SANGAMO THERAPEUTICS, INC. The discussion in "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains trend analysis, estimates and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements reflect our current views with respect to future events, are based on assumptions and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that could impact our business. In particular, we encourage you to review the risks and uncertainties summarized under "Special Note Regarding Forward-Looking Statements" that appears in the forepart of this report and as discussed in more detail under "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year endedDecember 31, 2020 as filed with theSecurities and Exchange Commission onFebruary 24, 2021 , or the 2020 Annual Report, as supplemented by the risks and uncertainties described under "Risk Factors" in Part II, Item 1A of this Quarterly Report. You should also read the following discussion and analysis in conjunction with our Condensed Consolidated Financial Statements and accompanying notes included in this report and the Consolidated Financial Statements and accompanying notes thereto included in our 2020 Annual Report. Overview We are a clinical-stage genomic medicine company committed to translating ground-breaking science into medicines that transform the lives of patients with serious diseases. We plan to deliver on this mission through development of our clinical and preclinical product candidates based on our novel science and our in-house manufacturing capabilities. Our current clinical-stage product candidates are: •Giroctocogene fitelparvovec, also known as SB-525, our lead product candidate, is a gene therapy for the treatment of severe hemophilia A and is the subject of the registrational Phase 3 AFFINE clinical trial. We are developing giroctocogene fitelparvovec with our collaborator Pfizer Inc., or Pfizer; •Isaralgagene civaparvovec, also known as ST-920, our wholly-owned gene therapy product candidate for the treatment of Fabry disease, is currently being evaluated in our Phase 1/2 STAAR clinical study and we have initiated plans for a Phase 3 clinical trial; •SAR445136, our zinc finger nuclease, or ZFN, gene-edited cell therapy product candidate for the treatment of sickle cell disease, is currently being evaluated in our Phase 1/2 PRECIZN-1 clinical study. We are developingSAR445136 with our collaboratorSanofi S.A. , or Sanofi; and •TX200, our wholly-owned Chimeric Antigen Receptor, or CAR, engineered regulatory T cell, or CAR-Treg, cell therapy product candidate for the treatment of HLA-A2 mismatched kidney transplant rejection, is currently being evaluated in our Phase 1/2 STEADFAST clinical study. Moreover, we are focusing our preclinical development in two priority areas: (i) CAR-Treg cell therapies for autoimmune disorders such as inflammatory bowel disease and multiple sclerosis, and (ii) genome engineering therapies for central nervous system, or CNS, diseases such as Alzheimer's, autism spectrum disorder and amyotrophic lateral sclerosis, some of which we are developing with our collaboratorsBiogen MA, Inc. andBiogen International GmbH , which we refer to together as Biogen,Novartis Institutes for BioMedical Research, Inc. , or Novartis, and Pfizer. Our multiple collaborations with biopharmaceutical companies bring us important financial and strategic benefits and reinforce the potential of our research and development efforts and our zinc finger protein, or ZFP, technology platform. They leverage our collaborators' therapeutic and clinical expertise and commercial resources with the goal to bring our medicines more rapidly to patients. We believe these collaborations reflect the value of our ZFP technology platform and will potentially expand the addressable markets of our product candidates. To date, we have received approximately$815.0 million in upfront licensing fees, milestone payments, and proceeds from the sale of our common stock to collaborators, and we are eligible to earn up to$6.9 billion in future milestone payments from our collaborations, in addition to potential product royalties. We believe that our current and future in-house manufacturing capacity provides us a competitive advantage. We currently operate an in-house adeno-associated virus, or AAV, manufacturing facility in ourBrisbane, California headquarters, and we recently completed and brought online a cell therapy manufacturing facility inBrisbane, California . We are also building another cell therapy manufacturing facility in Valbonne,France , which we expect to be operational by the end of 2021. We believe our manufacturing strategy, which leverages in-house manufacturing and the resources of our contracting manufacturing organizations, or CMOs, provides us flexibility, quality, control and the necessary capacity. 31 -------------------------------------------------------------------------------- Table of Contents Business Updates •We announced preliminary clinical data from the first four patients treated in our Phase 1/2 STAAR study evaluating isaralgagene civaparvovec for the treatment of Fabry disease. The data, a summary of which is located below, showed that, as of theSeptember 17, 2021 cutoff date, isaralgagene civaparvovec was generally well tolerated in the four patients treated in the first two dose cohorts. All four patients exhibited above normal ?-Gal A activity through 14 weeks for the most recently treated patient and one year for the first treated patient. Plasma Lyso-Gb3 levels decreased by approximately 40% in the one patient with elevated levels pre-treatment. In addition, we recently dosed the fifth patient in the study, who is the first patient in the third dose cohort. We are currently screening the sixth patient in the study. We expect to present updated clinical data from this study throughout 2022 and present data at a medical meeting. Based on the preliminary clinical data, we have initiated planning for a Phase 3 clinical trial of isaralgagene civaparvovec. •We announced preliminary proof-of-concept clinical data from our Phase 1/2 PRECIZN-1 study ofSAR445136 for the treatment of sickle cell disease, or SCD, that we are developing with Sanofi. The data, a summary of which is located below, showed that, as of theJune 25, 2021 cutoff date, none of the four treated patients required blood transfusions post-engraftment or experienced adverse or serious adverse events related to treatment through 13 weeks of follow-up for the most recently treated patient and 65 weeks of follow-up for the first treated patient. The four treated patients all experienced increases in total hemoglobin, fetal hemoglobin and percent F cells. We and Sanofi will be presenting additional clinical data from this study at the 63rd Annual Meeting of theAmerican Society of Hematology , or ASH, onDecember 12, 2021 . Based on the preliminary proof-of-concept clinical data, we and Sanofi continue to advance the program forward. We recently obtained manufacturing requirements guidance from theU.S. Food and Drug Administration , or FDA, in preparation for further potential clinical studies. •In order to prioritize the development ofSAR445136 , we and Sanofi have made the business decision to discontinue the development of ST400, our cell therapy product candidate for the treatment of transfusion dependent beta thalassemia. ST-400 was developed with the support of a grant from theCalifornia Institute for Regenerative Medicine , or CIRM. •We announced updated clinical data from our Phase 1/2 Alta study of giroctocogene fitelparvovec for the treatment of severe hemophilia A. The data, a summary of which is located below, showed that, as of theMay 19, 2021 cutoff date, for the four patients in the highest dose 3e13vg/kg cohort who had reached 104 weeks of follow-up, the mean Factor VIII, or FVIII, activity was 30.9% at week 104 as measured by chromogenic assay. In this cohort, annualized bleeding rate was zero for the first year after treatment and 0.9 throughout total duration of follow-up. Giroctocogene fitelparvovec was generally well tolerated as of the cutoff date. We and Pfizer will be presenting additional clinical data from this study at ASH onDecember 12, 2021 . •We and Pfizer also announced that some of the patients treated in the Phase 3 AFFINE trial of giroctocogene fitelparvovec have experienced FVIII activity greater than 150% following treatment. To date, none of these patients have experienced thrombotic events and some have been treated with direct oral anticoagulants to reduce thrombotic risk. Pfizer recently decided to voluntarily pause screening and dosing of additional patients in this trial to implement a proposed protocol amendment intended to provide guidelines for clinical management of elevated FVIII levels. Subsequent to the voluntary pause, we also recently learned that the FDA has put this trial on clinical hold. A clinical hold is an order issued by the FDA to the trial sponsor to suspend an ongoing clinical trial. We may not resume the AFFINE trial without FDA authorization. We and Pfizer plan to share the proposed protocol amendment with the FDA and other relevant review bodies and to respond to the clinical hold, after which we expect to provide an update on the trial. We anticipate pivotal data readouts for this trial to be based on full analyses of at least fifty patients. Over 50% of the patients have been enrolled in the Phase 3 AFFINE trial. •We have enrolled the first patient in our Phase 1/2 STEADFAST clinical study of TX200 for the treatment of HLA-A2 mismatched kidney transplant rejection. We expect the first two patients in this study to be dosed in the middle of 2022 following kidney transplantation. We continue to open study sites and screen patients for this study. •Biogen announced that the previously undisclosed neuromuscular pre-clinical target in our collaboration is type 1 myotonic dystrophy (DM1). •We recently completed and brought online our in-house cell therapy manufacturing facility in ourBrisbane, California headquarters and remain on track to complete our in-house cell therapy manufacturing facility in Valbonne,France by year-end. •We appointedD. Mark McClung as Chief Operating Officer, who previously served as Chief Business Officer. Summary of Preliminary Results from the Phase 1/2 STAAR study of Isaralgagene Civaparvovec •STAAR is an ongoing Phase 1/2 multicenter, open-label, dose-ranging clinical study to assess the safety and tolerability of a single infusion of isaralgagene civaparvovec in Fabry disease patients ? 18 years of age. 32 -------------------------------------------------------------------------------- Table of Contents •Patients are infused intravenously with a single dose and followed for 52 weeks. A separate long-term follow-up study will follow this study. At least two subjects will be dosed in each dose cohort, with a potential expansion in each cohort. •Patients who are on stable enzyme replacement therapy, or ERT, may withdraw ERT after treatment in a controlled and monitored fashion at the discretion of the patient and the investigator. •The dose escalation phase includes males with classic Fabry disease. The study will later be expanded to include females, as well as patients with Fabry-associated cardiac and renal disease. •The study's primary endpoint is incidence of treatment-emergent adverse events. Additional safety evaluations include routine hematology, chemistry and liver tests; vital signs; electrocardiogram; echocardiogram; serial alpha-fetoprotein testing and magnetic resonance imaging, or MRI, of liver to monitor for potential formation of any liver mass. Secondary endpoints include change from baseline at specific time points over the one-year study period in alpha-galactosidase A, or ?-Gal A, activity, globotriaosylceramide, or Gb3, and lyso-Gb3 levels in plasma; frequency of ERT infusion; changes in renal function, cardiac function and left ventricular mass, measured by cardiac MRI and rAAV2/6 vector clearance. Key exploratory endpoints include quality of life, Fabry symptoms and neuropathic pain scores; and immune response to AAV6 capsid and ?-Gal A. •As of theSeptember 17, 2021 cutoff date, four patients, ranging in age from 22 to 48 years, were treated with isaralgagene civaparvovec. Two patients were treated in Cohort 1 at the dose of 0.5e13 vg/kg and two patients were dosed in Cohort 2 at the dose of 1e13 vg/kg. •As of theSeptember 17, 2021 cutoff date, isaralgagene civaparvovec was generally well tolerated. One patient each in Cohorts 1 and 2 exhibited treatment-related adverse events for a total of five events (hemoglobin decreased, platelet count increased, rash and pyrexia), which were all classified as mild (Grade 1). No treatment-related serious adverse events were reported. No liver enzyme elevations requiring steroid treatment were recorded. •Results of plasma a-Gal A activity for the four patients as of the cutoff date are shown in the table below. All four patients exhibited above normal levels of ?-Gal A activity by Week 12 following treatment through 14 weeks for the most recently treated patient and 52 weeks for the first patient treated. ?-Gal A activity ranged from a 2-fold to 15-fold increase above mean normal activity levels as of the last date of measurement. In the one patient with elevated levels pre-treatment, plasma lyso-gb3 levels decreased by approximately 40% from baseline within ten weeks after dosing through Week 32. The other three patients, with low baseline levels of lyso-Gb3, maintained steady lyso-Gb3 levels through the cutoff date. •Prophylactic steroids were not administered per the study protocol, and as of the cutoff date, no patients had exhibited liver enzyme elevations requiring steroid treatment. •Several of the patients reported subjective improvements in quality-of-life measures as of the cutoff date. Three of the four patients exhibited improvements in anhidrosis (inability to sweat) or hypohydrosis (reduced ability to sweat), a primary and common Fabry disease symptom. •One of the four patients was on ERT, and one was formerly on ERT but had not received ERT in the prior six months. Following treatment of these patients with isaralgagene civaparvovec, investigators withdrew one of these patients from ERT after the cutoff date and are planning to withdraw the other patient from ERT based on the stability of ?-Gal A activity. 33 -------------------------------------------------------------------------------- Table of Contents Phase 1/2 STAAR Study: Plasma ?-Gal A activity [[Image Removed: sgmo-20210930_g1.jpg]] Biomarker results were evaluated from the 4 patients in the first 2 dose cohorts (0.5e13 vg/kg and 1.0e13 vg/kg) as of the cutoff date ofSeptember 17, 2021 . (*) Fold change was calculated at last measured time point. ?-Gal A activity was measured using a 3-hour reaction time and presented in nmol/h/mL. For Patients 1 and 4 this was sampled at ERT trough. Normal range and mean were determined based on healthy male individuals. Summary of Preliminary Safety and Efficacy Results from the Phase 1/2 PRECIZN-1 Study ofSAR415536 •PRECIZN-1 is an ongoing first-in-human, open label, single arm, multi-site study evaluating safety and tolerability ofSAR445136 (n=8; aged 18-40 years), with severe SCD across sixU.S. sites. •Eligible subjects underwent mobilization and apheresis with plerixafor. Autologous hematopoietic stem and progenitor cells, or HSPCs, were transfected ex vivo with ZFN messenger ribonucleic acid to manufactureSAR445136 . A single IV infusion was administered at least 72 hours after pre-conditioning with busulfan. •Subjects were monitored for stem cell engraftment and hematopoietic recovery, adverse events, clinical and laboratory hemolysis markers, total hemoglobin and fetal hemoglobin, percentage of F cells and sickle-cell related events post-SAR445136 infusion. •One subject failed to mobilize adequate cells. Of the seven subjects that underwent mobilization and apheresis through theJune 25, 2021 cutoff date, five achieved successful target yields of HSPCs. One subject discontinued due to intercurrent cholangitis. Baseline patient characteristics of the four patients infused as of the cutoff date are in Table 1 below. •All four patients improved clinically sinceSAR445136 infusion through the cutoff date. Total hemoglobin stabilized at 9-10 g/dL by week 26 postSAR445136 infusion along with improvements in the clinical markers of hemolysis in all four subjects. Percent fetal hemoglobin levels were 1-11% at screening, increasing to 15-29% by week 13 in all four subjects, to 14-39% by week 26 in the three subjects with at least 26 weeks of follow up, and persisting at 35% in one subject with 65 weeks of follow up (see Figure 1 below). Percent F cells increased to 49-94% in three subjects with at least 26 weeks of follow up, persisting at 90% in one subject with 65 weeks of follow up. The fourth subject had 87.5% F cells at 13 weeks of follow up. •As of theJune 25, 2021 cutoff date,SAR445136 was generally well tolerated with no infusion related reactions. The adverse events reported were consistent with plerixafor mobilization and busulfan myeloablation therapy. No adverse events or serious adverse events were reported as related toSAR445136 . 34 -------------------------------------------------------------------------------- Table of Contents Table 1. Baseline Characteristics and Clinical History Subject 103-002 Subject 100-001 Subject 102-001 Subject 103-003 Genotype HbSB0 HbSS HbSS HbSS Gender Female Female Male Male Age at consent, years 35 20 18 26 Pain crises/2 years, n 10 22 0 6 Active chest syndrome events/2 2 0 4 0 years, n Regular, chronic RBC None Yes Yes Yes transfusion therapy Status as of the cutoff date Week 65 completed Week 26 completed Week 26 completed Week 13 completed No blood transfusions No blood transfusions No blood transfusions No blood transfusions post engraftment post engraftment
post engraftment post engraftment
[[Image Removed: sgmo-20210930_g2.jpg]]
HbF = Fetal hemoglobin, HbS = Sickle hemoglobin, HbA = Adult hemoglobin, HbA2 =
Hemoglobin A2
35
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Table of Contents
Summary of Updated Results from the Phase 1/2 Alta Study of Giroctocogene
Fitelparvovec
•Eleven male patients participated in the study overall, with five patients in
the 3e13-vg/kg highest dose cohort. As of the May 19, 2021 cutoff date, one
patient in the highest dose cohort had not completed two years (104 weeks) of
follow up, resulting in patients having been followed for 95 to 195 weeks
overall.
•As of the May 19, 2021 cutoff date, the most commonly reported
treatment-related adverse events included elevated liver enzymes and
infusion-related reactions: increased alanine aminotransferase, or ALT (5/11
(45.5%) overall; 3/5 (60.0%) in the highest dose cohort), increased aspartate
aminotransferase, or AST (3/11 (27.3%) overall; 2/5 (40.0%) in the highest dose
cohort), pyrexia (3/11 (27.3%) overall; 3/5 (60.0%) in the highest dose cohort),
and tachycardia (2/11 (18.2%) overall; 2/5 (40.0%) in the highest dose cohort).
•Treatment-related serious adverse events were reported in one patient in the
highest dose cohort who experienced hypotension and fever with onset
approximately six hours after giroctocogene fitelparvovec infusion; the events
fully resolved with treatment and did not delay post-infusion discharge the next
day. ALT elevations requiring more than seven days of corticosteroid treatment
were observed in four of the five patients in the highest dose cohort as of the
May 19, 2021 cutoff date; elevations in ALT were managed with a tapering course
of corticosteroids (median 58 days; range: 11-134 days), with maintenance of
clinically meaningful levels of FVIII activity, as evidenced by a lack of
bleeding events around the time of corticosteroid treatment and minimal bleeding
events afterwards.
•As of the May 19, 2021 cutoff date, no patient in the study developed an
inhibitor to FVIII, and there have been no thrombotic events and no hepatic
masses detected.
•Patients in the highest dose cohort demonstrated FVIII activity as shown in the
table below through week 104 for the four patients in this cohort with available
data at week 104. In this cohort, the annualized bleeding rate, meaning the
number of all bleeding episodes starting three weeks after study drug infusion
divided by the observation period in years, was zero for the first year
post-infusion and 0.9 throughout the total duration of follow up through week
104. In the highest dose cohort, two patients experienced a total of three
bleeding events (two traumatic; one unknown) necessitating treatment with
exogenous FVIII; one of these events occurred in a target joint. As of the
May 19, 2021 cutoff date, no patients in this cohort have resumed prophylaxis.
Table. Factor VIII Activity Levels by 1-Stage and Chromogenic Assay for the Giroctocogene Fitelparvovec 3e13-vg/kg Cohort
Factor VIII Activity, % Normal, Study Week
Mean (SD)
Parameter Week 12 Week 24 Week 52 Week 78 Week 104
1-stage clotting 110.9 107.5 97.9 79.4 46.4
(36.4) (79.2) (135.5) (73.3) (37.0)
Chromogenic 71.7 68.9 62.2 56.9 30.9
(24.6) (48.2) (84.2) (55.1) (28.1)
Patients, n 5 5 4a 4a 4b(a) There was one patient each that was unable to attend visits at Weeks 52 and Week 78. (b) One patient had not yet reached Week 104 of follow-up at the time of the data cut.
Estimated Impacts of Evolving COVID-19 Pandemic We have experienced and continue to experience impacts from the evolving COVID-19 pandemic on our business and operations and could continue to experience these or potentially more severe impacts as the pandemic evolves inthe United States ,France ,United Kingdom and locations of our clinical studies and trials. We continue to conduct business operations pursuant to a modified operating plan that includes enhanced workplace safety protocols and modified working schedules. These protocols and modifications have slowed our productivity and disrupted our business to a moderate degree and are likely to continue doing so through the remainder of 2021 and possibly in 2022. For example, we have experienced periodic short-term disruptions to our onsite operations while addressing positive cases of COVID-19 by onsite workers, and our operations could experience longer term disruptions in the future in the event of a significant outbreak of COVID-19 among our onsite workers. Moreover, from time to time, we have been required to reorganize and prioritize our resources to mitigate moderate COVID-19 36 -------------------------------------------------------------------------------- Table of Contents impacts arising from travel restrictions, density restrictions and supply constraints. If our programs encounter longer-term disruptions, it could impact our ability to support our biopharmaceutical partners as contemplated in our collaboration agreements and could result in adjustments to our timelines, although we do not believe that the short-term disruptions to date have resulted in any such impacts. Additionally, our Phase 1/2 STAAR clinical study evaluating isaralgagene civaparvovec has experienced and continues to experience delays in its timeline due in part to COVID-19 impacts and the diversion of healthcare resources to fight the pandemic. For example, we estimate that the opening of the first clinical trial site in theUnited Kingdom for this study experienced a delay of approximately one year due to the significant prevalence of COVID-19 in theUnited Kingdom . Additionally, we have experienced delays in recruiting, enrolling and dosing patients for this study, due in part to the hesitation of patients to travel by plane to trial sites not within driving distance and to enter medical facilities during the pandemic and also due in part to trial sites prioritizing COVID-19 clinical care over research activities such as the STAAR study. The study has also experienced delays when certain patients have decided to take the COVID-19 vaccine prior to enrollment or dosing in the study. Moreover, we have experienced some short-term delays in sourcing the necessary raw materials to manufacture supplies for the STAAR study and in transporting clinical trial materials due to COVID-19 impacts. We estimate that these challenges have set back our STAAR study timelines three to six months. Clinical timelines for this study could be revised again if COVID-19 impacts to our recruitment, screening, enrollment and dosing of patients and to our sourcing of raw materials for this study intensify because of vaccination delays, new COVID-19 variants or unexpected events. In addition, our STEADFAST study evaluating TX200, our wholly-owned CAR-Treg cell therapy product candidate for the treatment of kidney transplant rejection, has experienced delays in its timeline due to COVID-19 impacts related to manufacturing and technology transfer challenges with our CMOs. We estimate that these challenges set back our clinical study timeline by approximately three months. While we have now enrolled the first patient in this study and expect to dose the first two patients in this study in the middle of 2022, this timeline could be revised if COVID-19 impacts result in additional delays. With respect to our partnered programs, the timelines for the studies and trials managed by our collaborators are also subject to potential delay in the future if these studies and trials experience similar challenges that we have experienced and continue to experience in our STAAR and STEADFAST studies. Going forward, we will continue to monitor the impact of COVID-19 on our operations, research commitments and clinical trials and those of our collaborators, clinical trial sites and CMOs. The magnitude of these impacts will depend, in part, on the length and severity of the COVID-19 pandemic and related government orders and restrictions, and how the pandemic limits the ability of us and our business partners to operate business in the ordinary course. Disruptions to these operations, and possibly more severe disruptions in the future that could arise due to the extension of government orders or new government orders applicable in the places we operate or our industry generally or to us and our facilities specifically, could impede our ability to conduct research in a timely manner, comply with our research obligations to our collaborators and advance the development of our therapeutic programs. These delays and disruptions could result in adverse material impacts to our business, operating results and financial condition. We do not anticipate any material negative impact on our financial condition in 2021 as a result of the COVID-19 pandemic. We believe we are well positioned financially in the near term to execute on our wholly-owned and partnered research and clinical programs. As ofSeptember 30, 2021 , we had$519.0 million in cash, cash equivalents, and marketable securities. Although we believe we are well-capitalized currently, the effects of the evolving pandemic could result in disruption of global financial markets, impairing our ability to access capital, which could negatively affect our liquidity in the future. We do not currently anticipate any material impairments to the valuation of the financial assets or goodwill on our balance sheet as a result of the COVID-19 pandemic. We do not believe that the remote workplace arrangements we have implemented for our office-based employees have affected our financial reporting or control systems. The extent to which the COVID-19 pandemic will impact our business, operations and financial condition, either directly or indirectly, will depend on future developments that remain highly uncertain at the present time. These developments include the ultimate duration and severity of the pandemic, the impacts of new COVID-19 variants, travel restrictions, new public health restrictions inthe United States ,France ,United Kingdom and other countries, business closures or business disruptions and the effectiveness and timeliness of actions taken inthe United States ,France ,United Kingdom and other countries to contain and treat the disease, including the effectiveness and timing of vaccination programs. The surge of new variants of the virus has resulted and may in the future result in the return of prior orders and restrictions or new quarantine and shelter-in-place orders or other restrictions. As our understanding of events evolves and additional information becomes available, we may materially change our guidance relating to our revenues, expenses and timelines for manufacturing, clinical trials and research and development. Certain Components of Results of Operations Our revenues have consisted primarily of revenues from upfront licensing fees, reimbursements for research services, milestone achievements and research grant funding. We expect revenues to continue to fluctuate from period to period and there 37 -------------------------------------------------------------------------------- Table of Contents can be no assurance that new collaborations or partner reimbursements will continue beyond their initial terms or that we are able to meet the milestones specified in these agreements. We have incurred net losses since inception and expect to incur losses for at least the next several years as we continue our research and development activities. To date, we have funded our operations primarily through the issuance of equity securities and revenues from collaborations and research grants. We expect to continue to devote substantial resources to research and development in the future and expect research and development expenses to increase in the next several years if we are successful in advancing our product candidates from research stage through clinical trials. Pursuant to the terms of our agreements with Biogen,Kite Pharma, Inc. , or Kite, Novartis and Sanofi, certain expenses related to research and development activities will be reimbursed to us. The reimbursement funds to be received from Biogen, Kite, Novartis and Sanofi will be recognized as revenue as the related costs are incurred and collection is reasonably assured. Critical Accounting Policies and Estimates The accompanying management's discussion and analysis of our financial condition and results of operations are based upon our Condensed Consolidated Financial Statements and the related disclosures, which have been prepared in accordance with generally accepted accounting principles inthe United States . The preparation of these Condensed Consolidated Financial Statements requires us to make estimates, assumptions and judgments that affect the reported amounts in our Condensed Consolidated Financial Statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe our critical accounting policies relating to revenue recognition and valuation of long-lived assets including goodwill and intangible assets are the most significant estimates and assumptions used in the preparation of our Condensed Consolidated Financial Statements. There have been no significant changes in our critical accounting policies and estimates during the three and nine months endedSeptember 30, 2021 , as compared to the critical accounting policies and estimates disclosed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2020 Annual Report. Results of Operations for the Three and Nine Months EndedSeptember 30, 2021 and 2020 Revenues Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except percentage values) (in thousands, except percentage values) 2021 2020 Change % 2021 2020 Change % Revenues$ 28,563 $ 57,763 $ (29,200) (51%)$ 82,715 $ 92,392 $ (9,677) (10%) Total revenues consisted of revenues from collaboration agreements and research grants. We anticipate revenues over the next several years will be derived primarily from our collaboration agreements with Biogen, Kite, Novartis, Pfizer and Sanofi as we continue to recognize upfront and milestone payments received under such agreements over time. The decrease of$29.2 million in revenues for the three months endedSeptember 30, 2021 , compared to the same period in 2020, was primarily attributed to a decrease of$39.3 million of milestone fees and recognition of upfront license fees related to our giroctocogene fitelparvovec and C9ORF72 collaboration agreements with Pfizer driven by completion of activities under these collaborations in the fourth quarter of 2020, and a decrease of$2.3 million in revenue related to our collaboration agreement with Sanofi, primarily due to a change in estimate regarding project costs, resulting in a decrease of proportional cumulative performance and a corresponding adjustment to revenue under the agreement. These decreases were partially offset by increases of$11.5 million related to our collaboration agreement with Novartis, which became effective inJuly 2020 , and an increase of$1.3 million in revenue related to our collaboration agreement with Biogen. The decrease of$9.7 million in revenues for the nine months endedSeptember 30, 2021 , compared to the same period in 2020, was primarily attributed to a decrease of$46.7 million of milestone fees and recognition of upfront license fees related to our giroctocogene fitelparvovec and C9ORF72 collaboration agreements with Pfizer driven by completion of activities under these collaborations in the fourth quarter of 2020, a decrease of$2.9 million in research revenue related to our collaboration agreement with Kite, a decrease of$2.5 million in revenue related to our collaboration agreement with Sanofi, primarily due to a change in estimate regarding project costs, resulting in a decrease of proportional cumulative performance and a corresponding adjustment to revenue under the agreement, and a decrease of$1.3 million in revenue related to sublicense fees under our agreement withDow AgroSciences LLC . These decreases were partially offset by increases of$29.0 million and$14.4 million 38 -------------------------------------------------------------------------------- Table of Contents due to the recognition of upfront license fees and research revenue under our collaboration agreements with Novartis and Biogen, respectively. Operating expenses Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except percentage values) (in
thousands, except percentage values)
2021 2020 Change % 2021 2020 Change %
Operating expenses:
Research and development $ 62,498 $ 45,287 $ 17,211 38% $ 179,018 $ 128,289 $ 50,729 40%
General and administrative 14,501 16,177 (1,676) (10%) 47,135 50,223 (3,088) (6%)
Total operating expenses $ 76,999 $ 61,464 $ 15,535 25% $ 226,153 $ 178,512 $ 47,641 27%
Research and Development Expenses
Research and development expenses consisted primarily of compensation related
expenses, including stock-based compensation, laboratory supplies, preclinical
and clinical studies, manufacturing clinical supply, contracted research, and
allocated facilities and information technology expenses.
The increase of $17.2 million in research and development expenses for the three
months ended September 30, 2021 , compared to the same period in 2020, was
primarily driven by a $7.6 million increase in preclinical, clinical and lab
supply expenses due to the timing of our trials and increased activity
attributed to our Biogen and Novartis collaborations, a $4.6 million increase in
manufacturing and overhead costs as we ramp up our internal manufacturing
operations, and a $3.3 million increase in compensation expense as a result of
increased headcount to support our programs, clinical trials and manufacturing
operations. Stock-based compensation expense included in research and
development expenses was $4.9 million and $3.6 million for the three months
ended September 30, 2021 and 2020, respectively.
The increase of $50.7 million in research and development expenses for the nine
months ended September 30, 2021 , compared to the same period in 2020, was
primarily driven by a $21.3 million increase in preclinical, clinical and lab
supply expenses due to the timing of our trials and increased activity
attributed to our new collaborations, a $16.2 million increase in compensation
expense as a result of increased headcount to support our programs, clinical
trials and manufacturing operations, and a $12.6 million increase in
manufacturing and overhead costs as we ramp up our internal manufacturing
operations. Stock-based compensation expense included in research and
development expenses was $14.6 million and $10.0 million for the nine months
ended September 30, 2021 and 2020, respectively.
We expect to continue to devote substantial resources to research and
development in the future and expect research and development expenses to
increase in the next several years if we are successful in advancing our
clinical programs and if we are able to progress our earlier stage product
candidates into clinical trials.
The length of time required to complete our development programs and our
development costs for those programs may be impacted by the scope and timing of
enrollment in clinical trials for our product candidates, our decisions to
pursue development programs in other therapeutic areas, and whether we pursue
development of our product candidates with a partner or collaborator or
independently. For example, our product candidates are being developed in
multiple therapeutic areas, and we do not yet know how many of those therapeutic
areas we will continue to pursue. Furthermore, the scope and number of clinical
trials required to obtain regulatory approval for each pursued therapeutic area
is subject to the input of the applicable regulatory authorities, and we have
not yet sought such input for all potential therapeutic areas that we may elect
to pursue, and even after having given such input, applicable regulatory
authorities may subsequently require additional clinical studies prior to
granting regulatory approval based on new data generated by us or other
companies, or for other reasons outside of our control. As a condition to any
regulatory approval, we may also be subject to post-marketing development
commitments, including additional clinical trial requirements. As a result of
the uncertainties discussed above, we are unable to determine the duration of or
complete costs associated with our development programs.
Our potential therapeutic products are subject to a lengthy and uncertain
regulatory process that may not result in our receipt of any necessary
regulatory approvals. Failure to receive the necessary regulatory approvals
would prevent us from commercializing the product candidates affected. In
addition, clinical trials of our product candidates may fail to demonstrate
safety and efficacy, which could prevent or significantly delay regulatory
approval. The full extent of the impact of the COVID-19 pandemic on our
business, operations and financial results will depend on numerous evolving
factors that we may not be able to accurately predict. A discussion of the risks
and uncertainties with respect to our research and development activities,
including completing the development of our product candidates, and the
consequences to our business, financial position and growth prospects can be
found in "Risk Factors" in Part I, Item 1A of the 2020 Annual Report, as
supplemented by the risks and uncertainties described under "Risk Factors" in
Part II, Item 1A of this Quarterly Report.
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General and Administrative Expenses
General and administrative expenses consist primarily of compensation related
expenses including stock-based compensation for executive, legal, finance and
administrative personnel, professional fees, allocated facilities and
information technology expenses, and other general corporate expenses.
The decrease of $1.7 million in general and administrative expenses for the
three months ended September 30, 2021 , compared to the same period in 2020, was
primarily due to a $0.9 million decrease in legal and professional fees, and a
decrease of $0.8 million due to reduced headcount and related compensation
costs. Stock-based compensation expense included in general and administrative
expenses was $2.9 million and $3.1 million for the three months ended
September 30, 2021 and 2020, respectively.
The decrease of $3.1 million in general and administrative expenses for the nine
months ended September 30, 2021 , compared to the same period in 2020, was
primarily due to a $2.6 million decrease in legal and professional fees, and a
$0.3 million decrease in allocated facility overhead costs. Stock-based
compensation expense included in general and administrative expenses was
$10.2 million and $9.1 million for the nine months ended September 30, 2021 and
2020, respectively.
As we continue to build out our product portfolio and advance our product
candidates into the clinic, we expect higher general and administrative expenses
to support the growth of the business.
Interest and other income, net
Interest and other income, net, decreased by $1.6 million for the three months
ended September 30, 2021 , compared to the same period in 2020, primarily due to
a decrease of $1.4 million as a result of fluctuations in foreign exchange
rates, and a decrease of $0.7 million in interest income due to lower portfolio
yields as a result of decrease in interest rates, partially offset by an
increase of $0.5 million in research tax credits earned by Sangamo France.
Interest and other income, net, decreased by $2.9 million for the nine months
ended September 30, 2021 , compared to the same period in 2020, primarily due to
a decrease of $3.2 million in interest income due to lower portfolio yields as a
result of decrease in interest rates, and a decrease of $1.7 million as a result
of fluctuations in foreign exchange rates, partially offset by an increase of
$2.0 million in research tax credits earned by Sangamo France.
Liquidity and Capital Resources
Liquidity
Since inception, we have incurred significant net losses and we have funded our
operations primarily through the issuance of equity securities, payments from
corporate collaborators and strategic partners and research grants.
As of September 30, 2021 , we had cash, cash equivalents, and marketable
securities totaling $519.0 million compared to $692.0 million as of December 31,
2020 . Our most significant use of capital was for employee compensation and
external research and development expenses, such as manufacturing, clinical
trials and preclinical activity related to our therapeutic programs. Our cash
and investment balances are held in a variety of interest-bearing instruments,
including U.S. government-sponsored entity debt securities, commercial paper,
money market funds, corporate debt securities, asset-backed securities and
certificates of deposit. Cash in excess of immediate requirements is invested in
accordance with our investment policy with a view toward capital preservation
and liquidity.
In August 2020 , we entered into an Open Market Sale Agreement, or the sales
agreement, with Jefferies LLC , or Jefferies, providing for the sale of up to
$150.0 million of our common stock from time to time in "at-the-market"
offerings under an existing shelf registration statement. During the nine months
ended September 30, 2021 , we sold 2,007,932 shares of our common stock under the
sales agreement for net proceeds of approximately $27.1 million .
While we expect our rate of cash usage to increase in the future, in particular
to support our product development endeavors, we currently believe that our
available cash, cash equivalents, and marketable securities and expected
revenues from collaborations, strategic partnerships and research grants, will
be adequate to fund our currently planned operations through at least the next
12 months from the date the Condensed Consolidated Financial Statements are
issued. During this period of uncertainty and volatility related to the COVID-19
pandemic, we will continue to monitor our liquidity.
Cash Flows
Operating activities
Net cash used in operating activities was $180.5 million for the nine months
ended September 30, 2021 , primarily reflecting our net loss of $140.8 million , a
decrease in deferred revenues of $62.3 million , an increase in prepaid expenses
and other assets by $6.5 million , a decrease in accounts payable and other
accrued liabilities by $4.7 million , a decrease in long term
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portion of lease liabilities by $3.2 million , an increase in accounts receivable
by $2.7 million , and a decrease in accrued compensation and employee benefits by
$1.9 million . These decreases were partially offset by $40.1 million of non-cash
expenses related to stock-based compensation, depreciation and amortization,
amortization of premium (discount) on marketable securities, and amortization
and other changes in operating lease right-of-use assets.
Net cash provided by operating activities was $174.2 million for the nine months
ended September 30, 2020 , primarily reflecting an increase in deferred revenues
of $235.6 million due to cash received in connection with the Biogen
collaboration agreement and the Novartis collaboration agreement, and $23.1
million of non-cash expenses related to stock-based compensation and
depreciation, partially offset by our net loss of $80.4 million .
Investing activities
Net cash provided by investing activities was $195.6 million for the nine months
ended September 30, 2021 , mostly related to net maturities, sales and purchases
of marketable securities, partially offset by $20.4 million purchases of
property and equipment. Net cash used in investing activities for the nine
months ended September 30, 2020 was $141.2 million , mostly related to net
maturities and purchases of marketable securities, and purchases of property and
equipment.
Financing activities
Net cash provided by financing activities was $30.7 million for the nine months
ended September 30, 2021 , mostly related to $27.9 million of proceeds from the
at-the-market offering, net of offering expenses of $0.8 million . Net cash
provided by financing activities for the nine months ended September 30, 2020
was $146.2 million , primarily reflecting the $145.4 million estimated fair value
of the shares issued to Biogen offset by $2.9 million of issuance costs related
to the issuance, and an increase of $4.2 million related to proceeds from the
exercise of stock options and restricted stock units and purchases under the
employee stock purchase plan.
Operating Capital and Capital Expenditure Requirements
We anticipate continuing to incur operating losses for at least the next several
years. While we expect our rate of cash usage to increase in the future, in
particular to support our product development endeavors, we currently believe
that our available cash, cash equivalents, and marketable securities and
expected revenues from collaborations, strategic partners and research grants,
will be adequate to fund our currently planned operations through at least the
next 12 months from the date the Condensed Consolidated Financial Statements are
issued. Although we believe we are well capitalized currently, the effects of
the ongoing COVID-19 pandemic could result in significant disruption of global
financial markets, impairing our ability to access capital, which could in the
future negatively affect our liquidity. Future capital requirements beyond the
next 12 months will be substantial, and we will need to raise substantial
additional capital to fund the development, manufacturing and potential
commercialization of our product candidates through equity or debt financing. In
addition, as we focus our efforts on proprietary human therapeutics, we will
need to seek FDA approvals of our product candidates, a process that could cost
in excess of hundreds of millions of dollars per product. We regularly consider
fund-raising opportunities and may decide, from time to time, to raise capital
based on various factors, including market conditions and our plans of
operation. Additional capital may not be available on terms acceptable to us, or
at all. If adequate funds are not available, or if the terms of potential
funding sources are unfavorable, our business and our ability to advance our
product candidate pipeline would be harmed. Furthermore, any sales of additional
equity securities, including sales pursuant to our at-the-market offering
program, may result in dilution to our stockholders, and any debt financing may
include covenants that restrict our business.
Our future capital requirements will depend on many forward-looking factors,
including the following:
•the initiation, progress, timing and completion of clinical trials for our
product candidates and potential product candidates;
•the outcome, timing and cost of regulatory approvals;
•the success of our collaboration agreements;
•delays that may be caused by changing regulatory requirements;
•the number of product candidates that we pursue;
•the costs involved in filing and prosecuting patent applications and enforcing
and defending patent claims;
•the timing and terms of future in-licensing and out-licensing transactions;
•the cost and timing of establishing sales, marketing, manufacturing and
distribution capabilities;
•the cost of procuring clinical and commercial supplies of our product
candidates;
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Table of Contents •the extent to which we acquire or invest in businesses, products or technologies, including the costs associated with such acquisitions and investments; and •the costs of potential disputes and litigation. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K. Contractual Obligations Our future minimum contractual obligations as ofDecember 31, 2020 were reported in the 2020 Annual Report. Other than as described below, during the nine months endedSeptember 30, 2021 , there have been no other material changes outside the ordinary course of our business from the contractual obligations previously disclosed in our 2020 Annual Report. InJanuary 2021 , we also entered into a new lease to acquire approximately 5,800 square feet of research and office space in Valbonne,France that expires inJanuary 2030 . The contractual obligations during the lease term are approximately$0.8 million . InOctober 2021 , we entered into an agreement to extend the lease of our research and office space inRichmond, California . For further information on the lease, see Note 11 in the accompanying Notes to Condensed Consolidated Financial Statements.
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