10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

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: 001-38841

 

Precision BioSciences, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

20-4206017

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

302 East Pettigrew St., Suite A-100

Durham, North Carolina

27701

(Address of principal executive offices)

(Zip Code)

 

(919) 314-5512

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.000005 per share

DTIL

The Nasdaq Global Select Market

 

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. Yes No

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). Yes No

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.

 

Large accelerated filer

 

Accelerated filer

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

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 No

As of August 1, 2023, the registrant had 115,070,517 shares of common stock, $0.000005 par value per share, outstanding.

 

 


 

Table of Contents

 

Page

 

Forward-Looking Statements

3

 

Risk Factor Summary

6

PART I.

FINANCIAL INFORMATION

7

Item 1.

Financial Statements (unaudited)

7

Condensed Balance Sheets

7

Condensed Statements of Operations

8

Condensed Statements of Changes in Stockholders’ Equity

9

Condensed Statements of Cash Flows

10

Notes to Condensed Financial Statements

11

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

37

Item 4.

Controls and Procedures

37

PART II.

OTHER INFORMATION

38

Item 1.

Legal Proceedings

38

Item 1A.

Risk Factors

38

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

90

Item 3.

Defaults Upon Senior Securities

90

Item 4.

Mine Safety Disclosures

90

Item 5.

Other Information

90

Item 6.

Exhibits

90

 

Signatures

92

 

 

 

 

 

 

2


 

 

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of present and historical facts contained in this Quarterly Report on Form 10-Q, including, without limitation, statements regarding our future results of operations and financial position, business strategy and approach, including related results, prospective products, use and development of Licensed Products (as defined herein), planned preclinical studies and clinical trials, or discontinuance thereof, the status and results of our preclinical and clinical studies, including, the potential of our product candidates, if approved, to become best-in-class or first-in-class, expected release of interim data, expectations regarding our allogeneic chimeric antigen receptor T cell immunotherapy product candidates, expectations regarding the use and effects of ARCUS, including in connection with in vivo genome editing, collaborations and potential new partnerships or alternative opportunities for our product candidates, capabilities of our manufacturing facility, potential new application filings and regulatory approvals, research and development costs, timing, expected results and likelihood of success, plans and objectives of management for future operations, as well as the impact of the COVID-19 pandemic and variants thereof may be forward-looking statements. Without limiting the foregoing, in some cases, you can identify forward-looking statements by terms such as “aim,” “may,” “will,” “should,” “expect,” “exploring,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “seeks,” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. No forward-looking statement is a guarantee of future results, performance, or achievements, and one should avoid placing undue reliance on such statements.

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to us. Such beliefs and assumptions may or may not prove to be correct. Additionally, such forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified in Part II. Item 1A. “Risk Factors” and Part I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These risks and uncertainties include, but are not limited to:

our ability to become profitable;
our ability to procure sufficient funding to advance our programs;
risks associated with raising additional capital and requirements under our current debt instruments and effects of restrictions thereunder;
our operating expenses and our ability to predict what those expenses will be;
our limited operating history;
the success of our programs and product candidates in which we expend our resources;
our limited ability or inability to assess the safety and efficacy of our product candidates;
the risk that other genome-editing technologies may provide significant advantages over our ARCUS technology;
our dependence on our ARCUS technology;
the initiation, cost, timing, progress, achievement of milestones and results of research and development activities and preclinical and clinical studies;
public perception about genome editing technology and its applications;
competition in the genome editing, biopharmaceutical, and biotechnology fields;
our or our collaborators’ ability to identify, develop and commercialize product candidates;
pending and potential product liability lawsuits and penalties against us or our collaborators related to our technology and our product candidates;
the U.S. and foreign regulatory landscape applicable to our and our collaborators’ development of product candidates;

3


 

our or our collaborators’ ability to advance product candidates into, and successfully design, implement and complete, clinical or field trials;
potential manufacturing problems associated with the development or commercialization of any of our product candidates;
our ability to obtain an adequate supply of T cells from qualified donors;
our ability to achieve our anticipated operating efficiencies at our manufacturing facility;
delays or difficulties in our and our collaborators’ ability to enroll patients;
changes in interim “top-line” and initial data that we announce or publish;
if our product candidates do not work as intended or cause undesirable side effects;
risks associated with applicable healthcare, data protection, privacy and security regulations and our compliance therewith;
our ability to obtain orphan drug designation or fast track designation for our product candidates or to realize the expected benefits of these designations;
our or our collaborators’ ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions, limitations and/or warnings in the label of an approved product candidate;
the rate and degree of market acceptance of any of our product candidates;
our ability to effectively manage the growth of our operations;
our ability to attract, retain, and motivate executives and personnel;
effects of system failures and security breaches;
insurance expenses and exposure to uninsured liabilities;
effects of tax rules;
effects of any pandemic, epidemic, or outbreak of an infectious disease;
the success of our existing collaboration agreements and our ability to enter into new collaboration arrangements;
our current and future relationships with and reliance on third parties including suppliers and manufacturers;
our ability to obtain and maintain intellectual property protection for our technology and any of our product candidates;
potential litigation relating to infringement or misappropriation of intellectual property rights;
effects of natural and manmade disasters, public health emergencies and other natural catastrophic events;
effects of sustained inflation, supply chain disruptions and major central bank policy actions;
market and economic conditions; and
risks related to ownership of our common stock, including fluctuations in our stock price.

Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. All forward-looking statements contained herein speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

4


 

As used in this Quarterly Report on Form 10-Q, unless otherwise stated or the context requires otherwise, references to “Precision,” the “Company,” “we,” “us,” and “our,” refer to Precision BioSciences, Inc.

 

 

5


 

RISK FACTOR SUMMARY

Our business is subject to numerous risks and uncertainties, including those described in Part II. Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our common stock. Some of the principal risks and uncertainties include the following.

We have incurred significant operating losses since our inception and expect to continue to incur losses for the foreseeable future. We have not been profitable and may not achieve or maintain profitability.
We will need substantial additional funding, and if we are unable to raise a sufficient amount of capital when needed on acceptable terms, or at all, we may be forced to delay, reduce or eliminate some or all of our research programs, product development activities and commercialization efforts.
We have a limited operating history, which makes it difficult to evaluate our current business and future prospects and may increase the risk of your investment.
ARCUS is a novel technology, making it difficult to predict the time, cost and potential success of product candidate development. We have not yet been able to assess the safety and efficacy of most of our product candidates in humans and have only limited safety and efficacy information in humans to date regarding three of our product candidates.
We are heavily dependent on the successful development and translation of ARCUS, and due to the early stages of our product development operations, we cannot give any assurance that any product candidates will be successfully developed and commercialized.
Adverse public perception of genome editing may negatively impact the developmental progress or commercial success of products that we develop alone or with collaborators.
We face significant competition in industries experiencing rapid technological change, and there is a possibility that our competitors may achieve regulatory approval before us or develop product candidates or treatments that are safer or more effective than ours, which may harm our financial condition and our ability to successfully market or commercialize any of our product candidates.
Our future profitability, if any, will depend in part on our ability and the ability of our collaborators to commercialize any products that we or our collaborators may develop in markets throughout the world. Commercialization of products in various markets could subject us to risks and uncertainties.
Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization of any products that we develop alone or with collaborators.
The regulatory landscape that will apply to development of therapeutic product candidates by us or our collaborators is rigorous, complex, uncertain and subject to change, which could result in delays or termination of development of such product candidates or unexpected costs in obtaining regulatory approvals.
Clinical trials are difficult to design and implement, expensive, time-consuming and involve an uncertain outcome, and the inability to successfully and timely conduct clinical trials and obtain regulatory approval for our product candidates would substantially harm our business.
Any product candidates that we or our collaborators may develop will be novel and may be complex and difficult to manufacture, and if we experience manufacturing problems, it could result in delays in development and commercialization of such product candidates or otherwise harm our business.
Even if we obtain regulatory approval for any products that we develop alone or with collaborators, such products will remain subject to ongoing regulatory requirements, which may result in significant additional expense.
Even if any product we develop alone or with collaborators receives marketing approval, such product may fail to achieve the degree of market acceptance by physicians, patients, healthcare payors and others in the medical community necessary for commercial success.
Our future success depends on our key executives, as well as attracting, retaining and motivating qualified personnel.

6


 

Part I. Financial information

 

Item 1. Financial Statements.

Precision Biosciences, Inc.

Condensed Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

June 30, 2023

 

 

December 31, 2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

137,794

 

 

$

189,576

 

Accounts receivable

 

 

652

 

 

 

720

 

Prepaid expenses

 

 

8,915

 

 

 

7,552

 

Other current assets

 

 

503

 

 

 

1,257

 

Total current assets

 

 

147,864

 

 

 

199,105

 

Property, equipment, and software—net

 

 

18,249

 

 

 

20,190

 

Intangible assets—net

 

 

1,552

 

 

 

1,348

 

Right-of-use assets—net

 

 

4,721

 

 

 

2,974

 

Investment in equity securities

 

 

1,807

 

 

 

2,576

 

Equity method investment

 

 

 

 

 

2,172

 

Note receivable—net

 

 

6,885

 

 

 

7,234

 

Other assets

 

 

619

 

 

 

2,570

 

Total assets

 

$

181,697

 

 

$

238,169

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

781

 

 

$

1,225

 

Accrued compensation

 

 

3,500

 

 

 

6,259

 

Accrued clinical and research and development expenses

 

 

2,280

 

 

 

3,206

 

Deferred revenue

 

 

23,811

 

 

 

46,192

 

Lease liabilities

 

 

2,499

 

 

 

2,037

 

Loan payable—net

 

 

22,317

 

 

 

 

Other current liabilities

 

 

1,211

 

 

 

745

 

Total current liabilities

 

 

56,399

 

 

 

59,664

 

Deferred revenue

 

 

78,084

 

 

 

82,872

 

Lease liabilities

 

 

3,173

 

 

 

2,776

 

Long term debt—net

 

 

 

 

 

22,223

 

Contract liabilities

 

 

10,000

 

 

 

10,000

 

Other noncurrent liabilities

 

 

 

 

 

201

 

Total liabilities

 

 

147,656

 

 

 

177,736

 

Commitments and contingencies (Note 4)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value— 10,000,000 shares authorized as of June 30, 2023 and December 31, 2022; no shares issued and outstanding as of June 30, 2023 and December 31, 2022

 

 

 

 

 

 

Common stock; $0.000005 par value— 200,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 115,880,989 shares issued and 115,070,517 shares outstanding as of June 30, 2023; 111,774,507 shares issued and 110,964,035 shares outstanding as of December 31, 2022

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

500,255

 

 

 

489,696

 

Accumulated deficit

 

 

(465,263

)

 

 

(428,312

)

Treasury stock

 

 

(952

)

 

 

(952

)

Total stockholders’ equity

 

 

34,041

 

 

 

60,433

 

Total liabilities and stockholders’ equity

 

$

181,697

 

 

$

238,169

 

 

See notes to condensed financial statements

7


 

Precision Biosciences, Inc.

Condensed Statements of Operations

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue

 

$

19,789

 

 

$

3,820

 

 

$

28,569

 

 

$

7,137

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

21,946

 

 

 

22,936

 

 

 

44,104

 

 

 

42,908

 

General and administrative

 

 

9,830

 

 

 

10,438

 

 

 

20,916

 

 

 

21,118

 

Total operating expenses

 

 

31,776

 

 

 

33,374

 

 

 

65,020

 

 

 

64,026

 

Operating loss

 

 

(11,987

)

 

 

(29,554

)

 

 

(36,451

)

 

 

(56,889

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Loss from equity method investment

 

 

(1,369

)

 

 

(1,448

)

 

 

(2,710

)

 

 

(2,400

)

Change in fair value of equity investment

 

 

 

 

 

 

 

 

(769

)

 

 

 

Interest expense

 

 

(553

)

 

 

(178

)

 

 

(1,075

)

 

 

(220

)

Interest income

 

 

1,946

 

 

 

192

 

 

 

3,989

 

 

 

364

 

Gain (loss) on disposal of assets

 

 

72

 

 

 

(47

)

 

 

65

 

 

 

(58

)

Total other income (expense)

 

 

96

 

 

 

(1,481

)

 

 

(500

)

 

 

(2,314

)

Net loss

 

$

(11,891

)

 

$

(31,035

)

 

$

(36,951

)

 

$

(59,203

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share - basic and diluted

 

$

(0.10

)

 

$

(0.46

)

 

$

(0.33

)

 

$

(0.92

)

Weighted-average shares of common stock outstanding - basic and diluted

 

 

114,099,594

 

 

 

67,954,688

 

 

 

112,708,231

 

 

 

64,512,356

 

 

See notes to condensed financial statements

8


 

Precision Biosciences, Inc.

Condensed Statements of Changes in

Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Treasury

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Stock

 

 

Equity

 

Balance- December 31, 2021

 

 

61,712,577

 

 

$

 

 

$

408,795

 

 

$

(316,675

)

 

$

(952

)

 

$

91,168

 

Stock option exercises

 

 

233,001

 

 

 

 

 

 

340

 

 

 

 

 

 

 

 

 

340

 

Issuance of common stock under employee stock purchase plan

 

 

78,060

 

 

 

 

 

 

282

 

 

 

 

 

 

 

 

 

282

 

Share-based compensation expense

 

 

 

 

 

 

 

 

4,390

 

 

 

 

 

 

 

 

 

4,390

 

Proceeds from issuance of common stock, net of issuance cost

 

 

561,405

 

 

 

 

 

 

1,647

 

 

 

 

 

 

 

 

 

1,647

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(28,168

)

 

 

 

 

 

(28,168

)

Balance- March 31, 2022

 

 

62,585,043

 

 

$

 

 

$

415,454

 

 

$

(344,843

)

 

$

(952

)

 

$

69,659

 

Stock option exercises

 

 

78,234

 

 

 

 

 

 

38

 

 

 

 

 

 

 

 

 

38

 

Share based compensation expense

 

 

 

 

 

 

 

 

5,138

 

 

 

 

 

 

 

 

 

5,138

 

Proceeds from issuance of common stock, net of issuance cost

 

 

36,274,651

 

 

 

 

 

 

47,670

 

 

 

 

 

 

 

 

 

47,670

 

Issuance of common stock to collaboration partners

 

 

12,407,440

 

 

 

 

 

 

11,553

 

 

 

 

 

 

 

 

 

11,553

 

Restricted stock units vested

 

 

260,137

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(31,035

)

 

 

 

 

 

(31,035

)

Balance- June 30, 2022

 

 

111,605,505

 

 

$

 

 

$

479,853

 

 

$

(375,878

)

 

$

(952

)

 

$

103,023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance- December 31, 2022

 

 

111,774,507

 

 

$

1

 

 

$

489,696

 

 

$

(428,312

)

 

$

(952

)

 

 

60,433

 

Stock option exercises

 

 

51,492

 

 

 

 

 

 

30

 

 

 

 

 

 

 

 

 

30

 

Issuance of common stock under employee stock purchase plan

 

 

280,196

 

 

 

 

 

 

266

 

 

 

 

 

 

 

 

 

266

 

Share-based compensation expense

 

 

 

 

 

 

 

 

4,092

 

 

 

 

 

 

 

 

 

4,092

 

Restricted stock units vested

 

 

503,214

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance cost

 

 

540,484

 

 

 

 

 

 

416

 

 

 

 

 

 

 

 

 

416

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(25,060

)

 

 

 

 

 

(25,060

)

Balance- March 31, 2023

 

 

113,149,893

 

 

$

1

 

 

$

494,500

 

 

$

(453,372

)

 

$

(952

)

 

$

40,177

 

Share-based compensation expense

 

 

 

 

 

 

 

 

3,874

 

 

 

 

 

 

 

 

 

3,874

 

Proceeds from issuance of common stock, net of issuance cost

 

 

2,325,730

 

 

 

 

 

 

1,881

 

 

 

 

 

 

 

 

 

1,881

 

Restricted stock units vested

 

 

405,366

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(11,891

)

 

 

 

 

 

(11,891

)

Balance- June 30, 2023

 

 

115,880,989

 

 

$

1

 

 

$

500,255

 

 

$

(465,263

)

 

$

(952

)

 

$

34,041

 

See notes to condensed financial statements

 

9


 

Precision Biosciences, Inc.

Condensed Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

For the Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

Cash flows used in operating activities:

 

 

 

 

 

 

Net loss

 

$

(36,951

)

 

$

(59,203

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

3,918

 

 

 

3,897

 

Share-based compensation

 

 

7,966

 

 

 

9,528

 

(Gain) loss on disposal of assets

 

 

(65

)

 

 

58

 

Non-cash interest expense

 

 

263

 

 

 

125

 

Amortization of right-of-use assets

 

 

745

 

 

 

585

 

Change in fair value of equity investment

 

 

769

 

 

 

 

Loss from equity method investment

 

 

2,710

 

 

 

2,400

 

Amortization of discount on note receivable

 

 

(189

)

 

 

(175

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses

 

 

(1,363

)

 

 

4,802

 

Accounts receivable

 

 

68

 

 

 

(50,019

)

Other assets and other current assets

 

 

954

 

 

 

(4,779

)

Accounts payable

 

 

(444

)

 

 

(575

)

Other liabilities and other current liabilities

 

 

(3,490

)

 

 

(2,711

)

Deferred revenue

 

 

(27,169

)

 

 

43,856

 

Lease liabilities and right-of-use assets

 

 

(320

)

 

 

(