CARTESIAN THERAPEUTICS, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report and with our audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , which we filed with theSEC onMarch 10, 2022 . In addition, you should read the "Risk Factors" and "Information Regarding Forward-Looking Statements" sections of this Quarterly Report and our Annual Report on Form 10-K for the year endedDecember 31, 2021 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Overview
We are a clinical-stage biopharmaceutical company. Our ImmTOR® platform encapsulates rapamycin, also known as sirolimus, an FDA approved immunomodulator, in biodegradable nanoparticles. ImmTOR is designed to induce antigen-specific immune tolerance.
We continually seek to enhance ImmTOR. In recent preclinical studies we have
conducted, we have observed that ImmTOR may have synergistic activity with
interleukin-2, or IL-2, molecules that have been engineered to be selective for
regulatory T cells, or Tregs. Treg-selective IL-2 mutant molecules, or IL-2
muteins, have been shown to transiently expand all pre-existing Tregs in
preclinical studies conducted by others. We have observed in preclinical studies
that the combination of ImmTOR, a Treg-selective IL-2 mutein and an antigen,
exhibited substantial synergistic activity in inducing and expanding
antigen-specific Tregs beyond ImmTOR alone with evidence of enhanced durability
of immune tolerance and the potential for ImmTOR dose sparing. This combination
of ImmTOR with a Treg selective IL-2 molecule represents an evolution of the
ImmTOR platform, which we call ImmTOR-IL™. We believe this combination has the
potential to be a "first-in-class" antigen specific IL-2 therapy for autoimmune
disease. We believe ImmTOR and ImmTOR-IL have the potential to enhance both the
efficacy and safety of biologic therapies (including gene therapies), improve
product candidates under development, and enable novel therapeutic modalities in
autoimmune disease.
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Our Product Candidates
Our ImmTOR platform has a broad range of potential applications. Our product development strategy is built on the following three distinct pillars.
Biologic therapies. Biologic therapies are a class of biologic drugs frequently
used to treat rare diseases. Through our analysis of biologic drugs, including
in our preclinical studies, we have observed that enzymes foreign to the human
body, such as enzymes derived from microbes or replacement enzymes in the case
of patients that are deficient in the specific enzyme, are especially prone to
causing undesired immune responses. Our partnered product candidate, SEL-212,
which is currently in Phase 3 clinical development, consists of ImmTOR
co-administered with pegadricase, a pegylated uricase enzyme of fungal origin.
This is an example of an immunogenic enzyme that we are combining with ImmTOR
with the intention of improving the enzyme's efficacy and safety. We believe
that ImmTOR has the potential to enable and expand the use of enzymes derived
from microbial sources, such as bacterial immunoglobulin A, or IgA, protease for
the treatment of IgA nephropathy and bacterial IgG protease, or Xork, for the
treatment of IgG-mediated autoimmune disease flares.
Gene therapies. We believe gene therapies have the potential to address key
unmet medical needs for many rare genetic diseases, but undesired immune
responses to the viral vectors used for gene replacement, augmentation and
editing may be restricting their broader use. AAV immunogenicity and AAV
toxicity represent two major challenges for the gene therapy field; in many
cases these two issues are inextricably linked. Immunogenicity of AAV vectors is
thought to cause or exacerbate many of the adverse events associated with AAV
gene therapy. Induction of acute inflammation and capsid-specific CD8 T cells by
AAV gene therapy is thought to contribute to observations of hepatotoxicity,
which has been associated with loss of transgene expression. The formation of
neutralizing antibodies against AAV after initial treatment with AAV mediated
gene therapies effectively prevents the possibility of re-dosing in patients who
may benefit from additional doses due to either the failure to achieve
therapeutic benefit or loss of transgene expression over time. Additionally, a
significant number of patients who would benefit from treatment by gene
therapies are ineligible due to pre-existing immunity to the AAV vectors from a
natural infection. This preexisting immunity could be addressed through an IgG
protease pre-treatment to open a dosing window for AAV gene therapies. We
believe that the combination of ImmTOR and Xork could simultaneously address the
two key issues facing the AAV gene therapy modality and make them more
accessible while also making them safer and more durable.
Tolerogenic Therapies for Autoimmune Disease: Autoimmune diseases are caused by
a breakdown in natural tolerance to our own self-antigens. With over 24 million
Americans afflicted with autoimmune diseases, there is a large unmet medical
need. As the ImmTOR platform is designed to induce or expand antigen specific T
regulatory cells, we believe the ImmTOR platform has the potential to treat
autoimmune diseases by restoring self-tolerance to auto-antigens.
In our preclinical studies, we observed that ImmTOR combined with a
Treg-selective IL-2 mutant protein, or IL-2 mutein, exhibited substantial
synergistic activity in increasing the percentage and durability of total Treg
expansion in the spleen. We believe that this combination has the potential to
be a best-in-class therapy in diseases where expansion of total Treg may prove
beneficial. This antigen specificity differentiates ImmTOR-IL from other IL-2
mutein approaches which do not show an antigen specific T-cell expansion. Thus,
we believe that not only is ImmTOR-IL a potentially best in class IL-2 where
generalized T cell expansion can be beneficial, but also a "first in class"
antigen specific IL-2 therapy.
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Below is a summary of our ongoing discovery, research, and development programs:
Program Phase of Development Anticipated Next Steps Commercial Rights
Biologic Therapies
SEL-212 Phase 3 clinical trials
(Chronic (DISSOLVE I / DISSOLVE II) Top-line data Q1 2023 Sobi
Refractory Gout)
IgA nephropathy Preclinical IND enabling studies, 2022 Selecta
Gene Therapies
SEL-302
(Methylmalonic IND filed / Phase 1 Study commencement, Q4 2022 Selecta
acidemia (MMA))
SEL-313 (Ornithine
Transcarbamylase IND-enabling Currently paused (OTC) Deficiency) SEL-018 (IgG Preclinical IND enabling studies, 2022
protease (Xork)) Pompe disease Preclinical Plans to be announced
AskBio
by our collaborator
Duchenne muscular Preclinical Plans to be announced Sarepta
dystrophy (DMD) by our collaborator Limb-girdle Plans to be announced muscular dystrophy Preclinical by our collaborator Sarepta (LGMD) Two indications Plans to be announced for lysosomal Preclinical by our collaborator Takeda storage disorders Tolerogenic Therapies for Autoimmune Disease Proprietary IL-2 Preclinical
receptor agonist Primary biliary Preclinical
cholangitis (PBC)
Biologic Therapies - Chronic Refractory Gout
SEL-212 consists of ImmTOR co-administered with pegadricase. Our pegadricase consists of a yeast-derived uricase modified with polyethylene glycol moieties. Uricase is an enzyme endogenous to all mammals, except for humans and certain primates, which converts uric acid to the more soluble metabolite, allantoin. There is a natural limit to the amount of uric acid that can be excreted by the kidneys, which decreases with age and can be reduced by some medications. By converting uric acid to allantoin, uricase provides an additional way for the body to reduce uric acid.
Biologic Therapies - IgA Nephropathy
The second indication in our biologic therapies program is IgA nephropathy, an autoimmune kidney disease that occurs when immune complexes of a subclass of antibodies called immunoglobulin A1, or IgA1, accumulates in the kidneys. Previous studies in animal models conducted at independent laboratories demonstrated that bacterial IgA protease has the potential to remove injurious IgA immune complexes from kidneys and reduce inflammation, fibrosis, and hematuria. We believe these results suggest that IgA protease can potentially decrease the rate of disease progression and possibly even reverse the disease. The barrier to IgA protease commercialization has been the bacterial origin of the protease, which makes it highly immunogenic. Based on the learnings of SEL-212, we believe the combination of ImmTOR with an IgA protease will enable repeated dosing to treat IgA nephropathy.
Currently, Ginkgo Bioworks Holdings, Inc. and
Gene Therapies - Methylmalonic Acidemia
Our lead therapeutic gene therapy program, SEL-302, is intended to use ImmTOR to enhance the treatment of methylmalonic acidemia, or MMA, an inherited disorder in which the body is unable to process certain proteins and fats (lipids) properly. This program was previously being conducted under our collaboration with AskBio. In October andNovember 2020 , we received rare pediatric disease designation and orphan drug designation, respectively, from the FDA for MMA-101, for the 31
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treatment of MMA due to methylmalonyl-CoA mutase, or MMUT gene mutations. See "?Licenses and Collaborations?AskBio" for more information. InApril 2021 , we were notified by AskBio that it intended to opt-out of development of the MMA indication. The feasibility study and license agreement with AskBio, or AskBio Collaboration Agreement, otherwise remains in effect. We filed an IND to conduct a Phase 1/2 clinical trial of our SEL-302 product candidate in pediatric patients with methylmalonic acidemia in the third quarter of 2021. OnNovember 23, 2021 , this trial was placed on clinical hold by the FDA, with questions specifically relating to CMC of the AAV vector. OnFebruary 9, 2022 , we submitted a written response to the FDA to answer its questions. OnMarch 9, 2022 , we received a letter from the FDA indicating the clinical hold was removed and the trial may proceed. ImmTOR manufacturing, controlled by us, continues to proceed in accordance with our expectations and we have not observed any impact to any of our ImmTOR programs.
Gene Therapies - OTC Deficiency
Our second proprietary gene therapy product candidate, SEL-313, is being developed to treat ornithine transcarbamylase, or OTC deficiency, and is currently in preclinical development. OTC deficiency is a rare genetic disorder that causes ammonia to accumulate in the blood due to mutations in the OTC gene, which is critical for proper function of the urea cycle. The most severe form of the disorder presents within the first few days of life. Severe symptoms include inability to control body temperature and breathing rate, seizures, coma, developmental delays and intellectual disability. Less severe forms of the disorder are characterized by delirium, erratic behavior, aversion to high protein foods, vomiting and seizures. The development of this program is currently paused.
Gene Therapies - IgG Protease (Xork)
We have exclusively licensed Xork, an IgG-specific protease from Genovis, an enzyme technology company. We plan to develop Xork, either alone or in combination with our ImmTOR platform, with the goal of enabling the dosing of transformative gene therapies in patients with pre-existing AAV immunity due to natural exposures to AAV viruses. Currently, significant proportions of the potential patient populations for many gene therapy trials are ineligible for treatment by AAV mediated gene therapies due to pre-existing antibodies which limits transduction efficiency of the therapy and could trigger potentially dangerous immune responses. IgG proteases are derived from bacteria. Xork exhibits low cross-reactivity to antibodies in normal human serum and is differentiated from IgG proteases derived from Streptococcus pyogenes, a common human pathogen.
Tolerogenic Therapies for Autoimmune Disease - ImmTOR & ImmTOR-IL
We intend to apply our ImmTOR platform to treat autoimmune diseases. In preclinical studies, we have observed ImmTOR's ability to induce antigen-specific T regulatory cells. We believe that ImmTOR, in combination with an autoantigen of interest, could create self-tolerance to auto-antigens and thus be a novel approach to the treatment of autoimmune diseases. Additionally, in preclinical studies we have observed ImmTOR, in combination with IL-2 muteins, expanding T-regulatory cells beyond IL-2 alone and we intend to pursue a combination of ImmTOR and IL-2 (ImmTOR-IL) in diseases where general T cell expansion has shown a therapeutic benefit. Additionally, we have observed in preclinical studies that the combination of ImmTOR, a Treg-selective IL-2 mutein and an antigen, exhibited substantial synergistic activity in inducing and expanding antigen specific regulatory T cells when ImmTOR and IL-2 is combined with an antigen of interest. We intend to pursue and develop treatments for autoimmune diseases with well-defined antigens using either ImmTOR or ImmTOR-IL.Cyrus Biotechnology, Inc. , a collaboration partner, is engineering a proprietary IL-2 protein to combine with the ImmTOR platform to potentially mitigate unwanted immune responses by reducing the inherent immunogenicity of the protein while also promoting immune tolerance. The IL-2 pathway influences critical aspects of both immune stimulation and immune regulation, through the development and expansion of Treg cells. These Treg cells are a specialized subpopulation of T cells involved in suppressing certain immune responses and maintaining the body's self-tolerance. In preclinical studies investigating the effects of ImmTOR in combination with a Treg-selective IL-2 mutant protein, or IL-2 mutein, we have observed a substantial synergistic activity in increasing the percentage and durability of Treg expansion in the spleen. Our lead autoimmune diseases indication is PBC, a T cell driven autoimmune disease that causes progressive destruction of the bile ducts. Patients with PBC are in need of a highly targeted, liver-directed approach to treating the root cause of the disorder. We believe PBC has a well-defined target antigen, significant unmet medical need, and is well suited to the application of our ImmTOR immune tolerance platform, as preclinical data suggest that ImmTOR has the potential to enhance the tolerogenic environment in the liver and provide a hepatoprotective benefit.
Licenses and Collaborations
In-licenses
Ginkgo Bioworks Holdings, Inc.
In
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transformative therapeutic potential. In return, Ginkgo is eligible to earn both upfront research and development fees and milestone payments, including certain milestone payments in the form of our common stock, clinical and commercial milestone payments of up to$85 million in cash, as well as downstream value in the form of royalties on sales. InJune 2022 , we paid$0.5 million and issued 892,857 shares of our common stock valued at$1.0 million to Ginkgo for the achievement of certain preclinical milestones. InJanuary 2022 , we entered into a Collaboration and License Agreement, or the Second Ginkgo Agreement, with Ginkgo. Under the Second Ginkgo Agreement, we will engage with Ginkgo to design novel AAV capsids with potentially improved transduction, enhanced tissue tropism and reduced immunogenicity. In return, Ginkgo is eligible to earn both upfront research and development fees and milestone payments, including certain milestone payments in the form of our common stock, clinical and commercial milestone payments of up to$207 million in cash for each of a specified number of products which have the potential to total, in the aggregate, up to$1.1 billion . Ginkgo is also entitled to potential further downstream value in the form of royalties on sales.
Genovis AB (publ.)
InOctober 2021 , we entered into a strategic licensing agreement with Genovis, or the Genovis Agreement. Under the Genovis Agreement, we paid to Genovis an upfront payment in exchange for an exclusive license to Genovis' Xork enzyme technology for all therapeutic uses in humans, excluding research, preclinical, diagnostic, and other potential non-therapeutic applications of the enzyme. Genovis is eligible to earn development and sales-based milestones, as well as tiered royalties on worldwide sales in the low double digits.
InSeptember 2021 , we entered into a Collaboration and License Agreement with Cyrus, or the Cyrus Agreement, pursuant to which Cyrus agreed to grant us an exclusive, worldwide license to certain intellectual property in order to form a protein engineering collaboration combining the ImmTOR platform with Cyrus' engineered protein therapeutics. We expect that novel engineered protein therapeutic candidates from the partnership will be used to expand our proprietary pipeline and further bolster the ImmTOR platform. In return for the licensed intellectual property, we made an upfront payment and will pay certain discovery, development, and sales-based milestones which could potentially total up to approximately$1.5 billion across multiple programs.
In
InOctober 2020 , we entered into an Option and License Agreement, or the IGAN Agreement, withIGAN Biosciences, Inc. , or IGAN. Pursuant to the IGAN Agreement, IGAN granted us an exclusive license to research, evaluate, and conduct preclinical development activities on IGAN's proprietary IgA proteases. We had an initial option term of 24 months during which we can elect to obtain an exclusive license to further develop and commercialize the product to treat all IgA-mediated diseases, including IgA nephropathy, Linear IgA bullous dermatitis, IgA pemphigus, and Henoch-Schonlein purpura. Upon execution of the IGAN Agreement, we paid IGAN a one-time upfront payment of$0.5 million and we would owe additional payments to IGAN if we were to opt-in to an exclusive license agreement, as well as upon the achievement of certain development and sales milestones. During the option term, we may terminate the IGAN Agreement immediately for any reason upon written notice to IGAN. If we opt-in to an exclusive license agreement, we may terminate the IGAN Agreement upon 120 days' written notice.
On
Out-licenses
InOctober 2021 , we entered into a strategic licensing agreement with Takeda, or the Takeda Agreement. Under the Takeda Agreement, we granted Takeda an exclusive license to our ImmTOR technology initially for two specified disease indications within the field of lysosomal storage disorders. Under the terms of the Takeda Agreement, we received an upfront payment and are entitled to receive up to$1.124 billion in future additional payments over the course of the partnership that are contingent on the achievement of development or commercial milestones or Takeda's election to continue its activities at specified development stages. We are also eligible for tiered royalties on future commercial sales of any licensed products.
Swedish Orphan Biovitrum AB (publ.)
InJune 2020 , we announced that we had entered into the Sobi License, pursuant to which we agreed to grant Sobi an exclusive, worldwide (except as toGreater China ) license to develop, manufacture and commercialize SEL-212, which is 33
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currently in development for the treatment of chronic refractory gout. InSeptember 2020 , pursuant to the Sobi License, Sobi paid us a one-time, upfront payment of$75 million . Sobi has also agreed to make milestone payments totaling up to$630 million to us upon the achievement of various development and regulatory milestones and sales thresholds for annual net sales of SEL-212, and tiered royalty payments ranging from the low double digits on the lowest sales tier to the high teens on the highest sales tier.
Additionally, Sobi purchased an aggregate of 5,416,390 shares of our common
stock at a purchase price of
Under the Sobi License, we will have operational oversight of the Phase 3
DISSOLVE clinical program of SEL-212 (DISSOLVE I and DISSOLVE II) that commenced
in
In
Sarepta Therapeutics, Inc.
InJune 2020 , we entered into a research license and option agreement with Sarepta, or the Sarepta Agreement. Pursuant to the agreement, we granted Sarepta a license to research and evaluate ImmTOR in combination with Sarepta's AAV gene therapy or gene editing technology, using viral or non-viral delivery, or the Sarepta Product, to treat Duchenne Muscular Dystrophy and certain Limb-Girdle Muscular Dystrophy subtypes, or the Sarepta Indications. Sarepta will have an option term of 24 months during which it can opt-in to obtain an exclusive license to further develop and commercialize the Sarepta Product to treat at least one Sarepta Indication, with a potential to extend the option term if Sarepta pays an additional fee to us. Sarepta made an upfront payment to us upon signing of the agreement, and we are eligible to receive additional payments under the option term. If Sarepta opts-in to an exclusive license agreement, we could receive option exercise payments per indication and we would be entitled to significant development and commercial milestone payments and tiered royalties ranging from the mid-to-high single digits based on net sales. InJune 2021 , we received a payment of$3.0 million for the achievement of certain preclinical milestones. InJune 2022 , we recorded a receivable of$2.0 million in exchange for a nine-month extension to Sarepta's options to both Duchenne muscular dystrophy and certain limb-girdle muscular dystrophies and recorded a receivable for a payment of$4.0 million for the achievement of certain non-clinical milestones
Feasibility Study and License Agreement
InAugust 2019 , we entered into a feasibility study and license agreement with AskBio, or the AskBio Collaboration Agreement. The initial product candidate being developed under this collaboration is gene therapy for MMA which can cause severe developmental defects and premature death as a result of an accumulation of toxic metabolites. We previously conducted preclinical studies for this product candidate and will leverage that previous work within the collaboration. InApril 2021 , we were notified by AskBio that it intended to opt-out of development of the MMA indication. The AskBio Collaboration Agreement otherwise remains in effect.
License Agreement for Pompe Disease
InDecember 2019 , we entered into the AskBio License Agreement which provides AskBio with exclusive worldwide rights to our ImmTOR platform to research, develop and commercialize certain AAV-gene therapy products targeting the GAA gene, or derivatives thereof, to treat Pompe Disease. Pursuant to the AskBio License Agreement, AskBio paid us upfront fees of an aggregate of$7.0 million . Also pursuant to the AskBio License Agreement, AskBio agreed to make additional payments to us based on the achievement of certain development and commercial milestones of up to an aggregate of$237.0 million . AskBio will also be obligated to make tiered royalty payments to us at percentages in the mid-to-high single digits based on achievement of certain sales milestones. We will supply AskBio with our ImmTOR platform and AskBio will be responsible for all preclinical, clinical and commercial manufacture and supply of products licensed under the AskBio License Agreement (other than ImmTOR) and carry out all other activities related to the research, development, and commercialization of such products at its sole expense, including all regulatory activities related thereto. The AskBio License Agreement contains other customary terms and conditions, including representations and warranties, covenants, termination, and indemnification obligations in favor of each party.
Impact of Global Events
COVID-19
We are closely monitoring how the COVID-19 pandemic is affecting our employees, business, supply chain, preclinical studies and clinical trials. In response to the spread of COVID-19, we have continued to have our administrative employees work outside of our offices to limit the total number of staff in our offices. We began encouraging more onsite employee presence inApril 2022 . Disruptions caused by the COVID-19 pandemic may result in difficulties or delays in initiating, 34
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enrolling, conducting or completing our planned and ongoing clinical trials, and the incurrence of unforeseen costs as a result of supply chain, preclinical study or clinical trial delays.
While the COVID-19 pandemic has not had a material impact on our clinical programs as of the date of this Quarterly Report, it could have an impact on our ability to complete the Phase 3 DISSOLVE clinical program of SEL-212, as the pandemic presents the potential inability of certain patients to complete the trial due to suffering from COVID-19, our ability to commence preclinical studies and clinical trials of our IgA nephropathy, gene therapy, and autoimmune disease programs, and our ability to obtain supply of both active drug substances and finished drug product as well as efficient execution of the overall supply chain for SEL-212 and our other programs. At this time, any impact of COVID-19 on our business, revenues, results of operations and financial condition will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as, for COVID-19, the duration of the pandemic, the emergence of new virus variants, travel restrictions and social distancing inthe United States and other countries, business closures, disruptions, mandated stay at home orders or lockdowns, supply chain disruptions, the ultimate impact on financial markets and the global economy, and the effectiveness of actions taken inthe United States and other countries to contain and treat the disease.
We are also closely monitoring the ongoing and rapidly evolving geopolitical situation inUkraine andRussia , and we have proactively undertaken mitigation steps to prioritize the safety of our patients and investigators, as well as address any potential disruptions. We have reserved existing clinical trial supplies in these countries for those already enrolled in the DISSOLVE II trial. In agreement with our study partner, Sobi, we have increased enrollment in DISSOLVE II to 153 subjects to replace subjects enrolled inRussia andUkraine who may be lost due to operational or other issues arising from instability in the region. As of the filing of this Quarterly Report, we expect to complete the DISSOLVE II trial in the fourth quarter of 2022, with topline results available in the first quarter of 2023.
Financial Operations
To date, we have financed our operations primarily through public offerings and private placements of our securities, funding received from research grants, collaboration and license arrangements and our credit facility. We do not have any products approved for sale and have not generated any product sales. Since inception, we have incurred significant operating losses. We incurred a net income and net loss of$37.4 million and$(20.0) million for the six months endedJune 30, 2022 and 2021, respectively. As ofJune 30, 2022 , we had an accumulated deficit of$392.9 million . We expect to continue to incur significant expenses and operating losses for at least the next several years as we:
•continue the research and development of our other product candidates as well as product candidates that we may be developing jointly with collaboration partners;
•seek to enhance our ImmTOR platform and discover and develop additional product candidates;
•seek to enter into collaboration, licensing and other agreements, including, but not limited to research and development, and/or commercialization agreements;
•seek regulatory approvals for any product candidates that successfully complete clinical trials;
•potentially establish a sales, marketing and distribution infrastructure and scales-up external manufacturing capabilities to commercialize any products for which we may obtain regulatory approval;
•maintain, expand and protect our intellectual property portfolio, including through licensing arrangements; and
•add clinical, scientific, operational, financial and management information systems and personnel, including personnel to support our product development and potential future commercialization efforts and to support our operations as a public company. Until we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, and license and collaboration agreements. We may be unable to raise capital when needed or on reasonable terms, if at all, which would force us to delay, limit, reduce or terminate our product development or future commercialization efforts. We will need to generate significant revenues to achieve profitability, and we may never do so. We believe that our existing cash, cash equivalents, restricted cash, and marketable securities as ofJune 30, 2022 , combined with the receivables totaling$23.9 million from Sobi and Sarepta, will enable us to fund our operating expenses and capital expenditure requirements into mid-2024. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect. 35
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The consolidated financial information presented below includes the accounts ofSelecta Biosciences, Inc. and our wholly owned subsidiaries,Selecta (RUS) LLC , a Russian limited liability company, orSelecta (RUS), andSelecta Biosciences Security Corporation , aMassachusetts securities corporation. All intercompany accounts and transactions have been eliminated.
Collaboration and license revenue
To date, we have not generated any revenue from product sales. Our revenue consists primarily of collaboration and license revenue, which includes amounts recognized related to upfront and milestone payments for research and development funding under collaboration and license agreements. We expect that any revenue we generate will fluctuate from quarter to quarter because of the timing and amounts of fees, research and development reimbursements and other payments from collaborators. We do not expect to generate revenue from product sales for at least the next several years. If we or our collaborators fail to complete the development of our product candidates in a timely manner or fail to obtain regulatory approval as needed, our ability to generate future revenue will be harmed, and will affect the results of our operations and financial position. For a further description of the agreements underlying our collaboration and license revenue, see Notes 12 and 14 to our consolidated financial statements included elsewhere in this Quarterly Report.
Research and development
Our research and development expenses consist of external research and development costs, which we track on a program-by-program basis and primarily include CMO-related costs, fees paid to CROs and internal research and development costs, which are primarily compensation expenses for our research and development employees, lab supplies, analytical testing, allocated overhead costs and other related expenses. Our internal research and development costs are often devoted to expanding our programs and are not necessarily allocable to a specific target. We have incurred a total of$400.9 million in research and development expenses from inception throughJune 30, 2022 , with a majority of the expenses being spent on the development of SEL-212 and the remainder being spent on our various discovery and preclinical stage product candidate programs and the general expansion of our technology platform. We expense research and development costs as incurred. Conducting a significant amount of research and development is central to our business model. Product candidates in clinical development generally have higher development costs than those in earlier stages of development, primarily due to the size, duration and cost of clinical trials. The successful development of our clinical and preclinical product candidates is highly uncertain. Clinical development timelines, the probability of success and development costs can differ materially from our expectations. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those which we currently expect will be required for the completion of clinical development of a product candidate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time to complete any clinical development. InJune 2020 , we and Sobi entered into the Sobi License. Pursuant to the Sobi License, clinical trial costs incurred to complete development of SEL-212, including but not limited to costs incurred while conducting and completing the Phase 3 DISSOLVE trials, will be reimbursed by Sobi. These costs, when reimbursed, will be recognized as revenue consistent with the revenue recognition methodology disclosed in Note 12 to our unaudited consolidated financial statements included elsewhere in this Quarterly Report. The reimbursable costs exclude any costs of additional development activities required that are related to ImmTOR and that are unrelated to SEL-212. We believe that our existing cash, cash equivalents, restricted cash, and marketable securities as ofJune 30, 2022 will enable us to fund our current planned operations into mid-2024, though we may realize additional cash resources upon the achievement of certain contingent collaboration milestones or it may pursue additional cash resources through public or private equity or debt financings or by establishing collaborations with other companies. Management's expectations with respect to our ability to fund current and long-term planned operations are based on estimates that are subject to risks and uncertainties. If actual results are different from management's estimates, we may need to seek additional strategic or financing opportunities sooner than would otherwise be expected. However, there is no guarantee that any collaboration milestones will be achieved or that any of these strategic or financing opportunities will be executed on favorable terms, and some could be dilutive to existing stockholders. If we are unable to obtain additional funding on a timely basis, we may be forced to significantly curtail, delay, or discontinue one or more of its planned research or development programs or be unable to expand our operations, meet long-term obligations or otherwise capitalize on our commercialization of our product candidates. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.
General and administrative
General and administrative expenses consist primarily of salaries and related
benefits, including stock-based compensation, related to our executive, finance,
business development and support functions. Other general and administrative
expenses include facility-related costs not otherwise allocated to research and
development expenses, travel expenses for our general and administrative
personnel and professional fees for auditing, tax and corporate legal services,
including intellectual property-related legal services.
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Investment income
Investment income consists primarily of interest income earned on our cash, cash equivalents and marketable securities.
Interest expense
Interest expense consists of interest expense on amounts borrowed under our credit facilities.
Other income (expense)
Other income (expense) was de minimis during the three and six months ended
Change in fair value of warrant liabilities
Common warrants classified as liabilities are remeasured at fair value, utilizing a Black-Scholes valuation methodology, quarterly with the change in fair value recognized as a component of earnings.
Foreign currency transaction gain (loss)
The functional currency of our Russian subsidiary is the Russian ruble. In addition to holding cash denominated in Russian rubles, our Russian bank accounts also hold cash balances denominated inU.S. dollars to facilitate payments to be settled inU.S. dollars or other currencies. As ofJune 30, 2022 andDecember 31, 2021 , we maintained cash of$0.3 million in Russian banks, all of which was denominated inU.S. dollars. The amounts denominated inU.S. dollars and used in transacting the day-to-day operations of our Russian subsidiary are subject to transaction gains and losses, which are reported as incurred. Results of Operations
Comparison of the Three Months Ended
Collaboration and license revenue
The following is a comparison of collaboration and license revenue for the three
months ended
Three Months Ended
June 30, Increase
2022 2021 (decrease)
Collaboration and license revenue
100 %
During the three months endedJune 30, 2022 , collaboration revenue was$39.3 million , compared to$19.7 million in 2021. During the three months endedJune 30, 2022 and 2021, we recognized$29.2 million and$19.5 million , respectively, under the license agreement with Sobi resulting from the shipment of clinical supply and the reimbursement of costs incurred for the Phase 3 DISSOLVE clinical program. Additionally, during the three months endedJune 30, 2022 ,$10.1 million was recognized under the Sarepta Agreement.
Research and development
The following is a comparison of research and development expenses for the three
months ended
Three Months Ended
June 30, Increase
2022 2021 (decrease)
SEL-212 $ 8,387 $ 5,956 $ 2,431 41 %
AskBio Empty Capsid collaboration 142 296 (154) (52) %
Preclinical stage product candidate programs 3,060 2,889 171 6 %
Other internal research and development expenses 7,593 5,322 2,271 43 %
Total research and development expenses
$ 4,719 33 %
Note: Certain prior period expenses have been reclassified to conform to current year presentation.
During the three months ended
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General and administrative
The following is a comparison of general and administrative expenses for the three months endedJune 30, 2022 and 2021 (in thousands, except percentages): Three Months Ended June 30, Increase 2022 2021 (decrease)
General and administrative
31 %
During the three months endedJune 30, 2022 , our general and administrative expenses increased by$1.5 million , or 31%, as compared to 2021. The increase in costs was primarily the result of expenses incurred for issuance costs for the 2022 equity offering and stock compensation.
Investment income
Investment income was
Foreign currency transaction gain (loss)
We recognized
Interest expense
Interest expense was$0.7 million for each of the three months endedJune 30, 2022 and 2021, representing interest expense and amortization of the carrying costs of our credit facilities.
Change in fair value of warrant liabilities
For the three months endedJune 30, 2022 , we recognized a$4.6 million charge from the increase in the fair value of warrant liabilities utilizing the Black-Scholes valuation methodology. The increase in value was primarily driven by an increase in the Company's share price. For the three months endedJune 30, 2021 , we recognized$4.8 million of income from the decrease in the fair value of warrant liabilities primarily driven by a decrease in the Company's share price and volatility. Other income (expense)
Other income (expense) was de minimis for each of the three months ended
Net income
Net income for the three months ended
Comparison of the Six Months Ended
Collaboration and license revenue
The following is a comparison of collaboration and license revenue for the six
months ended
Six Months Ended
June 30, Increase
2022 2021 (decrease)
Collaboration revenue $ 73,272 $ 30,713 $ 42,559 139 %
During the six months ended June 30, 2022 and 2021 we recognized $52.9 million
and $30.6 million under the license agreement with Sobi resulting from the
shipment of clinical supply and the reimbursement of costs incurred for the
Phase 3 DISSOLVE clinical program, all of which began in July 2020 .
Additionally, during the six months ended June 30, 2022 , $10.2 million was
recognized under the Sarepta Agreement, $9.2 million was recognized upon the
mutual termination of the Spark License Agreement, and $1.0 million was
recognized under the Takeda Agreement.
Research and development
The following is a comparison of research and development expenses for the six
months ended
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Six Months Ended
June 30, Increase
2022 2021 (decrease)
SEL-212 $ 15,444 $ 12,680 $ 2,764 22 %
AskBio Empty Capsid collaboration 496 732 (236) (32) %
Preclinical stage product candidate programs 6,975 3,837 3,138 82 %
Other internal research and development expenses 13,956 10,218 3,738 37 %
Total research and development expenses $ 36,871 $ 27,467 $ 9,404 34 %
Note: Certain prior period expenses have been reclassified to conform to current year presentation.
During the six months endedJune 30, 2022 , our research and development expenses increased by$9.4 million , or 34%, as compared to 2021. The increase in cost was primarily the result of expenses incurred for the SEL-212 clinical program, preclinical programs, contract license and milestone payments, stock compensation expense, and increased personnel expenses.
General and administrative
The following is a comparison of general and administrative expenses for the six
months ended
Six Months Ended
June 30, Increase
2022 2021 (decrease)
General and administrative
During the six months endedJune 30, 2022 , our general and administrative expenses increased by$1.8 million , or 18%, as compared to 2021. The increase in costs was primarily driven by expenses incurred for issuance costs for the 2022 equity offering and stock compensation.
Investment income
Investment income was
Foreign currency transaction gain (loss)
We recognized less than
Interest expense
Interest expense was$1.4 million for each of the six months endedJune 30, 2022 and 2021, representing interest expense and amortization of the carrying costs of our credit facilities.
Change in fair value of warrant liabilities
For the six months endedJune 30, 2022 , we recognized$13.9 million of income for the decrease in the fair value of warrant liabilities utilizing a Black-Scholes valuation methodology. The decrease in value was primarily driven by a decrease in the Company's share price and a small increase in the discount rate. For the six months endedJune 30, 2021 , we recognized a$11.9 million charge for the increase in the fair value of warrant liabilities utilizing a Black-Scholes valuation methodology. The increase in value was primarily driven by an increase in the Company's share price and a small increase in the discount rate this quarter. Other income (expense)
Other income was
Net income (loss)
Net income for the six months ended
Liquidity and Capital Resources
Since our inception, we have incurred recurring net losses. We expect that we
will continue to incur losses and that such losses will increase for the
foreseeable future. We expect that our research and development and general and
administrative
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expenses will continue to increase and, as a result, we will need additional capital to fund our operations, which we may raise through a combination of equity offerings, debt financings, third-party funding and other collaborations and strategic alliances. From our inception throughJune 30, 2022 , we have raised an aggregate of$692.1 million to fund our operations, which includes$118.5 million from the sale of preferred stock,$11.1 million in government grant funding,$36.7 million from borrowings under our credit facilities past and present,$219.4 million from our collaborations and license agreements,$64.5 million in combined net proceeds from our initial public offering,$185.2 million in combined net proceeds from private placements and follow-on offerings of our common stock, and, throughJune 30, 2022 ,$56.7 million in aggregate net proceeds from "at-the-market" offerings of our common stock. As ofJune 30, 2022 , our cash, cash equivalents, restricted cash, and marketable securities were$143.4 million , of which$1.4 million was restricted cash related to lease commitments and$0.3 million was held by our Russian subsidiary designated solely for use in its operations. Our Russian subsidiary cash is consolidated for financial reporting purposes. In addition to our existing cash equivalents, we receive research and development funding pursuant to our collaboration agreements. Currently, funding from payments under our collaboration agreements represent our only source of committed external funds. Indebtedness OnAugust 31, 2020 , we entered into a term loan of up to$35.0 million , or the 2020 Term Loan, consisting of term loans in an aggregate amount of$25.0 million , or the Term A Loan, and term loans in an aggregate amount of$10.0 million , or the Term B Loan, governed by the Loan and Security Agreement. The Term A Loan was funded in full onAugust 31, 2020 , or the Funding Date. The second draw period expired onSeptember 30, 2021 and the Term B Loan is no longer available to be drawn by the Company in the future. OnMarch 21, 2022 , we entered into a Second Amendment to Loan and Security Agreement, or the Second Amendment, which amended the Loan and Security Agreement. The Second Amendment extends the date on which amortization payments in respect of the 2020 Term Loan will commence by twelve months toApril 1, 2023 . Thereafter, amortization payments will be paid monthly in equal installments of principal and interest to fully amortize the outstanding principal over the remaining term of the 2020 Term Loan, subject to recalculation upon a change in the prime rate. The Second Amendment was determined to be a loan modification, and the$0.1 million fee is recorded as an addition to the debt discount on the effective date. The 2020 Term Loan is secured by a lien on substantially all of our assets, other than intellectual property, provided that such lien on substantially all assets includes any rights to payments and proceeds from the sale, licensing or disposition of intellectual property. We also granted Oxford a negative pledge with respect to our intellectual property. The 2020 Term Loan contains customary covenants and representations, including but not limited to financial reporting obligations and limitations on dividends, indebtedness, collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and subsidiaries. The 2020 Term Loan also contains other customary provisions, such as expense reimbursement, non-disclosure obligations as well as indemnification rights. The events of default under the 2020 Term Loan include, but are not limited to, our failure to make any payments of principal or interest under the 2020 Term Loan or other transaction documents, our breach or default in the performance of any covenant under the 2020 Term Loan or other transaction documents, the occurrence of a material adverse event, making a false or misleading representation or warranty in any material respect under the 2020 Term Loan, our insolvency or bankruptcy, any attachment or judgment on our assets of at least approximately$0.5 million , or the occurrence of any default under any of our agreements or obligations involving indebtedness in excess of approximately$0.5 million . If an event of default occurs, Oxford is entitled to take enforcement action, including acceleration of amounts due under the 2020 Term Loan. If we raise any additional debt financing, the terms of such additional debt could further restrict our operating and financial flexibility.
Future funding requirements
As of the date of this Quarterly Report, we have not generated any revenue from product sales. We do not know when, or if, we will generate revenue from product sales. We will not generate significant revenue from product sales unless and until we obtain regulatory approval and commercialize one of our current or future product candidates. Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, laboratory and related supplies, clinical costs, legal and other regulatory expenses, and general overhead costs. We expect that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products. We are subject to risks in the development of our products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We expect that we will need substantial additional funding to support our continuing operations. As ofJune 30, 2022 , we had an accumulated deficit of$392.9 million . We anticipate operating losses to continue for the foreseeable future due to, among other things, costs related to research, development of our product candidates, conducting 40
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preclinical studies and clinical trials, and our administrative organization. We will require substantial additional financing to fund our operations and to continue to execute our strategy, and we will pursue a range of options to secure additional capital.
We are continually evaluating various potential sources of additional funding such as strategic collaborations, license agreements and the issuance of equity to fund our operations. If we raise additional funds through strategic collaborations and alliances, which may include existing collaboration partners, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms that are not favorable to us. To the extent that we raise additional capital through the sale of equity, the ownership interest of our existing shareholders will be diluted, and other preferences may be necessary that adversely affect the rights of existing shareholders. We believe that our existing cash, cash equivalents, restricted cash, and marketable securities as ofJune 30, 2022 will enable us to fund our current planned operations into mid-2024, though we may realize additional cash resources upon the achievement of certain contingent collaboration milestones or it may pursue additional cash resources through public or private equity or debt financings or by establishing collaborations with other companies. Management's expectations with respect to our ability to fund current and long-term planned operations are based on estimates that are subject to risks and uncertainties. If actual results are different from management's estimates, we may need to seek additional strategic or financing opportunities sooner than would otherwise be expected. However, there is no guarantee that any collaboration milestones will be achieved or that any of these strategic or financing opportunities will be executed on favorable terms, and some could be dilutive to existing stockholders. If we are unable to obtain additional funding on a timely basis, we may be forced to significantly curtail, delay, or discontinue one or more of its planned research or development programs or be unable to expand our operations, meet long-term obligations or otherwise capitalize on our commercialization of our product candidates. Additionally, while the potential economic impact brought by and the duration of the COVID-19 pandemic may be difficult to assess or predict, the widespread pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, reducing our ability to access capital as and when needed. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.
Our future capital requirements will depend on many factors, including:
•the number of product candidates that we pursue;
•our collaboration agreements remaining in effect, our entering into additional collaboration agreements and our ability to achieve milestones under these agreements;
•the cost of manufacturing clinical supplies of our product candidates;
•our headcount growth and associated costs;
•the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials for our other product candidates;
•the costs, timing and outcome of regulatory review of our 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 revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;
•the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims;
•the effect of competing technological and market developments; and
•the extent to which we acquire or invest in businesses, products and technologies, including entering into licensing or collaboration arrangements for product candidates.
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