logc-10q_20200331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2020

OR

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

For the transition period from                  to                 

Commission File Number: 001-38707

 

LogicBio Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

47-1514975

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

65 Hayden Avenue, 2nd Floor, Lexington, MA 02421

(Address of principal executive offices) (Zip code)

(617) 245-0399

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

LOGC

 

Nasdaq Global Market

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

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

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

 

Large accelerated filer

 

Accelerated filer                  

 

Non-accelerated filer

 

Smaller reporting company

 

 

Emerging growth company

 

 

 

 

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

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

As of May 7, 2020, the registrant had 23,351,598 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

Page  

PART I.

FINANCIAL INFORMATION

4

Item 1.

Financial Statements (Unaudited)

4

 

Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019

4

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019

5

 

Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2020 and 2019

6

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2020 and 2019

7

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019

8

 

Notes to Unaudited Condensed Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

26

 

 

 

PART II.

OTHER INFORMATION

27

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 6.

Exhibits

29

Signatures

30

 

2


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of this Quarterly Report on Form 10-Q. In some cases, you can identify forward-looking statements by terminology such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” or similar expressions, or the negative or plural of these words or expressions. These forward-looking statements include statements concerning the following:

 

the initiation, cost, timing, progress and results of our current and future research and development activities and preclinical studies and potential future clinical trials, including our plans to resolve the clinical hold placed by the U.S. Food and Drug Administration, or the FDA, on the investigational new drug application, or IND, for LB-001;  

 

potential attributes and benefits of our GeneRide technology platform and our existing or future product candidates;

 

our ability to take advantage of the modular nature of our GeneRide platform to simplify and accelerate development of new product candidates;

 

the potential benefits of strategic partnership agreements and our ability to enter into selective strategic partnership arrangements;

 

the timing of, and our ability to obtain and maintain, regulatory approvals for our existing or future product candidates;

 

our ability to quickly and efficiently identify and develop additional product candidates;

 

our ability to advance any product candidate into and successfully complete clinical trials;

 

our intellectual property position, including with respect to our trade secrets and the duration of our patent protection; and

 

our estimates regarding expenses, future revenues, capital requirements, the sufficiency of our current and expected cash resources and our need for additional financing.

These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in greater detail under Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission on March 16, 2020, and under Part II, Item 1A. Risk Factors in this Quarterly Report on Form 10-Q, each as may be amended or updated in our Quarterly Reports on Form 10-Q. In particular, while we expect the COVID-19 pandemic to adversely affect our business operations and financial results, the extent of the impact on our ability to progress with our research, development, manufacturing and regulatory efforts, including our plans to resolve the clinical hold placed by the FDA on the IND for LB-001, and the value of and market for our common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the United States and in other countries, and the effectiveness of actions taken globally to contain and treat the disease. Any forward-looking statement in this Quarterly Report on Form 10-Q reflects our current view with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, industry and future growth. Given these uncertainties, you should not rely on these forward-looking statements as predictions of future events. We cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

Unless the context otherwise requires, the terms “LogicBio,” “LogicBio Therapeutics, Inc.,” the “Company,” “we,” “us,” “our” and similar references in this Quarterly Report on Form 10-Q refer to LogicBio Therapeutics, Inc. and its subsidiaries.

 

3


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

LogicBio Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

 

 

 

March 31, 2020

 

 

December 31, 2019

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

43,153

 

 

$

33,107

 

Short-term investments

 

 

 

 

 

17,540

 

Prepaid expenses and other current assets

 

 

3,038

 

 

 

2,045

 

Restricted cash

 

 

146

 

 

 

146

 

Total current assets

 

 

46,337

 

 

 

52,838

 

Property and equipment, net

 

 

1,591

 

 

 

1,696

 

Restricted cash

 

 

622

 

 

 

622

 

Operating lease right-of-use asset

 

 

199

 

 

 

504

 

TOTAL ASSETS

 

$

48,749

 

 

$

55,660

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,181

 

 

$

624

 

Accrued expenses and other current liabilities

 

 

1,934

 

 

 

2,939

 

Deferred revenue

 

 

1,065

 

 

 

 

Total current liabilities

 

 

5,180

 

 

 

3,563

 

Long-term debt, net of issuance costs and discount

 

 

9,862

 

 

 

9,810

 

Total liabilities

 

 

15,042

 

 

 

13,373

 

STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

Preferred stock, par value of $0.0001 per share; 25,000,000 shares authorized;

   no shares issued and outstanding as of March 31, 2020 and December 31, 2019.

 

 

 

 

 

 

Common stock, par value of $0.0001 per share; 175,000,000 shares authorized;

   23,216,661 and 23,036,943 shares issued and outstanding as of March 31, 2020 and

   December 31, 2019, respectively

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

110,529

 

 

 

109,640

 

Accumulated other comprehensive income

 

 

 

 

 

14

 

Accumulated deficit

 

 

(76,825

)

 

 

(67,370

)

Total stockholders’ equity

 

 

33,707

 

 

 

42,287

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

48,749

 

 

$

55,660

 

 

See notes to unaudited condensed consolidated financial statements.

 

4


 

LogicBio Therapeutics, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

REVENUE

 

 

 

 

 

 

 

 

Service revenue

 

$

1,021

 

 

$

 

Total revenue

 

 

1,021

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

Research and development

 

 

7,173

 

 

 

5,486

 

General and administrative

 

 

3,192

 

 

 

2,632

 

Total operating expenses

 

 

10,365

 

 

 

8,118

 

LOSS FROM OPERATIONS

 

 

(9,344

)

 

 

(8,118

)

OTHER INCOME (EXPENSE), NET:

 

 

 

 

 

 

 

 

Interest income

 

 

167

 

 

 

443

 

Interest expense

 

 

(272

)

 

 

 

Other expense, net

 

 

(6

)

 

 

 

Total other income (expense), net

 

 

(111

)

 

 

443

 

Loss before income taxes

 

 

(9,455

)

 

 

(7,675

)

Income tax provision

 

 

 

 

 

(22

)

Net loss

 

$

(9,455

)

 

$

(7,697

)

Net loss per share—basic and diluted

 

$

(0.41

)

 

$

(0.34

)

Weighted-average common stock outstanding—basic and diluted

 

 

23,175,802

 

 

 

22,313,129

 

 

See notes to unaudited condensed consolidated financial statements.

 

5


 

LogicBio Therapeutics, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Net loss

 

$

(9,455

)

 

$

(7,697

)

Other comprehensive income:

 

 

 

 

 

 

 

 

Unrealized gain on investments

 

 

 

 

 

9

 

Foreign currency translation adjustment

 

 

 

 

 

3

 

Comprehensive loss

 

$

(9,455

)

 

$

(7,685

)

 

See notes to unaudited condensed consolidated financial statements.

 

6


 

LogicBio Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

$0.0001 Par Value

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

(Loss) Income

 

 

Deficit

 

 

Equity

 

BALANCE, January 1, 2019

 

 

22,188,393

 

 

$

3

 

 

$

107,473

 

 

$

(9

)

 

$

(27,242

)

 

$

80,225

 

Vesting of restricted stock

 

 

160,337

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on investments

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

9

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

3

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

276

 

 

 

 

 

 

 

 

 

276

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,697

)

 

 

(7,697

)

BALANCE, March 31, 2019

 

 

22,348,730

 

 

$

3

 

 

$

107,749

 

 

$

3

 

 

$

(34,939

)

 

$

72,816

 

BALANCE, January 1, 2020

 

 

23,036,943

 

 

$

3

 

 

$

109,640

 

 

$

14

 

 

$

(67,370

)

 

$

42,287

 

Vesting of restricted stock

 

 

160,340

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of options

 

 

19,378

 

 

 

 

 

 

84

 

 

 

 

 

 

 

 

 

84

 

Realized gain on investments

 

 

 

 

 

 

 

 

 

 

 

(14

)

 

 

 

 

 

(14

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

805

 

 

 

 

 

 

 

 

 

805

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,455

)

 

 

(9,455

)

BALANCE, March 31, 2020

 

 

23,216,661

 

 

$

3

 

 

$

110,529

 

 

$

 

 

$

(76,825

)

 

$

33,707

 

 

See notes to unaudited condensed consolidated financial statements.

 

7


 

LogicBio Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(9,455

)

 

$

(7,697

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation expense

 

 

105

 

 

 

39

 

Net amortization of premiums and discounts on investments

 

 

26

 

 

 

(95

)

Stock-based compensation expense

 

 

805

 

 

 

276

 

Non-cash interest expense

 

 

52

 

 

 

 

Non-cash lease expense

 

 

305

 

 

 

274

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(993

)

 

 

(498

)

Other assets

 

 

 

 

 

(57

)

Accounts payable

 

 

1,557

 

 

 

201

 

Accrued expenses and other current liabilities

 

 

(1,005

)

 

 

(675

)

Deferred revenue

 

 

1,065

 

 

 

 

Net cash used in operating activities

 

 

(7,538

)

 

 

(8,232

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchase of investments

 

 

 

 

 

(44,562

)

Maturities of investments

 

 

17,500

 

 

 

 

Purchase of property and equipment

 

 

 

 

 

(247

)

Net cash provided by (used in) investing activities

 

 

17,500

 

 

 

(44,809

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

84

 

 

 

 

Net cash provided by financing activities

 

 

84

 

 

 

 

Effect on foreign exchange rates on cash and cash equivalents

 

 

 

 

 

5

 

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

10,046

 

 

 

(53,036

)

Cash, cash equivalents and restricted cash at beginning of year

 

 

33,875

 

 

 

81,052

 

Cash, cash equivalents and restricted cash at end of period

 

$

43,921

 

 

$

28,016

 

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED

   CASH

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

43,153

 

 

$

27,870

 

Short-term restricted cash

 

 

146

 

 

 

146

 

Long-term restricted cash

 

 

622

 

 

 

 

Total cash, cash equivalents and restricted cash

 

$

43,921

 

 

$

28,016

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

220

 

 

$

 

Cash paid for income taxes

 

$

 

 

$

31

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:

 

 

 

 

 

 

 

 

Right-of-use assets obtained in exchange for operating lease obligation

 

$

 

 

$

1,323

 

Property and equipment purchases in accounts payable and accrued expenses

 

$

 

 

$

81

 

 

See notes to unaudited condensed consolidated financial statements.

 

8


 

LogicBio Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share data)

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

Business Overview

LogicBio Therapeutics, Inc. (“LogicBio” or the “Company”) was incorporated in 2014 as a Delaware corporation. Its principal offices are in Lexington, Massachusetts. The Company is a genome editing company focused on developing medicines to durably treat rare diseases in pediatric patients with significant unmet medical need, using GeneRide, its proprietary technology platform. GeneRide technology is designed to precisely and stably integrate corrective genes into a patient’s genome to provide a durable therapeutic effect. The Company has demonstrated proof of concept of its therapeutic platform in animal models for a number of diseases and is focusing on its lead product candidate, LB-001, for the treatment of Methylmalonic Acidemia (“MMA”), a life-threatening disease that presents at birth.

In January 2020, the Company announced the submission of an investigational new drug application (“IND”) to support the initiation of a Phase 1/2 clinical trial for LB-001 in pediatric patients with MMA, which the FDA has placed on clinical hold. Subsequently, the Company received a letter from the FDA specifying its questions related to the clinical hold. The clinical hold was based on questions that were clinical and nonclinical in nature, including questions related to the studies conducted for the Company’s IND filing, but did not relate to chemistry, manufacturing, and controls. The Company expects to have interactions with the FDA regarding their questions through mid-2020, after which the Company plans to provide guidance on the anticipated timing for the initiation of the Phase 1/2 clinical trial for LB-001.

Since its inception, the Company has devoted the majority of its efforts to business planning, research and development, developing markets, raising capital, and recruiting management and technical staff. The Company is subject to a number of risks similar to those of other companies conducting high-risk, early-stage research and development of product candidates. Principal among these risks are a dependency on key individuals and intellectual property, competition from other products and companies, and the technical risks associated with the successful research, development and clinical manufacturing of its product candidates. The Company’s success is dependent upon its ability to continue to raise additional capital in order to fund ongoing research and development, meet its obligations and, ultimately, obtain regulatory approval of its products, successfully commercialize its products, generate revenue and attain profitable operations.

 

COVID-19 Impact

 

The Company is closely monitoring the COVID-19 pandemic in order to ensure the safety of its personnel and to continue advancing its research and development activities. Since mid-March, the Company has ceased all business travel, non-laboratory employees have been working remotely, and the Company has arranged laboratory employees to work in shifts to continue in-house research and development activities. The Company plans to maintain these or similar restrictions until it believes employees can fully resume such activities in accordance with federal, state and local requirements and guidelines.

 

The COVID-19 pandemic did not have a material impact on the Company’s results of operations, cash flow and financial position as of and for the three months ended March 31, 2020. However, the full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial position will depend on future developments that are uncertain and cannot be accurately predicted.

Liquidity and Capital Resources

During the years ended December 31, 2019 and 2018, the Company incurred net losses of $40,128 and $17,621, respectively, and reported cash used in operations totaling $38,750 and $15,267, respectively.  In addition, as of December 31, 2019, the Company had an accumulated deficit of $67,370. The Company expects to continue to generate operating losses and use cash in operations for the foreseeable future.  As of March 31, 2020, the Company had cash and cash equivalents of $43,153 which management believes will be sufficient to fund its operating expenses and capital expenditure requirements through the second quarter of 2021. However, based on the Company’s operating losses since inception, the expectation of continued operating losses for the foreseeable future, and the need to raise additional capital to finance its future operations, it has been deemed there is substantial doubt about the Company’s ability to continue as a going concern within one year from the date these condensed consolidated financial statements are issued.

The Company will require substantial additional capital to fund its research and development and ongoing operating expenses. Management’s plans to mitigate this risk include raising additional capital through equity or debt financings, or through

9


 

strategic transactions. These plans may also include the possible deferral of certain operating expenses unless and until additional capital is received. There can be no assurance that the Company will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to the Company, or that the Company will be successful in deferring certain operating expenses. While there can be no assurance the Company will be able to successfully reduce operating expenses or raise additional capital, management believes its historical success in managing cash flows and obtaining capital will continue in the foreseeable future.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by the Company in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 16, 2020.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments which are necessary for a fair statement of the Company’s financial position as of March 31, 2020, consolidated results of operations for the three months ended March 31, 2020 and 2019 and cash flows for the three months ended March 31, 2020. Such adjustments are of a normal and recurring nature. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2020.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 16, 2020. Since the date of those financial statements, there have been no material changes to its significant accounting policies other than the Company’s significant accounting policy over revenue recognition under ASC 606 (defined below) which is discussed in this note.

Revenue Recognition

To date the Company’s only revenue has consisted of service revenue, all of which is attributable to research cost reimbursement under the Company’s January 2020 research agreement with Takeda Pharmaceutical Company Limited (“Takeda”) for the development of product candidate LB-301 to treat Crigler-Najjar Syndrome (the “Takeda Agreement”). The Company has not generated any revenue from product sales and does not expect to generate any revenue from product sales for the foreseeable future.

 

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps:

 

(i)

identification of the promised goods or services in the contract;

 

(ii)

determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract;

10


 

 

(iii)

measurement of the transaction price, including the constraint on variable consideration;

 

(iv)

allocation of the transaction price to the performance obligations; and

 

(v)

recognition of revenue when (or as) each performance obligation is satisfied.

 

If a contract is determined to be within the scope of ASC 606 at inception, the Company assesses the goods or services promised within such contract, determines which of those goods and services are performance obligations, and assesses whether each promised good or service is distinct. The Company may provide options to additional items in such arrangements, which are accounted for as separate contracts when the customer elects to exercise such options, unless the option provides a material right to the customer. The Company determines transaction price based on the amount of consideration the Company expects to receive for transferring the promised goods or services in the contract. Consideration may be fixed, variable, or a combination of both. The Company then allocates the transaction price to each performance obligation based on the relative standalone selling price and recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) control is transferred to the customer and the performance obligation is satisfied.

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the Company’s condensed consolidated balance sheets. If the related performance obligation is expected to be satisfied within the next twelve months this will be classified in current liabilities. Amounts recognized as revenue prior to receipt are recorded as contract assets in the Company's balance sheets. If the Company expects to have an unconditional right to receive the consideration in the next twelve months, this will be classified in current assets. A net contract asset or liability is presented for each contract with a customer.

Recently Adopted Accounting Pronouncements

On January 1, 2020, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments. This ASU requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, the standard requires allowances to be recorded instead of reducing the amortized cost of the investment. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

There have been no new accounting pronouncements or changes to accounting pronouncements during the three months ended March 31, 2020, as compared to the recent accounting pronouncements described in Note 2 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, which could be expected to materially impact the Company’s unaudited condensed consolidated financial statements.

3. FAIR VALUE MEASUREMENTS

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:

 

Description

 

March 31, 2020

 

 

Quoted Prices in

Active Markets

for Identical

Assets (Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Other

Observable

Inputs

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds and other cash equivalents

 

$

43,153

 

 

$

43,153

 

 

$

 

 

$

 

Total financial assets

 

$

43,153

 

 

$

43,153

 

 

$

 

 

$

 

11


 

 

Description

 

December 31,

2019

 

 

Quoted Prices in

Active Markets

for Identical

Assets (Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Other

Observable

Inputs

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Overnight repurchase agreements

 

$

30,001

 

 

$

 

 

$

30,001

 

 

$

 

U.S. Treasury securities

 

 

17,540

 

 

 

17,540

 

 

 

 

 

 

 

Money market funds and other cash equivalents

 

 

1,093

 

 

 

1,093

 

 

 

 

 

 

 

Total financial assets

 

$

48,634

 

 

$

18,633

 

 

$

30,001

 

 

$

 

 

When developing fair value estimates, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. When available, the Company uses quoted market prices to measure fair value. The valuation technique used to measure fair value for the Company's Level 1 and Level 2 assets is a market approach, using prices and other relevant information generated by market transactions involving identical or comparable assets. If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including yield curves, volatilities, credit ratings and currency rates. In certain cases where market rate assumptions are not available, the Company is required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument.

 

The Company did not have any transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy during the three months ended March 31, 2020.

4. INVESTMENTS

As of March 31, 2020, the Company did not hold any short-term or long-term investments.

As of December 31, 2019, the Company held available-for-sale investments which were included in short-term investments on the condensed consolidated balance sheet and summarized in the table below:

 

 

 

 

December 31, 2019

 

 

 

Cost Basis

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair Value

 

U.S. Treasury securities

 

$

17,526

 

 

$

14

 

 

$

 

 

$

17,540

 

Total

 

$

17,526

 

 

$

14

 

 

$

 

 

$

17,540

 

 

 

Certain short-term debt securities with original maturities of less than 90 days are included in cash and cash equivalents on the condensed consolidated balance sheet and are not included in the table above. As of December 31, 2019, all investments had a contractual maturity within one year.

5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities at March 31, 2020 and December 31, 2019 consisted of the following:

 

 

 

March 31,

2020

 

 

December 31,

2019

 

Accrued compensation and benefits

 

$

551

 

 

$

1,155

 

Accrued professional services

 

 

959

 

 

 

1,004

 

Lease liabilities

 

 

199

 

 

 

504

 

Other

 

 

225

 

 

 

276

 

Total accrued expenses and other current liabilities

 

$

1,934

 

 

$

2,939

 

 

Accrued compensation and benefits consists primarily of accrued bonuses. Accrued professional services consists primarily of consulting services, legal services and services provided by contract research organizations (“CRO”) and contract manufacturing organizations (“CMO”).

12


 

6. DEBT

On July 2, 2019 (the “Closing Date”), the Company entered into a loan and security agreement (the “Loan Agreement”), for term loans with Oxford Finance LLC (“Oxford”) and Horizon Technology Finance Corporation (“Horizon,” and, together with Oxford, the “Lenders”). The Loan Agreement allows the Company to borrow up to $20,000 issuable in two equal tranches (the “Term Loans”). On the Closing Date, the first tranche of $10,000 was drawn down by the Company (the “Term A Loan”). The second tranche of $10,000 will be available to the Company through September 30, 2020, subject to certain clinical milestones (the “Term B Loan”).

The outstanding loan balance will accrue interest at the greater of (i) the rate of the one-month U.S. LIBOR rate plus 6.25% and (ii) 8.75%. The Loan Agreement provides for an interest only period until July 1, 2021, followed by thirty-six equal monthly payments of principal and interest continuing through June 1, 2024 (the “Maturity Date”). The Company has the option to prepay the outstanding balance prior to maturity, subject to a prepayment fee of 1.0% to 3.0% depending upon when the prepayment occurs. Upon repayment of the Term Loans, the Company is required to make a final payment to the Lenders equal to 4.5% of the original principal amount of the Term Loans funded which will be accrued by charges to interest expense over the term of the loans using the effective interest method.

In conjunction with the Loan Agreement, the Company issued 15,686 of common stock warrants (“Warrants”) to the Lenders at a per share exercise price of $12.75, a maximum contractual term of 10 years and exercisable immediately. The fair value of the Warrants was accounted for as a debt discount and calculated to be approximately $136 using the Black-Scholes method. The Company determined the Warrants met the criteria for equity classification, and, as such, the fair value of the Warrants is recorded as additional paid-in capital on the condensed consolidated balance sheets. Finally, the Company incurred issuance costs of approximately $150. Both the debt discount and issuance costs will be accreted to Notes payable by charges to interest expense over the term of the Term A Loan using the effective interest method.

The Loan Agreement contains customary representations, warranties and covenants and also includes customary events of default. Events of default include, among other things, the Company’s failure to pay amounts due, a breach of certain covenants, a material adverse change event, misrepresentations and judgments. Upon the occurrence of an event of default, a default interest rate of an additional 5.00% per annum may be applied to the outstanding loan balances, and the Lenders may declare all outstanding obligations immediately due and payable. Borrowings under the Loan Agreement are collateralized by substantially all the Company’s assets, other than its intellectual property, which include maintaining certain cash balances in controlled accounts.

Interest expense was $272 for the three months ended March 31, 2020. The effective rate on the Loan Agreement, including the amortization of the debt discount and issuance costs, and accretion of the final payment, was 9.7% at March 31, 2020. The components of the long-term debt balance are as follows:

 

 

 

March 31,

2020

 

 

December 31,

2019

 

Notes payable, gross

 

$

10,000

 

 

$

10,000

 

Less: Unamortized debt discount and

   issuance costs

 

 

(235

)

 

 

(254

)

Accretion of final payment fee

 

 

97

 

 

 

64

 

Carrying value of notes payable

 

 

9,862

 

 

 

9,810

 

Less: Current portion of long-term debt

 

 

 

 

 

 

Long-term debt, net of issuance costs and

   discount

 

$

9,862

 

 

$

9,810

 

 

As of March 31, 2020, the estimated future principal payments due were as follows:

 

 

 

As of

March 31,

2020

 

2020

 

 

 

2021

 

 

1,945

 

2022

 

 

3,333

 

2023

 

 

3,333

 

2024

 

 

1,389

 

Total principal payments

 

$

10,000

 

 

13


 

7. STOCK-BASED COMPENSATION

Equity Incentive Plans

In December 2014, the Company adopted the LogicBio Therapeutics, Inc. 2014 Equity Incentive Plan, as amended (the “2014 Plan”), for the issuance of stock options and other stock-based awards. In October 2018, the Company’s 2018 Equity Incentive Plan (the “2018 Plan”) became effective and as a result, no further awards will be made under the 2014 Plan. The 2018 Plan was established to provide equity-based ownership opportunities for employees and directors, as well as outside consultants and advisors. Any previously granted awards under the 2014 Plan will remain outstanding in accordance with their respective terms.

Under the 2018 Plan, there is an annual increase on January 1 of each year from 2019 until 2028, by the lesser of (i) 4% of the number of shares of common stock outstanding on December 31 of the prior year and (ii) an amount determined by the Board. On January 1, 2020, the Company increased the number of shares available for future grant under the 2018 Plan by 926,786 shares. At March 31, 2020, there were 1,309,885 shares available for future grant under the 2018 Plan.

The 2018 Plan is administered by the Board. The exercise prices, vesting and other restrictions are determined at the discretion of the Board, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the common stock on the date of grant. Stock options awarded under the 2018 Plan expire 10 years after the grant date, unless the Board sets a shorter term. Vesting periods for awards under the 2018 Plan are determined at the discretion of the Board. Incentive stock options granted to employees and shares of restricted stock granted to employees, officers, members of the Board, advisors, and consultants of the Company typically vest over four years. Non-statutory options and shares of restricted stock granted to employees, officers, members of the Board, advisors, and consultants of the Company typically vest over one to four years.

Stock Options

During the three months ended March 31, 2020 and 2019, the Company granted options to purchase 714,203 and 79,123 shares of common stock, respectively, with a weighted-average grant date fair value per share of $4.74 and $6.03, respectively. The Company recorded stock-based compensation expense for options granted of $761 and $210 during the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, there were 2,930,587 options outstanding and $7,268 of unrecognized stock-based compensation expense related to unvested stock options to be recognized over a weighted-average period of 3.1 years.

Restricted Common Stock

The Company has granted shares of restricted common stock with time-based and performance-based vesting conditions from time to time. During the three months ended March 31, 2020 and 2019, the Company did not grant any shares of restricted common stock. The Company recorded stock-based compensation expense for restricted common stock granted of $44 and $66 during the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, there were 83,047 shares of unvested restricted common stock outstanding and $216 of unrecognized stock-based compensation expense related to unvested restricted common stock to be recognized over a weighted-average period of 1.8 years.

Stock-Based Compensation Expense

Total stock-based compensation expense recorded as research and development and general and administrative expenses, respectively, for employees, directors and non-employees for the three months ended March 31, 2020 and 2019 is as follows:

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Research and development

 

$

295

 

 

$

155

 

General and administrative

 

 

510

 

 

 

121

 

Total stock-based compensation expense

 

$

805

 

 

$

276

 

 

8. STOCKHOLDERS’ EQUITY

Open Market Sale Agreement

On November 15, 2019, the Company entered into an Open Market Sale Agreement (the “Open Market Sale Agreement”) with Jefferies LLC, as agent (“Jefferies”), pursuant to which the Company may issue and sell shares of its common stock having an

14


 

aggregate offering price of up to $50,000 (the “Open Market Shares”) from time to time through Jefferies (the “Open Market Offering”).

Under the Open Market Sale Agreement, Jefferies may sell the Open Market Shares by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Exchange Act of 1934, as amended. The Company may sell the Open Market Shares in amounts and at times to be determined by the Company from time to time subject to the terms and conditions of the Open Market Sale Agreement, but it has no obligation to sell any of the Open Market Shares in the Open Market Offering.

The Company or Jefferies may suspend or terminate the offering of Open Market Shares upon notice to the other party and subject to other conditions. The Company has agreed to pay Jefferies commissions for its services in acting as agent in the sale of the Open Market Shares in the amount of up to 3.0% of gross proceeds from the sale of the Open Market Shares pursuant to the Open Market Sale Agreement. The Company has also agreed to provide Jefferies with customary indemnification and contribution rights.

The Company did not issue any shares under the Open Market Sales Agreement during the quarter ended March 31, 2020. From April 1 through May 7, 2020, the Company issued 51,889 shares of its common stock at an average weighted price of $5.76 per share, resulting in gross proceeds to the Company of $299. Costs associated with the proceeds consist of a 3% cash commission.

 

9. REVENUE

In January 2020, the Company entered into a research agreement with Takeda for the development of product candidate LB-301 to treat Crigler-Najjar Syndrome. Under the terms of the Takeda Agreement, Takeda will fund all research and development activities related to the development of LB-301 under a pre-agreed upon research plan (the “Research Plan”). The Takeda Agreement also provides Takeda with an exclusive, non-binding option to enter into a license agreement to the LB-301 program upon the exercise of an option (the “License Option”).

The Company assessed the Takeda Agreement in accordance with ASC 606 and concluded that that it represents a contract with a customer and is within the scope of ASC 606. The promised goods and services represent one combined performance obligation and the entire transaction price will be allocated to that single combined performance obligation. In addition, the Company concluded that the License Option does not provide any discounts or other rights. Terms related to an exclusive license negotiated after the exercise of the License Option will be part of a separate contract and reflect applicable standalone selling prices. As such, the Company concluded the License Option is not considered to be a material right.

Under the Takeda Agreement, Takeda is obligated to reimburse the Company for the costs incurred under the Research Plan. Costs incurred are billed by the Company to Takeda from time to time. The Company elected to recognize revenue under the "right to invoice" practical expedient based on the Company's right to invoice Takeda at an amount that approximates the value to the customer and the performance completed to date. For the quarter ended March 31, 2020, the Company recognized $1,021 as service revenue under the Takeda Agreement. Further, as of March 31, 2020, the Company recorded $1,065 as deferred revenue within current liabilities on the Company’s condensed consolidated balance sheets related to the Takeda Agreement.

 

15


 

10. INCOME TAXES

For the three months ended March 31, 2020 and the year ended December 31, 2019, the Company maintained a full valuation allowance on federal and state deferred tax assets since management does not forecast the Company to be in a profitable position in the near future. The income tax provision within the condensed consolidated statements of operations for the three months ended March 31, 2019 related to tax expense of the wholly owned foreign subsidiary, LogicBio Therapeutics Research Ltd, which ceased operations in 2018 and was formally dissolved in November 2019.

11. LOSS PER SHARE

Basic loss per share is computed by dividing net loss by the weighted-average shares of common stock outstanding, without consideration to common stock equivalents:

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Numerator:

 

 

 

 

 

 

 

 

Net loss

 

$

(9,455

)

 

$

(7,697

)

Denominator:

 

 

 

 

 

 

 

 

Weighted-average common stock outstanding

 

 

23,175,802

 

 

 

22,313,129

 

Net loss per share — basic and diluted

 

$

(0.41

)

 

$

(0.34

)

 

The Company’s potentially dilutive shares, which include any outstanding stock options, warrants and unvested restricted stock, are considered to be common stock equivalents and are only included in the calculation of diluted net loss when their effect is dilutive.

The Company excluded the following potential common stock equivalents from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutive effect for the three months ended March 31, 2020 and 2019.

 

 

 

March 31,

2020

 

 

March 31,

2019

 

Unvested restricted stock

 

 

83,047

 

 

 

724,383

 

Options to purchase common stock

 

 

2,930,587

 

 

 

2,429,562

 

Term A Loan warrants

 

 

15,686

 

 

 

 

 

12. LEASES

The Company has historically entered into lease arrangements for its facilities and certain equipment. As of March 31, 2020, the Company had one operating lease with required future minimum payments. In applying the guidance under ASC Topic 842 Leases (“ASC 842”), the Company determined the classification of this lease to be an operating lease and recorded a right-of-use asset and lease liability as of the effective date. The Company’s leases generally do not include termination or purchase options. From time to time, leases may include options to renew the lease after the expiration of the initial lease term. A renewal period is included in the lease term only when it reasonably certain that the Company will exercise such renewal options. As of March 31, 2020, no renewal options existed that the Company felt were reasonably certain of being exercised.

16


 

Operating Leases

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases for the three months ended March 31, 2020 and 2019:

 

 

 

Three Months Ended

March 31, 2020

 

 

Three Months

Ended

March 31, 2019

 

Operating leases

 

 

 

 

 

 

 

 

Lease cost

 

 

 

 

 

 

 

 

Operating lease cost

 

$

325

 

 

$

274

 

Variable lease cost

 

 

98

 

 

 

42

 

Total lease cost

 

$

423

 

 

$

316

 

Other year-to-date lease information

 

 

 

 

 

 

 

 

Operating cash flows used for operating leases

 

$

321

 

 

$

199

 

Operating lease liabilities arising from obtaining

   right-of-use assets

 

$

 

 

$

1,323

 

 

The following table contains a summary of the lease liabilities recognized on the Company’s condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019:

 

 

 

As of March 31, 2020

 

 

As of December 31, 2019

 

Other operating lease information

 

 

 

 

 

 

 

 

Operating lease liabilities — short term

 

$

199

 

 

$

504

 

Operating lease liabilities — long term

 

$

 

 

$

 

Weighted average remaining lease term

 

0.6 years

 

 

0.7 years

 

Weighted average discount rate

 

 

7.04

%

 

 

7.04

%

 

The variable lease costs for the three months ended March 31, 2020 include common area maintenance and other operating charges. As the Company’s leases do not provide an implicit rate, the Company utilized its incremental borrowing rate based on what it would normally pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments at the commencement date in determining the present value of lease payments. As of March 31, 2020, the Company classified its short-term operating lease liabilities within accrued expenses and other current liabilities.

Future minimum lease payments under the Company’s operating leases as of March 31, 2020 and December 31, 2019, were as follows:

 

 

 

As of

March 31, 2020

 

 

As of

December 31, 2019

 

Maturity of lease liabilities

 

 

 

 

 

 

 

 

2020

 

$

204

 

 

$

523

 

Thereafter

 

 

 

 

 

 

Total lease payments

 

$

204

 

 

$

523

 

Less: imputed interest

 

 

(5

)

 

 

(19

)

Total operating lease liabilities

 

$

199

 

 

$

504

 

 

In November 2019, the Company entered into a lease agreement for office, laboratory and vivarium space located at 65 Hayden Avenue Lexington, Massachusetts (“65 Hayden Ave Lease”) to replace the Company’s prior headquarters located at 99 Erie Street Cambridge, Massachusetts. Under the terms of the 65 Hayden Ave Lease, the Company will lease approximately 23,901 square feet of space and pay an initial annual base rent of approximately $1,494, which is subject to scheduled annual increases, plus certain operating expenses and taxes. The Company took possession of the space on April 1, 2020 (“Lease Commencement Date”) and the lease will continue through July 1, 2025 (“Lease Termination Date”). The Company has an option to extend the lease for a single additional term of 5 years. Upon execution of the 65 Hayden Ave Lease, the Company executed a $622 cash-collateralized letter of credit. Lease payments are anticipated to begin three months after the Lease Commencement Date and will continue in monthly installments through the Lease Termination Date.

17


 

The Company will assess the lease classification of the 65 Hayden Ave Lease and commence recognition of the associated rent expense as of the Lease Commencement Date.

13. RELATED PARTIES

From time to time, the Company is or has been party to consulting service agreements with each of its three co-founders. Under the terms of each agreement, the Company pays an annual fee of $68 for research and development consulting services. For the three months ended March 31, 2020, the Company recorded research and development expense of $17 related to consulting services received from Mark Kay, who is one of the co-founders and a member of the Board. For the three months ended March 31, 2019, the Company recorded $51 to research and development expenses under consulting service agreements with its three co-founders.

18


 

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the Securities and Exchange Commission, or SEC, on March 16, 2020.

This discussion contains certain forward-looking statements that involve risks and uncertainties. Forward-looking statements are identified by words such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or similar expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in the “Risk Factors” section of our Annual Report on Form 10-K and in this Quarterly Report on Form 10-Q. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These statements, like all statements in this Quarterly Report on Form 10-Q, speak only as of their date, and except as required by law, we undertake no obligation to update or revise these statements in light of future developments. We caution investors that our business and financial performance are subject to substantial risks and uncertainties.

Overview

We are a genome editing company focused on developing medicines to durably treat rare diseases in pediatric patients with significant unmet medical need using GeneRide, our proprietary technology platform. Our GeneRide technology is designed to precisely integrate corrective genes into a patient’s genome to provide a stable therapeutic effect. Because GeneRide is designed to have this durable therapeutic effect, we are initially targeting rare liver disorders in pediatric patients where it is critical to provide treatment early in a patient’s life before irreversible disease pathology can occur. We have demonstrated proof of concept of our therapeutic platform in animal models for a number of diseases and are focusing on development of our lead product candidate, LB-001, for the treatment of Methylmalonic Acidemia, or MMA, a life-threatening disease that presents at birth.

Based on our GeneRide technology, we are developing our lead product candidate, LB-001, to treat MMA. In January 2020, we announced the submission of an investigational new drug application, or IND, to support the initiation of a Phase 1/2 clinical trial in pediatric patients with MMA, which the FDA has placed on clinical hold. Subsequently, we received a letter from the FDA specifying its questions related to the clinical hold. The clinical hold was based on questions that were clinical and nonclinical in nature, including questions related to the studies conducted for our IND filing, but did not relate to chemistry, manufacturing, and controls. We expect to have interactions with the FDA regarding their questions through mid-2020, after which we plan to provide guidance on the anticipated timing for the initiation of the Phase 1/2 clinical trial for LB-001.

We believe that achieving clinical proof of concept in an inherited liver disease such as MMA will validate our platform technology, including its potential application to other organs and diseases. In January 2020, we announced a research agreement with Takeda Pharmaceutical Company Limited, or Takeda, to further develop LB-301 in Crigler-Najjar syndrome, or CN, the second indication to be pursued using the GeneRide platform. In addition to MMA and CN, we have demonstrated proof of concept of our platform in hemophilia B and alpha-1-antitrypsin deficiency, or A1ATD, animal disease models. We expect to select future product candidates from these genetic diseases or others addressed by targeting the liver initially, and later by targeting the central nervous system, or CNS, and muscle.

Since our inception in 2014, we have devoted the majority of our efforts to business planning, research and development, developing and protecting our intellectual property, raising capital and recruiting management and technical staff. We do not have any products approved for sale and our only revenue has consisted of service revenue related to research cost reimbursement received under the Takeda agreement. As of March 31, 2020, we have raised approximately $9.8 million in net proceeds through the loan and security agreement in July 2019, approximately $72.3 million in net proceeds through our initial public offering, or IPO, in October 2018 and approximately $33.1 million in net proceeds from the sale of our convertible preferred stock in 2016 and 2017. We have incurred significant operating losses since our inception. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and commercialization of our product candidate and any future product candidates. Our net loss was $9.5 million for the three months ended March 31, 2020 and our accumulated deficit was $76.8 million as of March 31, 2020. We expect to continue to incur significant expenses and operating losses for the foreseeable future in connection with our ongoing activities.

19


 

Impact of COVID-19

We have been actively monitoring the COVID-19 pandemic and its impact globally. Our objectives have remained the same throughout the pandemic: to support the safety of our team members and their families and to continue our research and development activities to develop genetic medicines that have the potential to durably treat rare diseases in patients with significant unmet medical need.

Since mid-March 2020, our non-laboratory employees have been working remotely in order to comply with social distancing and “stay at home” orders as well as applicable guidelines from the U.S. Centers for Disease Control and Prevention, or CDC. Our laboratory employees, whose work must be performed on premises, have been working in shifts to continue our in-house research and manufacturing activities on a decreased basis. We have also ceased all business travel for our employees. We plan to maintain these or similar restrictions on our business activities until we believe our employees can fully resume such business activities in accordance with federal, state and local requirements and guidelines.

Our research, development and manufacturing activities are dependent on our ability to continue our work on premises at our laboratory. We also rely on third parties located in countries that are affected by the COVID-19 pandemic, including the United States, for certain research, development and manufacturing activities. Similar to how we have restricted business activities at our premises, many of these third parties have also limited their staff from working on premises as part of their response to COVID-19. While we believe we and our third party vendors, suppliers and collaborators have largely been able to continue essential business activities to a certain degree, we cannot predict the impact of the progression of the COVID-19 pandemic on future results due to a variety of factors, including the health of our and their employees, our ability to maintain operations, the ability of our third party vendors, suppliers and collaborators to continue operations, any further government and/or public actions taken in response to the pandemic and ultimately the length of the pandemic.

In April 2020, as part of our effort to preserve capital, our leadership team volunteered to accept salary cuts ranging from 15% to 20%. We have also adopted certain other cost-cutting measures aimed at enhancing our capital position. During April and through May 7, 2020, we entered into “at-the-market” sales of our common stock resulting in gross proceeds of approximately $0.3 million. While we intend to continue to evaluate ways to enhance our liquidity and capital position, our efforts will largely depend on future developments that are highly uncertain and cannot be predicted with confidence at this time.

We plan to continue to closely monitor the COVID-19 pandemic in order to ensure the safety of our personnel and to continue advancing our research and development activities.

Components of Results of Operations

Revenue

To date, the Company’s only revenue has consisted of research cost reimbursements recognized as service revenue, all of which is attributable to the Company’s January 2020 research agreement with Takeda to develop LB-301 in CN. The Company has not generated any revenue from product sales and does not expect to generate any revenue from product sales for the foreseeable future.

Operating Expenses

Research and Development Expenses

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

 

salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions;

 

license maintenance fees and milestone fees incurred in connection with various license agreements;

 

the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and, eventually, clinical trial materials;

 

expenses incurred under agreements with contract research organizations, or CROs, contract manufacturing organizations, or CMOs, as well as academic institutions and consultants that conduct our preclinical studies and other scientific development services;

 

facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs;

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costs of outside consultants, including their fees, stock-based compensation and related travel expenses; and

 

costs related to compliance with regulatory requirements.

We expense research and development costs as incurred. Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate and business development and administrative functions. General and administrative expenses also include professional fees for legal, patent, accounting, auditing, tax and consulting services, travel expenses, and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

Other Income (Expense), Net

Interest income consists primarily of interest on our cash and cash equivalents and investments. Interest expense consists of interest expense related to the aggregate $10.0 million principal amount of the Term A Loan borrowing under the loan and security agreement in July 2019. A portion of the interest expense on the Term A Loan is non-cash expense relating to the accretion of the debt discount and amortization of issuance costs. In the three months ended March 31, 2020, we recorded $0.3 million in interest expense, of which $0.2 million relates to cash interest paid and the remainder to the accretion of the debt discount and amortization of issuance costs. Other expense, net consists primarily of foreign exchange losses.

Results of Operations

Comparison of the Three Months Ended March 31, 2020 and 2019

The following table summarizes our results of operations for the three months ended March 31, 2020 and 2019:

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

 

 

(in thousands)

 

REVENUE

 

 

 

 

 

 

 

 

Service revenue

 

$

1,021

 

 

$

 

Total revenue

 

 

1,021

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

Research and development

 

 

7,173

 

 

 

5,486

 

General and administrative

 

 

3,192

 

 

 

2,632

 

Total operating expenses

 

 

10,365

 

 

 

8,118

 

Loss from operations

 

 

(9,344

)

 

 

(8,118

)

Other income (expense):

 

 

 

 

 

 

 

 

Other (expense) income, net

 

 

(111

)

 

 

443

 

Loss before income taxes

 

 

(9,455

)

 

 

(7,675

)

Income tax provision

 

 

 

 

 

(22

)

Net loss

 

$

(9,455

)

 

$

(7,697

)

 

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Revenue

The Company’s revenue for the three months ended March 31, 2020 consisted solely of the $1.0 million in research cost reimbursements recognized as service revenue under the January 2020 research agreement with Takeda.

 

Research and Development Expenses

The following table summarizes our research and development expenses for the three months ended March 31, 2020 and 2019:

 

 

 

Three Months Ended

March 31,

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Increase

 

 

 

(in thousands)

 

LB-001 external development and manufacturing costs

 

$

3,494

 

 

$

2,754

 

 

$

740

 

Personnel-related costs

 

 

1,766

 

 

 

1,197

 

 

 

569

 

Other research and development costs

 

 

1,913

 

 

 

1,535

 

 

 

378