SEC Filing | Precision BioSciences

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2022

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

For the transition period from to

Commission File Number: 001-38841

Precision BioSciences, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	20-4206017
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
302 East Pettigrew St., Suite A-100 Durham, North Carolina	27701
(Address of principal executive offices)	(Zip Code)

(919) 314-5512

(Registrant’s telephone number, including area code)

N/A

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

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.000005 per share	DTIL	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 3, 2022, the registrant had 110,818,008 shares of common stock, $0.000005 par value per share, outstanding.

Table of Contents

		Page
	Forward-Looking Statements	3
	Risk Factor Summary	5
PART I.	FINANCIAL INFORMATION	6
Item 1.	Financial Statements	6
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Operations	7
	Condensed Consolidated Statements of Changes in Stockholders’ Equity	8
	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	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
PART II.	OTHER INFORMATION	39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	88
Item 3.	Defaults Upon Senior Securities	88
Item 4.	Mine Safety Disclosures	88
Item 5.	Other Information	88
Item 6.	Exhibits	89
	Signatures	91

FORWARD-LOOKING STATEMENTS

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

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

•

our ability to become profitable;

•

our ability to procure sufficient funding 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 limited ability or inability to assess the safety and efficacy of our product candidates

•

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 and preclinical and clinical studies;

•

public perception about genome editing technology and its applications;

•

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

•

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

•

pending and potential 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 trials;

•

potential manufacturing problems associated with the development or commercialization of any of our product candidates;

•

our ability to obtain an adequate supply of T cells from qualified donors;

•

our ability to achieve our anticipated operating efficiencies at our manufacturing facility;

•

delays or difficulties in our and our collaborators’ ability to enroll patients;

•

changes in interim “top-line” and initial data that we announce or publish;

•

if our product candidates do not work as intended or cause undesirable side effects;

•

risks associated with applicable healthcare, data protection, privacy and security regulations and our compliance therewith;

•

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 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;

•

our ability to effectively manage the growth of our operations;

•

our ability to attract, retain, and motivate executives and 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 the COVID-19 pandemic and variants thereof, or any pandemic, epidemic, or outbreak of an infectious disease;

•

effects of sustained inflation, supply chain disruptions and major central bank policy actions;

•

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-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.

RISK FACTOR SUMMARY

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

•

We have incurred significant operating losses since our inception and expect to continue to incur losses for the foreseeable future. We have not been profitable and may not achieve or maintain profitability.

•

We will need substantial additional funding, and if we are unable to raise a sufficient amount of capital when needed on acceptable terms, or at all, we may be forced to delay, reduce or eliminate some or all of our research programs, product development activities and commercialization efforts.

•

We have a limited operating history, which makes it difficult to evaluate our current business and future prospects and may increase the risk of your investment.

•

ARCUS is a novel technology, making it difficult to predict the time, cost and potential success of product candidate development. We have not yet been able to assess the safety and efficacy of most of our product candidates in humans and have only limited safety and efficacy information in humans to date regarding three of our product candidates.

•

We are heavily dependent on the successful development and translation of ARCUS, and due to the early stages of our product development operations, we cannot give any assurance that any product candidates will be successfully developed and commercialized.

•

Adverse public perception of genome editing may negatively impact the developmental progress or commercial success of products that we develop alone or with collaborators.

•

We face significant competition in industries experiencing rapid technological change, and there is a possibility that our competitors may achieve regulatory approval before us or develop product candidates or treatments that are safer or more effective than ours, which may harm our financial condition and our ability to successfully market or commercialize any of our product candidates.

•

Our future profitability, if any, will depend in part on our ability and the ability of our collaborators to commercialize any products that we or our collaborators may develop in markets throughout the world. Commercialization of products in various markets could subject us to risks and uncertainties.

•

Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization of any products that we develop alone or with collaborators.

•

The regulatory landscape that will apply to development of therapeutic product candidates by us or our collaborators is rigorous, complex, uncertain and subject to change, which could result in delays or termination of development of such product candidates or unexpected costs in obtaining regulatory approvals.

•

Clinical trials are difficult to design and implement, expensive, time-consuming and involve an uncertain outcome, and the inability to successfully and timely conduct clinical trials and obtain regulatory approval for our product candidates would substantially harm our business.

•

Any product candidates that we or our collaborators may develop will be novel and may be complex and difficult to manufacture, and if we experience manufacturing problems, it could result in delays in development and commercialization of such product candidates or otherwise harm our business.

•

Even if we obtain regulatory approval for any products that we develop alone or with collaborators, such products will remain subject to ongoing regulatory requirements, which may result in significant additional expense.

•

Even if any product we develop alone or with collaborators receives marketing approval, such product may fail to achieve the degree of market acceptance by physicians, patients, healthcare payors and others in the medical community necessary for commercial success.

•

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.

•

Our future success depends on our key executives, as well as attracting, retaining and motivating qualified personnel.

Part I. Financial information

Item 1. Financial Statements.

Precision Biosciences, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

	June 30, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	184,135		$	143,663
Accounts receivable		50,507			488
Prepaid expenses		12,632			17,434
Other current assets		418			169
Total current assets		247,692			161,754
Property, equipment, and software—net		23,053			25,154
Intangible assets—net		1,995			2,048
Right-of-use assets—net		3,595			4,180
Investment in equity securities		3,091			3,091
Equity method investment		1,351			3,751
Note receivable—net		7,054			6,879
Other assets		9,332			4,641
Total assets	$	297,163		$	211,498
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	797		$	1,144
Accrued compensation		4,050			6,765
Accrued clinical and research and development expenses		4,186			4,028
Deferred revenue		41,514			21,244
Lease liabilities		1,927			1,822
Other current liabilities		1,449			977
Total current liabilities		53,923			35,980
Deferred revenue		104,048			67,015
Lease liabilities		3,823			4,813
Long term debt—net		22,119			2,478
Contract liabilities		10,000			10,000
Other noncurrent liabilities		227			44
Total liabilities		194,140			120,330
Commitments and contingencies (Note 4)
Stockholders’ equity:
Preferred stock, $0.0001 par value— 10,000,000 shares authorized as of June 30, 2022 and December 31, 2021; no shares issued and outstanding as of June 30, 2022 and December 31, 2021		—			—
Common stock; $0.000005 par value— 200,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 111,605,505 shares issued and 110,795,033 shares outstanding as of June 30, 2022; 61,712,577 shares issued and 60,902,105 shares outstanding as of December 31, 2021		—			—
Additional paid-in capital		479,853			408,795
Accumulated deficit		(375,878	)		(316,675	)
Treasury stock		(952	)		(952	)
Total stockholders’ equity		103,023			91,168
Total liabilities and stockholders’ equity	$	297,163		$	211,498

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 June 30,						For the Six Months Ended June 30,
	2022			2021			2022			2021
Revenue	$	3,820		$	68,805		$	7,137		$	85,154
Operating expenses
Research and development		22,936			37,235			42,908			62,828
General and administrative		10,485			9,938			21,176			19,436
Total operating expenses		33,421			47,173			64,084			82,264
Operating (loss) income		(29,601	)		21,632			(56,947	)		2,890
Other (expense) income:
Loss from equity method investment		(1,448	)		—			(2,400	)		—
Interest expense		(178	)		(24	)		(220	)		(24	)
Interest income		192			48			364			101
Total other (expense) income, net		(1,434	)		24			(2,256	)		77
Net (loss) income	$	(31,035	)	$	21,656		$	(59,203	)	$	2,967

Net (loss) income per share
Basic	$	(0.46	)	$	0.38		$	(0.92	)	$	0.05
Diluted	$	(0.46	)	$	0.36		$	(0.92	)	$	0.05

Weighted average shares of common stock outstanding
Basic		67,954,688			57,739,622			64,512,356			57,185,402
Diluted		67,954,688			59,841,638			64,512,356			59,647,367

See notes to condensed consolidated financial statements

Precision Biosciences, Inc.

Condensed Consolidated 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- 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

Balance- January 1, 2022		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

See notes to condensed consolidated financial statements

Precision Biosciences, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	For the Six Months Ended June 30,
	2022			2021
Cash flows from operating activities:
Net (loss) income	$	(59,203	)	$	2,967
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization		3,897			4,542
Share-based compensation		9,528			7,528
Loss on disposal of assets		58			23
Non-cash interest expense		125			19
Amortization of right-of-use assets		585			588
Loss from equity method investment		2,400			—
Amortization of discount on note receivable		(175	)		—
Changes in operating assets and liabilities:
Prepaid expenses		4,802			(2,695	)
Accounts receivable		(50,019	)		9,512
Other assets and other current assets		(4,779	)		(200	)
Accounts payable		(575	)		192
Other liabilities and other current liabilities		(2,711	)		(905	)
Deferred revenue		43,856			6,099
Lease liabilities and right-of-use assets		(885	)		(937	)
Contract liabilities		—			10,000
Net cash (used in) provided by operating activities		(53,096	)		36,733
Cash flows from investing activities:
Purchases of property, equipment and software		(1,597	)		(2,815	)
Net cash used in investing activities		(1,597	)		(2,815	)
Cash flows from financing activities:
Proceeds from stock option exercises		378			2,647
Proceeds from employee stock purchase plan		282			418
Proceeds from offering of common stock, net of issuance costs		49,535			9,705
Proceeds from issuance of common stock to collaboration partners		25,000			35,000
Borrowings from revolving credit facility, net of issuance costs paid to lender		19,970			—
Proceeds from issuance of term loan, net of issuance costs paid to lender		—			2,470
Payments of debt issuance costs		—			(13	)
Net cash provided by financing activities		95,165			50,227
Net increase in cash and cash equivalents		40,472			84,145
Cash and cash equivalents—beginning of period		143,663			89,798
Cash and cash equivalents —end of period	$	184,135		$	173,943