CENTURY THERAPEUTICS, INC. The following discussion and analysis should be read in conjunction with our financial statements and accompanying notes included in this Quarterly Report on Form 10-Q and the financial statements and accompanying notes thereto for the fiscal year endedDecember 31, 2021 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, which are contained in our Annual Report on Form 10-K filed with theSecurities and Exchange Commission onMarch 17, 2022 (the "Annual Report"). This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Such forward-looking statements, which represent our intent, belief, or current expectations, involve risks and uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. In some cases you can identify forward-looking statements by terms such as "may," "will," "expect," "anticipate," "estimate," "intend," "plan," "predict," "potential," "believe," "should" and similar expressions. Factors that could cause or contribute to differences in results include, but are not limited to, those set forth under "Risk Factors" in our Annual Report. Except as required by law, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes.
Overview
We are an innovative biotechnology company developing transformative allogeneic cell therapies to create products for the treatment of both solid tumor and hematological malignancies with significant unmet medical need. We have created a comprehensive allogeneic cell therapy platform that includes industry-leading induced pluripotent stem cells, or iPSCs, differentiation know-how to generate immune effector cells from iPSCs, or iPSC- derived cells, clustered regularly interspaced short palindromic repeats, or CRISPR, mediated precision gene editing that allows us to incorporate multiple transgenes and remove target genes intended to optimize cell product performance, sophisticated protein engineering capabilities to develop proprietary next generation chimeric antigen receptors, or CARs, our proprietary Allo-EvasionTM technology intended to prevent rejection of our cell products by the host immune system, and cutting edge manufacturing capabilities intended to minimize product development and supply risk. We believe that these vertically integrated capabilities will allow us to further expand our existing pipeline and develop therapeutics from iPSC-derived natural killer cells, or iNK cells, or iNK, and iPSC-derived T cells, or iT cells, or iT, that may provide enhanced clinical outcomes compared to available therapeutic options. Our vision is to become a premier fully integrated biotechnology company by developing and ultimately commercializing off-the-shelf allogeneic cell therapies that dramatically and positively transform the lives of patients suffering from life-threatening cancers. To achieve our vision, we have assembled a world-class team whose members collectively have decades of experience in cell therapy and drug development, manufacturing, and commercialization. We were formed in 2018 asCentury Therapeutics, Inc. , or Prior Century. In 2019, in connection with our investment fromBayer Healthcare LLC , or Bayer, Prior Century contributed substantially all of its operating assets and cash to a newly formed entity,Century Therapeutics, LLC , or the LLC Entity. We refer to this transaction as the 2019 Reorganization. The 2019 Reorganization was accounted for as an asset acquisition under US Generally Accepted Accounting Principles, and as a result we recorded a one-time non-cash charge in the amount of$225.9 million which represented the fair value of the contributed in-process research and development, or IPR&D, of Prior Century. The IPR&D asset acquired was Prior Century's comprehensive allogeneic cell therapy platform. UntilFebruary 2021 , our business was operated through the LLC Entity. InFebruary 2021 , in connection with the sale of 24,721,999 shares of our Series C preferred stock, or the Series C Financing, the LLC Entity converted from aDelaware limited liability company to a Delaware C corporation. Upon completion of this conversion, Prior Century, whose only significant asset was its equity investment in LLC, merged with the C corporation, and in connection therewith the C corporation changed its name to "Century Therapeutics, Inc. " We refer to these transactions as the 2021 Reorganization. 34
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Our operations to date have been limited to organizing and staffing our company, business planning, raising capital, conducting discovery and research activities, filing patent applications, identifying potential product candidates and preparing to initiate and conduct clinical trials, undertaking preclinical studies and in-licensing intellectual property. All of our programs are currently in the development stage, and we do not have any products approved for sale. Since our inception, we have incurred net losses each year. We had an accumulated deficit of$456.7 million as ofJune 30, 2022 . Substantially all of our losses have resulted from expenses incurred in connection with our research and development programs, the acquisition of in-process research and development and general and administrative costs associated with our operations. Included in our accumulated deficit, as noted above, is a non-cash expense of$225.9 million related to the fair value of the in-process research and development of Prior Century. InJune 2021 , we completed our initial public offering, or IPO, in which we issued and sold 12,132,500 shares of our common stock, at a public offering price of$20.00 per share. We received net proceeds of$221.4 million after deducting underwriting discounts, commissions, and other offering cost of$21.2 million in the aggregate. To date, we have funded our operations from the issuance and sale of our equity securities and have not generated any revenues. Since our inception, we have raised approximately$591 million in net proceeds from sales of our equity securities. As ofJune 30, 2022 , we had cash and cash equivalents of$112.8 million and investments of$316.6 million . Based on our current business plans, we believe, our cash, cash equivalents and investments as ofJune 30, 2022 , will be sufficient for us to fund our operating expenses and capital expenditures requirements into 2025. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. We anticipate that our expenses and operating losses will increase substantially over the foreseeable future. The expected increase in expenses will be driven in large part by our ongoing activities, if and as we:
? continue to advance our iPSC cell therapy platforms;
? continue preclinical development of, and initiate clinical development of
CNTY-101, CNTY-103, CNTY-102 and our other product candidates;
? seek to discover and develop additional product candidates;
? establish and validate our own clinical-scale current good manufacturing
practices, or cGMP, facilities;
? seek regulatory approvals for any of our other product candidates that
successfully complete clinical trials;
? maintain, expand, protect, and enforce our intellectual property portfolio;
? acquire or in-license other product candidates and technologies;
incur additional costs associated with operating as a public company, which ? will require us to add operational, financial and management information
systems and personnel, including personnel to support our drug development, any
future commercialization efforts and our transition to a public company; and
? increase our employee headcount and related expenses to support these
activities.
We are also investing early in building our capabilities in key areas of
manufacturing sciences and operations, including development of our iPSC cell
therapy platforms, product characterization, and process analytics from the time
product candidates are in early research phases. Our investments also include
scaled research solutions, scaled infrastructure, and novel technologies
intended to improve efficiency, characterization, and scalability of
manufacturing.
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We anticipate that we will need to raise additional financing in the future to fund our operations, including funding for preclinical studies, clinical trials and the commercialization of any approved product candidates. We intend to use the proceeds from such financings to, among other uses, fund research and development of our product candidates and development programs, including our pre-clinical and clinical development of CNTY-101, CNTY-103, and CNTY-102, and as well as CNTY-104 and CNTY-106 in collaboration with Bristol-Myers Squibb. Until such time, if ever, as we can generate significant product revenue, we expect to finance our operations with our existing cash and cash equivalents, investments, any future equity or debt financings, and upfront and milestone and royalties payments, if any, received under future licenses or collaborations. We may not be able to raise additional capital on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would be adversely affected. Because of the numerous risks and uncertainties associated with product development, 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. The global COVID-19 pandemic continues to evolve rapidly, and we will continue to monitor it closely. The extent of the impact of the COVID-19 pandemic on our business, operations, and clinical development timelines and plans remains uncertain and will depend on certain developments, including the duration and spread of the outbreak, including as a result of the emergence of new variants of COVID-19, and its impact on our clinical trial enrollment, trial sites, CROs, contract manufacturing organizations, and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel. We have experienced modest delays in our discovery and development activities as a result of the COVID-19 pandemic, primarily due to temporary and partial shutdowns at certain of our CROs and academic institutions that have since resumed operations, and due to governmental responses to the pandemic. The ongoing pandemic has led to the implementation of various responses, including travel restrictions, mask mandates, social distancing requirements and other public health safety measures. Although many countries have re-opened, rises in new cases, including as the result of newly identified COVID-19 variants, have caused certain countries, states, and localities to re-initiate restrictions. In response, and in compliance with rapidly changing local and state regulations, we have implemented a mandatory vaccination policy for all employees and have taken other precautionary measures, including testing of any employees displaying symptoms of COVID-19. While the vaccines have proven effective in reducing the severity and mortality of COVID-19 including the variants that have evolved to date, the overall vaccination rate inthe United States may have not reached the level required for herd immunity. Certain variants of COVID-19 have proven to be more easily spread than earlier variants. The incomplete vaccination rate, and the emergence of new variants, which could prove resistant to existing vaccines, could again result in major disruptions to businesses and markets worldwide. We will continue to actively monitor the situation related to COVID-19 and may take further actions that alter our operations, including those that may be required by federal, state, or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business. The extent to which the ongoing pandemic may affect our preclinical studies, clinical trials, supply chain, labor force, business, financial condition, and results of operations will depend on future developments, which are highly uncertain and cannot be predicted at this time.
Bristol-Myers Squibb
OnJanuary 7, 2022 , we entered into the Research, Collaboration and License Agreement, with Bristol-Myers Squibb, or the Collaboration Agreement, to collaborate on the research, development and commercialization of iNK and iT cell programs for hematologic malignancies and solid tumors, or the Collaboration Program, and each product candidate, a Development Candidate. We and Bristol-Myers Squibb will initially collaborate on two Collaboration Programs focused on acute myeloid leukemia, or AML, and multiple myeloma, or MM , and Bristol-Myers Squibb has the option to add up to two additional Collaboration Programs for an additional fee. We are responsible for generating Development Candidates for each Collaboration Program, and Bristol-Myers Squibb has the option to elect to exclusively license the Development Candidates for pre-clinical development, clinical development and commercialization on a worldwide basis, or the License Option. Following Bristol-Myers Squibb's exercise of the License Option, we will be responsible for performing IND- 36
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enabling studies, supporting Bristol-Myers Squibb's preparation and submission of an IND, and manufacturing of clinical supplies until completion of a proof of concept clinical trial. Bristol-Myers Squibb will be responsible for all regulatory, clinical, manufacturing (after the proof of concept clinical trial) and commercialization activities for such Development Candidates worldwide. We have the option to co-promote Development Candidates generated from certain specified Collaboration Programs. Under the terms of the Collaboration Agreement, Bristol-Myers Squibb made a non-refundable, upfront cash payment of$100 million and will pay an exercise fee upon the exercise of the License Option, or the Licensed Program, and product candidates developed under a Licensed Program, the Licensed Products. For each Licensed Program, Bristol-Myers Squibb will pay up to$235 million in milestone payments upon the first achievement of certain development and regulatory milestones and will pay up to$500 million per Licensed Product in net sales-based milestone payments. Bristol-Myers Squibb will also pay us tiered royalties per Licensed Product as a percentage of net sales in the high-single digits to low-teens, subject to certain adjustments. In connection with the Collaboration Agreement, Bristol-Myers Squibb purchased 2,160,760 shares of our common stock at a price per share of$23.14 , for an aggregate purchase price of$50 million . We determined the common stock purchase represented a premium of$7.82 per share, or$23.2 million in the aggregate, and the remaining$26.8 million was recorded as issuance of common stock in stockholders' equity. We identified the following commitments under the arrangement: (i) research and development services under each of the two initial Collaboration Programs and (ii) License Option to elect to exclusively license the Development Candidates for each of the two initial Collaboration Programs. We determined that these four commitments represent distinct performance obligations for purposes of recognizing revenue and will recognize revenue as we fulfill each performance obligation.
License and collaboration agreements
OnSeptember 18, 2018 , we entered into a license agreement, or the Differentiation License, with FCDI. The Differentiation License, as amended, provides us with an exclusive license under certain patents and know-how related to human iPSC consisting of cells that are or are modifications of NK cells, T cells, dendritic cells and macrophages derived from human iPSC. In consideration for the Differentiation License, Prior Century issued 2,980,803 shares of common stock to FCDI, which were exchanged for 2,980,803 shares of common stock in connection with the Reorganization. Also onSeptember 18, 2018 , we entered into the non-exclusive license, or the Reprogramming License, with FCDI. The Reprogramming License, as amended, provides us with a non-exclusive license under certain patents and know- how related to the reprogramming of human somatic cells to iPSCs and provide us access to iPSC lines for clinical use. Under the Reprogramming License, we are required to make certain developmental and regulatory milestone payments as well as royalty payments upon commercialization in the low single digits. The potential development and regulatory milestone payments to be paid by us to FCDI are approximately$6 million per licensed product. In connection with the Reprogramming License, we entered into a collaboration agreement, or the FCDI Collaboration Agreement, with FCDI pursuant to which we agreed to fund research and development work at FCDI pursuant to a research plan. OnOctober 21, 2019 , we entered into the FCDI Collaboration Agreement with FCDI, whereby FCDI provides certain services to us to develop and manufacture iPSCs and immune cells derived therefrom. Under the terms of the FCDI Collaboration Agreement, as amended, FCDI will provide services in accordance with the approved research plan and related research budget. The research plan covers the period from the date of execution of the FCDI Collaboration Agreement throughMarch 31, 2022 , with the related research budget of approximately$31.4 million . 37 Table of Contents OnJanuary 7, 2022 , we and FCDI entered into a letter agreement, or the Letter Agreement, which amends each of the FCDI agreements as further discussed in Note 11 to our consolidated financial statements. Pursuant to the Letter Agreement, and in consideration for amending the FCDI Agreements, we agreed to pay to FCDI (i) an upfront payment of$10 million , (ii) a percentage of any milestone payments received by us under the Collaboration Agreement, in respect of achievement of development or regulatory milestones specific toJapan , and (iii) a percentage of all royalties received by us under the Collaboration Agreement in respect of sales of products inJapan . During the three and six months endedJune 30, 2022 , the Company made payments of$2.8 million and$5.9 million and incurred research and development expenses of$2.4 million and$3.8 million and legal fees of$61 thousand and$91 thousand , recorded within general and administrative expenses in its consolidated statements of operations and comprehensive loss. During the three and six months endedJune 30, 2021 , the Company made payments of$4.6 million and$7.8 million and incurred research and development expenses of$5.1 million and$7.9 million , and legal fees of$35 thousand and$56 thousand , recorded within general and administrative expenses in its consolidated statements of operations and comprehensive loss.
As of
Empirica acquisition
On
The transaction was accounted for as an asset acquisition of IPR&D. Total consideration in the acquisition was$4.7 million , consisting of cash consideration of$4.5 million and transaction expenses of$0.2 million . In addition to the purchase price,$1.5 million was deposited in escrow, or the Escrow Deposit, whereby release of the Escrow Deposit is subject to the terms of a promissory note, which provides for the funds to be released in equal installments over a three-year period related to continuing services by former Empirica shareholders who are employed by the Company. InJuly 2021 , the first annual installment of$523 was released from escrow. InJune 2022 , the second annual installment of$517 was release from escrow. The Escrow Deposit is recognized as an asset and the promissory note is post- acquisition compensation expense, which will be accrued over the term of the promissory note. We recorded$0.2 million compensation in research and development expense for six months endedJune 30, 2022 . For further details regarding this acquisition, see Note 4 to our unaudited consolidated financial statements.
Components of operating results
Collaboration Revenue
We have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products for the foreseeable future. Our revenues to date have been generated through our collaboration, option and license agreement with Bristol-Myers Squibb. We recognize revenue over the expected performance period under this agreement. We expect that our revenue for the next several years will be derived primarily from this agreement and any additional collaborations that we may enter into in the future. To date, we have not received any royalties under any of our existing collaboration agreements. Operating expenses Research and development
To date, research and development expenses have related primarily to discovery and development of our iPSC cell therapy platform technology and product candidates and acquired in-process research and
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development. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are recorded as prepaid expenses until the goods or services are received. Research and development expenses consist of personnel-related costs, including salaries, and benefits, stock compensation expense, external research and development expenses incurred under arrangements with third parties, laboratory supplies, costs to acquire and license technologies facility and other allocated expenses, including rent, depreciation, and allocated overhead costs, and other research and development expenses. We deploy our employee and infrastructure resources across multiple research and development programs for developing our iPSC cell therapy platforms, identifying and developing product candidates, and establishing manufacturing capabilities. Due to the number of ongoing projects and our ability to use resources across several projects, the vast majority of our research and development costs are not recorded on a program-specific basis. These include costs for personnel, laboratory, and other indirect facility and operating costs. Research and development activities account for a significant portion of our operating expenses. We anticipate that our research and development expenses will increase for the foreseeable future as we expand our research and development efforts including expanding the capabilities of our iPSC cell therapy platforms, identifying product candidates, completing preclinical studies and commencing clinical trials, seeking regulatory approval of our product candidates, and incurring costs to acquire and license technologies aligned with our goal of translating iPSCs to therapies. A change in the outcome of any of these variables could mean a significant change in the costs and timing associated with the development of our product candidates.
General and administrative
General and administrative expenses consist of personnel-related costs, including salaries, benefits, and non-cash stock-based compensation, for our employees in executive, legal, finance, human resources, information technology, and other administrative functions, legal fees, consulting fees, recruiting costs, and facility costs not otherwise included in research and development expenses. Legal fees include those related to corporate and patent matters. We anticipate that our general and administrative expenses will increase over the foreseeable future to support our continued research and development activities, operations generally, future business development opportunities, consulting fees, as well as due to the increased costs of operating as a public company.
In-process research and development
As a direct result of the execution of the Collaboration Agreement with
Bristol-Myers Squibb, we incurred
Interest expense
Interest expense relates to interest incurred on the Loan Agreement we entered
into with Hercules Capital, Inc., or Hercules, in 2020, as well as amortization
of the related deferred financing cost. See Note 9 to our consolidated financial
statements.
Other income, net
Interest income, net consists of interest earned on our cash, cash equivalents
and investment balances.
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Income taxes
UntilFebruary 25, 2021 , we were organized as a limited liability company, which is considered a passthrough entity for federal and state income tax purposes. Subsequent to the conversion of the LLC Entity to aC-Corp onFebruary 25, 2021 , we have incurred losses and recorded a full valuation allowance on all of our net deferred tax assets. As ofJune 30, 2022 , the Company recorded$34 thousand in provisions for income taxes related to its subsidiaryCentury Therapeutics Canada ULC in the accompanying consolidated financial statements. There were no provisions or benefit for income taxes in 2021.
Results of operations
Comparison of the three months ended
The following table summarizes our results of operations for the periods
presented:
Three Months Ended Three Months Ended
June 30, 2022 June 30, 2021 Change
(in thousands)
Collaboration revenue $ 1,396 $ - $ 1,396
Operating expenses:
Research and development 24,494 18,933 5,561
General and administrative 8,253 4,088 4,165In-process research and development -
- -
Total operating expenses 32,747 23,021 9,726
Loss from operations (31,351) (23,021) (8,330)
Interest expense (330) (318) (12)
Other income, net 711 66 645
Provision for income taxes (18) - (18)
Net loss $ (30,988) $ (23,273) $ (7,715)
Collaboration revenue
During the three months ended
Research and development expenses
The following table summarizes the components of our research and development expenses for the periods presented:
Three Months Ended Three Months Ended
June 30, 2022 June 30, 2021 Change
(in thousands)
Personnel and related costs $ 11,064 $ 6,146 $ 4,918 Facility and other allocated costs 3,255 2,089 1,166 Research and laboratory 6,300
4,628 1,672
Collaborations 2,571 5,071 (2,500)
Consulting 1,106 530 576
Other 198 469 (271)Total research and development expense $ 24,494 $
18,933
Research and development expenses were
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an increase in personnel-related expenses of
attributable to an increase in headcount to expand our research and development
capabilities;
an increase of
footprint for office and lab space;
? an increase of
laboratory supplies, preclinical studies, and other external research expenses;
a decrease of
FCDI has narrowed down to primarily manufacturing CNTY-101 clinical supply for
us.
General and administrative expenses
General and administrative expenses were$8.3 million for the three months endedJune 30, 2022 and$4.1 million for three months endedJune 30, 2021 . The increase of$4.2 million was primarily due to increased personnel-related expenses of$1.1 million , and an increase of stock-based compensation of$0.5 million , primarily attributable to an increase in headcount to build our infrastructure, increased directors' and officers' insurance expense of$0.5 million , and increased professional fees of$0.6 million relating to accounting, audit and legal services as well as costs associated with ongoing business activities and operating as a public company, and increased information technology and facility costs, including rent, of$1.4 million .
Interest expense
Interest expense was
Other income, net
Interest income was$0.7 million for the three months endedJune 30, 2022 and$66 thousand for the three months endedJune 30, 2021 , which included interest earned on our cash, cash equivalents, and investment balances.
Comparison of the six months ended
The following table summarizes our results of operations for the periods
presented:
Six Months Ended Six Months Ended
June 30, 2022 June 30, 2021 Change
(in thousands)
Collaboration revenue $ 2,454 $ - $ 2,454
Operating expenses:
Research and development 45,690 34,307 11,383
General and administrative 15,551 6,776 8,775
Write off of in-process research and
development asset 10,000 - 10,000
Total operating expenses 71,241 41,083 30,158
Loss from operations (68,787) (41,083) (27,704)
Other income (expense):
Interest expense (644) (632) (12)
Other income, net 964 94 870
Total other income (expense) 320 (538) 858Loss before provision for income taxes (68,467)
(41,621) (26,846)
Provision for income taxes (34) - (34)
Net loss $ (68,501) $ (41,621) $ (26,880)
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Collaboration revenue
During the six months ended
Research and development expenses
The following table summarizes the components of our research and development expenses for the periods presented:
Six Months Ended Six Months Ended
June 30, 2022 June 30, 2021 Change
(in thousands)
Personnel and related costs $ 20,660 $ 10,935 $ 9,725 Facility and other allocated costs 5,896 4,117 1,779 Research and laboratory 12,104
9,070 3,034
Collaborations 4,955 7,852 (2,897)
Consulting 1,715 1,220 495
Other 360 1,113 (753)Total research and development expense $ 45,690 $
34,307
Research and development expenses were
an increase in personnel-related expenses of
attributable to an increase in headcount to expand our research and development
capabilities;
an increase of
footprint for office and lab space;
? an increase of
laboratory supplies, preclinical studies, and other external research expenses;
a decrease of
FCDI has narrowed down to primarily manufacturing CNTY-101 clinical supply for
us.
General and administrative expenses
General and administrative expenses were$15.6 million for the six months endedJune 30, 2022 and$6.8 million for six months endedJune 30, 2021 . The increase of$8.8 million was primarily due to increased personnel-related expenses of$2.3 million , and an increase of stock-based compensation of$1.7 million , primarily attributable to an increase in headcount to build our infrastructure, increased directors' and officers' insurance expense of$1.2 million , and increased professional fees of$1.4 million relating to accounting, audit and legal services as well as costs associated with ongoing business activities and operating as a public company, and increased information technology and facility costs, including rent, of$2.1 million .
In-process research and development
In-process research and development expenses was$10 million for the six months endedJune 30, 2022 . As a direct result of the execution of the Collaboration Agreement with Bristol-Myers Squibb, the Company incurred$10 million in fees to amend the FCDI agreement to gain access to the territory rights ofJapan . See 42 Table of Contents
Note 11 to our consolidated financial statements. There was no in-process
research and development expenses for the six months ended
Interest expense
Interest expense was
Other income, net
Interest income was$1.0 million for the six months endedJune 30, 2022 and$94 thousand for the six months endedJune 30, 2021 , which included interest earned on our cash, cash equivalents, and investment balances.
Liquidity, capital resources, and capital requirements
Sources of liquidity
To date, we have funded our operations from the issuance and sale of our equity securities, debt financing and collaboration revenues. Since our inception, we have raised approximately$591 million in net proceeds from the sales of our equity securities. As ofJune 30, 2022 , we had cash, and cash equivalents of$112.8 million and investments of$316.6 million . Based on our research and development plans, we believe our existing cash, cash equivalents and investments, will be sufficient to fund our operating expenses and capital expenditures requirements into 2025. Since our inception, we have incurred significant operating losses. We have not yet commercialized any products and we do not expect to generate revenue from sales of any product candidates for a number of years, if ever. We had an accumulated deficit of$456.7 million as ofJune 30, 2022 . As further described in Note 3 of our consolidated financial statements, we obtained a cash capital commitment from Bayer totaling$215 million , from which net proceeds of$74.8 million were received inJune 2019 ,$38.1 million were received inNovember 2020 and$31.9 million were received inJanuary 2021 . The commitment agreement terminated in connection with the Series C Financing, and Bayer has no continuing obligation to invest any additional amounts thereunder. As further described in Note 9 of our consolidated financial statements, we entered into a Loan Agreement with Hercules, pursuant to which net proceeds of$9.6 million were received by us inSeptember 2020 . As further described in Note 10 of our consolidated financial statements, inFebruary 2021 , we sold 24,721,999 shares of our Series C preferred stock to certain institutional investors for net proceeds of approximately$159.6 million . Upon the closing of our IPO, the Series C preferred stock automatically converted into 9,825,513 shares of common stock. OnJune 22, 2021 , we closed our IPO in which we issued and sold 12,132,500 shares of our common stock at a public offering price of$20.00 per share. We received net proceeds of$221.2 million after deducting underwriting discounts and commissions and other expenses. As described in Note 11, inJanuary 2022 we entered into a Collaboration Agreement with Bristol-Myers Squibb resulting in an upfront payment of$100 million . In connection with the Collaboration Agreement, Bristol-Myers Squibb also purchased 2,160,760 shares of our common stock at a price per share of$23.14 , for an aggregate purchase price of$50 million . InJuly 2022 , we entered into a Sales Agreement, or the Sales Agreement, withCowen and Company, LLC , or Cowen, under which we may offer and sell, from time to time in our sole discretion, shares of our common stock, having an aggregate offering price of up to$150 million through Cowen as sales agent. No sales have been made under the Sales Agreement since its inception.
Future funding requirements
We expect to incur additional losses in the foreseeable future as we conduct and
expand our research and development efforts, including conducting preclinical
studies and clinical trials, developing new product candidates, establishing
internal and external manufacturing capabilities, and funding our operations
generally. Based on our current business plans, we believe that our existing
cash, cash equivalents, and
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investments, as of June 30, 2022 will be sufficient for us to fund our operating
expenses and capital expenditure requirements for at least the next 12 months
after this filing. We have based this estimate on assumptions that may prove to
be wrong, and we could exhaust our available capital resources sooner than we
expect. However, we anticipate that we will need to raise additional financing
in the future to fund our operations, including the commercialization of any
approved product candidates. We are subject to the risks typically related to
the development of new products, and we may encounter unforeseen expenses,
difficulties, complications, delays, and other unknown factors that may
adversely affect our business.
Our future capital requirements will depend on many factors, including:
? the scope, timing, progress, costs, and results of discovery, preclinical
development, and clinical trials for our current and future product candidates;
? the number of clinical trials required for regulatory approval of our current
and future product candidates;
? the costs, timing, and outcome of regulatory review of any of our current and
future product candidates;
? the cost of manufacturing clinical and commercial supplies of our current and
future product candidates;
the costs and timing of future commercialization activities, including ? manufacturing, marketing, sales, and distribution, for any of our product
candidates for which we receive marketing approval;
the costs and timing of preparing, filing, and prosecuting patent applications,
obtaining, maintaining, protecting, and enforcing our intellectual property ? rights, and defending any intellectual property-related claims, including any
claims by third parties that we are infringing upon, misappropriating, or violating their intellectual property rights;
our ability to maintain existing, and establish new, strategic collaborations, ? licensing, or other arrangements and the financial terms of any such
agreements, including the timing and amount of any future milestone, royalty,
or other payments due under any such agreement;
? the revenue, if any, received from commercial sales of our product candidates
for which we receive marketing approval;
? expenses to attract, hire and retain, skilled personnel;
? the costs of operating as a public company;
our ability to establish a commercially viable pricing structure and obtain ? approval for coverage and adequate reimbursement from third-party and
government payors;
? addressing any potential interruptions or delays resulting from factors related
to the COVID-19 pandemic, including the emergence of new variants of COVID-19;
? the effect of competing technological and market developments; and
? the extent to which we acquire or invest in businesses, products, and
technologies.
Until and unless we can generate substantial product revenue, we expect to
finance our cash needs through the proceeds from a combination of equity
offerings and debt financings, and potentially through additional license and
development agreements or strategic partnerships or collaborations with third
parties. Financing may not be available in sufficient amounts or on reasonable
terms. In addition, market volatility resulting from the COVID-19 pandemic,
inflationary pressures, political unrest and hostilities, war or other factors
could adversely impact our ability to access capital as and when needed. We have
no commitments for any additional financing and will likely be required to raise
such financing through the sale of additional securities,
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which, in the case of equity securities, may occur at prices lower than the offering price of our common stock. If we sell equity or equity-linked securities, our current stockholders, may be diluted, and the terms may include liquidation or other preferences that are senior to or otherwise adversely affect the rights of our stockholders. Moreover, if we issue debt, we may need to dedicate a substantial portion of our operating cash flow to paying principal and interest on such debt and we may need to comply with operating restrictions, such as limitations on incurring additional debt, which could impair our ability to acquire, sell or license intellectual property rights which could impede our ability to conduct our business.
Cash flows
The following table summarizes our cash flows for the periods indicated:
Six months ended Six months ended
June 30, 2022 June 30, 2021
Net cash provided by (used in):
Operating activities $ 61,198 $ (40,668)
Investing activities (31,519) (130,682)
Financing activities 26,925 418,134
Net increase in cash, cash equivalents, and
restricted cash $ 56,605 $ 246,784
Operating activities
Net cash provided by (used in) operating activities was $61.2 million and
($40.7) million for the six months ended June 30, 2022 and 2021, respectively.
Net cash provided by operating activities during the six months ended June 30,
2022 consisted primarily of our deferred revenue of $120.7 million from our
collaboration agreement with Bristol-Myers Squibb, increase in our operating
lease liability of $2.5 million , and non-cash charges of $8.8 million . The
non-cash charges of $8.8 million consisted primarily of $2.8 million for
depreciation expense, non-cash stock-based compensation expense of $5.2 million ,
and non-cash operating lease expense of $0.6 million . This increase was
partially offset by our net loss of $68.5 million and net cash outflows from
decreases in our accounts payable of $3.9 million .
Net cash used in operating activities during the six months ended June 30, 2021
consisted primarily of our net loss of $41.6 million and net cash outflows from
decreases in our accounts payable of $3.6 million , increases in our prepaid
expenses and other assets of $2.5 million , partially offset by increases in our
accrued expenses and other liabilities of $2.3 million , and non-cash charges of
$4.1 million . The non-cash charges of $4.1 million consisted primarily of $1.7
million for depreciation expense, non-cash stock-based compensation expense of
$1.8 million , and non-cash operating lease expense of $0.4 million .
Investing activities
Net cash used in investing activities was$31.5 million and$130.7 million for the six months endedJune 30, 2022 and 2021, respectively. Cash used in investing activities for the six months endedJune 30, 2022 consisted primarily of net purchases of fixed maturity securities of$17.0 million and purchases of property and equipment of$14.5 million .
Net cash used in investing activities for the six months ended
Financing activities
Net cash provided by financing activities was$26.9 million , and$418.1 million for the six months endedJune 30, 2022 and 2021, respectively. Cash provided by financing activities consisted primarily of net proceeds of$26.8 million from Bristol-Myers Squibb for the purchase of our common stock, and cash of$113
thousand
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from issuance of our common stock from equity incentive plans pursuant to the exercise of employee stock options.
Cash provided by financing activities was$418.1 million for the six months endedJune 30, 2021 and consisted primarily of net proceeds from initial public offering of$221.9 million , net proceeds from collection of subscription receivable of$31.9 million and from sale of our Series C preferred shares of$159.6 million which upon initial public offering were converted to common stock, and cash of$2.3 million resulting from Prior Century merging with and into us.
Contractual obligations and commitments
The following table summarizes our significant contractual obligations and
commitments as of
Payments Due by Period
1 Year 1 to 3 Years 3 to 5 Years More than 5 Years Total
(in thousands)
Operating leases $ 1,476 $ 11,608 $ 13,283 $ 46,960 $ 73,327
Long-term debt 6,544 3,851 - - 10,395
Interest on long-term debt (1) 524 923 - - 1,447
(1) Reflects minimum interest payable under the Loan Agreement. Payment herein subject to variable rate debt have been estimated.
Other than as disclosed in the table above, the payment obligations under our license, collaboration, and acquisition agreements as ofJune 30, 2022 are contingent upon future events such as our achievement of pre- specified development, regulatory, and commercial milestones, or royalties on net product sales. As ofJune 30, 2022 , the timing and likelihood of achieving the milestones and success payments and generating future product sales are uncertain and therefore, any related payments are not included in the table above. We have commitments under operating leases for certain facilities used in our operations. Our leases have initial lease terms ranging from 5 to 16 years. We entered into one lease that had not commenced atJune 30, 2022 . As a result, future lease payments of approximately$0.0 million in 1 year,$2.8 million in 1 to 3 years,$3.9 million in 3 to 5 years and$14.2 million in more than 5 years are not included within the table above. We also enter into agreements in the normal course of business for sponsored research, preclinical studies, contract manufacturing, and other services and products for operating purposes, which are generally cancelable upon written notice. These obligations and commitments are not included in the table above. See Note 12 to our unaudited consolidated financial statements for additional information.
We have entered into a
Off-balance sheet arrangements
Since our inception, we have not engaged in any off-balance sheet arrangements
as defined under the rules and regulations of the
JOBS Act accounting election
As a company with less than$1.07 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements that are 46
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otherwise generally applicable to public companies. As such, we may take advantage of reduced disclosure and other requirements otherwise generally applicable to public companies, including:
not being required to have our registered independent public accounting firm ? attest to management's assessment of our internal control over financial
reporting;
? presenting reduced disclosure about our executive compensation arrangements;
an exemption from compliance with any requirement that the
a supplement to the auditor's report providing additional information about the
audit and the financial statements;
? not being required to hold non-binding advisory votes on executive compensation
or golden parachute arrangements; and
? extended transition periods for complying with new or revised accounting
standards.
The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period to enable us to comply with new or revised accounting standards and, therefore, we will adopt new or revised accounting standards at the time private companies adopt the new or revised accounting standard and will do so until such time that we either (i) irrevocably elect to "opt out" of such extended transition period or (ii) no longer qualify as an emerging growth company. We will remain an emerging growth company until the earliest of (i)December 31, 2026 , (ii) the last day of the fiscal year in which we have total annual gross revenue of at least$1.07 billion , (iii) the last day of the fiscal year in which we are deemed to be a "large accelerated filer" as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded$700.0 million as of the last business day of the second fiscal quarter of such year or (iv) the date on which we have issued more than$1.0 billion in non-convertible debt securities during the prior three-year period. We are also a "smaller reporting company," meaning that the market value of our stock held by non-affiliates is less than$700.0 million and our annual revenue is less than$100.0 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than$250.0 million or (ii) our annual revenue is less than$100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than$700.0 million as of the last business day of the second fiscal quarter of such year. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Critical accounting policies and significant judgments and estimates
Refer to Note 2, Summary of Significant Accounting Policies, included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of our critical accounting policies.
During the six months ended
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included in the our Annual Report on Form 10-K filed with the
Collaboration Revenue We may enter into collaboration and licensing agreements with strategic partners for research and development, manufacturing, and commercialization of its product candidates. Payments under these arrangements may include non-refundable, upfront fees; reimbursement of certain costs; customer option fees for additional goods or services; payments upon the achievement of development, regulatory, and commercial milestones; sales of product at certain agreed-upon amounts; and royalties on product sales. We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, or ASC 606. This standard applies to all contracts with customers. When an agreement falls under the scope of other standards, such as ASC Topic 808, Collaborative Arrangements, or ASC 808, we will apply the recognition, measurement, presentation, and disclosure guidance in ASC 606 to the performance obligations in the agreements if those performance obligations are with a customer. Revenue recognized by analogizing to ASC 606 is recorded as collaboration revenue on the statements of operations. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under a collaboration agreement, we perform the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations on a relative stand-alone selling price basis; and (v) recognition of revenue when (or as) we satisfy each performance obligation. As part of the accounting for these arrangements, we must use its judgment to determine the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price. The estimation of the stand-alone selling price may include such estimates as forecasted revenues and costs, development timelines, discount rates, and probabilities of regulatory and commercial success. We also apply significant judgment when evaluating whether contractual obligations represent distinct performance obligations, allocating transaction price to performance obligations within a contract, determining when performance obligations have been met, assessing the recognition and future reversal of variable consideration and determining and applying appropriate methods of measuring progress for performance obligations satisfied over time. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as current deferred revenue. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, non-current. If an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services, the goods and services underlying the customer options are not considered to be performance obligations at the outset of the arrangement, as they are contingent upon option exercise. We evaluate the customer options for material rights or options to acquire additional goods or services for free or at a discount. If the customer options are not determined to represent a material right, no transaction price is allocated to these options and we will account for these options at that time they are exercised. If the customer options are determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement. The promises under our collaboration agreements may include research and development services to be performed by us for or on behalf of the customer. Amounts allocated to these performance obligations are recognized as we perform these obligations, and revenue is measures based on an inputs method of costs incurred to date of budgeted costs. Under certain circumstances, we may be reimbursed for certain expenses incurred under the research and development services.
At the inception of each arrangement that includes development milestone payments, we evaluate whether the milestones are considered probable of being achieved and estimates the amount to be included in the
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transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of us or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The Company evaluates factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, we reevaluate the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the statements of operations in the period of adjustment.
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