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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2022

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)

 

65 Hayden Avenue, 2nd Floor, Lexington, MA

(Address of principal executive offices)

 

(I.R.S. Employer

Identification No.)

02421

(Zip code)

 

(617) 245-0399

(Registrant’s telephone number, including area code)

 

n/a

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

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

LOGC

 

The 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 10, 2022, the registrant had 32,962,733 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

 

Table of Contents

 

 

Page  

PART I.

FINANCIAL INFORMATION

7

Item 1.

Financial Statements (Unaudited)

7

 

Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021

7

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021

8

 

Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2022 and 2021

9

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021

10

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021

11

 

Notes to Unaudited Condensed Consolidated Financial Statements

12

Item 2.

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

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

31

 

 

 

PART II.        

OTHER INFORMATION

33

Item 1.

Legal Proceedings

33

Item 1A.

Risk Factors

33

Item 6.

Exhibits

84

Signatures

85

 

 

2


 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

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 “anticipate,” “approach,” “believe,” “continue,” “could,” “designed,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “potential,” “projection,” “strategy,” “will,” “would,” “should,” “seek,” “likely,” “become,” “develop,” “engage,” “execute,” “expand,” “future” or similar expressions, or the negative or plural of these words or expressions. These forward-looking statements may include statements concerning the following:

 

the design, cost, initiation, timing, progress and results of our current and future research and development activities, including statements with respect to our Phase 1/2 SUNRISE clinical trial and other development activities for our product candidate, LB-001, in methylmalonic acidemia, or MMA;  

 

early clinical results and the significance and interpretation thereof and the expected timing to reinitiate dosing in our Phase 1/2 SUNRISE clinical trial following the removal of the clinical hold announced in May 2022 or of announcing additional interim clinical data in the SUNRISE trial;

 

potential attributes and benefits of our GeneRide® and sAAVy platforms and our existing or future product candidates, including any potential benefit of such platforms over competing platforms;

 

the direct or indirect impacts of the COVID-19 pandemic on our business, operations and the markets and communities in which we and our partners, collaborators and vendors operate;

 

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

 

our ability to optimize certain components of our viral vector manufacturing process, including production yields, drug product purity, decreasing “empty” capsids and developing reliable characterization methods;

 

the potential benefits of our collaboration and license agreements and our ability to enter into future collaboration and licensing 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 obtain the funding for our operations necessary to continue the advancement of any product candidates;

 

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

 

our intellectual property position, including obtaining and maintaining patents, the duration of our patent protection and trade secret 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.

Any or all of these forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. These forward-looking statements involve risks and uncertainties, including those that are discussed below under the heading “Risk Factors Summary”, and the risk factors identified further in Part II, Item 1A. "Risk Factors" included in this Quarterly Report on Form 10-Q and elsewhere in this Quarterly Report on Form 10-Q, that could cause our actual results, financial condition, performance or achievements to be materially different from those indicated in these forward-looking statements. In particular, the potential timing and cost impacts of the SUNRISE protocol amendments relating to the lifting of the clinical hold announced in May 2022, the impact of the ongoing COVID-19 pandemic on our ability to progress with our research, development, manufacturing and regulatory efforts, 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 safety concerns that the U.S. Food and Drug Administration, or FDA, and other regulatory bodies may continue to have and the ultimate duration of the pandemic. In addition we are subject to the following risks: existing preclinical data may not be predictive of the results of ongoing or later clinical trials; clinical trials may not be successful or may be discontinued or delayed for any reason; manufacturing and process development risks, including delays relating to continuously improving our manufacturing processes; risks associated with management and key personnel changes and transitional periods; the actual funding required to develop and commercialize product candidates, including for safety, tolerability, enrollment, manufacturing or economic reasons; the timing and content of decisions made by regulatory authorities; the actual time it takes to initiate and complete preclinical and clinical studies; the competitive landscape; changes in our economic and financial conditions; and our ability to obtain, maintain and enforce patent and other intellectual property protection for LB-001 and any other product candidates. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason. Unless otherwise stated, our forward-looking

3


 

statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

In this Quarterly Report on Form 10-Q, 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.

LOGICBIO®, GENERIDE®, SAAVY™, MAAVRXTM and any associated logos are trademarks of LogicBio and/or its affiliates. All other trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. The use or display of other parties’ trademarks, trade dress or products in this Quarterly Report on Form 10-Q does not imply that we have a relationship with, or endorsement or sponsorship of, the trademark or trade dress owners. Any website addresses given in this Quarterly Report on Form 10-Q are for information only and are not intended to be an active link or to incorporate any website information into this document.

 


4


 

 

RISK FACTORS SUMMARY

The following is a summary of the principal risks that could adversely affect our business, financial condition and results of operations:

 

Risks Related to Our Financial Position and Need for Additional Capital

 

We have incurred significant losses since inception and anticipate that we will incur continued losses for the foreseeable future. We may never achieve or maintain profitability.

 

Under our ASC 205-40 analysis, there is “substantial doubt” that we will have sufficient funds to satisfy our obligations through the next twelve months from the date of issuance of this Quarterly Report on Form 10-Q.

 

We will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the development and commercialization of any product candidates.

Risks Related to Discovery, Development, Clinical Testing, Manufacturing and Regulatory Approval

 

Our product candidates may cause serious adverse events or undesirable side effects or have other properties that may delay or prevent their regulatory approval, limit the commercial profile of an approved label or result in significant negative consequences following marketing approval, if any.

 

We intend to identify and develop product candidates based on our novel GeneRide and sAAVy technology platforms, which makes it difficult to predict the time and cost of product candidate development.

 

Because gene delivery is novel and the regulatory landscape that governs any product candidates we may develop is uncertain and may change, we cannot predict the time and cost of obtaining regulatory approval, if we receive it at all, for any product candidates we may develop.

 

Clinical trials are expensive, time-consuming, difficult to design and implement and involve an uncertain outcome.

 

If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

 

Even if we complete the necessary clinical trials, we cannot predict when, or if, we will obtain regulatory approval to commercialize a product candidate we may develop, and any such approval may be for a more narrow indication than we seek.

 

We may not be successful in our efforts to identify additional product candidates.

 

The regulatory approval processes of the FDA, the EMA and other regulatory authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

 

We are heavily dependent on the success of LB-001 and if LB-001 does not receive regulatory approval in the United States or other jurisdictions, or is not successfully commercialized, our business will be harmed.

 

Interim “top-line” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

Risks Related to Our Dependence on Third Parties

 

Reliance on third-party manufacturers increases the risk that we will not have sufficient quantities of testing materials, product candidates or any medicines that we may develop and commercialize, or that such supply will not be available to us at an acceptable cost.

 

If the third parties that conduct, supervise and monitor our clinical trials do not successfully carry out their contractual duties, or if they perform in an unsatisfactory manner, it may harm our business.

 

Collaborations we enter into with third parties for the research, development and commercialization of certain of our product candidates may not be successful, we may not be able to capitalize on the market potential of those product candidates.

 

Our collaborators or strategic partners may decide to adopt alternative technologies or may be unable to develop commercially viable products with our technology, which would negatively impact our revenues and our strategy to develop these products.

 

If we fail to comply with obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.

5


 

Risks Related to Our Intellectual Property

 

If we are unable to obtain and maintain sufficient patent protection for any product candidates and for our technology, our competitors could develop and commercialize products and technology similar or identical to ours.

 

If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.

 

Patent terms and market exclusivity for our product candidates may be inadequate to protect our competitive position for an adequate amount of time.

 

The intellectual property landscape around genetic medicines is highly dynamic, and third parties may initiate legal proceedings alleging that we are infringing, misappropriating, or otherwise violating their intellectual property rights, the outcome of which would be uncertain.

 

We may be subject to claims challenging the inventorship of our patents and other intellectual property.

Risks Related to Healthcare Laws and Other Legal Compliance Matters

 

Our current and future business operations are and will be subject to applicable healthcare regulatory laws, which could expose us to penalties and other sanctions.

 

We are subject to stringent privacy laws, information security laws, regulations, policies and contractual obligations related to data privacy and security and changes in such laws, regulations, policies and contractual obligations could adversely affect our business.

Risks Related to Employee Matters and Managing Growth

 

Our future success depends on our ability to retain our key personnel and to attract, retain and motivate qualified personnel.

Risks Related to Our Common Stock and Indebtedness

 

If we cannot comply with Nasdaq’s continued listing standards, our common stock could be delisted.

 

6


 

 

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, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

42,739

 

 

$

53,480

 

Accounts receivable

 

 

 

 

 

30

 

Prepaid expenses and other current assets

 

 

2,477

 

 

 

2,156

 

Total current assets

 

 

45,216

 

 

 

55,666

 

Property and equipment, net

 

 

1,775

 

 

 

1,911

 

Restricted cash

 

 

622

 

 

 

622

 

Operating lease right-of-use asset

 

 

4,286

 

 

 

4,571

 

TOTAL ASSETS

 

$

51,899

 

 

$

62,770

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,498

 

 

$

718

 

Accrued expenses and other current liabilities

 

 

1,764

 

 

 

3,704

 

Operating lease liabilities

 

 

1,262

 

 

 

1,227

 

Current portion of long-term debt

 

 

3,298

 

 

 

3,295

 

Current portion of deferred revenue

 

 

8,694

 

 

 

10,639

 

Total current liabilities

 

 

16,516

 

 

 

19,583

 

Long-term debt, net of issuance costs and discount

 

 

4,217

 

 

 

5,006

 

Operating lease liabilities, net of current portion

 

 

3,397

 

 

 

3,725

 

Deferred revenue, net of current portion

 

 

2,858

 

 

 

3,729

 

Total liabilities

 

 

26,988

 

 

 

32,043

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

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, 2022 and December 31, 2021.

 

 

 

 

 

 

Common stock, par value of $0.0001 per share; 175,000,000 shares authorized; 32,962,733 and 32,952,306 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

171,590

 

 

 

170,744

 

Accumulated deficit

 

 

(146,682

)

 

 

(140,020

)

Total stockholders’ equity

 

 

24,911

 

 

 

30,727

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

51,899

 

 

$

62,770

 

 

See notes to unaudited condensed consolidated financial statements.

 

7


 

 

LogicBio Therapeutics, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

REVENUE

 

 

 

 

 

 

 

 

Collaboration and service revenue

 

$

2,816

 

 

$

461

 

Total revenue

 

 

2,816

 

 

 

461

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

Research and development

 

 

5,641

 

 

 

6,419

 

General and administrative

 

 

3,624

 

 

 

4,059

 

Total operating expenses

 

 

9,265

 

 

 

10,478

 

LOSS FROM OPERATIONS

 

 

(6,449

)

 

 

(10,017

)

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

Interest income

 

 

5

 

 

 

6

 

Interest expense

 

 

(218

)

 

 

(271

)

Total other expense, net

 

 

(213

)

 

 

(265

)

Net loss

 

$

(6,662

)

 

$

(10,282

)

Net loss per share—basic and diluted

 

$

(0.20

)

 

$

(0.32

)

Weighted-average common stock outstanding—basic and diluted

 

 

32,961,180

 

 

 

31,933,794

 

 

See notes to unaudited condensed consolidated financial statements.

 

8


 

 

LogicBio Therapeutics, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Net loss

 

$

(6,662

)

 

$

(10,282

)

Other comprehensive income:

 

 

 

 

 

 

 

 

Unrealized gain on investments

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

 

 

 

 

Comprehensive loss

 

$

(6,662

)

 

$

(10,282

)

 

See notes to unaudited condensed consolidated financial statements.

 

9


 

 

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

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

BALANCE, January 1, 2021

 

 

31,775,748

 

 

$

3

 

 

$

161,415

 

 

$

 

 

$

(99,991

)

 

$

61,427

 

Vesting of restricted stock

 

 

31,372

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock related to at-the-market offerings, net of issuance costs of $65

 

 

251,086

 

 

 

 

 

 

2,091

 

 

 

 

 

 

 

 

 

2,091

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

989

 

 

 

 

 

 

 

 

 

989

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,282

)

 

 

(10,282

)

BALANCE, March 31, 2021

 

 

32,058,206

 

 

$

3

 

 

$

164,495

 

 

$

 

 

$

(110,273

)

 

$

54,225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, January 1, 2022

 

 

32,952,306

 

 

$

3

 

 

$

170,744

 

 

$

 

 

$

(140,020

)

 

$

30,727

 

Vesting of restricted stock

 

 

10,427

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

846

 

 

 

 

 

 

 

 

 

846

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,662

)

 

 

(6,662

)

BALANCE, March 31, 2022

 

 

32,962,733

 

 

$

3

 

 

$

171,590

 

 

$

 

 

$

(146,682

)

 

$

24,911

 

 

See notes to unaudited condensed consolidated financial statements.

 

10


 

 

LogicBio Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(6,662

)

 

$

(10,282

)

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

 

 

 

 

 

 

 

 

Depreciation expense

 

 

166

 

 

 

138

 

Stock-based compensation expense

 

 

846

 

 

 

989

 

Non-cash interest expense

 

 

48

 

 

 

53

 

Non-cash lease expense

 

 

277

 

 

 

269

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(321

)

 

 

109

 

Accounts receivable

 

 

30

 

 

 

174

 

Accounts payable

 

 

757

 

 

 

262

 

Accrued expenses and other current liabilities

 

 

(2,226

)

 

 

215

 

Deferred revenue

 

 

(2,816

)

 

 

 

Net cash used in operating activities

 

 

(9,901

)

 

 

(8,073

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(7

)

 

 

(151

)

Net cash used in investing activities

 

 

(7

)

 

 

(151

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Net proceeds from at-the-market common stock issuances

 

 

 

 

 

2,091

 

Principal repayments on term loan

 

 

(833

)

 

 

 

Net cash (used in) provided by financing activities

 

 

(833

)

 

 

2,091

 

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED

   CASH

 

 

(10,741

)

 

 

(6,133

)

Cash, cash equivalents and restricted cash at beginning of year

 

 

54,102

 

 

 

70,697

 

Cash, cash equivalents and restricted cash at end of period

 

$

43,361

 

 

$

64,564

 

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED

   CASH

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

42,739

 

 

$

63,942

 

Long-term restricted cash

 

 

622

 

 

 

622

 

Total cash, cash equivalents and restricted cash

 

$

43,361

 

 

$

64,564

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

170

 

 

$

218

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES:

 

 

 

 

 

 

 

 

Property and equipment purchases in accrued expenses and accounts payable

 

$

23

 

 

$

70

 

 

See notes to unaudited condensed consolidated financial statements.

 

11


 

 

LogicBio Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(Dollars 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 office is in Lexington, Massachusetts. LogicBio is a clinical-stage genetic medicine company pioneering genome editing and gene delivery platforms to address rare and serious diseases from infancy through adulthood. The Company's gene editing platform, GeneRide®, is a new approach to precise gene insertion harnessing a cell's natural deoxyribonucleic acid (“DNA”) repair process potentially leading to durable therapeutic protein expression levels. The Company's gene delivery platform, sAAVy™, is an adeno-associated virus (“AAV”) capsid engineering platform designed to optimize gene delivery for treatments in a broad range of indications and tissues.

 

The Company’s lead product candidate, LB-001, is a single-administration, genome editing therapy developed using its GeneRide technology, currently in Phase 1/2 development for the treatment of methylmalonic acidemia (“MMA”) in pediatric patients. MMA is a rare and life-threatening genetic disorder affecting approximately 1 in 50,000 newborns in the United States that often results in developmental delays and other long-term complications and a high rate of hospitalizations.

 

In April 2021, the Company entered into an Exclusive Research Collaboration, License and Option Agreement with CANbridge Care Pharma Hong Kong Limited (“CANbridge”), pursuant to which LogicBio granted CANbridge (a) an exclusive worldwide license to certain of the Company’s intellectual property rights, including those relating to AAV sL65 (“sL65”), the first capsid produced from the sAAVy platform, to develop, manufacture and commercialize gene therapy candidates for the treatment of Fabry and Pompe diseases, (b) an option to obtain an exclusive worldwide license to certain of the Company’s intellectual property rights, including those relating to sL65, to develop and commercialize gene therapy candidates for the treatment of two additional indications, and (c) an exclusive option to obtain an exclusive license to develop and commercialize LB-001 for the treatment of MMA in China, Taiwan, Hong Kong and Macau. Also in April 2021, the Company announced a research collaboration with Daiichi Sankyo Company, Limited (“Daiichi”) for the development of treatments for two indications based on GeneRide. In addition, the Company entered into a research collaboration with Takeda Pharmaceutical Company Limited (“Takeda”) in January 2020 to develop LB-301, an investigational therapy leveraging GeneRide, for the treatment of Crigler-Najjar syndrome (“CN”), a rare pediatric disease. The work under the research plan was completed in 2021.  

 

Since its inception, the Company has devoted the majority of its efforts to research and development, including its preclinical and clinical development activities and its manufacturing and process development activities, raising capital, and providing general and administrative support for these operations. 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 clinical and regulatory risks associated with drug development, 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 product candidates, successfully commercialize its products, if approved, generate revenue and attain profitable operations.

 

COVID-19 Impact

 

The Company is closely monitoring the COVID-19 pandemic in order to promote the safety of its personnel and to continue advancing its research and development activities. The Company is following federal, state and local requirements and guidelines with respect to the COVID-19 pandemic and has allowed its employees to work on-premises in accordance with those 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 quarter ended March 31, 2022. However, the Company is aware that certain of its third-party vendors are being affected by import/export and other restrictions due to COVID-19, which may have an impact on certain of the Company’s research, development and manufacturing activities. The full extent to which the COVID-19 pandemic, including the development of additional variants, could 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.

 

12


 

 

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 our third-party vendors’, suppliers’ and collaborators’ 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. 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.

 

Liquidity and Capital Resources

 

The Company has had recurring losses since inception and incurred a loss of $6,662 during the three months ended March 31, 2022. Net cash used in operations for the three months ended March 31, 2022 was $9,901. The Company expects to continue to generate operating losses and use cash in operations for the foreseeable future. As of March 31, 2022, the Company had cash and cash equivalents of $42,739 which management believes will be sufficient to fund its operating expenses and capital expenditure requirements through the first quarter of 2023, however due to the uncertainties described below, there is substantial doubt about the Company’s ability to continue as a going concern. On a quarterly basis, the Company is required to conduct an accounting analysis under ASC 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, (“ASC 205-40”). The result of the Company’s ASC 205-40 analysis is that there is substantial doubt about the Company’s ability to continue as a going concern through the next twelve months from the date of issuance of these unaudited condensed consolidated financial statements.

 

The Company will require substantial additional capital to fund its research and development, including its preclinical and clinical development activities and its manufacturing and process development activities, and ongoing operating expenses. Management’s plans to mitigate the conditions that raise substantial doubt include raising additional capital through equity or debt financings, payments from its collaborators, strategic transactions, or a combination of those approaches. These plans may also include the possible elimination or 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. 

 

The accompanying unaudited 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 unaudited 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 unaudited 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 U.S. 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 unaudited 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, 2021, filed with the SEC on March 4, 2022.

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, 2022, consolidated results of operations for the three months ended March 31, 2022 and 2021 and cash flows for the three months ended March 31, 2022 and 2021. Such adjustments are of a normal and recurring nature. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022.

 

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, 2021, filed with the SEC on March 4, 2022. Since the date of those financial statements, there have been no material changes to its significant accounting policies.

13


 

Recently Issued Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. The Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial statements upon adoption.

In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848). This ASU provides optional expedients and exceptions for applying U.S. GAAP to transactions affected by reference rate (e.g., LIBOR) reform if certain criteria are met, for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The ASU is effective now through December 31, 2022. The Company will evaluate transactions or contract modifications, including any related to its July 2019 loan and security agreement which uses LIBOR as a reference rate, occurring as a result of reference rate reform and determine whether to apply the optional guidance on an ongoing basis. The ASU is currently not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

 

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, 2022

 

 

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

 

$

41,793

 

 

$

41,793

 

 

$

 

 

$

 

Total financial assets

 

$

41,793

 

 

$

41,793

 

 

$

 

 

$

 

 

Description

 

December 31,

2021

 

 

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

 

$

52,866

 

 

$

52,866

 

 

$

 

 

$

 

Total financial assets

 

$

52,866

 

 

$

52,866

 

 

$

 

 

$

 

 

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 financial 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 levels of the fair value measurement hierarchy during the three months ended March 31, 2022.

14


 

4. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities at March 31, 2022 and December 31, 2021 consisted of the following:

 

 

 

March 31,

2022

 

 

December 31,

2021

 

Accrued compensation and benefits

 

$

623

 

 

$

2,289

 

Accrued professional services

 

 

1,049

 

 

 

1,341

 

Other

 

 

92

 

 

 

74

 

Total accrued expenses and other current liabilities

 

$

1,764

 

 

$

3,704

 

 

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”).

5. 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 allowed 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. In September 2020 and March 2021, the Company entered into amendments to the Loan Agreement, each of which extended the availability of the $10,000 second tranche subject to certain conditions. In the second quarter of 2021, the Company met the conditions to initiate drawdown of the second tranche but did not exercise its right to do so, and the option to draw down the second tranche of the Term Loans expired.

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 warrants to purchase 15,686 shares of common stock (“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 Long-term debt, net of issuance costs and discount by charges to interest expense over the term of the 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 5.0% 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.

15


 

Interest expense was $218 and $271 for the three months ended March 31, 2022 and 2021, respectively. The effective rate on the Loan Agreement, including the amortization of the debt discount and issuance costs, and accretion of the final payment, was 11.34% at March 31, 2022. The components of the long-term debt balance are as follows:

 

 

 

March 31,

2022

 

 

December 31,

2021

 

Notes payable, gross

 

$

7,222

 

 

$

8,055

 

Less: Unamortized debt discount and

   issuance costs

 

 

(76

)

 

 

(93

)

Accretion of final payment fee

 

 

369

 

 

 

339

 

Carrying value of notes payable

 

 

7,515

 

 

 

8,301

 

Less: Current portion of long-term debt

 

 

(3,298

)

 

 

(3,295

)

Long-term debt, net of issuance costs and

   discount

 

$

4,217

 

 

$

5,006

 

 

As of March 31, 2022, the estimated future principal payments due were as follows:

 

 

 

As of March 31, 2022

 

2022

 

$

2,500

 

2023

 

 

3,333

 

2024

 

 

1,389

 

Thereafter

 

 

 

Total principal payments

 

$

7,222

 

 

6. 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 have been, or 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 awards granted under the 2014 Plan prior to the adoption of the 2018 Plan remained 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 Company’s Board of Directors (“Board”). On January 1, 2022, the number of shares available for future grant under the 2018 Plan increased by 1,318,271 shares. At March 31, 2022, there were 752,054 shares available for future grant under the 2018 Plan.

The 2018 Plan is administered by the Compensation Committee of the Board, except with respect to such matters that are not delegated to the Compensation Committee by the Board (collectively, the “Administrator”). The exercise prices, vesting and certain other restrictions are determined at the discretion of the Administrator, 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. The term of stock options awarded under the 2018 Plan may not exceed 10 years from the grant date. Stock options, shares of restricted stock and restricted stock units (“RSUs”) 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, 2022 and 2021, the Company granted options with time-based vesting to purchase 1,473,150 and 1,087,456 shares of common stock, respectively, with a weighted-average grant date fair value per share of $0.46 and $5.16, respectively. The Company recorded stock-based compensation expense for options granted of $844 and $839 during the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, there were 5,635,975 outstanding options, of which 3,513,828 were unvested, and $7,985 of unrecognized stock-based compensation expense to be recognized over a weighted-average period of 2.72 years.

16


 

Restricted Stock

The Company has granted shares of restricted stock with time-based and performance-based vesting conditions from time to time. The Company did not grant any restricted stock during the three-month periods ended March 31, 2022 or 2021. During the three months ended March 31, 2022, no expense was recorded for restricted stock previously granted. During the three months ended March 31, 2021, the Company recorded stock-based compensation expense of $30 related to restricted stock previously granted. As of March 31, 2022, there were no unvested shares of restricted stock outstanding.

 

Restricted Stock Units

The Company has granted RSUs with time-based vesting conditions from time to time. Each RSU represents the right to receive one share of the Company’s common stock upon vesting. The fair value is calculated based upon the Company’s closing stock price on the date of grant, and the stock-based compensation expense is recognized over the vesting period. The Company did not grant any RSUs during the three months ended March 31, 2022. The Company granted 5,939 RSUs during the three months ended March 31, 2021. The Company recorded stock-based compensation for RSUs of $2 and $120 during the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, there were no unvested RSUs outstanding.

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, 2022 and 2021 is as follows:

 

 

 

Three Months Ended

March 31,

 

 

 

2022

 

 

2021

 

Research and development

 

$

282

 

 

$

304

 

General and administrative

 

 

564

 

 

 

685

 

Total stock-based compensation expense

 

$

846

 

 

$

989

 

 

7. 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”), and filed a related prospectus supplement, pursuant to which the Company may issue and sell shares of its common stock at the then current market prices having an 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.

During the three months ended March 31, 2022, the Company did not issue any Open Market Shares. During the three months ended March 31, 2021, the Company issued 251,086 Open Market Shares at a weighted-average price of $8.59 per share, resulting in net proceeds to the Company of $2,091. At March 31, 2022, the Company had $41,253 in aggregate gross offering amount available under the Open Market Sale Agreement.

 

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8. REVENUE

Service Revenue

Takeda Agreement

In January 2020, the Company entered into a Research Collaboration and Option Agreement with Takeda (“Takeda Agreement”), which expired by its own terms in the year ended December 31, 2021.

The Company assessed the Takeda Agreement in accordance with ASC 606 and concluded that it represented a contract with a customer and was within the scope of ASC 606. The promised goods and services represented one combined performance obligation and the entire transaction price was allocated to that single combined performance obligation. In addition, the Company concluded that the exclusive option to obtain an exclusive license to LB-301 granted to Takeda under the Takeda Agreement (the “License Option”) did not provide any discounts or other rights. Terms related to an exclusive license negotiated after the exercise of the License Option would be part of a separate contract and reflect applicable standalone selling prices. As such, the Company concluded the License Option was not considered to be a material right.

Under the Takeda Agreement, Takeda was obligated to reimburse the Company for the costs incurred under the research plan. Costs incurred were 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 approximated the value transferred to the customer and the performance completed to date. During the quarters ended March 31, 2022 and 2021, the Company recognized $0 and $461, respectively, in service revenue under the Takeda Agreement.

Daiichi Sankyo Agreement

In April 2021, the Company entered into a Research Collaboration and Exclusive Option Agreement (the “Daiichi Agreement”) with Daiichi for the development of gene therapy candidates for two indications based on the GeneRide platform (each, a “Daiichi Candidate”). Under the terms of the Daiichi Agreement, Daiichi will fund all research and development activities related to the development of the Daiichi Candidates under a mutually agreed research plan (the “Daiichi Research Plan”). The Daiichi Agreement also provides Daiichi with an exclusive, non-binding option for each Daiichi Candidate to negotiate in good faith for a certain period of time to enter into a license agreement with respect to each such Daiichi Candidate (the “Daiichi License Options”).

The Company assessed the Daiichi Agreement in accordance with ASC 606 and concluded that it represents a contract with a customer and is within the scope of ASC 606. The Company concluded that its conduct of research services under the Daiichi Research Plan, which includes a research data package, participation in various joint oversight committees, a research license and a materials transfer, represents a single combined performance obligation. The Company determined the transaction price totaled $2,000, which included an upfront payment of $1,000 and an additional $1,000 prepayment of the first-year research and development fees. The entire transaction price will be allocated to the single combined performance obligation, which is transferred over the expected term of the conduct of the research services. Terms related to exclusive licenses negotiated after the exercise of the Daiichi License Options will be part of a separate contract and reflect applicable standalone selling prices. As such, the Company concluded the Daiichi License Options are not considered to be a material right.

The upfront payment of $2,000 was recorded as deferred revenue and is being recognized as revenue over time in conjunction with the Company’s conduct of research services as the research services are the primary component of the combined performance obligation. Revenue associated with the upfront payment and ongoing research services will be recognized using an input-based measurement of actual costs incurred as a percentage of the estimated total costs expected to be incurred over the expected term of conduct of the research services. The Company believes this input-based method to recognize revenue best reflects the transfer of value to Daiichi. During the quarter ended March 31, 2022, the Company recognized $335 as service revenue under the Daiichi Agreement. As of March 31, 2022, there was $748 in deferred revenue related to the Daiichi Agreement, of which $703 was classified as current deferred revenue.  

Collaboration Revenue

CANbridge Agreement

In April 2021, the Company entered into an Exclusive Research Collaboration, License and Option Agreement (the “CANbridge Agreement”) with CANbridge.

Under the terms of the CANbridge Agreement, the Company granted CANbridge (a) an exclusive worldwide license to certain of the Company’s intellectual property rights, including those relating to sL65 to develop, manufacture and commercialize gene therapy

18


 

candidates for the treatment of Fabry and Pompe diseases (the “Fabry and Pompe License”), (b) an option to obtain an exclusive worldwide license to certain of the Company’s intellectual property rights, including those relating to sL65, to develop and commercialize gene therapy candidates for the treatment of two additional indications (the “Candidate Options”) and (c) an exclusive option to obtain an exclusive license to develop and commercialize LB-001 for the treatment of MMA (the “LB-001 Option”) in China, Taiwan, Hong Kong and Macau (“Greater China”). Pursuant to the CANbridge Agreement, LogicBio and CANbridge are collaborating to develop the gene therapy candidates referenced in (a) above for the treatment of Fabry and Pompe diseases plus, upon CANbridge’s exercise of the applicable Candidate Options, two additional indications under a mutually agreed research plan (the “CANbridge Research Plan”).

Under the CANbridge Agreement, the Company received an upfront, non-refundable and non-creditable payment of $10,000 from CANbridge a portion of which was paid to a third party under certain of the Company’s in-licensing obligations. In addition, CANbridge is obligated to reimburse the Company for research and development costs incurred by the Company for activities related to the development of the gene therapy candidates for Fabry and Pompe diseases under the CANbridge Research Plan.

 

The Company is eligible to receive up to $542,000 in aggregate from CANbridge contingent on the achievement of specified clinical, regulatory and sales milestones relating to the named gene therapy candidates for Fabry and Pompe diseases, the additional indications for which CANbridge exercises the Candidate Options, and the payment of any option exercise fees. The Company is also eligible to receive up to $49,000 in aggregate clinical, regulatory and sales milestones for LB-001, subject to the exercise of the LB-001 Option, and the payment of the LB-001 Option exercise fee. CANbridge is obligated to pay to the Company royalties based on an escalating tiered, mid- to high-single digit percentage of the annual worldwide net sales for each non-LB-001 indication pursued. In addition, CANbridge will pay to the Company royalties based on an escalating tiered, high-single digit to mid-double digit percentage of the annual Greater China net sales for LB-001 for the treatment of MMA, subject to the exercise of the LB-001 Option.

The Company applied ASC Topic 808, Collaborative Arrangements (“ASC 808”) and determined that the CANbridge Agreement is within the scope of ASC 808. Furthermore, the Company determined that certain aspects of the CANbridge Agreement represented a vendor-customer relationship as CANbridge represents a customer for certain activities. As such, the Company applied the relevant guidance from ASC 606 to evaluate the appropriate accounting for the vendor-customer aspects of the CANbridge Agreement. In accordance with ASC 606, the Company identified its performance obligation as a grant of a license to CANbridge for certain of its intellectual property rights, including those relating to sL65, and its conduct of research services under the CANbridge Research Plan, which includes participation in various joint oversight committees and a technology transfer. The Company determined that its grant of a license to CANbridge to certain of its intellectual property subject to certain conditions was not distinct as it does not have stand-alone value to CANbridge apart from the services to be performed by the Company pursuant to the CANbridge Agreement. A third party would not be able to provide research and development services due to the specific nature of the intellectual property and knowledge required to perform the services, and CANbridge could not benefit from the license without the corresponding services. The Company also concluded that the LB-001 Option and Candidate Options were not provided to CANbridge at a significant discount. The terms of the options, including the upfront exercise fee and applicable milestone payments, reflected applicable standalone selling prices at the time of the CANbridge Agreement. As such, the Company concluded that none of the options was considered to be material rights and, as such, were not performance obligations.  

Accordingly, the Company determined that its grant of a license to CANbridge and its conduct of research and development services under the CANbridge Research Plan should be accounted for as one combined performance obligation, and that the combined performance obligation is transferred over the expected term of the conduct of the research and development services. 

In accordance with ASC 606, the Company determined that the initial transaction price under the CANbridge agreement was $10,878, consisting of the upfront, non-refundable and non-creditable payment of $10,000 and an upfront payment of estimated quarterly research costs $878. The upfront payment of $10,878 was initially recorded as deferred revenue and, along with payments related to the Company’s conduct of research services under the CANbridge Research Plan, will be recognized as revenue using an input-based measurement of actual costs incurred as a percentage of the estimated total costs expected to be incurred over the expected term of conduct of the research services. The Company believes this input-based method to recognize revenue best reflects the transfer of value to CANbridge. The Company recorded the initial $878 prepayment of the quarterly research and development fees as deferred revenue, and such fees will be recognized as revenue as the research services are delivered.

The Company also assessed the effects of variable elements including the likelihood of receiving (i) various clinical, regulatory and commercial milestone payments, and (ii) royalties on net sales of any product candidate. Based on its assessment, the Company concluded that, based on the likelihood of these uncertain events occurring, there was not a significant variable element included in the transaction price. Accordingly, the Company has not assigned a transaction price to these variable elements given the substantial uncertainty related to their achievement and has not assigned a transaction price to any CANbridge milestone or royalties.

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The Company recognized revenue of $2,481 under the CANbridge Agreement during the quarter ended March 31, 2022. As of March 31, 2022, aggregate deferred revenue related to the CANbridge Agreement was $10,804 of which $7,991 was classified as current. Both the current and non-current deferred revenue amounts will be recognized during the expected term of the conduct of research and development services. As a direct result of the Company’s entry into the CANbridge Agreement, the Company incurred $775 in sublicense fees to certain of its existing licensors which was expensed to research and development expense during the second quarter of 2021.

 

9. INCOME TAXES

For the three months ended March 31, 2022 and the year ended December 31, 2021, 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 taxable position in the near future.

10. 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,

 

 

 

2022

 

 

2021

 

Numerator:

 

 

 

 

 

 

 

 

Net loss

 

$

(6,662

)

 

$

(10,282

)

Denominator:

 

 

 

 

 

 

 

 

Weighted-average common stock outstanding

 

 

32,961,180

 

 

 

31,933,794

 

Net loss per share — basic and diluted

 

$

(0.20

)

 

$

(0.32

)

 

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, 2022 and 2021.

 

 

 

March 31,

2022

 

 

March 31,

2021

 

Unvested restricted common stock

 

 

 

 

 

24,535

 

Unvested restricted stock units

 

 

 

 

 

88,430

 

Options to purchase common stock

 

 

5,635,975

 

 

 

4,060,357

 

Loan warrants

 

 

15,686

 

 

 

15,686

 

 

11. LEASES

The Company has historically entered into lease arrangements for its facilities and certain equipment. As of March 31, 2022, the Company had one operating lease with required future minimum payments related to its headquarters in Lexington, MA.

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 leases approximately 23,901 square feet of space and pays 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 due in monthly installments through the Lease Termination Date.

At the Lease Commencement Date, the Company performed a lease assessment under the guidance prescribed in ASC Topic 842, Leases (“ASC 842”), and concluded that the 65 Hayden Ave Lease was an operating lease. As such, the Company recorded an

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operating lease right-of-use asset and corresponding operating lease liability on the consolidated balance sheets of $6,428 which reflected the net present value of future payments under the lease. The discount rate used to calculate the net present value of future payments was the Company’s incremental borrowing rate at the Lease Commencement Date, which was 7.6%.

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, 2022 and 2021:

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Operating leases

 

 

 

 

 

 

 

 

Lease cost

 

 

 

 

 

 

 

 

Operating lease cost

 

$

378

 

 

$

378

 

Variable lease cost

 

 

223

 

 

 

215

 

Total lease cost

 

$

601

 

 

$

593

 

Other year-to-date lease information

 

 

 

 

 

 

 

 

Operating cash flows used

   for operating leases

 

$

385

 

 

$

373

 

Operating lease liabilities

   arising from obtaining

   right-of-use assets

 

$