What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-03-02 compared with 2022-03-10 · 340 added, 258 removed, 1101 unchanged (35% of the section changed)

10 unchanged sentences

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

control issues and instances of fraud, if any, within our company have been detected.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all 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.

9 unchanged sentences

Other Information

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Directors, Executive Officers and Corporate Governance

20 unchanged sentences

8-K 001-37798 3.1 6/29/2016

Certificate of Amendment to the Restated Certificate of Incorporation of Selecta Biosciences, Inc., dated June 21, 2022

8-K 001-37798 3.1 6/21/2022

Amended and Restated By-laws of Selecta Biosciences, Inc.

16 unchanged sentences

8-K 001-37798 4.1 12/26/2019

Form of Amendment No.

1 to Common Stock Purchase Warrant by and between Selecta Biosciences, Inc.

and certain Directors, dated December 20, 2022

— — — Filed herewith

Form of Warrant to Purchase Stock, dated August 31, 2020, issued by Selecta Biosciences, Inc.

1 unchanged sentence

8-K 001-37798 4.1 9/3/2020

Form of Common Stock Purchase Warrant, dated April 11, 2022

8-K 001-37798 4.1 4/6/2022

Description of Securities

9 unchanged sentences

Non-Employee Director Compensation Program

10-Q 001-37798 10.2 11/10/2021

— — — Filed herewith

Form of Indemnification Agreement for Directors and Officers

27 unchanged sentences

10-Q 001-37798 10.3 11/8/2019

First Amendment to Lease by and between BRE-BMR Grove LLC and Selecta Biosciences, Inc.

dated September 1, 2022

10-Q 001-37798 10.1 11/3/2022

Employment Agreement, dated as of September 25, 2018, by and between the Registrant and Carsten Brunn, Ph.D.

6 unchanged sentences

10-Q 001-37798 10.1 11/5/2020

Employment Agreement, dated September 3, 2021, by and between Selecta Biosciences, Inc.

and Kevin Tan

10-Q 001-37798 10.1 11/10/2021

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

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

Employment Agreement, dated as of November 9, 2022, by and between the Registrant and Blaine Davis

— — — Filed herewith

Separation and Release Agreement, dated November 2 3 , 2022, by and between the Registrant and Kevin Tan

— — — Filed herewith

License and Development Agreement, dated as of June 11, 2020, by and between the Registrant and Swedish Orphan Biovitrum AB (Publ)

8 unchanged sentences

10-Q 001-37798 10.3 11/9/2021

Second Amendment to Loan and Security Agreement, dated March 21, 2022, 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 3/21/2022

Third Amendment to Loan and Security Agreement, dated September 20, 2022, between Selecta Biosciences, Inc., Oxford Finance LLC, as Collateral Agent and as a Lender, and Silicon Valley Bank, as a Lender

10-Q 001-37798 10.2 11/3/2022

Subsidiaries of Selecta Biosciences, Inc.

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(Principal Executive Officer)

/s/ Kevin Tan Chief Financial Officer March 10, 2022

Kevin Tan (Principal Financial and Accounting Officer)

/s/ Blaine Davis Chief Financial Officer March 2, 2023

Blaine Davis (Principal Financial and Accounting Officer)

/s/ Carrie S.

Cox Director March 2, 2023

Director March 10, 2022

/s/ Timothy C.

16 unchanged sentences

Consolidated Balance Sheets at December 31, 2022 and 2021

Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2021, 2020 and 2019

Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 31, 2022, 2021 and 2020

5 unchanged sentences

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”).

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

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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”)

Accrued and Prepaid Clinical Trial Expense

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.

As discussed in Note 2 to the consolidated financial statements, the Company records research and development expenses, which include expenses related to clinical trials, as incurred.

The Company’s determination of clinical trial costs incurred, as well as the related accrued and prepaid expenses at each reporting period, incorporates judgment and utilizes various assumptions.

Such assumptions include progress of the studies, including the phase or completion of events, invoices received and contracted costs.

Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred.

Auditing the Company’s accrued and prepaid research and development expenses was especially challenging due to the significant judgment required to estimate the expenses incurred but not yet invoiced.

While the Company’s estimates of accrued and prepaid clinical trial expenses are primarily based on information received related to each study from its vendors, the Company makes an estimate for additional costs incurred based on management judgment.

Additionally, due to the long duration of clinical trials and the timing of invoicing received from third parties, the actual amounts incurred are not always known at the time the financial statements are issued.

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.

To evaluate the accrued and prepaid clinical trial expenses, our audit procedures included, among others, testing the accuracy and completeness of the underlying data used in the estimates and evaluating the significant assumptions that are used by management to estimate the recorded accruals and prepayments.

We obtained third party confirmations from the clinical research organization to further test the underlying data used in management’s estimate.

We corroborated the progress of research and development activities associated with clinical trials through discussion with the Company’s research and development personnel that oversee the research and development activities.

We inspected the Company’s third-party contracts, amendments, and any pending change orders to assess the impact on amounts recorded.

In addition, we performed analytics over fluctuations in accruals and prepaids by vendor throughout the period subject to audit and compared subsequent invoices received from third parties to amounts accrued.

/s/ Ernst & Young LLP

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Accounts receivable 6,596 9,914

Unbilled receivables 3,162 —

Prepaid expenses and other current assets 3,778 6,474

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Total assets $ 165,886 $ 159,883

Liabilities and stockholders’ equity (deficit)

Liabilities and stockholders’ equity

Current liabilities:

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Commitments and contingencies (Note 17)

Stockholders’ equity (deficit):

Stockholders’ equity:

Preferred stock, $ 0.0001 par value;

10,000,000 shares authorized;

no shares issued and outstanding at December 31, 2021 and December 31, 2020

no shares issued and outstanding as of December 31, 2022 and December 31, 2021

Common stock, $ 0.0001 par value;

200,000,000 shares authorized;

350,000,000 and 200,000,000 shares authorized as of December 31, 2022 and December 31, 2021, respectively;

153,042,435 and 123,622,965 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively

2 unchanged sentences

Accumulated other comprehensive loss ( 4,558 ) ( 4,566 )

Total stockholders’ equity (deficit) 22,521 ( 18,006 )

Total liabilities and stockholders’ equity (deficit) $ 159,883 $ 165,435

Total stockholders’ equity 93,828 22,521

Total liabilities and stockholders’ equity $ 165,886 $ 159,883

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

1 unchanged sentence

and Subsidiaries

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Amounts in thousands, except share and per share data)

6 unchanged sentences

Total operating expenses 96,239 89,674 73,418

Operating loss ( 4,597 ) ( 56,821 ) ( 52,455 )

Operating income (loss) 14,538 ( 4,597 ) ( 56,821 )

Investment income 2,073 44 260

3 unchanged sentences

Change in fair value of warrant liabilities 20,882 ( 2,339 ) ( 10,443 )

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 income, net 330 15 89

Income (loss) before income taxes 34,770 ( 9,721 ) ( 68,876 )

Income tax (expense) benefit 609 ( 15,966 ) —

Net income (loss) 35,379 ( 25,687 ) ( 68,876 )

Other comprehensive income (loss):

1 unchanged sentence

Unrealized loss on marketable securities ( 10 ) ( 1 ) —

Total comprehensive loss $ ( 25,690 ) $ ( 68,916 ) $ ( 55,316 )

Net loss per share:

Basic and diluted $ ( 0.22 ) $ ( 0.68 ) $ ( 1.22 )

Total comprehensive income (loss) $ 35,387 $ ( 25,690 ) $ ( 68,916 )

Net income (loss) per share:

Basic $ 0.24 $ ( 0.22 ) $ ( 0.68 )

Diluted $ 0.10 $ ( 0.22 ) $ ( 0.68 )

Weighted average common shares outstanding:

Basic and diluted 114,328,798 101,202,176 45,548,511

Basic 144,758,555 114,328,798 101,202,176

Diluted 145,874,889 114,328,798 101,202,176

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

10 unchanged sentences

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 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, pre-funded warrants and warrants through private placement 37,634,883 4 26,125 — — 26,129

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

6 unchanged sentences

Issuance of common stock through at-the-market offering, net 13,767,511 1 51,933 — — 51,934

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 1,076,669 — 5,624 — — 5,624

Other financing fees — — ( 370 ) — — ( 370 )

Issuance of common warrants with long-term debt, net — — 444 — — 444

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 )

4 unchanged sentences

Issuance of common stock through at-the-market offering, net 774,544 — 2,121 — — 2,121

Issuance of common stock upon exercise of warrants 1,076,669 — 5,624 — — 5,624

Issuance of common stock and common warrants 27,428,572 3 21,477 — — 21,480

Issuance of common stock, license agreement 892,857 — 1,000 — — 1,000

Reclassification of warrant liabilities — — 780 — — 780

Stock-based compensation expense — — 10,194 — — 10,194

1 unchanged sentence

Unrealized loss on marketable securities — — — — ( 10 ) ( 10 )

Net loss — — — ( 25,687 ) — ( 25,687 )

Net income — — — 35,379 — 35,379

Balance at December 31, 2022

7 unchanged sentences

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:

Net income (loss) $ 35,379 $ ( 25,687 ) $ ( 68,876 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization 1,287 1,252 734

1 unchanged sentence

Non-cash lease expense 1,337 1,119 1,127

Loss on disposal of property and equipment

(Gain) on disposal of property and equipment ( 147 ) — ( 52 )

Stock-based compensation expense 11,194 7,720 5,422

2 unchanged sentences

Loss on extinguishment of debt — — 461

Net realized losses on marketable securities — — ( 1 )

Changes in operating assets and liabilities:

Accounts receivable 3,318 ( 2,690 ) ( 2,224 )

Unbilled receivable ( 3,162 ) — —

Prepaid expenses, deposits and other assets 2,471 ( 1,451 ) ( 4,418 )

8 unchanged sentences

Purchases of marketable securities ( 33,501 ) ( 30,455 ) —

Sales of marketable securities — — 1,992

Purchases of property and equipment ( 1,201 ) ( 1,085 ) ( 815 )

4 unchanged sentences

Repayments of principal on outstanding debt — — ( 19,313 )

Net proceeds from issuance of common stock — — 30,942

Debt amendment fee included in debt discount ( 110 ) — —

Net proceeds from issuance of common stock- at-the-market offering 2,121 51,958 2,108

Net proceeds from issuance of common stock and common warrants 36,859 — —

Net proceeds from issuance of common stock- private placement — — 10,268

12 unchanged sentences

Noncash investing and financing activities

Issuance of common stock, license agreement in stock-based compensation expense $ 1,000 $ — $ —

Cashless warrant exercise $ — $ 5,624 $ 21,790

Reclassification of warrant liability to equity upon exercise of warrants $ — $ 1,494 $ —

Reclassification of warrant liability to equity $ 780 $ — $ 1,494

Fair value of warrants issued in connection with issuance of long-term debt $ — $ — $ 444

Purchase of property and equipment not yet paid $ 17 $ 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 .

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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.

The Company is a clinical-stage biotechnology company leveraging the Company's ImmTOR® platform to develop toloreogenic therapies that selectively mitigate unwanted immune responses.

With a proven ability to induce tolerance to highly immunogenic proteins, the Company believes ImmTOR has the potential to amplify the efficacy of biologic therapies, including redosing of life-saving gene therapies, as well as restore the body's natural self-tolerance in autoimmune diseases.

The Company has several proprietary and partnered programs in its pipeline focused on enzyme therapies, gene therapies, and autoimmune diseases.

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.

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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.

To date, the Company has financed its operations primarily through public offerings and private placements of its securities, funding received from research grants, collaboration and license arrangements and its credit facility.

The Company currently has no source of product revenue, and it does not expect to generate product revenue for the foreseeable future.

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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.

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, disruptions, mandated stay at home orders or lockdowns, 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

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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.

These investments are included in investments 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.

Cash and cash equivalents are

deposited with federally insured financial institutions in the United States and may, at times, exceed federally insured limits.

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.

As of December 31, 2021, the Company maintained approximately $ 0.3 million in Russian bank accounts, all of which was held in U.S.

As of December 31, 2022, the Company maintained approximately $ 0.2 million in Russian bank accounts in denominations of both Russian rubles and U.S.

Fair Value of Financial Instruments

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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 and fees paid to lenders 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.

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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.

(i) all components of net income (loss) and (ii) all components of comprehensive income (loss) other than net income (loss), referred to as other comprehensive income (loss).

Other comprehensive income (loss) is comprised of unrealized gains and losses on debt securities and foreign currency translation adjustments.

Revenue Recognition

9 unchanged sentences

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.

If a promised good or service is not distinct, it is combined with other promised goods or services into a performance obligation.

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.

For example, certain performance obligations associated with Swedish Orphan Biovitrum, or Sobi, 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:

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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.

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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.

If the license to the Company’s intellectual property is determined to be distinct from the other promised goods and services 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 promised goods and services in the contract.

For licenses that are combined with other promised goods and services, 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.

licenses are evaluated to determine if they are issued at a discount, and therefore, represent material rights and accounted for as separate performance obligations.

Optional 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:

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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.

Net Income (Loss) Per Share

The Company calculates basic net income (loss) per share by dividing net income (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

6 unchanged sentences

The Company elected not to recognize leases with an original term less than one year on its balance sheet.

Operating lease right-of-

use (ROU) assets and their corresponding lease liabilities are recorded based on the present value of lease payments over the expected remaining lease term.

Operating lease right-of-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.

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, the fixed and in-substance fixed contract consideration must be allocated to lease and non-lease components based on their relative fair values.

Non-components of a contract (e.g., administrative tasks that do not transfer a good or service to the Company, reimbursement or payment of a lessor’s cost, etc.) do not receive an allocation of the consideration in the contract.

Although allocation of consideration of lease and non-lease components is required, the Company elected the practical expedient to not separate lease components (e.g.

land, building, etc.) and non-lease components (e.g., common area maintenance, consumables, etc.).

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.

Right-of-use assets and operating lease liabilities are remeasured upon certain modifications to leases using the present value of remaining lease payments and the estimated incremental borrowing rate upon lease modification.

The Company enters into lease agreements with terms generally ranging from 2 - 8 years.

8 unchanged sentences

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):

2 unchanged sentences

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.

The Company adopted the new standard effective January 1, 2022, and there was no impact on its consolidated financial statements.

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.

The Company has adopted ASU 2020-06 as of October 1, 2022, with an effective date of January 1, 2022, using the modified retrospective method.

The adoption of ASU 2020-06 had no impact on the Company's consolidated financial statements and disclosures.

Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments .

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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

statement users better understand significant estimates and judgments used in estimating credit losses.

ASU 2016-13 also requires enhanced disclosures to help financial 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.

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Marketable Securities and Investments

The following table summarizes the marketable securities held as of December 31, 2021 (in thousands):

The following table summarizes the marketable securities held as of December 31, 2022 and 2021 (in thousands):

cost Unrealized gains Unrealized losses Fair

December 31, 2022

government agency securities and treasuries $ 13,566 $ — $ ( 9 ) $ 13,557

Corporate bonds 1,953 — ( 2 ) 1,951

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Total $ 28,175 $ — $ ( 11 ) $ 28,164

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.

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, 2022 and 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 years ended December 31, 2022 and 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.

As of December 31, 2022 and 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.

Net Loss Per Share

The Company has reported a net loss for the years ended December 31, 2021, 2020 and 2019.

The Company has reported net income for the year ended December 31, 2022 and a net loss for the years ended December 31, 2021 and 2020.

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):

The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except share and per-share data):

Year Ended December 31,

2022 2021 2020

Net loss $ ( 25,687 ) $ ( 68,876 ) $ ( 55,350 )

Weighted-average common shares outstanding - basic and diluted 114,328,798 101,202,176 45,548,511

Net income (loss) $ 35,379 $ ( 25,687 ) $ ( 68,876 )

Change in fair value of warrants ( 20,882 ) — —

Adjusted net income (loss) $ 14,497 $ ( 25,687 ) $ ( 68,876 )

Weighted-average common shares outstanding - basic 144,758,555 114,328,798 101,202,176

Dilutive effect of employee equity incentive plans and outstanding warrants 1,116,334 — —

Weighted-average common shares used in per share calculations - diluted 145,874,889 114,328,798 101,202,176

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:

Basic $ 0.24 $ ( 0.22 ) $ ( 0.68 )

Diluted $ 0.10 $ ( 0.22 ) $ ( 0.68 )

The following table represents the potential dilutive common shares excluded from the computation of the diluted net income (loss) per share for all periods presented, as the effect would have been anti-dilutive:

Year Ended December 31,

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Marketable securities:

government agency securities and treasuries 13,557 — 13,557 —

Corporate bonds 1,951 — 1,951 —

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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 $ —

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As of December 31, 2022, 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).

Short-term restricted cash is included within prepaid expenses and other current assets in the consolidated balance sheets.

The Company’s consolidated statement of cash flows includes the following as of December 31, 2022, 2021 and 2020 (in thousands):

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Marketable Securities

As of December 31, 2021, marketable securities classified as Level 2 within the valuation hierarchy consist of corporate bonds and commercial paper.

As of December 31, 2022, marketable securities classified as Level 2 within the valuation hierarchy consist of U.S.

government agency securities and treasuries, 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.

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

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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.

In December 2019, the Company issued common warrants in connection with a private placement of common shares, or the 2019 Warrants.

Pursuant to the terms of the 2019 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.

Pursuant to the Stipulation and Agreement of Settlement discussed in Note 17, on December 20, 2022, the Company amended the terms of the outstanding 2019 Warrants held by certain members of the Company's board of directors to remove the cash settlement provision (the Amended 2019 Warrants).

As a result, the Amended 2019 Warrants were remeasured at fair value on December 20, 2022 and reclassified from a liability to equity on the balance sheet.

Refer to Note 10 for further discussion on the equity classified Amended 2019 Warrants.

In April 2022, the Company issued warrants in connection with an underwritten offering of shares of common stock and warrants to purchase shares of common stock, or the 2022 Warrants.

Pursuant to the terms of the 2022 Warrants, the Company could be required to settle the 2022 Warrants in cash in the event of an acquisition of the Company under certain circumstances and, as a result, the 2022 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 2019 Warrants and the 2022 Warrants upon issuance using the Black-Scholes valuation model and is required to revalue the 2019 Warrants and the 2022 Warrants at each reporting date, with any changes in fair value recorded in the statement of operations and comprehensive income (loss).

The valuations of the 2019 Warrants and the 2022 Warrants are classified as Level 3 of the fair value hierarchy due to the need to use assumptions in the valuations that are both significant to the fair value measurement and unobservable, including the stock price volatility and the expected life of the 2019 Warrants and the 2022 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:

The changes in the fair values of the warrants are reflected in the statement of operations and comprehensive income (loss) for the years ended December 31, 2022, 2021 and 2020.

The estimated fair values of the 2019 Warrants, the Amended 2019 Warrants on the modification date, and the 2022 Warrants were determined using the following inputs to the Black-Scholes simulation valuation:

Estimated fair value of the underlying stock .

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Expected life .

The expected life of the warrants is assumed to be equivalent to their remaining contractual term which expires on December 23, 2024.

The expected life of the 2019 Warrants and the 2022 Warrants is assumed to be equivalent to their remaining contractual terms which expire on December 23, 2024 and April 11, 2027, respectively.

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:

A summary of the Black-Scholes pricing model assumptions used to record the fair value of the 2019 Warrants liability is as follows:

Risk-free interest rate 4.74 % 0.97 %

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Expected volatility 79.92 % 96.10 %

A summary of the Black-Scholes pricing model assumptions used to record the fair value of the Amended 2019 Warrants liability on the modification date is as follows:

At Modification

Risk-free interest rate 4.64 %

Dividend yield —

Expected life (in years) 2.01

Expected volatility 79.77 %

A summary of the Black-Scholes valuation model assumptions used to record the fair value of the 2022 Warrants liability is as follows:

December 31, April 11,

Risk-free interest rate 4.22 % 2.79 %

Dividend yield — —

Expected life (in years) 4.28 5.00

Expected volatility 98.05 % 96.00 %

Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis

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Fair value as of December 31, 2021

Exercises ( 5,624 )

Issuances 15,379

Reclassification of warrant liability to equity upon modification ( 780 )

Change in fair value ( 20,882 )

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Property and equipment, net $ 2,794 $ 2,142

Depreciation expense was $ 0.6 million, $ 0.6 million and $ 0.7 million for the years ended December 31, 2021, 2020 and

2019, respectively.

Depreciation expense was $ 0.7 million, $ 0.6 million and $ 0.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Accrued Expenses

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Payroll and employee related expenses $ 4,242 $ 3,179

Collaboration and licensing — 1,350

Accrued patent fees 696 309

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Accrued expenses $ 14,084 $ 10,533

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.

65 Grove Street Lease

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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.

On September 1, 2022, the Company entered into an amendment, or the Lease Agreement Amendment, to its lease agreement with BRE-BMR Grove LLC, originally entered into on July 23, 2019, or the Lease Agreement, to expand the Company’s corporate headquarters located at 65 Grove Street, Watertown, Massachusetts by approximately 7,216 square feet.

The lease term began on September 1, 2022, consistent with when the Company took control of the office space and the expected lease term is 5.7 years.

The discount rate of 11.3 % was determined based on the Company’s incremental borrowing rate adjusted for the lease term including any reasonably certain renewal periods.

Rent payments began in November 2022, and the base rent for the first year is $ 0.1 million per month.

In connection with the Lease Agreement Amendment, the Company entered into an amendment to its Loan and Security Agreement with Oxford, as Collateral Agent and a Lender, and SVB, as a Lender, on September 20, 2022, or the Third Amendment, to provide for an increase of $ 0.2 million in the letter of credit for a total of $ 1.6 million as of December 31, 2022, which renews automatically each year.

The Company recorded the right-of-use asset and operating lease liabilities of $ 3.2 million during the year ended December 31, 2022 as control of the premises was transferred to the Company.

On October 6, 2022, the Company entered into a sublease agreement with Nexo Therapeutics, Inc., or the Tenant, to sublease approximately 7,216 square feet of space currently rented by the Company at the corporate headquarters located at 65 Grove Street, Watertown, Massachusetts.

The sublease commenced on October 24, 2022, when the Company, the Tenant and BRE-BMR Grove LLC, executed the Consent to Sublease.

The term of the sublease expires on March 31, 2024 with no option to extend the sublease term.

Sublease income is included within other income, net in the consolidated statements of operations and comprehensive income (loss).

As a result of the sublease agreement and Consent to Sublease, rent payments to BRE-BMR Grove LLC for the lease of the office space increased.

The change of consideration in the contract was accounted for as a lease modification and the right-of-use asset and lease liability were remeasured at the modification date of October 24, 2022.

The discount rate of 11.9 % was determined based on the Company’s incremental borrowing rate adjusted for the lease term including any reasonably certain renewal periods as of October 24, 2022, resulting in a decrease of less than $ 0.1 million to both the right-of-use asset and lease liabilities.

Moscow, Russia Lease

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Short-term lease cost 11 10 10

Less sublease income ( 176 ) — —

Total lease cost $ 3,021 $ 2,867 $ 2,730

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$ 2,048 $ 1,812

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.

Other than the initial recording of the right-of-use asset and lease liability for the Headquarters Lease in 2020 and 2022, which were non-cash, the changes in the Company’s right-of-use asset and lease liability for the years ended December 31, 2022 and 2021 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:

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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 second draw period expired on September 30, 2021 and the Term B Loan is no longer available to be drawn by the Company.

On March 21, 2022, the Company entered into a Second Amendment to its 2020 Term Loan.

The Second Amendment extended the date on which amortization payments in respect of the 2020 Term Loan will commence to April 1, 2023.

Thereafter, amortization payments will be paid monthly in equal installments of principal and interest to fully amortize the outstanding principal over the remaining term of the 2020 Term Loan, subject to recalculation upon a change in the prime rate.

The Second Amendment was determined to be a loan modification, and the $ 0.1 million fee was recorded as an addition to the debt discount on the effective date.

The 2020 Term Loan will mature on August 1, 2025.

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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

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.

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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.

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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.

During the years ended December 31, 2022, 2021 and 2020, the Company recognized $ 3.0 million, $ 2.8 million and $ 1.6 million respectively of interest expense related to the 2020 Term Loan and the previous term loan.

Equity Financings

Underwritten Offering

On April 6, 2022, the Company entered into an underwriting agreement with SVB Securities LLC, as representative of the several underwriters named therein, relating to an underwritten offering of 27,428,572 shares, or the Shares, of the Company’s common stock and warrants to purchase up to 20,571,429 shares of common stock, or the 2022 Warrants.

The offering of the Shares and the 2022 Warrants is referred to as the 2022 Offering.

Each Share and accompanying 2022 Warrant to purchase 0.75 shares of common stock was sold at a combined offering price of $ 1.41 .

The exercise price for the 2022 Warrants is $ 1.55 per share.

The Company received net proceeds from the 2022 Offering of approximately $ 36.9 million.

The 2022 Warrants are subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the Company’s common stock and also upon any distributions for no consideration of assets to the Company’s stockholders.

Each 2022 Warrant is exercisable at any time and from time to time after issuance.

In the event of certain corporate transactions, the holders of the 2022 Warrants will be entitled to receive the kind and amount of securities, cash or other property that the holders would have received had they exercised the Warrants immediately prior to such transaction.

Therefore, the Company is required to account for the 2022 Warrants as liabilities and record the 2022 Warrants at fair value.

The 2022 Warrants do not entitle the holders thereof to any voting rights or any of the other rights or privileges to which holders of Common Stock are entitled.

“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.

333-241692) with the SEC to sell an aggregate amount of up to $ 200.0 million of certain of its securities.

2020 Sales Agreement

On August 6, 2020, the Company filed a universal shelf registration statement on Form S-3 (File No.

333-241692) with the Securities and Exchange Commission, or 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.

Concurrent with the filing of the 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 was permitted, from time to time, to issue and sell common stock with an aggregate value of up to $ 50.0 million in an “at the market offering.” 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.

The shares of common stock sold pursuant to the 2021 Sales Agreement will be issued pursuant to such shelf registration statement on Form S-3 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, 2022, the Company sold 774,544 shares of its common stock pursuant to the 2021 Sales Agreement for aggregate net proceeds of $ 2.1 million, after deducting commissions and other transaction costs.

the year ended December 31, 2021, the Company sold 13,767,511 shares of its common stock pursuant to the 2021 and 2020 Sales Agreements for aggregate net proceeds of $ 51.9 million, after deducting commissions and other transaction costs.

June 2020 Sobi Stock Purchase

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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.

The Company recorded the fair value of the 2019 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.

As discussed in Note 5, the Company remeasured the Amended 2019 Warrants at the fair value of $ 0.8 million on December 20, 2022 and reclassified this amount to additional paid-in capital.

The remaining 2019 Warrants liability and the 2022 Warrants liability were revalued as of December 31, 2022 at $ 19.1 million.

During the years ended December 31, 2022, 2021 and 2020, the Company recorded a decrease of $ 20.9 million and an increase of $ 2.3 million and $ 10.4 million, respectively, in the fair value of the warrants in the consolidated statements of operations and comprehensive income (loss).

June 2017 Financing

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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.

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.

The equity classified warrants expired in 2022.

The following is a summary of warrant activity for the years ended December 31, 2022 and 2021:

Number of Warrants

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Exercises — ( 1,642,036 ) ( 1,642,036 ) 1.46

Issuance 196,850 — 196,850 2.54

Outstanding at December 31, 2021 292,469 10,443,511 10,735,980 $ 1.62

Exercises — ( 1,642,036 ) ( 1,642,036 ) 1.46

Issuance — 20,571,429 20,571,429 1.55

Canceled ( 79,130 ) — ( 79,130 ) 17.71

Reclassification of warrant liability to equity on modification 2,022,987 ( 2,022,987 ) — $ 1.46

Outstanding at December 31, 2022 2,236,326 28,991,953 31,228,279 $ 1.53

On June 17, 2022, at the 2022 Annual Meeting of Stockholders, the Company’s stockholders approved an amendment to the Company’s Restated Certificate of Incorporation, or the Charter, to increase the number of authorized shares of common stock, par value $ 0.0001 per share, from 200,000,000 to 350,000,000 shares.

On June 21, 2022, the Company filed a Certificate of Amendment to the Charter with the Secretary of State of the State of Delaware, which became effective upon filing.

As of December 31, 2022, the Company had 350,000,000 shares of common stock authorized for issuance, $ 0.0001 par value per share, with 153,042,435 shares issued and outstanding.

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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.

Upon the effective date of the 2016 Plan, awards issued under the 2008 Plan remain subject to the terms of the 2008

Awards granted under the 2008 Plan that expire, lapse or terminate become available under the 2016 Plan as shares available for future grants.

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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):

Stock-based compensation expense by classification included within the consolidated statements of operations and comprehensive income (loss) was as follows (in thousands):

Year Ended December 31,

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Weighted-average fair value of common stock $ 2.63 $ 3.58 $ 2.49

The expected term of the Company's stock options granted to employees has been determined utilizing the "simplified" method for awards that qualify as "plain-vanilla" options.

Under the simplified method, the expected term is presumed to be the midpoint between the vesting date and the end of the contractual term.

The Company utilizes this method due to lack of historical exercise data and the plain nature of its stock-based awards.

The weighted average grant date fair value of stock options granted to employees during the years ended December 31, 2022, 2021 and 2020 was $ 1.99 , $ 2.73 , and $ 1.86 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:

As of December 31, 2022, total unrecognized compensation expense related to unvested employee stock options was $ 14.8 million, which is expected to be recognized over a weighted average period of 2.6 years.

The following table summarizes the stock option activity under the 2008 Plan, the 2016 Plan, and the 2018 Inducement Incentive Award Plan:

Weighted-average

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Outstanding at December 31, 2021 423,073 $ 6.34 3.85 $ 42

Exercised ( 50,000 ) $ 2.04

Forfeited ( 156,834 ) $ 3.44

Outstanding at December 31, 2022 266,239 $ 8.05 5.08 $ —

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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.

During the year ended December 31, 2022, the Company granted 813,200 restricted stock awards with a weighted average fair value of $ 3.31 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 and 699,500 restricted stock awards with a weighted average fair value of $ 1.70 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 two 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.

The Company has estimated a forfeiture rate of 10 % for restricted stock awards to employees based on historical experience.

Unrecognized compensation expense for all restricted stock units was $ 3.4 million as of December 31, 2022, which is expected to be recognized over a weighted average period of 2.4 years.

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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.

In January 2022 and 2021, the number of shares of common stock authorized for issuance under the ESPP was increased by 1,236,229 shares and 1,080,711 shares,

respectively.

During the year ended December 31, 2022, the Company issued 120,877 shares of common stock under the ESPP.

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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.

As of December 31, 2022, the Company recorded $ 0.1 million as a short-term contract liability and no long-term contract liability, representing deferred revenue associated with this agreement.

As of December 31, 2021, the Company recorded $ 1.0 million as a short-term contract liability and $ 1.0 million as a long-term contract liability, respectively, representing deferred revenue associated with this agreement.

Revenue of $ 1.8 million and $ 1.0 million related to the Takeda Agreement was recognized during the years ended December 31, 2022 and 2021, respectively.

Swedish Orphan Biovitrum

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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.

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.

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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.

The transactions contemplated by the Sobi License were consummated on July 28, 2020.

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.

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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.

The Company re-evaluates 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 premium amount is included in the transaction price for revenue recognition.

The Company estimates and includes 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.

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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.

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.

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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.

On June 29, 2022, the Company completed enrollment of the DISSOLVE II trial.

The completion of enrollment of the DISSOLVE II trial resulted in the achievement of a development milestone and a $ 10.0 million payment obligation from Sobi to the Company.

This amount was added to the overall transaction price and payment was received during the year ended December 31, 2022.

As of December 31, 2022, the Company recorded no short-term or long-term contract liability.

As of December 31, 2021, the Company recorded $ 37.5 million, as a short-term contract liability and $ 5.1 million, as a long-term contract liability, representing deferred revenue associated with this agreement.

In addition, as of December 31, 2022 the Company has recorded $ 0.1 million of contract assets related to incremental costs that would not have been incurred if the Sobi License had not been obtained, of which $ 0.1 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.

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As of December 31, 2022 and 2021, the Company recorded a total outstanding receivable of $ 5.0 million and $ 9.9 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.

As of December 31, 2022, the Company recorded a total unbilled receivable of $ 3.2 million, representing revenue earned but not yet billed for the Phase 3 DISSOLVE program.

Revenue of $ 82.6 million and $ 83.5 million related to the Sobi License was recognized during the years ended December 31, 2022 and 2021, respectively, inclusive of $ 13.4 million of revenue recognized from performance obligations related to prior periods as a result of the change in transaction price during the year ended December 31, 2022.

Sarepta Therapeutics, Inc.

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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.

Sarepta initially had an option term of 24 months during which it could 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.

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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.

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.

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During the year ended December 31, 2021, the Company and Sarepta entered into a third amendment relating to the additional feasibility study.

During the year ended December 31, 2022, the Company and Sarepta entered into two amendments 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.

On June 10, 2022, the Company was notified by Sarepta that Sarepta would be extending their options under the Sarepta Agreement.

In exchange for a nine -month extension to Sarepta’s options to both Duchenne muscular dystrophy and certain limb-girdle muscular dystrophies, the Company received a milestone payment of $ 2.0 million during the three months ended September 30, 2022.

On June 15, 2022, the Company was notified by Sarepta of the achievement of a milestone event related to certain preclinical study milestones under the Sarepta Agreement.

Accordingly, the Company received a milestone payment of $ 4.0 million during the three months ended September 30, 2022.

As of December 31, 2022, one milestone remained 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.

The Company is recognizing the revenue associated with the transaction price and combined single performance obligation utilizing the output method, over the 33-month term as the manufactured supply is delivered to Sarepta.

As of December 31, 2022 and 2021, the Company recorded $ 0.5 million and $ 4.6 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.

Revenue of $ 10.2 million and $ 0.4 million related to the Sarepta Agreement was recognized during the years ended December 31, 2022 and 2021, respectively, inclusive of $ 0.9 million of revenue recognized from performance obligations related to prior periods as a result of the change in transaction price during the year ended December 31, 2022.

Asklepios Biopharmaceutical, Inc.

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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.

Pursuant to the AskBio License Agreement, AskBio 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.

On November 18, 2022, both parties agreed to mutually terminate the AskBio License Agreement.

Therefore, the remaining contract liability of $ 7.0 million was recognized as revenue during the period ended December 31, 2022.

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.

The Spark License Agreement provided 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.

Additionally, in connection with the Spark License Agreement, the Company entered into a Stock Purchase Agreement with Spark, or the Spark Purchase Agreement.

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.

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.

Therefore, the remaining contract liability of $ 9.2 million was recognized as revenue during the year ended December 31, 2022.

Skolkovo Foundation

3 unchanged sentences

As of December 31, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 0.6 million.

Contract Balances from Contracts with Customers ( Takeda, Sobi, Sarepta, AskBio, Spark and Skolkovo )

Contract Balances from Contracts with Customers ( Takeda, Sobi, Sarepta, AskBio, and Spark )

The following table presents changes in the Company’s contract liabilities during the year ended December 31, 2022 (in thousands):

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Related-Party Transactions

April 2022 Offering

During the year ended December 31, 2022, the Company completed the 2022 Offering as described in Note 10.

The following table sets forth the number of shares of Common Stock and 2022 Warrants purchased in the 2022 Offering by directors and executive officers, as of the time of the Offering, and related parties thereto:

Name Shares of Common Stock purchased 2022 Warrants purchased Total aggregate purchase price

TAS Partners, LLC (affiliate of Timothy A.

Springer, Ph.D.) 6,681,600 5,011,200 $ 9,421,056

Warrant liability reclassification

During the year ended December 31, 2022, the Company amended the terms of certain of the outstanding 2019 Warrants held by members of the Company's board of directors and remeasured the Amended 2019 Warrants as described in Notes 5 and 10.

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.

The Company incurred expenses for consulting services provided by its founders totaling $ 0.1 million during each of the years ended December 31, 2021 and 2020.

No expenses were incurred for the year ended December 31, 2022.

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.

Collaboration and License Agreements

On October 25, 2021, the Company entered into a Collaboration and License Agreement, or the First Ginkgo Agreement, with Ginkgo Bioworks Holdings, Inc., or 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.

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.

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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

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 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 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.

On January 3, 2022, the Company entered into a Collaboration and License Agreement, or the Second Ginkgo Agreement, with Ginkgo.

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 shares of the Company’s common stock, clinical and commercial milestone payments of up to $ 207 million in cash.

The Second 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 Second Ginkgo Agreement as incurred until regulatory approval is received in accordance with ASC 730.

The Company is accounting for the contingently issuable shares of common stock 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.

On June 13, 2022, the Company was notified of the achievement of the midpoint of the technical development plan under the First Ginkgo Agreement by Ginkgo.

This milestone resulted in the payment of $ 0.5 million and issuance of 892,857 shares of the Company’s common stock then-valued at $ 1.0 million to Ginkgo during the year ended December 31, 2022.

Genovis AB (publ.)

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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.

Genovis is eligible to earn from the Company development and sales-based milestones and sublicensing fees.

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.

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The Company will expense costs related to the Cyrus Agreement as incurred until regulatory approval is received in accordance with ASC 730.

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.

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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.

The Company has recognized the $ 2.0 million investment of Cyrus’ Series B Preferred Stock at cost on the purchase date.

On June 13, 2022, the Company and Cyrus mutually agreed that the preclinical key in-vitro success milestone had been achieved.

As of December 31, 2022, 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.

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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.

In December 2022, we initiated ReiMMAgine, the Phase 1/2 clinical trial of SEL-302.

The ReiMMAgine trial is now enrolling patients and aims to evaluate the safety, tolerability and efficacy of SEL-302.

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.

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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.

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.

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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.

As of December 31, 2022, 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.

In connection with the Spark Purchase Agreement and the calculated premium paid by Spark for the equity investments made as described in Note 12, the Company has made additional contractual payments pursuant to the MIT license totaling $ 0.4 million as of December 31, 2022.

The Company made no additional payments during the year ended December 31, 2022.

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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.

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.

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As a result, the Company elected out of the default installment sale treatment with the filing of its 2020 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:

In the elect out method, the Company was initially 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 cash proceeds under the Sobi license, the Company will exclude such amounts from taxable income up to the originally estimated fair value that was previously taxed.

For the year ended December 31, 2022, the Company recognized a current tax benefit for penalty abatements received of $ 0.6 million.

For the year ended December 31, 2021, the Company recognized tax expense of $ 16.0 million, inclusive of penalties and interest of $ 1.3 million assessed as of December 31, 2021.

For the year ended December 31, 2020, the Company did not record a current or deferred income tax expense or benefit.

The following table reconciles the federal statutory income tax rate to the Company’s effective income tax rate:

Year Ended December 31,

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Valuation allowance, net ( 4.4 %) ( 230.1 %) ( 23.6 %)

Stock compensation ( 5.2 %) ( 1.3 %) — %

Stock-based compensation 1.8 % ( 5.2 %) ( 1.3 %)

Effective income tax rate ( 1.8 %) ( 164.2 %) — %

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Research and development credits 2,806 1,426

Stock-based compensations expense 3,955 2,919

Stock-based compensation expense 5,892 3,955

Other expenses 1,697 745

Deferred revenue 83,417 102,583

Operating lease liability 2,636 2,884

Patent costs/amortization 6,843 5,379

Operating lease liabilities 3,186 2,636

R&E capitalization 9,588 —

Patent costs 7,472 6,843

Gross deferred tax assets 131,073 132,120

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Depreciation $ ( 81 ) $ ( 90 )

Operating lease right-of-use asset ( 2,685 ) ( 2,991 )

Operating lease right-of-use assets ( 3,174 ) ( 2,685 )

Gross deferred tax liabilities ( 3,255 ) ( 2,775 )

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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.

benefit of its deferred tax assets.

The valuation allowance decreased by $ 1.5 million for the year ended December 31, 2022, primarily as a result of pre-tax income and credits.

The valuation allowance increased by $ 22.4 million for the year ended December 31, 2021, primarily as a result of an increase in deferred revenue.

As of December 31, 2022, the Company is in the process of closing down operations in Russia and does not expect any tax liability.

At December 31, 2022, the Company has federal net operating loss carryforward of $ 62.4 million, which can be carried forward indefinitely but will be subject to an 80% limitation and state net operating loss carryforward of $ 61.8 million, which will expire at various times through 2042.

The Company has $ 2.3 million and $ 0.6 million, respectively, of federal and state research and development tax credit carryforwards, which will expire at various times through 2042.

8 unchanged sentences

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.

The Company generated research credits for the years ended December 31, 2022 and 2021, but has not conducted a formal study to document its qualified activities.

This study may result in an adjustment to the Company’s research and development credit carryforwards;

however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position.

A full valuation allowance has been provided against our research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the deferred tax asset established for the research and development credit carryforwards and the valuation allowance.

The Tax Cuts and Jobs Act of 2017 requires taxpayers to capitalize and amortize, rather than deduct, research and experimental, or R&E, expenditures under section 174 for tax years beginning after December 31, 2021.

This rule became effective for the Company during the year and resulted in the capitalization of R&E costs of $ 38.1 million.

The Company will amortize these costs for tax purposes over 5 years if the R&E was performed in the U.S.

and over 15 years if the R&E was performed outside the U.S.

Interest and penalty charges, if any, related to unrecognized tax benefits would be classified as income tax expense in the accompanying statement of operations.

7 unchanged sentences

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.

As of January 2022, all matching contributions vest ratably over two years and participant contributions vest immediately.

Contributions by the Company totaled $ 0.3 million, $ 0.2 million, and $ 0.1 million during each of the years ended December 31, 2022, 2021 and 2020, respectively.

9 unchanged sentences

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.

While the litigation was stayed, the parties reached an agreement in principle to settle the matter, and on March 18, 2022, they submitted a Stipulation and Agreement of Settlement and other documentation to the Court for its approval of the settlement.

On July 21, 2022, the Court held a settlement hearing, at which the settlement was approved.

On August 1, 2022, the Court entered an Order and Final Judgment which dismissed the action, and all claims contained therein, with prejudice.

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.

4 unchanged sentences

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

required to make under these indemnification agreements is unlimited.

The maximum potential amount of future payments the Company could be 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.

3 unchanged sentences

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.

On January 8, 2023, the Company entered into a License and Development Agreement with Astellas Therapeutics, Inc., or the Astellas Agreement.

Under the Astellas Agreement obtained the sole and exclusive right to commercialize Xork for use in Pompe disease with an Astellas gene therapy investigational or authorized product, with a current focus on AT845.

The Company received a $ 10 million upfront payment in February 2023 and is eligible to receive $ 340.0 million for certain additional development and commercial milestones plus royalties on any potential commercial sales where Xork is used as a pre-treatment for AT845.

As a result of the sublicense of Xork to Astellas, the Company made a $ 4.0 million payment to Genovis in February 2023.

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

What changed 10-K

Item 9A. Controls and Procedures