SEC Filing | Precision BioSciences

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10-Q

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 September 30, 2023

☐ 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 Capital 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 November 1, 2023, the registrant had 118,935,191 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	8
Item 1.	Financial Statements (unaudited)	8
	Condensed Balance Sheets	8
	Condensed Statements of Operations	9
	Condensed Statements of Changes in Stockholders’ Equity	10
	Condensed Statements of Cash Flows	11
	Notes to Condensed Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	46
PART II.	OTHER INFORMATION	47
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	97
Item 3.	Defaults Upon Senior Securities	97
Item 4.	Mine Safety Disclosures	97
Item 5.	Other Information	97
Item 6.	Exhibits	98
	Signatures	99

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 studies, expected release of interim data, 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, 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;

•

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;

•

our or our collaborators’ or other licensees’ 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;

•

delays or difficulties in our or 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 and other license 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; and

•

our ability to meet the requirements of and maintain listing of our common stock on NASDAQ or other public stock exchanges.

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.

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.

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.

•

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 or other licensees 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.

•

Our failure to meet the continued listing requirements of The Nasdaq Capital Market could result in a delisting of our common stock.

Part I. Financial information

Item 1. Financial Statements.

Precision Biosciences, Inc.

Condensed Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)


	September 30, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	122,231		$	189,576
Accounts receivable		3,510			720
Prepaid expenses		8,075			6,025
Convertible note receivable		11,687			—
Other current assets		349			1,228
Current assets of discontinued operations		—			1,556
Total current assets		145,852			199,105
Property, equipment, and software—net		8,739			11,815
Intangible assets—net		977			731
Right-of-use assets—net		1,076			1,964
Investment in equity securities		1,807			2,576
Equity method investment		—			2,172
Note receivable—net		5,659			7,234
Other assets		234			226
Noncurrent assets of discontinued operations		—			12,346
Total assets	$	164,344		$	238,169
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	531		$	653
Accrued compensation		3,828			5,104
Accrued research and development expenses		1,468			1,827
Deferred revenue		17,445			46,192
Lease liabilities		1,494			1,678
Loan payable—net		22,365			—
Other current liabilities		1,845			745
Current liabilities of discontinued operations		1,641			3,465
Total current liabilities		50,617			59,664
Deferred revenue		73,898			82,872
Lease liabilities		—			1,059
Long term debt—net		—			22,223
Other liabilities		766			201
Contract liabilities		10,000			10,000
Noncurrent liabilities of discontinued operations		—			1,717
Total liabilities		135,281			177,736
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.0001 par value— 10,000,000 shares authorized as of September 30, 2023 and December 31, 2022; no shares issued and outstanding as of September 30, 2023 and December 31, 2022		—			—
Common stock; $0.000005 par value— 200,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 116,490,480 shares issued and 115,680,008 shares outstanding as of September 30, 2023; 111,774,507 shares issued and 110,964,035 shares outstanding as of December 31, 2022		1			1
Additional paid-in capital		503,356			489,696
Accumulated deficit		(473,342	)		(428,312	)
Treasury stock		(952	)		(952	)
Total stockholders’ equity		29,063			60,433
Total liabilities and stockholders’ equity	$	164,344		$	238,169

See notes to condensed financial statements

Precision Biosciences, Inc.

Condensed Statements of Operations

(In thousands, except share and per share amounts)

(Unaudited)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2023			2022			2023			2022
Revenue	$	13,120		$	7,363		$	41,689		$	14,500
Operating expenses
Research and development		15,850			11,758			39,986			33,439
General and administrative		9,633			10,281			30,549			31,260
Total operating expenses		25,483			22,039			70,535			64,699
Operating loss		(12,363	)		(14,676	)		(28,846	)		(50,199	)
Other income (expense):
Loss from equity method investment		(1,350	)		(1,782	)		(4,060	)		(4,183	)
Gain (loss) on changes in fair value		311			—			(458	)		—
Interest expense		(576	)		(405	)		(1,651	)		(625	)
Interest income		1,870			1,172			5,859			1,536
(Loss) gain on disposal of assets		(2	)		—			63			(11	)
Total other income (expense)		253			(1,015	)		(247	)		(3,283	)
Loss from continuing operations		(12,110	)		(15,691	)		(29,093	)		(53,482	)
Income (loss) from discontinued operations (including gain on disposal of $8,446 during the three and nine months ended September 30, 2023)		4,031			(8,255	)		(15,937	)		(29,667	)
Net loss	$	(8,079	)	$	(23,946	)	$	(45,030	)	$	(83,149	)

Net loss per share - basic and diluted	$	(0.07	)	$	(0.22	)	$	(0.40	)	$	(1.04	)
Weighted-average shares of common stock outstanding - basic and diluted		115,174,752			110,849,196			113,539,440			80,127,701

See notes to condensed financial statements

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
Stock option exercises		19,124		—		9			—			—			9
Share based compensation expense		—		—		5,133			—			—			5,133
Issuance of common stock to collaboration partners		116,612		—		160			—			—			161
Restricted stock units vested		3,978		—		—			—			—			—
Net loss		—		—		—			(23,946	)		—			(23,946	)
Balance- September 30, 2022		111,745,219	$	—	$	485,155		$	(399,824	)	$	(952	)	$	84,380

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
Issuance of common stock under employee stock purchase plan		264,533		—		104			—			—			104
Share-based compensation expense		—		—		3,105			—			—			3,105
Proceeds from issuance of common stock, net of issuance cost		344,958		—		(108	)		—			—			(108	)
Net loss		—		—		—			(8,079	)		—			(8,079	)
Balance- September 30, 2023		116,490,480	$	1	$	503,356		$	(473,342	)	$	(952	)	$	29,063

See notes to condensed financial statements

Precision Biosciences, Inc.

Condensed Statements of Cash Flows

(In thousands)

(Unaudited)


	For the Nine Months Ended September 30,
	2023			2022
Cash flows used in operating activities:
Net loss	$	(45,030	)	$	(83,149	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		5,538			5,838
Share-based compensation		11,071			14,661
(Gain) loss on disposal of assets		(63	)		58
Gain on disposal of business		(8,446	)		—
Non-cash interest expense		315			210
Amortization of right-of-use assets		1,161			891
Loss on changes in fair value		458			—
Loss from equity method investment		4,060			4,183
Amortization of discount on note receivable		(313	)		(264	)
Changes in operating assets and liabilities:
Prepaid expenses		(1,047	)		5,142
Accounts receivable		(2,773	)		(227	)
Other assets and other current assets		1,539			(4,689	)
Accounts payable		(495	)		(187	)
Other liabilities and other current liabilities		(3,101	)		(