dtil-10q_20190930.htm

 

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, 2019

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 November 6, 2019, the registrant had 50,787,317 shares of common stock, $0.000005 par value per share, outstanding.

 

 

 


Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

5

Item 1.

Financial Statements

5

 

Condensed Consolidated Balance Sheets

5

 

Condensed Consolidated Statements of Operations

6

 

Condensed Consolidated Statements of Changes In Stockholders’ Equity (Deficit)

7

 

Condensed Consolidated Statements of Cash Flows

9

 

Notes to Unaudited Condensed Consolidated Financial Statements

10

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 and Use of Proceeds

90

Item 3.

Defaults Upon Senior Securities

90

Item 4.

Mine Safety Disclosures

90

Item 5.

Other Information

90

Item 6.

Exhibits

91

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, planned preclinical or greenhouse studies and clinical or field trials, the status and results of our preclinical and clinical studies, expected release of interim data, expectations regarding our allogeneic chimeric antigen receptor T cell immunotherapy product candidates, capabilities of our manufacturing facility, regulatory approvals, research and development costs, expected results and likelihood of success, as well as plans and objectives of management for future operations, may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “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 I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II. Item 1A “Risk Factors.” These risks and uncertainties include, but are not limited to:

 

our ability to become profitable;

our ability to procure sufficient funding and requirements under our current debt instruments;

our limited operating history;

our ability to identify, develop and commercialize our product candidates;

our dependence on our ARCUS technology;

the initiation, cost, timing, progress and results of research and development activities, preclinical or greenhouse studies and clinical or field trials;

our or our collaborators’ ability to identify, develop and commercialize product candidates;

our or our collaborators’ ability to advance product candidates into, and successfully complete, clinical or field trials;

our or our collaborators’ ability to obtain and maintain regulatory approval of future product candidates, and any related restrictions, limitations and/or warnings in the label of an approved product candidate;

the regulatory landscape that will apply to our and our collaborators’ development of product candidates;

our ability to achieve our anticipated operating efficiencies as we commence manufacturing operations at our new facility;

our ability to obtain and maintain intellectual property protection for our technology and any of our product candidates; the potential for off-target editing or other adverse events, undesirable side effects or unexpected characteristics associated with any of our product candidates;

the success of our existing collaboration agreements; our ability to enter into new collaboration arrangements;

3


public perception about genome editing technology and its applications;

competition in the genome editing, biopharmaceutical, biotechnology and agricultural biotechnology fields;

potential manufacturing problems associated with any of our product candidates;

pending and potential liability lawsuits and penalties related to our technology and our product candidates; and

our current and future relationships with third parties.

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. 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


Part I. Financial information

 

Item 1.  Financial Statements.

Precision Biosciences, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

September 30, 2019

 

 

December 31, 2018

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

206,265

 

 

$

103,193

 

Accounts receivable

 

 

250

 

 

 

523

 

Prepaid expenses

 

 

10,738

 

 

 

8,913

 

Other current assets

 

 

2,248

 

 

 

3,046

 

Total current assets

 

 

219,501

 

 

 

115,675

 

Property, equipment, and software—net

 

 

38,959

 

 

 

21,147

 

Intangible assets—net

 

 

1,446

 

 

 

1,466

 

Other assets

 

 

392

 

 

 

312

 

Total assets

 

$

260,298

 

 

$

138,600

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

4,465

 

 

$

2,218

 

Accrued compensation

 

 

2,961

 

 

 

965

 

Accrued clinical and research and development expenses

 

 

3,556

 

 

 

1,569

 

Accrued other expenses and other current liabilities

 

 

1,977

 

 

 

887

 

Deferred revenue

 

 

10,767

 

 

 

8,436

 

Total current liabilities

 

 

23,726

 

 

 

14,075

 

Deferred revenue—noncurrent

 

 

77,887

 

 

 

82,807

 

Deferred rent—noncurrent

 

 

2,897

 

 

 

1,758

 

Total liabilities

 

 

104,510

 

 

 

98,640

 

Commitments and contingencies (Note 4)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Series A convertible preferred stock; $0.0001 par value—25,650,000 shares

   authorized, issued and outstanding as of December 31, 2018

 

 

 

 

 

3

 

Series B convertible preferred stock; $0.0001 par value— 21,956,100 shares

   authorized; 21,956,095 shares issued and outstanding as of December 31, 2018

 

 

 

 

 

2

 

Preferred stock, $0.0001 par value— 10,000,000 shares authorized

   as of September 30, 2019 and no shares authorized as of

   December 31, 2018; no shares issued and outstanding as of September 30, 2019

 

 

 

 

 

 

Common stock; $0.000005 par value— 200,000,000 shares authorized,

   51,470,176 shares issued and 50,659,704 shares outstanding as

   of September 30, 2019; 130,000,000 shares authorized, 16,717,117 shares

   issued and 15,906,645 shares outstanding as of December 31, 2018

 

 

 

 

 

 

Additional paid-in capital

 

 

312,891

 

 

 

126,094

 

Accumulated deficit

 

 

(156,151

)

 

 

(85,187

)

Treasury stock

 

 

(952

)

 

 

(952

)

Total stockholders’ equity

 

 

155,788

 

 

 

39,960

 

Total liabilities and stockholders’ equity

 

$

260,298

 

 

$

138,600

 

 

See notes to condensed consolidated financial statements

5


Precision Biosciences, Inc.

Condensed Consolidated 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,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenue

 

$

4,865

 

 

$

2,541

 

 

$

15,716

 

 

$

5,943

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

19,791

 

 

 

9,737

 

 

 

62,512

 

 

 

28,723

 

General and administrative

 

 

7,052

 

 

 

3,251

 

 

 

18,547

 

 

 

9,027

 

Total operating expenses

 

 

26,843

 

 

 

12,988

 

 

 

81,059

 

 

 

37,750

 

Loss from operations

 

 

(21,978

)

 

 

(10,447

)

 

 

(65,343

)

 

 

(31,807

)

Other income (expense), net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of convertible note payable

 

 

 

 

 

 

 

 

(9,758

)

 

 

 

Interest expense

 

 

 

 

 

 

 

 

(182

)

 

 

 

Interest income

 

 

1,236

 

 

 

691

 

 

 

3,322

 

 

 

1,213

 

Total other income (expense), net

 

 

1,236

 

 

 

691

 

 

 

(6,618

)

 

 

1,213

 

Net loss and net loss attributable to common stockholders

 

$

(20,742

)

 

$

(9,756

)

 

$

(71,961

)

 

$

(30,594

)

Net loss per share attributable to common stockholders-

   basic and diluted

 

$

(0.41

)

 

$

(0.62

)

 

$

(1.85

)

 

$

(1.94

)

Weighted average shares of common stock outstanding-

   basic and diluted

 

 

50,623,665

 

 

 

15,816,748

 

 

 

39,002,304

 

 

 

15,751,091

 

 

See notes to condensed consolidated financial statements

 

 

6


Precision Biosciences, Inc.

Condensed Consolidated Statements of Changes in

Stockholders’ Equity (Deficit)

(In thousands, except share amounts)

(Unaudited)

 

 

 

 

 

Series A Convertible

Preferred Stock

 

 

Series B Convertible

Preferred Stock

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Treasury

 

 

Total

Stockholder's

Equity

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Stock

 

 

(Deficit)

 

Balance- January 1, 2019

 

 

25,650,000

 

 

$

3

 

 

 

21,956,095

 

 

$

2

 

 

 

16,717,117

 

 

 

 

$

 

 

$

126,094

 

 

$

(85,187

)

 

$

(952

)

 

$

39,960

 

Adjustment to beginning accumulated

   deficit from adoption of ASU

   2014-09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

997

 

 

 

 

 

 

997

 

Stock option exercises

 

 

 

 

 

 

 

 

 

 

 

 

 

 

145,975

 

 

 

 

 

 

 

 

107

 

 

 

 

 

 

 

 

 

107

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,549

 

 

 

 

 

 

 

 

 

 

 

1,549

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(31,783

)

 

 

 

 

 

(31,783

)

Balance- March 31, 2019

 

 

25,650,000

 

 

$

3

 

 

 

21,956,095

 

 

$

2

 

 

 

16,863,092

 

 

 

 

$

 

 

$

127,750

 

 

$

(115,973

)

 

$

(952

)

 

$

10,830

 

Conversion of convertible preferred

   stock into common stock upon

   initial public offering

 

 

(25,650,000

)

 

 

(3

)

 

 

(21,956,095

)

 

 

(2

)

 

 

22,301,190

 

 

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon

   conversion of convertible notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,921,461

 

 

 

 

 

 

 

 

49,490

 

 

 

 

 

 

 

 

 

49,490

 

Issuance of common stock in initial

   public offering, net of discounts

   and issuance costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,085,000

 

 

 

 

 

 

 

 

130,543

 

 

 

 

 

 

 

 

 

130,543

 

Stock option exercises

 

 

 

 

 

 

 

 

 

 

 

 

 

 

230,272

 

 

 

 

 

 

 

 

272

 

 

 

 

 

 

 

 

 

 

 

272

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,279

 

 

 

 

 

 

 

 

 

2,279

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(19,436

)

 

 

 

 

 

(19,436

)

Balance- June 30, 2019

 

 

 

 

$

 

 

 

 

 

$

 

 

 

51,401,015

 

 

 

 

$

 

 

$

310,339

 

 

$

(135,409

)

 

$

(952

)

 

$

173,978

 

Stock option exercises

 

 

 

 

 

 

 

 

 

 

 

 

 

 

69,161

 

 

 

 

 

 

 

 

61

 

 

 

 

 

 

 

 

 

 

 

61

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,491

 

 

 

 

 

 

 

 

 

2,491

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,742

)

 

 

 

 

 

(20,742

)

Balance- September 30, 2019

 

 

 

 

$

 

 

 

 

 

$

 

 

 

51,470,176

 

 

 

 

$

 

 

$

312,891

 

 

$

(156,151

)

 

$

(952

)

 

$

155,788

 

 

7


 

Precision Biosciences, Inc.

Condensed Consolidated Statements of Changes in

Stockholders’ Equity (Deficit)

(In thousands, except share amounts)

(Unaudited)

 

 

 

Series A Convertible

Preferred Stock

 

 

Series B Convertible

Preferred Stock

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Treasury

 

 

Total

Stockholder's

Equity

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Stock

 

 

(Deficit)

 

Balance- January 1, 2018

 

 

25,650,000

 

 

$

3

 

 

 

 

 

$

 

 

 

16,496,801

 

 

$

 

 

$

13,691

 

 

$

(39,111

)

 

$

(952

)

 

$

(26,369

)

Stock option exercises

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,802

 

 

 

 

 

 

20

 

 

 

 

 

 

 

 

 

20

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

189

 

 

 

(38

)

 

 

 

 

 

151

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,012

)

 

 

 

 

 

(9,012

)

Balance- March 31, 2018

 

 

25,650,000

 

 

$

3

 

 

 

 

 

$

 

 

 

16,526,603

 

 

$

 

 

$

13,900

 

 

$

(48,161

)

 

$

(952

)

 

$

(35,210

)

Issuance of Series B convertible

   preferred stock, net of issuance

   costs

 

 

 

 

 

 

 

 

17,579,843

 

 

 

2

 

 

 

 

 

 

 

 

 

87,824

 

 

 

 

 

 

 

 

 

87,826

 

Stock option exercises

 

 

 

 

 

 

 

 

 

 

 

 

 

 

65,449

 

 

 

 

 

 

62

 

 

 

 

 

 

 

 

 

62

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

254

 

 

 

 

 

 

 

 

 

254

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,826

)

 

 

 

 

 

(11,826

)

Balance- June 30, 2018

 

 

25,650,000

 

 

$

3

 

 

 

17,579,843

 

 

$

2

 

 

 

16,592,052

 

 

$

 

 

$

102,040

 

 

$

(59,987

)

 

$

(952

)

 

$

41,106

 

Issuance of Series B convertible

   preferred stock, net of issuance costs

 

 

 

 

 

 

 

 

4,376,252

 

 

 

 

 

 

 

 

 

 

 

 

21,917

 

 

 

 

 

 

 

 

$

21,917

 

Stock option exercises

 

 

 

 

 

 

 

 

 

 

 

 

 

 

44,763

 

 

 

 

 

 

27

 

 

 

 

 

 

 

 

 

27

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

292

 

 

 

 

 

 

 

 

 

292

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,756

)

 

 

 

 

 

(9,756

)

Balance- September 30, 2018

 

 

25,650,000

 

 

$

3

 

 

 

21,956,095

 

 

$

2

 

 

 

16,636,815

 

 

$

 

 

$

124,276

 

 

$

(69,743

)

 

$

(952

)

 

$

53,586

 

 

See notes to condensed consolidated financial statements

 

 

 

 

8


 

Precision Biosciences, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

For the Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(71,961

)

 

$

(30,594

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,508

 

 

 

1,555

 

Share-based compensation

 

 

6,319

 

 

 

697

 

Loss on disposal of assets

 

 

22

 

 

 

8

 

Non-cash interest expense

 

 

182

 

 

 

 

Change in fair value of convertible notes payable

 

 

9,758

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

(1,826

)

 

 

(8,634

)

Accounts receivable

 

 

273

 

 

 

(6,523

)

Other assets and other current assets

 

 

(601

)

 

 

(349

)

Accounts payable

 

 

597

 

 

 

953

 

Accrued other expenses and other current liabilities

 

 

4,862

 

 

 

2,780

 

Deferred revenue

 

 

(1,592

)

 

 

1,296

 

Net cash used in operating activities

 

 

(50,459

)

 

 

(38,811

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisition of license rights

 

 

 

 

 

(1,400

)

Purchases of property, equipment and software

 

 

(19,137

)

 

 

(4,407

)

Proceeds from disposal of assets

 

 

 

 

 

15

 

Net cash used in investing activities

 

 

(19,137

)

 

 

(5,792

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from stock option exercises

 

 

440

 

 

 

109

 

Issuance of Series B convertible preferred stock, net of issuance costs

 

 

 

 

 

109,741

 

Deferred offering costs

 

 

(2,507

)

 

 

(481

)

Issuance of convertible notes

 

 

39,550

 

 

 

 

Proceeds from IPO, net of underwriting discounts and commissions

 

 

135,185

 

 

 

 

Net cash provided by financing activities

 

 

172,668

 

 

 

109,369

 

Net increase in cash and cash equivalents

 

 

103,072

 

 

 

64,766

 

Cash and cash equivalents—beginning of period

 

 

103,193

 

 

 

62,802

 

Cash and cash equivalents —end of period

 

$

206,265

 

 

$

127,568