UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2022

OR

For the transition period from to

Commission File Number: 001-38841

Precision BioSciences, Inc.

(Exact Name of Registrant as Specified in its Charter)

(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:

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.

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 May 3, 2022, the registrant had 62,176,408 shares of common stock, $0.000005 par value per share, outstanding.

Table of Contents

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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 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, 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:

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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-Qs, 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.

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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.

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Part I. Financial information

Item 1.  Financial Statements.

Precision Biosciences, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

See notes to condensed consolidated financial statements

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Precision Biosciences, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(Unaudited)

See notes to condensed consolidated financial statements

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Precision Biosciences, Inc.

Condensed Consolidated Statements of Changes in

Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

See notes to condensed consolidated financial statements

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Precision Biosciences, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

See notes to condensed consolidated financial statements

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Precision BioSciences, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (Unaudited)

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many important factors, including those set forth in Part II. Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in, or implied by, these forward-looking statements. As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to “we,” “us,” “our,” the “Company” and “Precision” refer to Precision BioSciences, Inc. and its subsidiaries on a consolidated basis.

Overview

We are a clinical stage gene editing company dedicated to improving life by developing ex vivo allogeneic chimeric antigen receptor (“CAR”) T immunotherapies and in vivo therapies for genetic and infectious diseases with the application of our wholly owned proprietary ARCUS genome editing platform. The foundation of ARCUS is a natural homing endonuclease which allows us to replicate precise gene editing as it evolved in nature. ARCUS is designed to be precise in its specificity and versatile in its design for gene knock out as well as complex edits with gene insertion and gene repair. ARCUS is also unique in its relatively small size which potentially allows delivery to a wider range of cells and tissues using viral and non-viral gene delivery methods.

We believe our CAR T cells are the only allogeneic CAR T cells in human clinical trials made with a single gene editing step designed to specifically avoid the potentially deleterious effects of making multiple edits to T cells. We are simultaneously conducting a Phase 1/2a clinical trial evaluating PBCAR0191 as a potential first-in-class and a Phase 1 clinical trial evaluating PBCAR19B as, if approved, a potential best-in-class CD19-targeting CAR T cell therapy in adult patients with relapsed or refractory (“R/R”), B-cell malignancies. We plan to provide an update on our allogeneic CAR T pipeline in June 2022, including our PBCAR0191, PBCAR19B and PBCAR269A programs.

Made from donor-derived T cells modified using our ARCUS genome editing technology, PBCAR0191 recognizes the well characterized tumor cell surface protein CD19, an important and validated target in several B-cell cancers. PBCAR0191 is designed to avoid graft-versus-host disease, a significant complication associated with donor-derived, cell-based therapies. In December 2021, we announced a Phase 1 data update, in which a 100% overall response rate (6/6) and a 66% complete response rate (4/6) was observed among patients that previously received an autologous CAR T therapy and progressed. We prioritized enrollment of this high unmet need patient population as a potential path for PBCAR0191. We plan to provide a program update on PBCAR0191 in June 2022.

PBCAR19B is a novel immune-evading stealth cell candidate employing a single-gene edit in an effort to knock-down beta-2 microglobulin designed for evading T cell rejection, while also inserting a human leukocyte antigen E transgene to further evade rejection from natural killer cells. We initiated a clinical trial of PBCAR19B in patients with R/R non-Hodgkin’s lymphoma (“NHL”) in mid-2021 and plan to commence dosing in the third quarter of 2022 at the next dose level with clinical trial material from an optimized manufacturing process. We plan to provide a program update on PBCAR19B in June 2022.

PBCAR269A is an investigational allogeneic CAR T cell candidate targeting B-cell maturation antigen (“BCMA”) for R/R multiple myeloma. We are evaluating PBCAR269A in a Phase 1/2a study in combination with nirogacestat, a gamma secretase inhibitor developed by SpringWorks Therapeutics. The first patient was dosed in the combination arm in June 2021 and we expect to provide a program update on PBCAR269A in June 2022.

In November 2021, we announced that we will not continue development for PBCAR20A based on data observed to date in a heterogeneous R/R NHL population previously treated with anti-CD20 monoclonal antibodies, as treatment with PBCAR20A did not result in compelling response rates in a Phase 1/2a clinical study. While this study provided important information regarding allogeneic CAR T dosing and lymphodepletion regimens, we intend to focus our clinical efforts in R/R lymphoma on CD19 targeting programs, as we believe CD19 is a more robust antigenic target in R/R heterogeneous NHL populations. All subjects enrolled in the study and evaluated for treatment with PBCAR20A had acceptable tolerability with no GvHD, no Grade ≥ 3 cytokine release syndrome, and no Grade ≥ 3 neurotoxicity.

We expect in vivo therapies for genetic and infectious diseases to be a significant focus of our operations long-term because the differentiated attributes of ARCUS are particularly advantageous for this type of application. In vivo gene correction involves the delivery of ARCUS nucleases directly into a patient’s cells to treat disease at the level of the underlying DNA. In vivo genome editing is more complex and challenging than ex vivo approaches like CAR T cells due to the need to safely deliver ARCUS directly to cells in the body. We believe that in vivo applications are particularly well suited to ARCUS because they require extremely low levels of off-target editing and efficient delivery.

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In the in vivo gene editing pipeline, we continue to target advancing three investigational new drug applications (“INDs”) or Clinical Trial Applications “(CTAs”) over the next three years, including trials to evaluate: PBGENE-PCSK9 for the treatment of familial hypercholesterolemia (“FH”), PBGENE-PH1 for the treatment of primary hyperoxaluria type 1 (“PH1”) and PBGENE-HBV for the treatment of chronic hepatitis B virus (“HBV”).

In August 2021, we entered into a development and license agreement (the “iECURE Agreement”) with iECURE, Inc. (“iECURE”). Under the iECURE Agreement, iECURE will advance our wholly owned PBGENE-PCSK9 candidate through preclinical activities as well as a Phase 1 clinical trial in FH, with a CTA filing expected as early as the end of 2022. iECURE will also use our PCSK9-directed ARCUS nuclease to develop gene-insertion therapies for four other pre-specified rare genetic diseases, including ornithine transcarbamylase (“OTC”) deficiency, Citrullinemia Type 1 (“CTLN1”), phenylketonuria (“PKU”), and another program focused on liver disease. We received a partial equity stake in iECURE and are eligible to receive milestone and mid-single digit to low double digit royalty payments on sales of iECURE products developed with ARCUS.

We have initiated IND-enabling activities for our PBGENE-PH1 candidate designed to knock out the HAO1 gene as a potential one-time treatment for PH1. We commenced the latest ARCUS preclinical study for PBGENE-PH1 delivered by lipid nanoparticle (“LNP”) and expect to submit an IND/CTA in 2023 for our PH1 program.

Our gene editing program for chronic HBV applies ARCUS to knock out persistent covalently closed circular DNA and inactivate integrated HBV genomes, potentially achieving durable HBV S-antigen loss and reducing viral persistence. We will pursue clinical development of our PBGENE-HBV candidate using LNP delivery and expect to submit an IND/CTA in 2024 for our HBV program.

In December 2021, we announced our entry into an agreement with a syndicate of investors led by ACCELR8 to separate our wholly owned subsidiary, Elo Life Systems Inc (“Elo”), and create an independent food and agriculture business (“New Elo”). As partial consideration for the assets contributed and license granted to New Elo, we received a $10.0 million promissory note payable from New Elo (the “Note Receivable”) and common stock in New Elo. The Note Receivable matures on the earlier of (i) December 1, 2028 or (ii) a Deemed Liquidation Event (as defined in the New Elo’s Amended and Restated Certificate of Incorporation). The Note Receivable accrues interest at 2.00% per annum, and is payable annually on December 17th.

Since our formation in 2006, we have devoted substantially all of our resources to developing ARCUS, conducting research and development activities, recruiting skilled personnel, developing manufacturing processes, establishing our intellectual property portfolio and providing general and administrative support for these operations. We have financed our operations primarily through proceeds from upfront and milestone payments from collaboration and licensing agreements, our initial public offering (“IPO”), private placements of our convertible preferred stock and convertible debt financings, at-the-market offerings of common stock, and borrowings on credit facilities.

Since our inception, we have incurred significant operating losses and have not generated any revenue from the sale of products. Our ability to generate any product revenue or product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our product candidates or the product candidates of our collaborators for which we may receive milestone payments or royalties. As of March 31, 2022, we had an accumulated deficit of $344.8 million.

Currently, operating expenses are decreasing as a result of our financial discipline, including evaluation of our priority programs. As our programs continue to advance, we expect our operating expenses will increase year-over-year in connection with our ongoing and planned clinical trials, anticipated IND and CTA filings, and potential BLA filings, and the expected expansion of our ex vivo and in vivo product development programs and capabilities. We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for one of our product candidates or the product candidates of our collaborators for which we may receive milestone payments or royalties. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing and distribution. In addition, we expect to continue to incur additional costs associated with operating as a public company.

As a result of these anticipated expenditures, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our cash needs through a combination of public equity, debt financings or other sources, which may include current and new collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We cannot assure you that we will ever generate significant revenue to achieve profitability.

Because of the numerous risks and uncertainties associated with the development of therapeutic products, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be required to raise additional capital on terms that are unfavorable to us or we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

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Impact of the COVID-19 Pandemic

We are closely monitoring how the ongoing COVID-19 pandemic and variants thereof continues to affect our employees, business, preclinical studies and clinical trials. We have taken steps in line with guidance from the U.S. Centers for Disease Control and Prevention (“CDC”) and the State of North Carolina to protect the health and safety of our employees and the community. We have implemented measures to mitigate exposure risks and support operations. We initiated a health and safety program addressing use of face masks, mandatory vaccinations, social distancing, sanitary handwashing practices, use of personal protective equipment stations, stringent cleaning and sanitization of all facilities and measures to reduce total occupancy in facilities. We have also implemented temperature and symptom screening procedures at each location, and we have communicated to all our Precisioneers that if they are not comfortable coming to work, regardless of role, then they do not have to do so.

We are working closely with our clinical sites, physician partners and the patient community to monitor and manage the impact of the COVID-19 pandemic and variants thereof. We remain committed to our clinical programs and development plans, however, disruptions, competing resource demands and safety concerns caused by the COVID-19 pandemic and variants thereof have caused, and are likely to continue to cause, delays in our clinical trial site activation and impact our ability to enroll patients. We may also experience other difficulties, disruptions or delays in conducting preclinical studies or initiating, enrolling, conducting or completing our planned and ongoing clinical trials, and we may incur other unforeseen costs as a result. We expect that the COVID-19 pandemic and variants thereof may continue to impact our business, including our preclinical studies and clinical trials. The impact of the COVID-19 pandemic and variants thereof on our preclinical studies and any further impact to our clinical trials will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, the ultimate impact on financial markets and the global economy, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. The CARES Act was signed into law on March 27, 2020, which provides for, among other things, the deferral of the deposit and payment of certain taxes. Pursuant to the CARES Act, we have continued to elect to defer payment of a portion of the employer’s share of social security taxes since May 1, 2020. See “Risk Factors— The ongoing novel coronavirus disease, COVID-19 has impacted, and may continue to impact, 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” in Part II. Item 1A. of this Quarterly Report on Form 10-Q.

Collaborations

Eli Lilly and Company

In January 2021, we closed a development and license agreement, subsequently amended by the First Amendment to the Development and License Agreement dated August 9, 2021 (as amended, the “Development and License Agreement”) with Eli Lilly and Company (“Lilly”) to utilize ARCUS for the research and development of potential in vivo therapies for genetic disorders. Lilly has initially nominated Duchenne muscular dystrophy (“DMD”), a liver-directed target and a central nervous system directed target, and has the right to nominate up to three additional gene targets for genetic disorders over the Nomination Period. Lilly may extend the Nomination Period for an additional two years from the date on which such initial Nomination Period ends, upon Lilly’s election and payment of an extension fee. Under the terms of the Development and License Agreement, Lilly will receive an exclusive license to research, develop, manufacture and commercialize the resulting licensed products to diagnose, prevent and treat any and all diseases by in vivo gene editing directed against the applicable gene target. The Development and License Agreement provides that we will be responsible for conducting certain pre-clinical research and IND-enabling activities with respect to the gene targets nominated by Lilly to be subject to the collaboration, including manufacture of initial clinical trial material for the first licensed product. Lilly will be responsible for, and must use commercially reasonable efforts with respect to, conducting clinical development and commercialization activities for licensed products resulting from the collaboration, and may engage us for additional clinical and/or initial commercial manufacture of licensed products.

In connection with the closing, we received an upfront cash payment of $100.0 million as well as $35.0 million from Lilly’s purchase of 3,762,190 newly issued shares of our common stock pursuant to a stock purchase agreement as described below (the “Stock Purchase Agreement”). We will also be eligible to receive milestone payments of up to an aggregate of $420.0 million per licensed product as well as nomination fees for additional targets and certain research funding. If licensed products resulting from the collaboration are approved and sold, we will also be entitled to receive tiered royalties ranging from the mid-single digit percentages to the low-teens percentages on world-wide net sales of the licensed products, subject to customary potential reductions. Lilly’s obligation to pay royalties to us expires on a country-by-country and licensed product-by-licensed product basis, upon the latest to occur of certain events related to expiration of patents, regulatory exclusivity or a period of ten years following first commercial sale of the licensed product.

We have the right to elect to co-fund the clinical development of one licensed product, which may be selected from among the third or any subsequent licensed products to reach IND or CTA filing. If we elect to co-fund such licensed product, we would reimburse Lilly for a portion of the clinical development expenses for such product and, in exchange, each royalty tier with respect to net sales of such

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licensed product would be increased by a low single digit percentage. During the term of the Development and License Agreement, we may not (and may not license or collaborate with any third party to) research, develop, or commercialize any in vivo gene editing product directed against any gene targets that have been nominated and are subject to the Development and License Agreement.

Unless earlier terminated, the Development and License Agreement will remain in effect on a licensed product-by-licensed product and country-by-country basis until the expiration of a defined royalty term for each licensed product and country. Lilly has the right to terminate the Development and License Agreement for convenience by providing advance notice to us. Either party may terminate the Development and License Agreement (i) for material breach by the other party and a failure to cure such breach within the time period specified in the agreement or (ii) due to a challenge to its patents brought by the other party.

During the three months ended March 31, 2022 and March 31, 2021, we recognized revenue under the agreement with Lilly of approximately $3.3 million and $5.4 million, respectively. Deferred revenue related to the agreement with Lilly amounted to $85.4 million and $88.3 million as of March 31, 2022 and December 31, 2021, of which $19.7 million and $21.2 million, respectively, was included in current liabilities within the condensed consolidated balance sheets.

iECURE

In August 2021, we entered into the iECURE Agreement under which iECURE plans to advance the Company’s PBGENE-PCSK9 candidate through Phase 1 studies and gain access to our PCSK9-directed ARCUS nuclease to develop four other pre-specified rare gene editing therapies for genetic diseases.

Pursuant to the iECURE Agreement, we retain the rights to PBGENE-PCSK9, including all products developed for genetic indications with increased risk of severe cardiovascular events such as FH. In return, we granted iECURE a license to use its PCSK9-directed ARCUS nuclease to insert genes into the PCSK9 locus to develop treatments for four other pre-specified rare genetic diseases, including OTC deficiency, CTLN1, PKU, and another program focused on liver disease. Simultaneously with the entry into the iECURE Agreement, we entered into an Equity Issuance Agreement with iECURE, pursuant to which iECURE granted us partial equity ownership in iECURE as partial consideration for the license to use our PCSK9-directed ARCUS nuclease. Additionally, the Company is eligible to receive milestone and mid-single digit to low double digit royalty payments on sales of iECURE products developed with ARCUS.

As further discussed in Note 9, Collaboration and License Agreements, the fair value of the costs to be incurred by iECURE to progress our PBGENE-PCSK9 candidate through a Phase 1 clinical trial of $17.4 million was recorded to the prepaid expenses and other assets line items of the condensed consolidated balance sheets. During the three months ended March 31, 2022, we recognized $0.7 million of research and development expense related to amortization of the PCSK9 prepaid. As of March 31, 2022, the remaining balance of the PCSK9 prepaid was $12.2 million, which is included in the prepaid expenses and other assets line items of the condensed consolidated balance sheets in the amounts of $9.8 million and $2.4 million, respectively.

Servier

In February 2016, we entered into the Servier Agreement with Servier, pursuant to which we agreed to develop allogeneic CAR T cell therapies for five unique antigen targets. One target was selected at the Servier Agreement’s inception. Two additional hematological cancer targets beyond CD19 and two new solid tumor targets were selected in 2020. With the addition of these new targets, we received development milestone payments in 2020. Upon selection of an antigen target under the Servier Agreement, we agreed to perform early-stage research and development on individual T cell modifications for the selected target, develop the resulting therapeutic product candidates through Phase 1 clinical trials and prepare initial clinical trial material of such product candidates for use in Phase 2 clinical trials.

On April 9, 2021, we entered into the Program Purchase Agreement with Servier, pursuant to which we reacquired all of our global development and commercialization rights previously granted to Servier pursuant to the Servier Agreement, and mutually terminated the Servier Agreement.  

Pursuant to the Servier Agreement, we had developed certain allogeneic CAR T candidates, including PBCAR0191 and the stealth cell PBCAR19B, each targeting CD19, as well as four additional product targets under the Servier Agreement.  Pursuant to the terms of the Program Purchase Agreement, we regained full global rights to research, develop, manufacture and commercialize products resulting from such programs, with sole control over all activities. Additionally, per the terms of the Program Purchase Agreement we do not have an obligation to continue development of the Servier Targets. With respect to products directed to CD19, Servier has certain rights of negotiation, which may be exercised during a specified time period if we elect to initiate a process or entertain third party offers for partnering such products.

Pursuant to the terms of the Program Purchase Agreement, we made a payment of $1.25 million in cash to Servier and agreed to waive earned milestones totaling $18.75 million that would have been otherwise payable to us.

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The Program Purchase Agreement also requires us to make certain payments to Servier based on the achievement of regulatory and commercial milestones for each product, and a low- to mid-single-digit percentage royalty (subject to certain reductions) based on net sales of approved products, if any, resulting from our continued development and commercialization of the programs, for a period not to exceed ten years after first commercial sale of the applicable product in the United States or certain countries in Europe. If we enter into specified product partnering transactions, the Program Purchase Agreement requires us to pay to Servier a portion of certain consideration received pursuant to such product partnering transactions in lieu of the foregoing milestones (with the exception of a one-time clinical phase development milestone) and royalties. For additional discussion of accounting for payment obligations arising from the Program Purchase Agreement, refer to Note 4 of the condensed consolidated financial statements, “Commitments and Contingencies.”

We recognized no revenue under the agreement with Servier during the three months ended March 31, 2022. During the three months ended March 31, 2021, we recognized revenue under the agreement with Servier of approximately $10.3 million.  We did not have deferred revenue related to the agreement with Servier as of March 31, 2022 or December 31, 2021.

Tiziana

In September 2021, we entered into an exclusive license agreement to evaluate Tiziana’s foralumab, a fully human anti-CD3 monoclonal antibody, as a lymphodepleting agent in conjunction with our allogeneic CAR T cells for the potential treatment of cancers. We will investigate foralumab first in combination with an anti-CD19 CAR T and plan an IND update as early as 2022 to enable combination use.

SpringWorks Therapeutics

In September 2020, we entered into a Clinical Trial Collaboration Agreement with SpringWorks. Pursuant to such agreement, PBCAR269A will be evaluated in combination with nirogacestat, SpringWorks’ investigational gamma secretase inhibitor, in patients with R/R multiple myeloma. Under the terms of the agreement, we will bear all costs associated with the conduct of the clinical trial including providing PBCAR269A for use in the trial, and SpringWorks is responsible for providing nirogacestat at its sole cost and expense. The first patient was dosed in the combination arm in June 2021.

Trustees of the University of Pennsylvania

In January 2018, we entered into a research, collaboration and license agreement with the Trustees of the University of Pennsylvania (“Penn”) to collaborate on the preclinical development for gene editing products involving the delivery of an ARCUS nuclease. In April 2020, both parties agreed to coordinate a wind-down of all activities in their entirety under the agreement, effective as of June 2020, however, in August 2020 and subsequently in January 2021, both parties agreed to extend certain portions of the agreement through 2022. We will not be required to make termination payments to Penn.

Components of Our Results of Operations

Revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales in the foreseeable future. We record revenue from collaboration agreements, including amounts related to upfront payments, milestone payments, annual fees for licenses of our intellectual property and research and development funding.

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our product candidates. These include the following:

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We expense research and development costs as incurred. We track external research and development costs, including the costs of laboratory supplies and services, outsourced research and development, clinical trials, contract manufacturing, laboratory equipment and maintenance and certain other development costs, by product candidate when the program IND application is accepted by the FDA. Internal and external costs associated with infrastructure resources, other research and development costs, facility related costs and depreciation and amortization that are not identifiable to a specific product candidate are included in the platform development and early-stage research expenses category. 

Research and development activities are central to our business model. Currently, research and development expenses are decreasing as a result of our financial discipline, including our decision to discontinue development of PBCAR20A to allow prioritization of our other clinical programs, decreased external clinical trial material costs and discontinued investment in the development of food and agricultural product candidates following the separation of Elo in 2021. However, we ultimately expect that our research and development expenses will increase in the foreseeable future and will comprise a larger percentage of our total expenses as we continue to progress our clinical trials for our ex vivo allogeneic CAR T immunotherapies, particularly if we pursue pivotal clinical trials, and conduct preclinical research and IND/CTA enabling activities for our in vivo pipeline of therapies for genetic and infectious diseases.

We cannot determine with certainty the duration and costs of ongoing and future clinical trials of our CD19, CD19B, and BCMA product candidates, or any other product candidate we may develop or if, when or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we obtain marketing approval. We may never succeed in obtaining marketing approval for any product candidate. The duration, costs and timing of clinical trials and development of our CD19, CD19B, and BCMA product candidates, and any other our product candidate we may develop will depend on a variety of factors, including:

A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to slower than expected patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries, consulting fees, recruitment-related costs and other employee-related costs, including share-based compensation, for personnel in our executive, finance, business development, operations and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and expenses for rent and maintenance of facilities and other operating costs that are not specifically attributable to research activities.

We expect that our general and administrative expenses will increase in the future to meet our growing infrastructure needs.

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Loss from Equity Method Investments

Loss from equity method investments represents our proportionate share of the net loss of New Elo, our equity method investee.

Interest Expense

Interest expense consists of interest payments and debt discount amortization on debt outstanding.

Interest Income

Interest income consists of interest income earned on our cash and cash equivalents and Note Receivable.

Results of Operations

Comparison of the Three Months Ended March 31, 2022 and March 31, 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and March 31, 2021, together with the changes in those items:

Revenue

Revenue for the three months ended March 31, 2022 was $3.3 million, compared to $16.3 million for the three months ended March 31, 2021. The decrease of $13.0 million in revenue during the three months ended March 31, 2022 was primarily the result of a $10.3 million decrease in revenue recognized under the Servier Agreement as there has not been any related revenue recognized under the Servier Agreement subsequent to full satisfaction of the performance obligation upon the execution of the Program Purchase Agreement in April 2021, a $2.1 million decrease in revenue recognized under the Lilly Agreement, and a $0.6 million decrease in revenue recognized from an agriculture partnering collaboration.

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Research and Development Expenses