all costs and expenses, including the cost of materials provided by the Company, associated with the preclinical research and toxicology studies being performed by Spark for any licensed products for a specified amount of time, or the Reimbursement Period, in an amount not to exceed $ 2.5 million. In F-29 Table of Contents June 2019, the term of the Reimbursement Period under the Letter Agreement expired. During the year ended December 31, 2019, the Company updated its estimate of variable consideration included in the transaction price to include $ 1.2 million of unpaid reimbursements to Spark. In December 2019, the term for Spark to exercise additional target options expired. Therefore, during the year ended December 31, 2019, the Company recognized $ 6.7 million in revenue. Additionally, during the year ended December 31, 2019, there were two deliveries resulting in less than $ 0.1 million of revenue recognized. As of December 31, 2020, there was a contract liability of $ 9.2 million representing long-term deferred revenue to be recognized upon the occurrence of future deliveries under this agreement. No revenue related to the Spark License Agreement was recognized during the years ended December 31, 2021 and 2020, as no deliveries were made during these periods. On January 18, 2022, both parties agreed to mutually terminate the Spark License Agreement. Therefore, the contract liability of $ 9.2 million representing deferred revenue is presented as short-term on the accompanying consolidated balance sheet as of December 31, 2021. Skolkovo Foundation During the year ended December 31, 2021, revenue of $ 0.1 million related to the remaining contract liability of the Russia-based Development Fund of New Technologies Development and Commercialization Center, or Skolkovo, grant funding was recognized at the expiration of the three-year audit period. Transaction Price Allocated to Future Performance Obligations Remaining performance obligations represent the transaction price of contracts for which work has not been performed (or has been partially performed). As of December 31, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 65.3 million. Contract Balances from Contracts with Customers ( Takeda, Sobi, Sarepta, AskBio, Spark and Skolkovo ) The following table presents changes in the Company’s contract liabilities during the year ended December 31, 2021 (in thousands): Balance at Balance at beginning of period Additions Deductions end of period Contract liabilities: Deferred revenue $ 110,796 $ 6,000 $ ( 51,496 ) $ 65,300 Total contract liabilities $ 110,796 $ 6,000 $ ( 51,496 ) $ 65,300 13. Related-Party Transactions Consulting Services The Company incurred expenses for consulting services provided by its founders totaling $ 0.1 million, $ 0.1 million and $ 0.5 million during the years ended December 31, 2021, 2020 and 2019, respectively. The Company entered into consulting agreements with its founders to serve on its Scientific Advisory Board, effective January 1, 2020 to December 31, 2021, under which they were paid quarterly for their services. 14. Collaboration and License Agreements Ginkgo Bioworks Holdings, Inc. Collaboration and License Agreement On October 25, 2021, the Company entered into a Collaboration and License Agreement, or the First Ginkgo Agreement, with Ginkgo. Under the First Ginkgo Agreement, Ginkgo will design next generation IgA proteases with potentially transformative therapeutic potential. In return, Ginkgo is eligible to earn both upfront research and development fees and milestone payments, including certain milestone payments for fixed fair values in the form of Selecta common stock, clinical and commercial milestone payments of up to $ 85.0 million in cash. The Ginkgo Agreement was assessed for collaboration components and was determined not to be within the scope of ASC 808 as the risk and rewards are not shared by both parties. The Company will expense costs related to the Ginkgo Agreement as incurred until regulatory approval is received in accordance with ASC 730. The Company is accounting for the contingently issuable shares to be issued in exchange for the license obtained from Ginkgo as a liability classified stock based compensation arrangement with a non-employee which will be recognized when achievement of the milestones is probable. The Company will assess the capitalization of costs incurred F-30 Table of Contents after the receipt of regulatory approval and, if applicable, will amortize these payments based on the expected useful life of each asset, typically based on the expected commercial exclusivity period. The Company is also obligated to pay Ginkgo tiered royalties ranging from low-single digit to high-single digit percentages of annual net sales of collaboration products which will be expensed as the commercial sales occur. Genovis AB (publ.) License Agreement On October 21, 2021, the Company entered into an Exclusive License Agreement, or the Genovis Agreement, with Genovis. Under the Genovis Agreement, the Company paid to Genovis an upfront payment in exchange for an exclusive license to Genovis’ IgG Protease, or Xork, enzyme technology across all therapeutic uses in humans, excluding research, preclinical, diagnostic and other potential non-therapeutic applications of the enzyme. Genovis is eligible to earn development and sales-based milestones. The Genovis Agreement was assessed for collaboration components and was determined not to be within the scope of ASC 808 as the risk and rewards are not shared by both parties. The Company will expense costs related to the Genovis Agreement as incurred until regulatory approval is received in accordance with ASC 730. The Company will assess the capitalization of costs incurred after the receipt of regulatory approval and, if applicable, will amortize these payments based on the expected useful life of each asset, typically based on the expected commercial exclusivity period. The Company is also obligated to pay Genovis tiered royalties of low double digit percentages of worldwide annual net sales of collaboration products which will be expensed as the commercial sales occur. Cyrus Biotechnology, Inc. Collaboration and License Agreement On September 7, 2021, the Company and Cyrus Biotechnology, Inc., or Cyrus, entered into a collaboration and license agreement, or the Cyrus Agreement. Pursuant to the Cyrus Agreement, Cyrus agreed to grant the Company an exclusive, worldwide license to certain intellectual property to form a protein engineering collaboration combining the Company’s ImmTOR platform with Cyrus’ ability to redesign protein therapeutics. The lead program is a proprietary interleukin-2, or IL-2, protein agonist designed to selectively promote expansion of regulatory T cells for treatment of patients with autoimmune diseases and other deleterious immune conditions. In return for the licensed intellectual property, the Company made an upfront payment and is obligated to pay certain discovery, development, and sales-based milestones which could potentially total up to approximately $ 1.5 billion across multiple programs. The Cyrus Agreement was assessed for collaboration components and was determined not to be within the scope of ASC 808 as the risk and rewards are not shared by both parties. The Company will expense costs related to the Cyrus Agreement as incurred until regulatory approval is received in accordance with ASC 730. The Company will assess the capitalization of costs incurred after the receipt of regulatory approval and, if applicable, will amortize these payments based on the expected useful life of each asset, typically based on the expected commercial exclusivity period. The Company is also obligated to pay Cyrus tiered royalties ranging from mid-single digit to low-double digit percentages of annual net sales of collaboration products which will be expensed as the commercial sales occur. Additionally, on September 7, 2021, the Company entered into a stock purchase agreement, or the Series B Preferred Stock Purchase Agreement, in connection with the Cyrus Agreement. Pursuant to the Series B Preferred Stock Purchase Agreement, the Company purchased 2,326,934 shares of Cyrus’ Series B Preferred Stock, par value $ 0.0001 per share, at a purchase price of $ 0.8595 per share for $ 2.0 million. In accordance with ASC 810, the Company has a variable interest in Cyrus resulting from its equity investment. The Company will share in Cyrus’ expected losses or receive a portion of its expected returns and absorb the variability associated with changes in the entity’s net assets. However, the Company is not the primary beneficiary as it does not have the power to direct the activities most significant to Cyrus, and therefore it is not required to consolidate Cyrus. The Company determined its equity interest to be within the scope of ASC 321 and elected to record the $ 2.0 million investment of Cyrus’ Series B Preferred Stock at cost on the purchase date. As of December 31, 2021, no impairment indicators are present and therefore the carrying value of the investment in Cyrus is $ 2.0 million on the accompanying consolidated balance sheet. The Company’s maximum exposure to loss related to this variable interest entity is limited to the carrying value of the investment. The Company has not provided financing to Cyrus other than the amount contractually required by the Series B Preferred Stock Purchase Agreement. Asklepios Biopharmaceutical, Inc. Feasibility Study and License Agreement In August 2019, the Company entered into a feasibility study and license agreement with AskBio, or the AskBio Collaboration Agreement. Pursuant to the AskBio Collaboration Agreement, the Company and AskBio agreed to license intellectual property rights to each other as part of a collaboration to research, develop, and commercialize certain AAV gene therapy products utilizing the Company’s ImmTOR platform to enable re-dosing of such AAV gene therapy products to treat serious rare and orphan genetic diseases for which there is a significant unmet medical need. F-31 Table of Contents Pursuant to the AskBio Collaboration Agreement, the Company and AskBio agreed to conduct proof of concept studies to potentially validate the use of ImmTOR in conjunction with AskBio’s AAV gene therapy, or SEL-302, (previously disclosed as MMA-101, in combination with ImmTOR) for the treatment of MMA, to mitigate the formation of neutralizing anti-AAV capsid antibodies, or the POC Studies. On April 29, 2021, the Company was notified by AskBio that it intended to opt-out of development of the MMA indication. The feasibility study and license agreement with AskBio, or AskBio Collaboration Agreement, otherwise remains in effect. Consequently, the Company has assumed all rights to the MMA program and intends to continue to progress the SEL-302 program through clinical development. The Company filed an IND to conduct a Phase 1/2 clinical trial of its SEL-302 product candidate in pediatric patients with methylmalonic acidemia in the third quarter of 2021. On November 23, 2021, this trial was placed on clinical hold by the FDA, with questions specifically relating to chemistry, manufacturing and controls, or CMC, of the AAV vector. On February 9, 2022, we submitted a written response to the FDA to answer its questions. On March 9, 2022, we received a letter from the FDA indicating the clinical hold was removed and the trial may proceed. The SEL-399 program combined an empty AAV capsid (EMC-101), which is an AAV capsid containing no transgene, with ImmTOR and is being conducted in partnership with AskBio. Building on the preclinical data the Company has generated showing ImmTOR’s effect on mitigating or reducing the formation of neutralizing antibodies to AAV gene therapies, the Company completed a clinical trial of SEL-399 in healthy adult volunteers in Belgium. The goal of the SEL-399 clinical trial was to demonstrate the appropriate dose of ImmTOR in humans to mitigate the formation of antibodies to AAV capsids used in gene therapies. This promising study in healthy volunteers provides support for the potential use of ImmTOR for the inhibition of neutralizing antibodies to AAV8 in gene therapy clinical trials. The Company and AskBio will share responsibility for the research, development and commercialization of products developed under the SEL-399 program collaboration. The parties will also share research, development, and commercialization costs equally for all collaboration products, but with a right of either party to opt out of certain products, and thereby no longer be required to share costs for such products. Each party will receive a percentage of net profits under the collaboration equal to the percentage of shared costs borne by such party in the development of such product. Pursuant to the AskBio Collaboration Agreement, AskBio is responsible for manufacturing the AAV capsids and AAV vectors and the Company is responsible for manufacturing ImmTOR. The AskBio Collaboration Agreement is considered to be within the scope of ASC 808, as both parties are active participants and exposed to the risks and rewards of the collaborative activity. The Company evaluated the terms of the AskBio Collaboration Agreement and have identified the following promises in the arrangement (1) conducting research and development activities to develop and commercialize products under the collaboration, or the R&D Services, (2) granting a non-exclusive, non-transferable, royalty-free, fully paid up, worldwide license to certain intellectual property of the Company, or the IP Rights, for the purpose of performing the POC Studies, or the Research License, (3) granting an exclusive, nontransferable, worldwide license to the IP Rights for use in certain indications, or the Collaboration License, (4) providing manufactured supply of preclinical and clinical ImmTOR, or the Manufactured Supply, (5) participation on identified steering committees responsible for the oversight of the collaboration, or the JSC Participation, and (6) granting an exclusive option to obtain a license under the IP Rights to research, develop and commercialize Licensed Products. The Company determined that the R&D Services, Research License, Collaboration License, Manufactured Supply, and JSC Participation were not capable of being distinct, and therefore must be combined into a single performance obligation. Therefore, promises (1) through (5) identified above were combined into a single performance obligation. Furthermore, the Company evaluated the Option Agreement and determined that it does not provide AskBio with a material right under ASC 606 as the option was not priced at a discount (see discussion of the option exercise in Note 12). The Company noted that AskBio did not meet the definition of a customer within the scope of ASC 606 for any distinct performance obligations as the Company concluded that such items were not an output of the Company’s ordinary activities. As such, the Company determined that the entire arrangement would be accounted for within the scope of ASC 808. In accordance with ASC 808, collaboration expenses are recognized within R&D expense and selling, general and administrative expense on the Company’s condensed consolidated statements of operations. Under certain collaborative arrangements, the Company is entitled to reimbursement of certain R&D expense. Activities under collaborative arrangements for which the Company is entitled to reimbursement are considered to be collaborative activities under the scope of ASC 808. For these units of account, the Company does not analogize to ASC 606 or recognize revenue. Rather, the Company analogizes to the guidance in ASC 730, which requires that reimbursements from counterparties be recognized as an offset to the related costs. In accordance with ASC 730, the Company records reimbursement payments received from collaborators as reductions to R&D expense. For the years ended December 31, 2021 and 2020, the Company recognized $ 2.7 million and $ 3.8 million, respectively, of collaboration expense under the AskBio Collaboration Agreement in which actual costs incurred by both parties approximate a 50 % cost share. F-32 Table of Contents Massachusetts Institute of Technology In November 2008, the Company entered into an exclusive patent license agreement, or the MIT License, with the Massachusetts Institute of Technology, or MIT, under which the Company received an exclusive royalty-bearing license to utilize patents held by MIT in exchange for upfront consideration and annual license maintenance fees. Such fees are expensed as incurred and have not been material to any period presented. In June 2020, the Company entered into a Fifth Amendment, or the MIT Amendment, to the MIT License, which is effective as of May 15, 2020. Pursuant to the MIT Amendment, certain of the Company’s diligence obligations were extended. The extension included the obligation to commence a Phase 3 trial for a licensed product by the second quarter of 2021 or to file an IND (or equivalent) with the FDA or comparable European regulatory agency for a licensed product by the second quarter of 2023. Additionally, certain of the Company’s development and regulatory milestones and payments upon achievement of such milestones were adjusted. As of December 31, 2021, and in connection with the execution of the Spark License Agreement, the Company has made contractual payments pursuant to the MIT License totaling $ 2.2 million, and $ 0.4 million relative to the calculated premium paid by Spark for the equity investments made under the Spark Purchase Agreement. The Company made no additional payments during the year ended December 31, 2021. Shenyang Sunshine Pharmaceutical Co., Ltd In May 2014, the Company entered into a license agreement, or the 3SBio License, with Shenyang Sunshine Pharmaceutical Co., Ltd., or 3SBio. The Company has paid to 3SBio an aggregate of $ 7.0 million in upfront and milestone-based payments under the 3SBio License as of December 31, 2021. The Company is required to make future payments to 3SBio contingent upon the occurrence of events related to the achievement of clinical and regulatory approval milestones of up to an aggregate of $ 15.0 million for products containing the Company’s ImmTOR platform. 15. Income Taxes The Company provides for income taxes under ASC 740. Under ASC 740, the Company provides deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the Company’s financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. On June 11, 2020, the Company entered into the Sobi License (see note 12). In September 2020, Sobi paid the Company a one-time upfront payment of $ 75.0 million. Sobi has also agreed to make milestone payments totaling up to $ 630.0 million to the Company upon achievement of various development and regulatory milestones and sales thresholds for annual net sales of SEL-212, and tiered royalty payments ranging from low double digits on the lowest sales tier to high teens on the highest sales tier. For income tax purposes, the transfer of trademark and product rights is treated as a sale and the net proceeds from the sale are taxed under the default installment method as cash is received by the Company. During the year ending December 31, 2021, the Company completed an analysis of future tax obligations under the default installment sale method versus making a timely filed election on its 2020 tax return due October 15, 2021 to elect out of the installment sale method for income tax purposes. As a result, the Company elected out of the default installment sale treatment with the filing of its tax return. In the elect out method, the Company was taxed based upon the estimated fair value of all present and future proceeds from the sale and the Company utilized all of its available net operating losses and income tax credits, which served to reduce the federal and state tax liability. As the Company recognizes future revenue under the Sobi license for US GAAP purposes, the Company will exclude that revenue from taxable income. For the year ended December 31, 2021, the Company recognized a current tax expense of $ 16.0 million, inclusive of estimated penalties and interest of $ 1.3 million. For the years ended December 31, 2020 and 2019, the Company did not record a current or deferred income tax expense or benefit. The following table reconciles the federal statutory income rate to the Company’s effective income tax rate: F-33 Table of Contents Year Ended December 31, 2021 2020 2019 Statutory U.S. federal rate 21.0 % 21.0 % 21.0 % State income taxes - net of federal benefit ( 166.0 %) 5.8 % 6.3 % Permanent items 8.3 % ( 2.9 %) ( 2.1 %) Research tax credits 55.0 % 1.0 % 1.1 % Deferred revenue 156.5 % — % — % Other ( 3.7 %) — % — % Valuation allowance, net ( 230.1 %) ( 23.6 %) ( 26.3 %) Stock compensation ( 5.2 %) ( 1.3 %) — % Effective income tax rate ( 164.2 %) — % — % The tax effects of temporary differences that give rise to the Company’s net deferred tax assets are as follows (in thousands): Year Ended December 31, 2021 2020 Deferred Tax Assets Net operating loss carryforwards $ 13,932 $ 63,678 Research and development credits 1,426 7,632 Stock-based compensations expense 3,955 2,919 Other expenses 745 788 Deferred revenue 102,583 26,699 Operating lease liability 2,636 2,884 Patent costs/amortization 6,843 5,379 Gross deferred tax assets 132,120 109,979 Deferred Tax Liabilities Depreciation $ ( 90 ) $ ( 11 ) Operating lease right-of-use asset ( 2,685 ) ( 2,991 ) Gross deferred tax liabilities ( 2,775 ) ( 3,002 ) Net deferred tax assets before valuation allowance 129,345 106,977 Valuation allowance ( 129,345 ) ( 106,977 ) Net deferred tax assets $ — $ — The Company has provided a full valuation allowance against its net deferred tax assets, as the Company believes that it is more likely than not that the deferred tax assets will not be realized. Realization of future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carryforward period. The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets and concluded that it is more likely than not that the Company will not realize the benefit of its deferred tax assets. The valuation allowance increased by $ 22.4 million and $ 16.3 million for the years ended December 31, 2021, and 2020, respectively, primarily as a result of an increase in deferred revenue. In 2014, the Company’s Russian subsidiary was granted a 10 year tax holiday in Russia. The Company’s foreign operations continue to benefit from the tax holiday, which is set to expire on December 31, 2023, however the Company is in the process of closing down operations in Russia and does not expect any tax liability. At December 31, 2021, the Company has federal and state net operating loss carryforwards of $ 51.1 million and $ 50.8 million, respectively, which will expire at various times through 2041. Of the federal net operating losses, $ 51.1 million can be carried forward indefinitely but will be subject to an 80% limitation. The Company has $ 1.2 million and $ 0.3 million, respectively, of federal and state research and development tax credit carryforwards, which will expire at various times through 2041. Utilization of the NOL carryforwards and research and orphan drug credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended (the Code), and similar state law due to ownership changes that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. If the Company experiences a change of control, as defined by Section 382 of the Code and similar state law, utilization of the NOL carryforwards or research and orphan drug credit carryforwards may be subject to an annual limitation under Section 382 of the Code, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. F-34 Table of Contents Any limitation may result in expiration of a portion of the NOL carryforwards or research and orphan drug credit carryforwards before utilization. The Company performed an analysis of ownership changes through December 31, 2021. Based on this analysis, the Company does not believe that any of its tax attributes through December 31, 2021 will expire unutilized due to Section 382 limitations. The Company applies ASC 740, Income Taxes to uncertain tax positions. As of the adoption date on January 1, 2010 and through December 31, 2021, the Company had no unrecognized tax benefits or related interest and penalties accrued. During 2021, the Company completed a detailed study of its research and development and orphan drug credits through December 31, 2020. As a result, the Company adjusted its current tax payable and deferred tax asset balances and the impacts are included in the federal research and orphan drug credit and state income taxes lines in the effective rate reconciliation above. Interest and penalty charges, if any, related to unrecognized tax benefits would be classified as income tax expense in the accompanying statement of operations. As of December 31, 2021, the Company had no accrued interest related to uncertain tax positions. The statute of limitations for assessment by the Internal Revenue Service and Massachusetts tax authorities is open for tax years since inception as the Company claimed research tax credits on its 2020 tax return which remains open for examination for the 2020 year as well as for any year in which a credit has been claimed for. The Company files income tax returns in the United States and Massachusetts. There are currently no federal, state or foreign audits in progress. 16. Defined Contribution Plan The Company maintains a defined contribution plan, or the 401(k) Plan, under Section 401(k) of the Internal Revenue Code. The 401(k) Plan covers all employees who meet defined minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pretax basis. The 401(k) Plan provides for matching contributions on a portion of participant contributions pursuant to the 401(k) Plan’s matching formula. All matching contributions vest ratably over four years and participant contributions vest immediately. Contributions by the Company totaled $ 0.2 million, $ 0.1 million, and $ 0.1 million during each of the years ended December 31, 2021, 2020 and 2019, respectively. 17. Commitments and Contingencies As of December 31, 2021, the Company was not a party to any litigation that could have a material adverse effect on the Company’s business, financial position, results of operations or cash flows. On August 3, 2020, a stockholder of Selecta filed a stockholder derivative action, purportedly on behalf of Selecta and against certain current and former members of the Company’s Board of Directors, as well as one affiliated company owned by a current board member, in the Court of Chancery of the State of Delaware, namely Franchi v. Barabe, et al. The complaint alleges that the individual defendants breached their fiduciary duties and committed corporate waste when they authorized a private placement transaction, announced on December 19, 2019, at a price allegedly below fair value. The complaint further alleges that the four defendant directors who participated in the private placement were unjustly enriched in connection with the transaction. On September 25, 2020, the defendants filed a motion to dismiss the lawsuit. On November 6, 2020, the plaintiff filed an amended complaint, and the defendants filed a second motion to dismiss on January 8, 2021. On December 31, 2020, we received a litigation demand letter from two other putative stockholders relating to the same private placement transaction. On April 12, 2021, the Court of Chancery in the State of Delaware granted a motion to stay the litigation pending a review by a Special Committee appointed by the Company’s Board of Directors. While the litigation was stayed, the parties reached an agreement in principle to settle the matter, and they expect to submit documentation to the Court for its approval of the settlement in the near future. As of December 31, 2021, the Company accrued an estimated liability of $ 0.9 million for the plaintiff’s litigation, as the liability has been determined to be probable. Other As permitted under Delaware law, the Company indemnifies its directors for certain events or occurrences while the director is, or was, serving at the Company’s request in such capacity. The term of the indemnification is for the director’s lifetime. The maximum potential amount of future payments the Company could be required to make is unlimited; however, the Company has directors’ insurance coverage that limits its exposure and enables it to recover a portion of any future amounts paid. The Company also has indemnification arrangements under certain of its facility leases that require it to indemnify the landlord against certain costs, expenses, fines, suits, claims, demands, liabilities, and actions directly resulting from certain breaches, violations, or non-performance of any covenant or condition of the Company’s lease. The term of the indemnification is for the term of the related lease agreement. The maximum potential amount of future payments the Company could be F-35 Table of Contents required to make under these indemnification agreements is unlimited. To date, the Company had not experienced any material losses related to any of its indemnification obligations, and no material claims with respect thereto were outstanding. The Company is a party in various other contractual disputes and potential claims arising in the ordinary course of business. The Company does not believe that the resolution of these matters will have a material adverse effect the Company’s business, financial position, results of operations or cash flows. 18. Subsequent Events Collaboration and License Agreements On January 3, 2022, the Company entered into a Collaboration and License Agreement with Ginkgo Bioworks, Inc, or the Second Ginkgo Agreement. Under this agreement, the Company will engage with Ginkgo to develop AAV capsids designed to enhance transduction efficiency and transgene expression. In return, Ginkgo is eligible to earn both upfront research and development fees and milestone payments, including certain milestone payments in the form of Selecta common stock, clinical and commercial milestone payments of up to $ 207 million in cash, as well as downstream value in the form of royalties on sales. “At-the-Market” Offerings Subsequent to December 31, 2021, the Company sold 576,418 shares of its common stock pursuant to the 2021 Sales Agreement for aggregate net proceeds of $ 1.7 million, after deducting commissions and other transaction costs. F-36