10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on May 11, 2023
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to ______
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 5, 2023, the registrant had
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Form 10-Q”), including its section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains express or implied forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Forward-looking statements in this Form 10-Q may include, but are not limited to, statements about:
In some cases, forward-looking statements can be identified by terminology such as “will,” “may,” “should,” “could,” “expects,” “intends,” “plans,” “aims,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section entitled “Risk Factors” and elsewhere in this Form 10-Q. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those expressed or implied by the forward-looking statements. No forward-looking statement is a promise or a guarantee of future performance.
The forward-looking statements in this Form 10-Q represent our views as of the date of this Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Form 10-Q.
This Form 10-Q may include statistical and other industry and market data that we obtained from industry publications and research, surveys, and studies conducted by third parties. Industry publications and third-party research, surveys, and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We have not independently verified the information contained in such sources.
We use various trademarks and trade names in our business, including without limitation our corporate name and logo. All other trademarks or trade names referred to in this Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this Form 10-Q may be referred to without the ® and symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.
Table of Contents
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PART I. |
FINANCIAL INFORMATION |
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Item 1. |
Financial Statements (Unaudited) |
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1 |
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2 |
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3 |
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5 |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21 |
Item 3. |
29 |
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Item 4. |
29 |
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PART II. |
30 |
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Item 1. |
30 |
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Item 1A. |
30 |
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Item 2. |
31 |
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Item 3. |
31 |
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Item 4. |
31 |
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Item 5. |
31 |
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Item 6. |
32 |
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33 |
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i
Graphite Bio, Inc.
Condensed Balance Sheets
(in thousands, except share and per share data)
(unaudited)
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March 31, |
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December 31, |
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2023 |
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2022 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Investments in marketable securities, current |
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Prepaid expenses and other current assets |
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Total current assets |
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Restricted cash |
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Investments in marketable securities, non-current |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued compensation |
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Accrued research costs |
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Accrued expenses and other current liabilities |
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Operating lease liabilities, current |
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Total current liabilities |
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Operating lease liabilities, non-current |
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Other long- term liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
1
Graphite Bio, Inc.
Condensed Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
(unaudited)
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Three Months Ended |
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2023 |
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2022 |
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Operating expenses: |
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Research and development |
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$ |
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$ |
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General and administrative |
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Restructuring costs |
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Total operating expenses |
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Loss from operations |
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Other income (expense), net: |
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Interest income, net |
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Loss on disposal of assets |
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Total other income, net |
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Net loss |
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$ |
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$ |
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Unrealized gain (loss) on investments in marketable securities |
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Comprehensive loss |
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$ |
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$ |
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Net loss per share attributable to common stockholders—basic and diluted |
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$ |
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$ |
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Weighted-average shares used in computing net loss per share—basic and diluted |
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The accompanying notes are an integral part of these unaudited condensed financial statements
2
Graphite Bio, Inc.
Condensed Statements of Stockholders’ Equity
(in thousands, except share data)
(unaudited)
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Accumulated |
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Common |
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Additional |
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Other |
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Total |
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Stock |
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Paid-In |
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Comprehensive |
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Accumulated |
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Stockholders’ |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balance at December 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Vesting of early exercised shares |
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— |
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— |
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— |
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— |
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Repurchase of unvested early exercised shares |
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( |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Unrealized gain on investments in marketable securities |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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Balance at March 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
3
Graphite Bio, Inc.
Condensed Statements of Stockholders’ Equity
(in thousands, except share data)
(unaudited)
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Accumulated |
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Common |
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Additional |
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Other |
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Total |
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Stock |
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Paid-In |
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Comprehensive |
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Accumulated |
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Stockholders’ |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balance at December 31, 2021 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Vesting of early exercised shares |
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— |
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— |
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— |
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— |
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Unrealized loss on investments in marketable securities |
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— |
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— |
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— |
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( |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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Balance at March 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
4
Graphite Bio, Inc.
Condensed Statements of Cash Flows
(in thousands)
(unaudited)
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Three Months Ended |
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March 31, |
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Net amortization of premiums and discounts on investments in marketable securities |
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Depreciation and amortization |
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Noncash lease expense |
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Stock-based compensation expense |
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Changes in assets and liabilities: |
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Prepaid expenses and other current assets and other assets |
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Accounts payable |
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Accrued compensation |
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Accrued research costs |
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Accrued expenses and other current liabilities and other liabilities |
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Operating lease liabilities |
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( |
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Net cash used in operating activities |
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Cash flows from investing activities: |
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Purchases of property and equipment |
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( |
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Purchases of investments in marketable securities |
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( |
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Proceeds from maturities of marketable securities |
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Net cash provided by (used in) investing activities |
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Cash flows from financing activities: |
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Repurchase of unvested early exercised shares |
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Net cash used in financing activities |
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Net increase (decrease) in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash, at beginning of period |
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Cash, cash equivalents and restricted cash, at end of period |
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$ |
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$ |
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Reconciliation of cash, cash equivalents and restricted cash to statement of financial position: |
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Cash and cash equivalents |
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Restricted cash |
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Cash, cash equivalents and restricted cash in statement of financial position |
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$ |
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$ |
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Supplemental disclosures of non-cash investing and financing information: |
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Property and equipment purchases in accounts payable and accrued expenses |
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$ |
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( |
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$ |
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Lessor funded lease incentive additions included in property and equipment |
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$ |
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$ |
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Vesting of early exercised stock options |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed financial statements.
Graphite Bio, Inc.
Notes to Condensed Financial Statements
(unaudited)
Organization and Business
Graphite Bio, Inc. (the “Company”) is a clinical-stage, next-generation gene editing company harnessing high-efficiency targeted gene integration to develop a new class of therapies to potentially cure a wide range of serious and life-threatening diseases. The Company’s precision gene editing approach aims to achieve one of medicine’s most elusive goals: to precisely “find & replace” any gene in the genome. The Company has a next-generation gene editing approach designed to allow the Company to precisely correct mutations, replace entire disease-causing genes with normal genes, or insert new genes into predetermined, safe locations.
In January 2023, the Company announced a voluntary pause of its Phase 1/2 CEDAR study of nulabeglogene autogedtemcel (nula-cel), the Company’s lead product candidate for sickle cell disease (SCD), due to a serious adverse event in the first patient dosed, which the Company concluded is likely related to study treatment. Nula-cel was designed to provide a highly differentiated approach with the potential to directly correct the mutation that causes SCD and restore normal adult hemoglobin (HgbA) expression.
In February 2023, the Company announced its decision to discontinue the development of nula-cel and initiate a process to explore strategic alternatives. As a result of this decision, the Company announced a corporate restructuring that will result in an approximately 50% reduction in workforce. The Company also disclosed its intention to continue research activities associated with its early-stage non-genotoxic conditioning program, with the goal of advancing toward one or more potential development candidates.
From its inception in 2017, the Company’s primary activities have been to perform research and development, undertake preclinical studies and enable manufacturing activities in support of its product development efforts, organize and staff the Company, establish its intellectual property portfolio, and raise capital to support and expand such activities.
The Company was incorporated in Ontario, Canada in June 2017 as Longbow Therapeutics Inc., and was reincorporated in the State of Delaware in October 2019. In February 2020, the Company changed its name to Integral Medicines, Inc., and again in August 2020, changed the name to Graphite Bio, Inc. Research and development of the Company’s initial technology ceased at the end of 2018, and the Company did not have any significant operations or any research and development activities in 2019. In March 2020, the Company identified new gene editing technology which the Company sought to further develop, and the Company licensed the related intellectual property rights from The Board of Trustees of the Leland Stanford Junior University (“Stanford”) in December 2020 (Note 6).
Liquidity Matters
The Company has incurred significant operating losses since inception and has primarily relied on private equity and convertible debt financings to fund its operations. As of March 31, 2023, the Company had an accumulated deficit of $
On July 21, 2022, the Company filed a shelf registration statement on Form S-3 (the “2022 Shelf”) with the SEC in relation to the registration of up to an aggregate offering price of $
2. Summary of Significant Accounting Policies
Basis of Presentation
These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
6
Unaudited Interim Condensed Financial Statements
The interim condensed balance sheet as of March 31, 2023 and the condensed statements of operations and comprehensive loss and stockholders’ equity for the three months ended March 31, 2023 and 2022 and the condensed statements of cash flows for the three months ended March 31, 2023 and 2022 are unaudited. The unaudited interim condensed financial statements have been prepared on the same basis as the annual financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair statement of the Company’s financial position as of March 31, 2023 and its results of operations and cash flows for the three months ended March 31, 2023 and 2022. The financial data and the other financial information disclosed in these notes to the financial statements related to the three month periods are also unaudited. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other future annual or interim period. The condensed balance sheet as of December 31, 2022 included herein was derived from the audited financial statements as of that date. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from these interim financial statements. These condensed financial statements should be read in conjunction with the Company's audited financial statements and the related notes thereto for the year ended December 31, 2022, which are included in the Company’s Annual Report on Form 10-K filed with the SEC.
Significant Accounting Policies
The significant accounting policies used in preparation of these condensed financial statements for the three months ended March 31, 2023 are consistent with those discussed in Note 2 to the condensed financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, except as noted below and within the “Adopted and Recently Issued Accounting Pronouncements” section.
Use of Estimates
The preparation of condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed financial statements, and the reported amounts of expenses during the reporting period. On an ongoing basis, the Company evaluates estimates and assumptions, including but not limited to those related to the fair value of the marketable securities, stock-based compensation expense, accruals for research and development costs, lease assets and liabilities, the valuation of deferred tax assets, and uncertain income tax positions. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of
Restricted Cash
Restricted cash of $
Marketable Securities
The Company’s marketable securities are accounted for as available-for-sale and recorded at fair value with the related unrealized gains and losses included in accumulated other comprehensive gain (loss).
The Company reviews its investment portfolio to identify and evaluate investments that have an indication of possible other-than-temporary impairment. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.
Operating Leases
7
Adopted and Recently Issued Accounting Pronouncements
The Company is a smaller reporting company and an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay the adoption of new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. Thus, the Company has elected to use the extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that (i) the Company is no longer an emerging growth company or (ii) the Company affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. However as described below, the Company early adopted certain accounting standards, as the JOBS Act does not preclude an emerging growth company from adopting a new or revised accounting standard earlier than the time that such standard applies to private companies to the extent early adoption is permitted.
3. Fair Value Measurements
Assets and liabilities recorded at fair value on a recurring basis in the condensed balance sheets, as well as assets and liabilities measured at fair value on a non-recurring basis or disclosed at fair value, are categorized based upon the level of judgment associated with inputs used to measure their fair values. The accounting guidance for fair value provides a framework for measuring fair value and requires certain disclosures about how fair value is determined. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date.
The accounting guidance also establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:
Level 1 — Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
Level 2 — Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and
Level 3 — Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. An assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. Changes in the ability to observe valuation inputs may result in a reclassification of levels of certain securities within the fair value hierarchy. The Company recognizes transfers into and out of levels within the fair value hierarchy in the period in which the actual event or change in circumstances that caused the transfer occurs.
As of March 31, 2023 and December 31, 2022, Level 1 securities consist of U.S. Treasury and money market funds, for which the carrying amounts are based on the quoted market prices in active markets.
As of March 31, 2023 and December 31, 2022, Level 2 securities consist of highly rated commercial paper, U.S. agency securities, and asset-backed securities, for which fair value is determined through the use of models or other valuation methodologies. The Company had an immaterial amount of unrealized gains on its Level 2 securities as of March 31, 2023 and December 31, 2022.
During the periods presented, the Company did not have any Level 3 securities.
8
The following tables set forth the financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy as of March 31, 2023 and December 31, 2022 (in thousands):
|
|
March 31, 2023 |
|
|||||||||||||
|
|
Total Fair |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Commercial paper (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. treasuries(2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial paper(2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. agency securities(2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset-backed securities(2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total cash equivalents and marketable securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
December 31, 2022 |
|
|||||||||||||
|
|
Total Fair |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Commercial paper (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. treasuries(2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial paper(2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. agency securities(2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Asset-backed securities(2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total marketable securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total cash equivalents and marketable securities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
4. Marketable Securities
All marketable securities were considered available-for-sale as of March 31, 2023 and December 31, 2022. The amortized cost, gross unrealized holding gains or losses, and fair value of the Company’s marketable securities by major security type are summarized in the tables below (in thousands):
|
|
March 31, 2023 |
|
|||||||||||||
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
||||
Available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. treasuries |
|
$ |
|
|
$ |
|
|
$ |
( | ) |
|
$ |
|
|||
Commercial paper |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
U.S. agency securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Asset-backed securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total available-for-sale securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
9
|
|
December 31, 2022 |
|
|||||||||||||
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
||||
Available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. treasuries |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Commercial paper |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
U.S. agency securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Asset-backed securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total available-for-sale securities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
The amortized cost of available-for-sale securities is adjusted for amortization of premiums and accretion of discounts to maturity. As of March 31, 2023, the aggregate fair value of securities with remaining maturities of less than one year held by the Company in an unrealized loss position was $
There were
10
5. Balance Sheet Components
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets as of March 31, 2023 and December 31, 2022 consisted of the following (in thousands):
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
Advances to suppliers |
|
$ |
|
|
$ |
|
||
Prepaid insurance |
|
|
|
|
|
|
||
Other prepaid expenses |
|
|
|
|
|
|
||
Total prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
Property and Equipment, Net
Property and equipment, net as of March 31, 2023 and December 31, 2022 consisted of the following (in thousands):
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
Furniture and fixtures |
|
$ |
|
|
$ |
|
||
Computers and network equipment |
|
|
|
|
|
|
||
Lab equipment |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Construction-in-progress |
|
|
|
|
|
|
||
Total property and equipment |
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Total property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense for the three months ended March 31, 2023 and 2022 was $
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities as of March 31, 2023 and December 31, 2022 consisted of the following (in thousands):
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
Professional fees |
|
$ |
|
|
$ |
|
||
Early exercise liability |
|
|
|
|
|
|
||
Other accrued expenses |
|
|
|
|
|
|
||
Accrued employee termination benefits |
|
|
|
|
|
— |
|
|
Total accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
||
6. Significant Agreements
Stanford Exclusive License Agreement and Option Agreement
In December 2020, the Company entered into an exclusive license agreement (the “License Agreement”) with The Board of Trustees of the Leland Stanford Junior University (Stanford), pursuant to which Stanford granted the Company a worldwide license to specified technology and patent rights to develop, manufacture and commercialize human prophylactic and therapeutic products. Other than with respect to specified, broadly applicable assays and procedures and subject to retained rights by Stanford, the license is exclusive with respect to human prophylactic and therapeutic products for the treatment of SCD, XSCID and beta thalassemia. The license is non-exclusive with respect to those broadly applicable assays and procedures and with respect to all human prophylactic and therapeutic products other than for the treatment of SCD, XSCID and beta thalassemia.
Pursuant to the License Agreement, the Company paid an upfront license fee of $
11
On May 7, 2021, the Company issued an aggregate of
On June 18, 2021, the Company exercised its right to repurchase an aggregate of
The acquisition of the exclusive license, including patent rights and know-how, and clinical supplies was accounted for as an asset acquisition and as the acquired technology and inventories did not have an alternative use, the total consideration of $
In connection with the License Agreement, the Company reimbursed Stanford $
The Company is obligated to make future development and regulatory milestone payments in total of up to $
In January 2021, the Company entered into an option agreement (the “First Option Agreement”), with Stanford, pursuant to which Stanford granted the Company the right to obtain a license to specified patent rights relating to human prophylactic and therapeutic products. The Company may exercise the option in whole or in part to obtain a license under one or more of the optioned patent rights.
Subject to the Company’s exercise of the option under the First Option Agreement and its execution of an amendment to the License Agreement that incorporates the optioned patent rights and any optioned technology, the Company has agreed to issue to Stanford
The term of the First Option Agreement expires
In April 2021, the Company entered into an option agreement (the “Second Option Agreement”) with Stanford to negotiate the license for additional technologies from Stanford. Pursuant to the Second Option Agreement, the Company agreed to pay Stanford option fees in an aggregate amount of $
LCGM Service Agreement
On August 30, 2021, the Company entered into a Master Manufacturing and Service Agreement with the Laboratory for Cell & Gene Medicine at Stanford (“LCGM MSA”). Pursuant to the LCGM MSA, LCGM will conduct clinical manufacturing, release testing, and product release for nula-cel in the Company’s Phase 1/2 CEDAR clinical trial to treat SCD. During 2021, the Company entered into various SOWs under the LCGM MSA under which it received technology transfer and related services for HBB Beta-Globin Gene Variant for SCD, manufacturing engineer test runs, the exclusive use of a manufacturing suite at the LCGM facility, and Phase 1/2 CEDAR clinical development and manufacturing of the HBB Variant for SCD. During the three months ended March 31, 2023 and 2022, the Company has recognized $
IDT License Agreement
On June 7, 2021, the Company entered into a License Agreement (“IDT License Agreement”) with Integrated DNA Technologies, Inc. (“IDT”). Pursuant to the IDT License Agreement, IDT granted the Company and its affiliates a worldwide, non-exclusive, sublicensable license to research and develop products incorporating HiFi Cas9 protein variants for use in human therapeutic applications for SCD, XSCID and Gaucher disease (the “Field”) and a worldwide, exclusive, sublicensable license to commercialize such products in the Field. The Company has also been granted the right to expand the licensed Field to include human therapeutic applications in the additional fields of beta thalassemia disorder and lysosomal storage disorders upon the payment of an exercise fee in the amount of $
12
In consideration of the licenses and rights granted to the Company under the IDT License Agreement, the Company agreed to pay to IDT an upfront payment in the amount of $
The IDT License Agreement remains in effect on a country-by-country and product-by-product basis until the expiration of the royalty term for such product in such jurisdiction. The Company and IDT each have the right to terminate the IDT License Agreement for the other party’s material breach of its obligations under the IDT License Agreement, subject to specified rights to cure. Additionally, the Company may terminate the IDT License Agreement for any reason upon written notice.
During the three months ended March 31, 2023 and 2022, the Company has
Bayside Lease
On December 16, 2021, the Company entered into a lease agreement with Bayside Area Development, LLC (“Bayside”) for
As of March 31, 2023 and December 31, 2022, the Company posted a security deposit in the amount of $
As of March 31, 2023 and December 31, 2022, there was
7. Commitments and Contingencies
Research and Development Agreements
The Company enters into contracts in the normal course of business with CROs for clinical trials, with CMOs or other vendors for preclinical and clinical studies, supplies and other services and products for operating purposes. These contracts generally provide for termination on notice or may have a potential termination fee if a purchase order is cancelled within a specified time. As of March 31, 2023 and December 31, 2022, there were no amounts accrued related to termination and cancellation charges.
License Agreements
The Company enters into license agreements (Note 6), pursuant to which the Company may acquire or license other patents, patent applications or know-how from various third parties to access intellectual property covering product candidates that the Company is developing. Under these acquisitions or licensing agreements, the Company may be liable for certain diligence obligations and payments, which are contingent upon achieving various development, regulatory and commercial milestones. Also, pursuant to the terms of some of these license agreements, when and if commercial sales of a product commence, the Company may be obligated to pay royalties to such third parties on net sales of the respective products. No such milestones were achieved or probable as of March 31, 2023 and December 31, 2022. All products are in development as of March 31, 2023 and December 31, 2022 and
Legal Contingencies
From time to time, the Company may become involved in legal proceedings arising from the ordinary course of business. The Company records a liability for such matters when it is probable that future losses will be incurred and that such losses can be reasonably estimated. Significant judgment by the Company is required to determine both probability and the estimated amount. Management is
13
currently not aware of any legal matters that could have a material adverse effect on its financial position, results of operations or cash flows.
Guarantees and Indemnifications
In the normal course of business, the Company enters into agreements that contain a variety of representations and provide for general indemnification. Its exposure under these agreements is unknown because it involves claims that may be made against the Company in the future. To the extent permitted under Delaware law, the Company has agreed to indemnify its directors and officers for certain events or occurrences while the director or officer is, or was serving, at a request in such capacity. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. As of March 31, 2023 and December 31, 2022, the Company did not have any material indemnification claims that were probable or reasonably possible and consequently has not recorded related liabilities.
14
8. Operating Leases
As of March 31, 2023, the current and non-current portions of the total liability for operating leases was $
Facility leases
On January 27, 2021, the Company entered into a new lease agreement for office and lab space in South San Francisco, California that included two office suites. The lease terms for the
On
As of March 31, 2023, the Company had operating lease right-of-use assets of $
Embedded leases
On May 10, 2021 and August 30, 2021, the Company and LCGM entered into the LCGM MSA and SOW #3, respectively, for the exclusive use of a manufacturing suite at the LCGM facility. Pursuant to the terms of SOW #3, LCGM agreed to provide the Company with certain dedicated space for the clinical manufacturing, release testing, and product release in the Company’s Phase 1/2 CEDAR clinical trial to treat sickle cell disease. The Company concluded that the agreement contains an embedded lease as the Company controls the use of a dedicated manufacturing suite and the equipment therein. The agreement includes fixed lease payments of $
The Company and Explora BioLabs, Inc. (“Explora”) entered into a License Service Agreement and Master Services Agreement (together, the “Explora Agreements”) on November 17, 2021 and December 16, 2021, respectively. Pursuant to the terms of the Explora Agreements, Explora agreed to provide a certain dedicated space to perform in vitro or in vivo studies, obtain or house research animals, and provide scientific or technical consultation to the Company. The Company concluded that the agreement contains an embedded lease as the Company controls the use of a dedicated manufacturing suite and the equipment therein. The Explora Agreements contain fixed lease payments of $
As of March 31, 2023, the Company had operating lease right-of-use assets of $
Operating Lease Obligations
As of March 31, 2023, the future minimum lease payments for the Company’s operating leases for each of the years ending December 31 were as follows (in thousands):
|
|
Amount |
|
||
2023 (Remaining nine months) |
|
$ |
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total undiscounted lease payments |
|
|
|
|
|
Present value adjustment |
|
|
|
( |
) |
Total net lease liabilities |
|
$ |
|
|
|
Lease expense was $
Under the terms of the remaining lease agreements, the Company is also responsible for certain variable lease payments that are not included in the measurement of the lease liability. Variable lease payments for operating leases were $
The following information represents supplemental disclosure for the statement of cash flows related to the operating leases (in thousands):
|
|
March 31, 2023 |
|
||
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
|
Operating cash flows under operating leases |
|
$ |
|
|
|
9. Common Stock
As of March 31, 2023 and December 31, 2022, the Company was authorized to issue
On June 29, 2021, the underwriters also exercised their option to purchase an additional
Shares Reserved for Future Issuance
As of March 31, 2023 and December 31, 2022, the Company reserved common stock for future issuances as follows:
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
Outstanding stock option awards |
|
|
|
|
|
|
||
Shares available for future stock option grants |
|
|
|
|
|
|
||
ESPP shares available for future grants |
|
|
|
|
|
|
||
Total shares reserved for future issuance |
|
|
|
|
|
|
||
Founders’ and Investor’s Restricted Common Stock
In March 2020, the Board approved and in April 2020, the Company issued
If a founder terminates the service relationship with the Company during the vesting period, the Company may repurchase any unvested restricted common stock at the price per share equal to the lower of (i) the original purchase price, subject to adjustment in the event of any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or (ii) the current fair market value as of the date the Company elects to exercise its Stanford Adjustment Repurchase Right, as described below. The repurchase right lapses in 180 days after the termination of the founder’s service or employment. During the vesting term, holders of founders’ common stock awards are deemed to be common stockholders and have the right to receive dividends and voting rights.
The founders’ shares of common stock are also subject to the Company’s option to repurchase per the Stanford Adjustment Repurchase Right, as described below.
The Company accounts for shares issued to founders as equity compensation awards and the estimated fair value at the grant date was minimal.
Stanford Adjustment Repurchase Right
Upon the issuance of shares of common stock to Stanford pursuant to the License Agreement, as discussed in Note 6, the Company has a right to repurchase from each founder and an investor a number of shares of common stock equal to the number of shares issued to Stanford multiplied by the applicable number of shares issued to the founder or investor, as applicable, divided by
16
(a fully diluted number of shares of the Company at the end of March 2020, after founders and the investor’s shares were approved by the board of directors). The Stanford Adjustment Repurchase Right may be exercised by the Company within six months following the date of the issuance of the shares of common stock to Stanford. The repurchase price per share is equal to the lower of (i) the purchase price, subject to adjustment in the event of any reorganization, recapitalization, reclassification, etc., or (ii) the current fair market value as of the date the Company elects to exercise its Stanford Adjustment Repurchase Right.
On May 7, 2021, the Company issued an aggregate of
On June 18, 2021, the Company exercised its right to repurchase an aggregate of
The Company accounts for the founders and investor’s shares of restricted common stock as equity share-based awards.
10. Equity Incentive Plans
2020 Stock Option and Grant Plan
Prior to the effectiveness of the registration statement on Form S-1 (File No. 333-256838) for its IPO, the Company granted share-based awards under the 2020 Stock Option and Grant Plan, as amended (the “2020 Plan”). The Company was authorized to grant under the 2020 Plan incentive stock options, nonqualified stock options, restricted stock awards, restricted stock units and other share-based awards to the Company’s officers, employees, directors and consultants. Options under the 2020 Plan could be granted for periods of up to
2021 Stock Option and Incentive Plan
In June 2021, the Company’s board of directors approved the 2021 Stock Option and Incentive Plan (the “2021 Plan”) that became effective immediately prior to the date when the Company’s prospectus was declared effective by the SEC on June 24, 2021. The Company initially reserved
As of March 31, 2023, there were
Restricted Stock Awards
During the year ended December 31, 2020, the Company issued
The Company accounted for restricted stock awards as early exercised options and recognized a liability in other liabilities when cash was received for the purchase of shares of restricted stock awards. As shares of restricted stock awards vest, the Company reclassified the liability to common stock and additional paid in capital. As of March 31, 2023 and December 31, 2022, the Company recorded a minimal liability for restricted stock awards included in other liabilities.
There were
17
Employee Stock Purchase Plan
In June 2021, the Company’s board of directors and stockholders approved the 2021 Employee Stock Purchase Plan (the “ESPP”) which became effective upon the IPO. Pursuant to the ESPP, certain employees of the Company, excluding consultants and non-employee directors, are eligible to purchase common stock of the Company at a reduced rate during offering periods. The ESPP permits participants to purchase common stock using funds contributed through payroll deductions, subject to a calendar year limit of $
The Company recorded $
Incentive Stock Options and Nonqualified Stock Options
Stock options issued under the 2020 Plan and 2021 Plan generally vest over a
A summary of option activity under the 2020 Plan and the 2021 Plan during the three months ended March 31, 2023 is as follows:
|
|
Number of |
|
|
Weighted- |
|
|
Weighted- |
|
|
Aggregate |
|
||||
Outstanding as of December 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options granted - 2021 Plan |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Options exercised |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Options cancelled |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Outstanding as of March 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested and expected to vest as of March 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Aggregate intrinsic value represents the difference between the fair value of the underlying common stock and the exercise price as of March 31, 2023. The weighted-average grant date fair value of options granted during the three months ended March 31, 2023 was $
Early Exercise of Stock Options
The terms of the 2020 Plan permit the exercise of options granted prior to vesting, subject to required approvals. The unvested shares are subject to the repurchase right upon termination of employment at the original purchase price. The repurchase right lapses in
As of March 31, 2023 and December 31, 2022,
18
Stock-Based Compensation Expense
The following table presents the components of stock-based compensation expense for the Company’s stock-based awards for the periods presented (in thousands):
|
|
Three Months Ended |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Restricted stock awards and founders’ common stock awards |
|
$ |
|
|
$ |
|
||
ESPP |
|
|
|
|
|
|
||
Stock options |
|
|
|
|
|
|
||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
||
The above stock-based compensation expense also includes the expenses of $
The following table presents the classification of stock-based compensation expense for the Company’s stock-based awards for the periods presented (in thousands):
|
|
Three Months Ended |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Research and development expenses |
|
$ |
|
|
$ |
|
||
General and administrative expenses |
|
|
|
|
|
|
||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
||
As of March 31, 2023 and December 31, 2022 there was $
11. Restructuring Activities
In February 2023, the Company’s board of directors approved a restructuring plan (the “Restructuring Plan”) to reduce the Company’s operating costs and better align its workforce with the needs of its business. The Restructuring Plan eliminated approximately
Employees affected by the Restructuring Plan obtained involuntary termination benefits that are provided pursuant to a one-time benefit arrangement. For employees who were notified of their termination in February 2023 and have no requirements to provide future service, the Company recognized the liability for the termination benefits in full at fair value in the current period. For employees who are required to render services beyond a minimum retention period to receive their one-time termination benefits, the Company is recognizing the termination benefits ratably over their future service periods. The service periods began in February 2023 and all will end at various dates through June 2023. The Company expects that it will incur approximately $
The following table summarizes the Company’s restructuring liability that is included in accrued expenses and other current liabilities in the accompanying condensed balance sheet:
|
|
Three Months Ended |
|
|
Accrued employee termination benefits beginning balance |
|
$ |
|
|
Employee termination benefits charges incurred during the period |
|
|
|
|
Amounts paid or otherwise settled during the period |
|
|
( |
) |
Accrued employee termination benefits as of March 31, 2023 |
|
$ |
|
|
In addition, the board of directors determined that it was in the best interests of the Company and its stockholders to put in place arrangements designed to provide that the Company will have the continued dedication and commitment of those employees, including executives, determined to be key to the Company’s planned go-forward operations. The Board approved, and management implemented a retention program for certain employees staying with the Company which includes cash retention bonuses totaling $
19
result, these cash retention bonuses are being accrued over the requisite service period, with $
12. Net Loss Per Share Attributable to Common Stockholders
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders, which excludes shares which are legally outstanding, but subject to repurchase by the Company (in thousands, except share and per share amounts):
|
|
Three Months Ended |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Numerator: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( | ) |
|
$ |
( | ) |
Denominator: |
|
|
|
|
|
|
||
Weighted-average common shares outstanding |
|
|
|
|
|
|
||
Less: weighted-average unvested restricted shares and shares subject to repurchase |
|
|
( |
) |
|
|
( |
) |
Weighted-average shares used to compute basic and diluted net loss per share attributable to common stockholders |
|
|
|
|
|
|
||
Net loss per share attributable to common stockholders — basic and |
|
$ |
( |
) |
|
$ |
( |
) |
Anti-dilutive Outstanding Shares or Equivalents
The following outstanding options, unvested shares, and ESPP shares were excluded (as common stock equivalents) from the computation of diluted net loss per common share for the periods presented as their effect would have been anti-dilutive (in thousands):
|
|
Three Months Ended |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Options to purchase common stock |
|
|
|
|
|
|
||
Common stock subject to vesting or repurchase |
|
|
|
|
|
|
||
Employee Stock Purchase Plan shares |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
13. Income Taxes
During the three months ended March 31, 2023 and 2022, the Company recorded a full valuation allowance on federal and state deferred tax assets since management does not forecast the Company to be in a taxable position in the near future.
14. Subsequent Events
Management has evaluated subsequent events through May 11, 2023 and has determined that there are no subsequent events to report.
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q, and the financial statements and accompanying notes, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2022. Certain of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section entitled “Risk Factors,” our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read the section entitled “Risk Factors” to gain an understanding of the material and other risks that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled “Cautionary Note Regarding Forward-Looking Statements.”
Overview
We are a clinical-stage, next-generation gene editing company harnessing high-efficiency targeted gene integration to develop a new class of therapies to potentially cure a wide range of serious and life-threatening diseases. Our precision gene editing approach aims to achieve one of medicine’s most elusive goals: to precisely “find & replace” any gene in the genome. We have a next-generation gene editing platform that is designed to precisely correct mutations, replace entire disease-causing genes with normal genes, or insert new genes into predetermined, safe locations.
In January 2023, we announced a voluntary pause of our Phase 1/2 CEDAR study of nulabeglogene autogedtemcel (nula-cel), for sickle cell disease (SCD) due to a serious adverse event in the first patient dosed, which we concluded is likely related to study treatment. Nula-cel was being developed as a highly differentiated approach to treating SCD, with the potential to directly correct the mutation that causes SCD and restore normal adult hemoglobin (HgbA) expression.
In February 2023, we announced our decision to discontinue the development of nula-cel and initiate a process to explore strategic alternatives. As a result of this decision, we announced a corporate restructuring that resulted in an approximately 50% reduction in our workforce. We also disclosed our intention to continue research activities associated with our early-stage non-genotoxic conditioning program, with the goal of advancing toward one or more potential development candidates.
We were incorporated in Ontario, Canada in June 2017 as Longbow Therapeutics Inc. and were reincorporated in the State of Delaware in October 2019. In February 2020, we changed our name to Integral Medicines, Inc. and in August 2020, we changed our name to Graphite Bio, Inc. Research and development of our initial technology ceased at the end of 2018 and we did not have any significant operations or any research and development activities in 2019. In March 2020, we identified new gene editing technology which we sought to further develop, and we licensed the related intellectual property rights from The Board of Trustees of the Leland Stanford Junior University (Stanford) in December 2020.
Since our inception in June 2017, we have devoted substantially all of our resources to performing research and development, enabling manufacturing activities in support of our product development efforts, hiring personnel, acquiring and developing our technology and product candidates, organizing and staffing our Company, performing business planning, establishing our intellectual property portfolio, raising capital and providing general and administrative support for these activities. We have one product candidate that has an accepted IND. All of our other product candidates are in preclinical development, and we do not have any products approved for sale and have not generated any revenue from product sales. To date, we have funded our operations primarily with an aggregate of $197.7 million in aggregate gross proceeds from the sales of our redeemable convertible preferred stock and the issuance of convertible notes. In June and July 2021, we completed our initial public offering (“IPO”) and issued 16,100,000 shares of our common stock for $17.00 a share with a total net proceeds of approximately $251.3 million, and total underwriting costs of $19.1 million and issuance costs of $3.2 million. We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future. Accordingly, until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through public or private equity or debt financings, and collaborations, strategic alliances and licensing arrangements with third parties.
We have incurred significant operating losses since inception. As of March 31, 2023, we had cash, cash equivalents and marketable securities of $264.1 million and an accumulated deficit of $266.3 million. We expect to continue to incur substantial losses for the foreseeable future, and our transition to profitability will depend upon successful development, approval and commercialization of our product candidates and upon achievement of sufficient revenues to support our cost structure. We do not expect to generate any revenue from commercial product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take at least several years. We may never achieve profitability, and unless and until then, we will need to continue to raise additional capital. Based upon our current operating plan, we estimate that our cash, cash equivalents and investments in marketable securities as of March 31, 2023 will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next 12 months.
We expect to continue to incur significant expenses in connection with our ongoing and planned activities, as we:
We rely and will continue to rely on third parties in the conduct of our preclinical studies and clinical trials and for manufacturing and supply of our product candidates. We have no internal manufacturing capabilities, and we may continue to rely on third parties for our preclinical and clinical trial materials, of which the main suppliers are single-source suppliers. Given our stage of development, we do not yet have a marketing or sales organization or commercial infrastructure. Accordingly, if we obtain regulatory approval for any of our product candidates, we also expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.
Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from sales of any product for which we receive regulatory approval, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and may be forced to reduce our operations.
Stanford Exclusive License Agreement and Option Agreement
In December 2020, we entered into an exclusive license agreement (the “License Agreement”), with The Board of Trustees of the Leland Stanford Junior University (Stanford), pursuant to which Stanford granted us a worldwide license to specified technology and patent rights to develop, manufacture and commercialize human prophylactic and therapeutic products. Other than with respect to specified, broadly applicable assays and procedures and subject to retained rights by Stanford, the license is exclusive with respect to human prophylactic and therapeutic products for the treatment of SCD, XSCID and beta thalassemia. The license is non-exclusive with respect to those broadly applicable assays and procedures and with respect to all human prophylactic and therapeutic products other than for the treatment of SCD, XSCID and beta thalassemia.
To date, pursuant to the License Agreement, we have paid an upfront license fee to Stanford of $50.0 thousand and issued to Stanford and its designees an aggregate of approximately 0.6 million shares of our common stock. The acquisition of the exclusive license, including patent rights and know-how, and clinical supplies was accounted for as an asset acquisition and as the acquired technology and inventories did not have an alternative use, the total consideration of $2.8 million was recorded as research and development expense in the statements of operations and comprehensive loss for the year ended December 31, 2020. We are obligated to pay Stanford an annual license maintenance fee on each anniversary of the effective date of the License Agreement. The annual license maintenance fee initially is $5.0 thousand and will increase to $50.0 thousand in three increments over the first seven anniversaries of the effective date of the License Agreement. After the first commercial sale of a product falling within the scope of the license (the “Licensed Product”), the annual license maintenance fee is $200.0 thousand.
In May 2021, we issued 640,861 shares of our common stock in connection with the License Agreement. Subsequently, in June 2021, related to the License Agreement, we repurchased 624,845 shares of our common stock from investors and founders.
We are required to share with Stanford a portion of any non-royalty income we receive from sublicensing the licensed patent rights or technology, subject to specified exclusions. With respect to sublicenses granted to products for the treatment of SCD, XSCID and beta thalassemia, the portion of sublicense income we must share with Stanford varies by indication and declines from between a mid-teen to a second quartile double-digit percentage prior to the filing of an IND to between a high single-digit to very low double-digit percentage upon achievement of a specified clinical milestone. With respect to sublicenses granted under the licensed technology rights and not licensed patent rights, the portion of sublicense income shared with Stanford declines from between a mid-single-digit and very low double-digit percentage prior to the filing of an IND to a low single-digit percentage after filing of an IND.
We are obligated to make payments to Stanford with respect to each Licensed Product of up to an aggregate of $12.8 million upon the achievement of certain development, regulatory and commercial milestones. Such amounts are payable only once upon the first occurrence of a particular milestone event with respect to each Licensed Product and only once with respect to each new indication covered by any of the Licensed Products.
We also are obligated to pay Stanford low single-digit royalties based on worldwide annual net sales of any Licensed Product, subject to specified reductions. We will be obligated to continue to pay royalties on a Licensed Product-by-Licensed Product and country-by-country basis, until the latest of (i) the expiration of the last valid claim under the licensed patents that covers the sale or
22
manufacture of such Licensed Product in such country, (ii) the expiration of any period of regulatory exclusivity with respect to such Licensed Product in such country or (iii) the expiration of ten years after the first commercial sale of such Licensed Product in such country.
The term of the License Agreement expires on the later of (i) the expiration of the last patent or abandonment of the last patent application within the license patent rights or (ii) the expiration of all royalty terms with respect to Licensed Products. The License Agreement may be terminated by us at will or by Stanford if we remain in breach of the License Agreement following a cure period to remedy the breach.
We are required to use diligent efforts to manufacture, market and sell Licensed Products for the treatment of each of SCD, XSCID and beta thalassemia. In addition, we are required to achieve specified milestones by specified dates with respect to Licensed Products for the treatment of each of SCD, XSCID and beta thalassemia. If we fail to satisfy our diligence obligations, Stanford may terminate the License Agreement for our breach. For more details on the License Agreement, please see Note 6 of the Notes to Condensed Financial Statements.
In January 2021, we entered into an option agreement (the “First Option Agreement”), with Stanford, pursuant to which Stanford granted us the right to obtain a license to specified patent rights relating to human prophylactic and therapeutic products. We may exercise the option in whole or in part to obtain a license under one or more of the optioned patent rights.
Subject to our exercise of the option under the First Option Agreement and our execution of an amendment to the License Agreement that incorporates the optioned patent rights and any optioned technology, we have agreed to issue to Stanford 132,137 shares of our common stock and pay a license execution fee of $10.0 thousand.
The term of the First Option Agreement expires 18 months after its effective date, subject to our right to extend such expiration date by up to an additional one year upon notice to Stanford and by another additional one year upon the reasonable agreement of Stanford. The First Option Agreement will terminate if the License Agreement terminates. On June 23, 2022, we exercised the right to extend the term of the First Option Agreement for an additional year. As of March 31, 2023, we have not exercised the option and no fees have been paid under the First Option Agreement.
In April 2021, we entered into an option agreement (the “Second Option Agreement”) with Stanford to negotiate the license for additional technologies from Stanford. Pursuant to the Second Option Agreement, we agreed to pay Stanford option fees in an aggregate amount of $30.0 thousand over the term of the option. On April 13, 2022, we entered into an amendment to the Second Option Agreement which extended the term for an additional year. As of March 31, 2023, we have not exercised the option and no fees have been paid under the Second Option Agreement.
LCGM Service Agreement
On August 30, 2021, we entered into a Master Manufacturing and Service Agreement with the Laboratory for Cell & Gene Medicine (“LCGM”) at Stanford (“LCGM MSA”). Pursuant to the LCGM MSA, LCGM will conduct clinical manufacturing, release testing, and product release for nula-cel in our Phase 1/2 CEDAR clinical trial to treat SCD. During 2021, we entered into various SOWs under the LCGM MSA under which we received technology transfer and related services for HBB Beta-Globin Gene Variant for SCD, manufacturing engineer test runs, the exclusive use of a manufacturing suite at the LCGM facility, and Phase 1/2 CEDAR clinical development and manufacturing of the HBB Variant for SCD. We have recognized $1.1 million and $1.5 million in research and development expense in connection with the LCGM MSA during the three months ended March 31, 2023 and March 31, 2022, respectively.
IDT License Agreement
On June 7, 2021, we entered into a License Agreement (the “IDT License Agreement”) with Integrated DNA Technologies, Inc. (IDT). Pursuant to the IDT License Agreement, IDT granted us and our affiliates a worldwide, non-exclusive, sublicensable license to research and develop products incorporating HiFi Cas9 protein variants for use in human therapeutic applications for SCD, XSCID and Gaucher disease (the “Field”) and a worldwide, exclusive, sublicensable license to commercialize such products in the Field. We have also been granted the right to expand the licensed Field to include human therapeutic applications in the additional fields of beta thalassemia disorder and lysosomal storage disorders upon the payment of an exercise fee in the amount of $0.5 million per additional field or $1.0 million for both additional fields.
In consideration of the licenses and rights granted to us under the IDT License Agreement, we agreed to pay to IDT an upfront payment in the amount of $3.0 million and up to $5.3 million (or $8.8 million if we elect to expand the Field as described above to include both the beta thalassemia and lysosomal storage disorders fields) in total regulatory milestone payments. Each regulatory milestone payment is payable once on an indication-by-indication basis. In addition, we have agreed to pay IDT a low single-digit royalty on the net sales of products, subject to reductions in specified circumstances. The acquisition of the license was accounted for as an asset acquisition and as the acquired technology did not have an alternative use, the total consideration of $3.0 million was recorded as research and development expense in the statement of operations and comprehensive loss for the year ended December 31, 2021. During the three months ended March 31, 2023, we have not recognized any research and development expense in connection with the
23
IDT License Agreement. There are no milestones probable as of March 31, 2023; therefore, no milestone payments have been recognized in the three months ended March 31, 2023.
The IDT License Agreement remains in effect on a country-by-country and product-by-product basis until the expiration of the royalty term for such product in such jurisdiction. We and IDT each have the right to terminate the IDT License Agreement for the other party’s material breach of its obligations under the IDT License Agreement, subject to specified rights to cure. Additionally, we may terminate the IDT License Agreement for any reason upon written notice.
Initial Public Offering
In June and July 2021, we completed an initial public offering of our common stock. As part of the IPO, we issued and sold 16,100,000 shares of our common stock at a public offering price of $17.00 per share. In June and July 2021, we received net proceeds of approximately $251.3 million from the IPO, after deducting underwriting discounts and commissions of $19.1 million and offering costs of approximately $3.2 million.
Components of Results of Operations
Operating Expenses
Research and Development
Research and development costs consist primarily of external and internal costs incurred for our research activities and the development of our gene editing platform and associated rights which we licensed in December 2020.
External costs include:
Internal costs include:
Research and development costs are expensed as incurred. Since inception, we have not tracked our internal indirect costs and external research and development costs by program. The intellectual property we licensed in late 2020 is fundamental to our platform and we did not focus on any specific programs. In the future, we expect to track research and development costs on a program by program basis as we identify the specific programs and product candidates to develop.
During 2022 and 2021, we were eligible for a research and development tax credit. The tax incentive was available to us based on research and development activity within the United States and California during that year. These research and development tax incentives are recognized as a reduction to payroll tax expense when the right to receive has been attained and funds are collectible and are capped at $250.0 thousand per year.
The process of conducting preclinical research is costly and time-consuming. We are unable to determine the duration and completion costs of our research projects or if, when and to what extent they will lead to product candidates and enter into clinical research. Our future research and development costs may vary significantly based on factors such as:
24
General and Administrative Expenses
General and administrative expenses consist primarily of expenses related to employee-related costs, including salaries, benefits and stock-based compensation expense, for our executive, business development, finance and accounting, human resources and other administrative functions; legal services, including relating to intellectual property and corporate matters; accounting, auditing, consulting and tax services; insurance; and facility and other allocated costs not otherwise included in research and development expenses. We expect to continue to incur significant general and administrative expenses for the foreseeable future as we implement our restructuring plan, pursue potential strategic alternatives and conduct our operations generally. We also expect to continue to incur significant expenses associated with being a public company, including costs related to accounting, audit, legal, regulatory, and tax-related services associated with maintaining compliance with applicable Nasdaq and SEC requirements; director and officer insurance costs; and investor and public relations costs.
Other Income (Expense), Net
Other income (expense), net primarily consists of amounts realized from interest income from the investments in marketable securities.
Results of Operations
Three Months Ended March 31, 2023 and 2022
The following table summarizes our statements of operations and comprehensive loss for the respective periods (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Operating expenses: |
|
|
|
|
|
|
||
Research and development |
|
$ |
16,244 |
|
|
$ |
18,246 |
|
General and administrative |
|
|
7,623 |
|
|
|
7,712 |
|
Restructuring costs |
|
|
2,583 |
|
|
|
— |
|
Total operating expenses |
|
|
26,450 |
|
|
|
25,958 |
|
Loss from operations |
|
|
(26,450 |
) |
|
|
(25,958 |
) |
Other income (expense), net: |
|
|
|
|
|
|
||
Interest income, net |
|
|
2,587 |
|
|
|
123 |
|
Loss on disposal of assets |
|
|
(71 |
) |
|
|
— |
|
Total other income (expense), net |
|
|
2,516 |
|
|
|
123 |
|
Net loss |
|
$ |
(23,934 |
) |
|
$ |
(25,835 |
) |
Unrealized gain (loss) on investments |
|
|
579 |
|
|
|
(309 |
) |
Comprehensive loss |
|
$ |
(23,355 |
) |
|
$ |
(26,144 |
) |
25
Operating Expenses
Research and Development Expenses
Research and development expenses were $16.2 million for the three months ended March 31, 2023 compared to $18.2 million for the three months ended March 31, 2022, a decrease of $2.0 million. The decrease in research and development expenses was primarily attributable to a decrease of $2.4 million in clinical trial related activities and contract manufacturing activities for our clinical trials and drug supply. This was partially offset by a $0.3 million increase in personnel costs and a $0.1 million increase in other research and development costs primarily related to facilities costs, lease expense and service agreements.
General and Administrative Expenses
General and administrative expenses were $7.6 million for the three months ended March 31, 2023 compared to $7.7 million for the three months ended March 31, 2022, a decrease of $0.1 million. The decrease in general and administrative expenses was comprised of a decrease of $0.2 million in consulting and personnel-related costs, including associated stock-based compensation expense. This was partially offset by a $0.1 million increase in depreciation and amortization expense due to an increase in fixed assets.
Other Income (Expense), Net
The other income (expense), net for the three months ended March 31, 2023 and 2022 was comprised of interest income.
Liquidity and Capital Resources
We have incurred losses since inception and have incurred negative cash flows from operations from inception through March 31, 2023. As of March 31, 2023, we had $264.1 million of cash, cash equivalents and marketable securities and our accumulated deficit was $266.3 million. In June and July 2021, we raised net proceeds of $251.3 million in our IPO, pursuant to which we sold an aggregate of 16,100,000 shares of common stock.
Prior to our IPO, we funded our operations primarily from the sale of redeemable convertible preferred stock and issuance of convertible promissory notes.
On July 21, 2022, we filed the 2022 Shelf with the SEC in relation to the registration of up to an aggregate offering price of $300.0 million of common stock, preferred stock, debt securities, warrants and units or any combination thereof. We also simultaneously entered into a Sales Agreement to provide for the offering, issuance and sale by us of up to an aggregate of $75.0 million of our common stock from time to time in “at-the-market” offerings under the 2022 Shelf and subject to the limitations thereof. We will pay to the Sales Agent cash commissions of up to 3.0 percent of the gross proceeds of sales of common stock under the Sales Agreement. We have not issued any shares or received any proceeds from any offerings under the 2022 Shelf through May 11, 2023.
Future Funding Requirements
Our primary uses of cash are to fund our operations, which consist primarily of research and development expenditures related to our programs and, to a lesser extent, general and administrative expenditures. We anticipate that we will continue to incur significant expenses for the foreseeable future as we continue to advance our product candidates, expand our corporate infrastructure, including the costs associated with being a public company, further our research and development initiatives for our product candidates, scale our laboratory and manufacturing operations, and incur marketing costs associated with potential commercialization. We are subject to all of the risks typically related to the development of new drug candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We anticipate that we will need substantial additional funding in connection with our continuing operations.
Based upon our current operating plan, we estimate that our existing cash, cash equivalents and investments in marketable securities as of the date of the filing of this Form 10-Q, will be sufficient to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2024. Until we can generate sufficient revenues from the commercialization of our product candidates or from collaboration agreements with third parties, if ever, we expect to finance our future cash needs through public or private equity or debt financings, collaborations and other strategic alliances and licensing arrangements, or any combination of these approaches. The sale of equity or convertible debt securities may result in dilution to our stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. Debt financings may subject us to covenant limitations or restrictions on our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Our ability to raise additional funds may be adversely impacted by negative global economic conditions and any disruptions to and volatility in the credit and financial markets in the United States and worldwide that have resulted and may result from the ongoing COVID-19 pandemic, inflationary pressures or other factors. There can be no assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable or acceptable to us. If we are unable to obtain adequate financing when needed or on terms favorable or acceptable to us, we may be forced to delay, reduce the scope of or eliminate one or more of our research and development programs.
Our future capital requirements will depend on many factors, including:
26
A change in the outcome of any of these or other variables could significantly change the costs and timing associated with the development of our product candidates. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such change.
Cash Flows
The following table summarizes our sources and uses of cash for the periods presented (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Net cash used in operating activities |
|
$ |
(21,074 |
) |
|
$ |
(21,240 |
) |
Net cash provided by (used in) investing activities |
|
|
43,163 |
|
|
|
(170,666 |
) |
Net cash used in financing activities |
|
|
(8 |
) |
|
|
— |
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
$ |
22,081 |
|
|
$ |
(191,906 |
) |
Cash Used in Operating Activities
Net cash used in operating activities was $21.1 million for the three months ended March 31, 2023, which was primarily attributable to our net loss of $23.9 million and net changes in operating assets and liabilities of $1.1 million, adjusted for net noncash charges of $3.9 million. Noncash charges included $3.3 million in stock-based compensation expense and $1.6 million in noncash lease expense, which is partially offset by $0.9 million in depreciation and amortization expense.
Net cash used in operating activities was $21.2 million for the three months ended March 31, 2022, which was primarily attributable to our net loss of $25.8 million and net changes in operating assets and liabilities of $0.7 million, adjusted for net noncash charges of $5.3 million. Noncash charges included $3.3 million in stock-based compensation expense, $1.5 million in noncash lease expense, and $0.5 million in depreciation and amortization expense.
Cash Used in Investing Activities
Net cash provided by investing activities was $43.2 million for the three months ended March 31, 2023, which was primarily attributable to cash received from the maturity of investments of $71.7 million. This was partially offset by cash used the investment in
27
current and non-current marketable securities of $28.1 million and the purchases of lab equipment for use at our headquarters of $0.4 million.
Net cash used in investing activities was $170.7 million for the three months ended March 31, 2022, which was primarily attributable to the investment in current and non-current marketable securities of $154.4 million and $13.0 million, respectively, and the purchases of lab equipment for use at our headquarters of $3.3 million.
Cash Provided by Financing Activities
Net cash used in financing activities for the three months ended March 31, 2023 consisted of repurchases of unvested early exercised shares.
During the three months ended March 31, 2022, we did not have any cash flows from financing activities.
Recently Adopted Accounting Pronouncements
For information on new accounting standards, see Note 2 to our financial statements included in Part I in this Quarterly Report.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including but not limited to those related to accrued research and development costs, the fair value of redeemable convertible preferred stock, investments in marketable securities, and common stock and stock-based compensation expense, the valuation of deferred tax assets, and uncertain income tax positions. We base our estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
During the three months ended March 31, 2023, there were no material changes to our critical accounting policies or in the methodology used for estimates from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Emerging Growth Company and Smaller Reporting Company Status
We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay the adoption of new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. Other exemptions and reduced reporting requirements under the JOBS Act for emerging growth companies include presentation of only two years of audited financial statements in a registration statement for an initial public offering, an exemption from the requirement to provide an auditor’s report on internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation and less extensive disclosure about our executive compensation arrangements. We have elected to use the extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
However, as described in Note 2 to our condensed financial statements included elsewhere in this Quarterly Report, we early adopted certain accounting standards, as the JOBS Act does not preclude an emerging growth company from adopting a new or revised accounting standard earlier than the time that such standard applies to private companies to the extent early adoption is permitted. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
We will remain an emerging growth company until the earliest of (i) the last day of our first fiscal year in which we have total annual gross revenues of $1.23 billion or more, (ii) December 31, 2026, (iii) the date on which we are deemed to be a “large accelerated filer,” under the rules of the SEC, which means the market value of equity securities that is held by non-affiliates exceeds $700.0 million as of the prior June 30th and (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
If we are a “smaller reporting company” at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Under SEC rules and regulations, as a smaller reporting company, we are not required to provide the information required by this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2023, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. 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, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are not party to any material legal proceedings at this time. From time to time, we may become involved in various legal proceedings that arise in the ordinary course of our business.
Item 1A. Risk Factors.
This Form 10-Q contains forward-looking information based on our current expectations. Because our business is subject to many risks and our actual results may differ materially from any forward-looking statements made by or on behalf of us, the discussion of our business and operations in this Form 10-Q should be read together with the risk factors contained in Item 1A of our Annual Report on Form 10-K for year ended December 31, 2022 filed with the SEC on March 20, 2023 (as amended, the “Annual Report”), which describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies, or prospects in a material and adverse manner. There are no material changes from the risk factors as previously disclosed in our Annual Report.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
On June 29, 2021, we completed our IPO and issued 14,000,000 shares of our common stock at an initial offering price of $17.00 per share. On July 2, 2021, we issued 2,100,000 shares of our common stock to the underwriters of the IPO pursuant to the exercise of their option to purchase additional shares at a price of $17.00 per share less underwriting discounts and commissions. We received net proceeds from the IPO of approximately $251.3 million, after deducting underwriting discounts and commissions of approximately $19.1 million and offering expenses of approximately $3.2 million. None of the expenses associated with the IPO were paid to directors, officers, persons owning 10% or more of any class of equity securities, or to their associates. Morgan Stanley & Co. LLC, BofA Securities, Inc., Cowen and Company, LLC and SVB Leerink, LLC acted as book-running managers for the IPO.
Shares of our common stock began trading on The Nasdaq Global Market on June 25, 2021. The offer and sale of the shares were registered under the Securities Act on a registration statement on Form S-1 (Registration No. 333-256838), which was declared effective on June 24, 2021.
As of March 31, 2023, we have used approximately $149.4 million of the net proceeds received in the IPO. Cash used since the IPO is described elsewhere in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our periodic reports filed with the SEC. There has been no material change in the planned use of proceeds from our IPO as described in the registration statement on Form S-1. We invested the funds received in cash equivalents and other marketable securities in accordance with our investment policy.
The following table provides stock repurchase activity during each of the months of the three months ended March 31, 2023:
|
|
Total number of shares purchased(1) |
|
|
|
Average price paid per share |
|
|
Total number of shares purchased as part of publicly announced plans or programs |
|
|
Maximum number of shares that may yet be purchased under the plans or programs |
|
||||
January 1, 2023 - January 31, 2023 |
|
|
— |
|
|
$ |
|
— |
|
|
|
— |
|
|
|
— |
|
February 1, 2023 - February 28, 2023 |
|
|
26,942 |
|
|
|
|
0.30 |
|
|
|
— |
|
|
|
— |
|
March 1, 2023 - March 31, 2023 |
|
|
— |
|
|
|
|
0.30 |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
26,942 |
|
|
$ |
|
0.30 |
|
|
|
— |
|
|
|
— |
|
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
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Exhibit Number |
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Description |
3.1 |
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3.2 |
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4.1 |
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4.2 |
|
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|
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|
10.1# |
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|
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31.1 |
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31.2 |
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|
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|
|
32.1* |
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32.2* |
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101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document |
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101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
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|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
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|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
# Indicates a management contract or any compensatory plan, contract or arrangement.
* This certification will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent specifically incorporated by reference into such filing.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
GRAPHITE BIO, INC. |
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|
Date: May 11, 2023 |
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By: |
/s/ Josh Lehrer, M.D. |
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|
|
Josh Lehrer, M.D. |
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|
|
President and Chief Executive Officer (Principal Executive Officer) |
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|
|
Date: May 11, 2023 |
|
By: |
/s/ Alethia Young |
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|
|
Alethia Young |
|
|
|
Chief Financial Officer (Principal Financial and Accounting Officer) |
33