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dtil-10q_20210930.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, 2021

☐	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 November 3, 2021, the registrant had 60,767,307 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	7
	Condensed Consolidated Balance Sheets	7
	Condensed Consolidated Statements of Operations	8
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	9
	Condensed Consolidated Statements of Cash Flows	10
	Notes to Unaudited Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41
PART II.	OTHER INFORMATION	42
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	93
Item 3.	Defaults Upon Senior Securities	93
Item 4.	Mine Safety Disclosures	93
Item 5.	Other Information	93
Item 6.	Exhibits	94
	Signatures	96

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, expectations regarding the use and effects of ARCUS, including in connection with in vivo genome editing, potential new partnerships or alternative opportunities for our product candidates, capabilities of our manufacturing facility, 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 COVID-19 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 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 and effects of restrictions thereunder;

•

risks associated with raising additional capital;

•

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 dependence on our ARCUS technology;

•

the risk that other genome-editing technologies may provide significant advantages over our ARCUS technology;

•

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

•

public perception about genome editing technology and its applications;

•

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

•

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

•

pending and potential 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’ 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;

•

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” 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 privacy and security regulations and our compliance therewith;

•

the rate and degree of market acceptance of any of our product candidates;

•

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

•

our current and future relationships with 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;

•

our ability to effectively manage the growth of our operations;

•

our ability to attract, retain, and motivate key scientific and management personnel;

•

market and economic conditions;

•

effects of system failures and security breaches;

•

effects of natural and manmade disasters, public health emergencies and other natural catastrophic events;

•

effects of COVID-19 and variants thereof, or any pandemic, epidemic, or outbreak of an infectious disease;

•

insurance expenses and exposure to uninsured liabilities;

•

effects of tax rules; 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.

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. and its subsidiaries on a consolidated basis.

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 never been profitable and may never 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, depends in part on our and our collaborators’ ability to penetrate global markets, where we would be subject to additional regulatory burdens and other risks and uncertainties associated with international operations that could materially adversely affect our business.

•

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.

•

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.

•

The ongoing novel coronavirus disease, COVID-19, has impacted our business and any other pandemic, epidemic or outbreak of an infectious disease may materially and adversely impact our business, including our preclinical studies and clinical trials.

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, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	160,471		$	89,798
Accounts receivable		488			10,000
Prepaid expenses		21,191			5,762
Other current assets		898			4
Total current assets		183,048			105,564
Property, equipment, and software—net		31,536			35,090
Intangible assets—net		2,074			1,373
Right-of-use assets—net		5,513			6,410
Investment in equity securities		812			—
Other assets		4,216			1,721
Total assets	$	227,199		$	150,158
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	486		$	792
Accrued compensation		4,548			5,745
Accrued clinical and research and development expenses		3,008			3,269
Deferred revenue		21,976			30,236
Lease liabilities		2,123			1,933
Loan payable—net		2,454			—
Other current liabilities		1,880			854
Total current liabilities		36,475			42,829
Deferred revenue		71,838			53,926
Lease liabilities		6,966			8,586
Contract liabilities		10,000			—
Other liabilities		477			392
Total liabilities		125,756			105,733
Commitments and contingencies (Note 4)
Stockholders’ equity:
Preferred stock, $0.0001 par value— 10,000,000 shares authorized as of September 30, 2021 and December 31, 2020; no shares issued and outstanding as of September 30, 2021 and December 31, 2020		—			—
Common stock; $0.000005 par value— 200,000,000 shares authorized as of September 30, 2021 and December 31, 2020; 60,892,018 shares issued and 60,081,546 shares outstanding as of September 30, 2021; 53,503,124 shares issued and 52,692,652 shares outstanding as of December 31, 2020		—			—
Additional paid-in capital		396,780			331,450
Accumulated deficit		(294,385	)		(286,073	)
Treasury stock		(952	)		(952	)
Total stockholders’ equity		101,443			44,425
Total liabilities and stockholders’ equity	$	227,199		$	150,158

See notes to condensed consolidated financial statements

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,
	2021			2020			2021			2020
Revenue	$	24,036		$	7,363		$	109,190		$	15,439
Operating expenses
Research and development		25,940			24,873			88,768			74,935
General and administrative		9,638			8,534			29,074			26,852
Total operating expenses		35,578			33,407			117,842			101,787
Operating loss		(11,542	)		(26,044	)		(8,652	)		(86,348	)
Other income (expense):
Change in fair value of equity investment		274			—			274			—
Interest expense		(55	)		—			(79	)		—
Interest income		44			28			145			795
Total other income, net		263			28			340			795
Net loss and net loss attributable to common stockholders	$	(11,279	)	$	(26,016	)	$	(8,312	)	$	(85,553	)

Net loss per share attributable to common stockholders- basic and diluted	$	(0.19	)	$	(0.50	)	$	(0.14	)	$	(1.65	)
Weighted average shares of common stock outstanding- basic and diluted		59,657,677			52,346,715			58,018,550			51,858,032

See notes to condensed consolidated financial statements

Precision Biosciences, Inc.

Condensed Consolidated Statements of Changes in

Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

See notes to condensed consolidated financial statements

	Common Stock				Additional Paid-In		Accumulated			Treasury			Total Stockholder's
	Shares		Amount		Capital		Deficit			Stock			Equity
Balance- January 1, 2020		51,965,708	$	—	$	316,333	$	(177,067	)	$	(952	)	$	138,314
Stock option exercises		244,999		—		212		—			—			212
Issuance of common stock under employee stock purchase plan		42,620		—		239		—			—			239
Share-based compensation expense		—		—		3,105		—			—			3,105
Net loss		—		—				(26,836	)		—			(26,836	)
Balance- March 31, 2020		52,253,327	$	—	$	319,889	$	(203,903	)	$	(952	)	$	115,034
Stock option exercises		725,574		—		148		—			—			148
Share-based compensation expense		—		—		3,118		—			—			3,118
Net loss		—		—		—		(32,701	)		—			(32,701	)
Balance- June 30, 2020		52,978,901	$	—	$	323,155	$	(236,604	)	$	(952	)	$	85,599
Stock option exercises		222,983		-		131		-			-			131
Issuance of common stock under employee stock purchase plan		83,608		-		401		-			-			401
Share-based compensation expense		—		-		3,709		-			-			3,709
Net loss		—		-		-		(26,016	)		-			(26,016	)
Balance - September 30, 2020		53,285,492	$	—	$	327,396	$	(262,620	)	$	(952	)	$	63,824

Balance- January 1, 2021		53,503,124	$	—	$	331,450	$	(286,073	)	$	(952	)	$	44,425
Stock option exercises		676,791		—		1,297		—			—			1,297
Issuance of common stock under employee stock purchase plan		90,796		—		418		—			—			418
Share-based compensation expense		—		—		3,632		—			—			3,632
Issuance of common stock to collaboration partners		3,762,190				27,739		—						27,739
Net loss		—		—		—		(18,689	)		—			(18,689	)
Balance- March 31, 2021		58,032,901	$	—	$	364,536	$	(304,762	)	$	(952	)	$	58,822
Stock option exercises		766,767		—		1,353		—			—			1,353
Share-based compensation expense		—		—		3,896		—			—			3,896
Proceeds from issuance of common stock, net of issuance cost		1,293,754				14,826		—						14,826
Net income		—		—		—		21,656			—			21,656
Balance- June 30, 2021		60,093,422	$	—	$	384,611	$	(283,106	)	$	(952	)	$	100,553
Stock option exercises		414,073		—		3,393		—			—			3,393
Issuance of common stock under employee stock purchase plan		36,091		—		386		—			—			386
Share-based compensation expense		—		—		4,551		—			—			4,551
Proceeds from issuance of common stock, net of issuance cost		348,432		—		3,839		—			—			3,839
Net loss		—		—		—		(11,279	)		—			(11,279	)
Balance- September 30, 2021		60,892,018	$	—	$	396,780	$	(294,385	)	$	(952	)	$	101,443

See notes to condensed consolidated financial statements

Precision Biosciences, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	For the Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities:
Net loss	$	(8,312	)	$	(85,553	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		6,806			6,587
Share-based compensation		12,079			9,932
Loss on disposal of assets		23			—
Non-cash interest expense		42			—
Amortization of right-of-use assets		897			755
Non-cash consideration received from collaboration partners		(17,894	)		—
Change in fair value of equity investments		(274	)		—
Changes in operating assets and liabilities:
Prepaid expenses		(323	)		1,262
Accounts receivable		9,512			(9,151	)
Other assets and other current assets		47			2,185
Accounts payable		240			(1,337	)
Other liabilities and other current liabilities		(976	)		2,023
Deferred revenue		2,391			627
Lease liabilities and right-of-use assets		(1,430	)		(1,264	)
Contract liabilities		10,000			—
Net cash provided by (used in) operating activities		12,828			(73,934	)
Cash flows from investing activities:
Purchases of property, equipment and software		(3,548	)		(3,935	)
Purchases of intangible assets