UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 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: 001-37798 Selecta Biosciences, Inc. (Exact name of registrant as specified in its charter) Delaware 26-1622110 (State or other jurisdicti ...

Selecta Biosciences, Inc. (SELB) Q3 2022 Earnings Conference Call November 3, 2022 8:30 AM ET Company Participants Carsten Brunn - President and Chief Executive Officer Kevin Tan - Chief Financial Officer Peter Traber - Chief Medical Officer Takashi Kishimoto - Chief Scientific Officer Conference Call Participants Elizabeth Scott - SVB Securities Rick Miller - Cantor Fitzgerald Yun Zhong - BTIG John Newman - Canaccord Tiffany Marchell - William Blair Boobalan Pachaiyappan - H.C. Wainwright Uy Ear - Mizuho O ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited consolidated financial statements and related notes, along with management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited consolidated financial statements of Selecta Biosciences, Inc. and its subsidiaries for the period ended September 30, 2022, including the balance sheets, statements of operations and comprehensive income (loss), statements of changes in stockholders' equity, and statements of cash flows, along with detailed notes explaining significant accounting policies, financial instruments, revenue arrangements, and other financial disclosures [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific points in time Consolidated Balance Sheets (Amounts in thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | | :-------------------------------- | :----------- | :----------- | | **Assets** | | | | Cash and cash equivalents | $112,843 | $114,057 | | Marketable securities | $33,599 | $13,998 | | Total current assets | $159,677 | $144,443 | | Total assets | $178,265 | $159,883 | | **Liabilities** | | | | Deferred revenue (current) | $3,820 | $53,883 | | Total current liabilities | $23,728 | $72,251 | | Warrant liabilities | $33,473 | $25,423 | | Total liabilities | $93,358 | $137,362 | | **Stockholders' Equity** | | | | Total stockholders' equity | $84,907 | $22,521 | | Accumulated deficit | $(400,830) | $(430,316) | | Total liabilities and stockholders' equity | $178,265 | $159,883 | [Consolidated Statements of Operations and Comprehensive Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) This section details the company's revenues, expenses, and net income or loss over specific reporting periods Consolidated Statements of Operations and Comprehensive Income (Loss) (Amounts in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Collaboration and license revenue | $20,710 | $24,427 | $93,982 | $55,140 | | Research and development expenses | $16,539 | $20,951 | $53,410 | $48,418 | | General and administrative expenses | $5,770 | $5,445 | $17,538 | $15,397 | | Total operating expenses | $22,309 | $26,396 | $70,948 | $63,815 | | Operating income (loss) | $(1,599) | $(1,969) | $23,034 | $(8,675) | | Change in fair value of warrant liabilities | $(6,539) | $592 | $7,329 | $(11,335) | | Income (loss) before income taxes | $(8,214) | $(2,066) | $29,165 | $(22,098) | | Income tax (expense) benefit | $321 | $(15,828) | $321 | $(15,828) | | Net income (loss) | $(7,893) | $(17,894) | $29,486 | $(37,926) | | Basic net income (loss) per share | $(0.05) | $(0.16) | $0.21 | $(0.34) | | Diluted net income (loss) per share | $(0.05) | $(0.16) | $0.15 | $(0.34) | [Consolidated Statements of Changes in Stockholders' Equity (Deficit)](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(Deficit)) This section outlines changes in the company's equity, reflecting net income, stock issuances, and other transactions Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Amounts in thousands, except share data) | Metric | Balance at Dec 31, 2021 | Balance at Sep 30, 2022 | | :------------------------------------ | :---------------------- | :---------------------- | | Common stock (shares) | 123,622,965 | 153,028,822 | | Common stock (amount) | $12 | $15 | | Additional paid-in capital | $457,391 | $490,252 | | Accumulated deficit | $(430,316) | $(400,830) | | Total stockholders' equity | $22,521 | $84,907 | Key Changes (Nine Months Ended Sep 30, 2022) * **Net income:** $28,778 (March 31, 2022) + $8,601 (June 30, 2022) - $7,893 (September 30, 2022) = **$29,486** * **Issuance of common stock and common warrants:** **$21,480** * **Stock-based compensation expense:** $2,753 + $2,564 + $2,601 = **$7,918** [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows (Amounts in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) | $29,486 | $(37,926) | | Net cash (used in) operating activities | $(19,782) | $(28,922) | | Net cash (used in) investing activities | $(20,491) | $(26,862) | | Net cash provided by financing activities | $39,215 | $31,741 | | Net change in cash, cash equivalents, and restricted cash | $(993) | $(24,040) | | Cash, cash equivalents, and restricted cash at end of period | $114,443 | $116,024 | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the consolidated financial statements [1. Description of the Business](index=9&type=section&id=1.%20Description%20of%20the%20Business) This note describes the company's core business, its ImmTOR platform, and its financial strategy - Selecta Biosciences, Inc. is a clinical-stage biopharmaceutical company focused on developing its ImmTOR platform, which encapsulates rapamycin to induce antigen-specific immune tolerance. The platform aims to restore self-tolerance in autoimmune diseases, amplify biologic efficacy, and mitigate anti-drug antibodies[28](index=28&type=chunk) - The Company has financed operations through public/private equity offerings, debt, research grants, and collaboration/license agreements, with no current product revenue. It expects to incur operating losses for the foreseeable future due to ongoing R&D[32](index=32&type=chunk)[33](index=33&type=chunk) - As of September 30, 2022, cash, cash equivalents, restricted cash, and marketable securities totaled **$148.0 million**, expected to fund operations for at least the next twelve months. However, this is subject to risks and uncertainties, and additional funding may be required sooner[33](index=33&type=chunk) [2. Summary of Significant Accounting Policies](index=10&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and methods used in preparing the financial statements - The Company's significant accounting policies remain consistent with its 2021 Annual Report on Form 10-K, with no material changes except for recent accounting pronouncements[36](index=36&type=chunk) - ASU 2021-04, effective for fiscal years beginning after December 15, 2021, regarding issuer's accounting for certain modifications or exchanges of freestanding equity-classified written call options (warrants), was adopted without impact on financial position or results[37](index=37&type=chunk) - ASU 2020-06 (simplifying accounting for certain financial instruments) and ASU 2016-13 (credit losses) are not yet adopted but are being assessed for potential impact, with ASU 2016-13 not expected to have an impact[38](index=38&type=chunk)[40](index=40&type=chunk) [3. Marketable Securities and Investments](index=11&type=section&id=3.%20Marketable%20Securities%20and%20Investments) This note details the company's holdings in marketable securities and other investments Marketable Securities (Amounts in thousands) | Type | Sep 30, 2022 Fair Value | Dec 31, 2021 Fair Value | | :--------------------------------- | :---------------------- | :---------------------- | | U.S. government agency securities and treasuries | $16,821 | — | | Corporate bonds | $1,945 | $2,006 | | Commercial paper | $14,833 | $11,992 | | **Total** | **$33,599** | **$13,998** | - All marketable securities had maturities of less than 12 months when purchased and are classified as short-term - The Company holds a **$2.0 million** investment in Cyrus Biotechnology, Inc. as of September 30, 2022, and December 31, 2021, with maximum exposure to loss limited to the carrying value of the investment[42](index=42&type=chunk) [4. Net Income (Loss) Per Share](index=11&type=section&id=4.%20Net%20Income%20(Loss)%20Per%20Share) This note provides a breakdown of basic and diluted net income or loss per share calculations Net Income (Loss) Per Share (Amounts in thousands, except share and per-share data) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income (loss) | $(7,893) | $(17,894) | $29,486 | $(37,926) | | Basic EPS | $(0.05) | $(0.16) | $0.21 | $(0.34) | | Diluted EPS | $(0.05) | $(0.16) | $0.15 | $(0.34) | | Weighted-average common shares outstanding - basic | 152,849,992 | 115,169,949 | 141,969,449 | 113,161,622 | | Weighted-average common shares used in per share calculations - diluted | 152,849,992 | 115,169,949 | 143,792,060 | 113,161,622 | Potential Dilutive Shares Excluded from Diluted Net Loss Per Share (Anti-dilutive) | Type | Sep 30, 2022 (3 Months) | Sep 30, 2021 (3 Months) | Sep 30, 2022 (9 Months) | Sep 30, 2021 (9 Months) | | :--------------------------------- | :---------------------- | :---------------------- | :---------------------- | :---------------------- | | Options, RSUs and ESPP shares | 16,147,192 | 11,701,844 | 16,960,983 | 11,701,844 | | Warrants to purchase common stock | 31,228,279 | 12,378,016 | 213,339 | 12,378,016 | | **Total** | **47,375,471** | **24,079,860** | **17,174,322** | **24,079,860** | [5. Fair Value Measurements](index=12&type=section&id=5.%20Fair%20Value%20Measurements) This note explains fair value determination for financial instruments, especially warrant liabilities Fair Value Measurements (Amounts in thousands) | Asset/Liability | Sep 30, 2022 Total | Dec 31, 2021 Total | | :--------------------------------- | :----------------- | :----------------- | | Money market funds | $47,448 | $66,563 | | Marketable securities | $33,599 | $13,998 | | **Total Assets at Fair Value** | **$81,047** | **$80,561** | | Warrant liabilities (Level 3) | $33,473 | $25,423 | | **Total Liabilities at Fair Value** | **$33,473** | **$25,423** | - Warrant liabilities are classified as Level 3 due to the use of unobservable inputs (stock price volatility, expected life) in the Black-Scholes valuation model. The fair value of warrant liabilities increased from **$25.4 million** at December 31, 2021, to **$33.5 million** at September 30, 2022, primarily due to new issuances and changes in fair value[52](index=52&type=chunk)[57](index=57&type=chunk) Black-Scholes Valuation Model Assumptions for 2019 Warrants | Assumption | Sep 30, 2022 | Dec 31, 2021 | | :----------------- | :----------- | :----------- | | Risk-free interest rate | 4.22% | 0.97% | | Expected life (years) | 2.23 | 2.98 | | Expected volatility | 83.26% | 96.10% | Black-Scholes Valuation Model Assumptions for 2022 Warrants | Assumption | Sep 30, 2022 | Apr 11, 2022 (At Issuance) | | :----------------- | :----------- | :------------------------- | | Risk-free interest rate | 4.06% | 2.79% | | Expected life (years) | 4.53 | 5.00 | | Expected volatility | 95.66% | 96.00% | [6. Property and Equipment](index=14&type=section&id=6.%20Property%20and%20Equipment) This note provides details on the company's property and equipment, including depreciation Property and Equipment, Net (Amounts in thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | | :--------------------------------- | :----------- | :----------- | | Laboratory equipment | $6,145 | $5,134 | | Computer equipment and software | $699 | $731 | | Leasehold improvements | $57 | $45 | | Furniture and fixtures | $396 | $332 | | Office equipment | $192 | $163 | | Construction in process | $434 | $534 | | **Total property and equipment** | **$7,923** | **$6,939** | | Less accumulated depreciation | $(5,019) | $(4,797) | | **Property and equipment, net** | **$2,904** | **$2,142** | - Depreciation expense was **$0.2 million** and **$0.1 million** for the three months ended September 30, 2022 and 2021, respectively - Depreciation expense was **$0.5 million** and **$0.4 million** for the nine months ended September 30, 2022 and 2021, respectively [7. Accrued Expenses](index=14&type=section&id=7.%20Accrued%20Expenses) This note details the various accrued expenses recognized by the company Accrued Expenses (Amounts in thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | | :--------------------------------- | :----------- | :----------- | | Payroll and employee related expenses | $2,699 | $3,179 | | Accrued patent fees | $460 | $309 | | Accrued external research and development costs | $7,616 | $4,339 | | Accrued professional and consulting services | $687 | $815 | | Accrued interest | $208 | $170 | | Other | $593 | $1,721 | | **Total Accrued expenses** | **$12,263** | **$10,533** | - Other accrued expenses as of December 31, 2021, included a **$0.9 million** estimated liability for litigation settlement [8. Leases](index=15&type=section&id=8.%20Leases) This note provides information on the company's lease agreements, including lease costs and liabilities - On September 1, 2022, the Company amended its lease agreement to expand its corporate headquarters by approximately 7,216 square feet, with a lease term of 5.7 years and rent payments beginning November 2022. This resulted in recording **$3.2 million** in right-of-use assets and operating lease liabilities[60](index=60&type=chunk) Lease Costs (Amounts in thousands) | Lease Cost Type | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :---------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Operating lease cost | $569 | $457 | $1,580 | $1,355 | | Variable lease cost | $205 | $182 | $630 | $652 | | Short-term lease cost | $3 | $2 | $8 | $7 | | **Total lease cost** | **$777** | **$641** | **$2,218** | **$2,014** | Operating Lease Liabilities Maturity as of Sep 30, 2022 (Amounts in thousands) | Year | Amount | | :----------------- | :----- | | 2022 (remainder) | $653 | | 2023 | $2,656 | | 2024 | $2,736 | | 2025 | $2,818 | | 2026 | $2,902 | | Thereafter | $3,936 | | **Total future minimum lease payments** | **$15,701** | | Less imputed interest | $3,643 | | **Total operating lease liabilities** | **$12,058** | [9. Debt](index=16&type=section&id=9.%20Debt) This note provides details on the company's debt obligations, including the 2020 Term Loan - On March 21, 2022, the Company amended its 2020 Term Loan, extending amortization payments to April 1, 2023. A **$0.1 million** fee was added to the debt discount. On September 20, 2022, a third amendment increased the letter of credit by **$0.2 million** to **$1.6 million**[63](index=63&type=chunk) 2020 Term Loan and Unamortized Debt Discount Balances (Amounts in thousands) | Metric | Sep 30, 2022 | | :--------------------------------- | :----------- | | Face value | $25,000 | | Venture debt termination fee | $2,250 | | Less: Debt discount | $(1,156) | | Less: Current portion of loan payable | $(5,879) | | **Loan payable, net of current portion** | **$20,215** | Future Minimum Principal Payments on 2020 Term Loan (Amounts in thousands) | Year Ended | Amount | | :----------------- | :----- | | 2023 | $7,759 | | 2024 | $10,345 | | 2025 | $6,896 | | **Total minimum principal payments** | **$25,000** | [10. Equity](index=16&type=section&id=10.%20Equity) This note details changes in the company's equity, including common stock, warrants, and reserved shares - Stockholders approved an increase in authorized common stock from 200,000,000 to 350,000,000 shares on June 17, 2022[65](index=65&type=chunk) - In April 2022, the Company completed an underwritten offering of 27,428,572 common shares and warrants to purchase up to 20,571,429 shares, generating approximately **$36.9 million** in net proceeds. The 2022 Warrants are classified as liabilities due to potential cash settlement upon acquisition[66](index=66&type=chunk)[67](index=67&type=chunk) Warrant Activity (Nine Months Ended Sep 30, 2022) | Metric | Equity Classified | Liability Classified | Total | Weighted Average Exercise Price | | :--------------------------------- | :---------------- | :------------------- | :------ | :------------------------------ | | Outstanding at Dec 31, 2021 | 292,469 | 10,443,511 | 10,735,980 | $1.62 | | Issuance | — | 20,571,429 | 20,571,429 | $1.55 | | Canceled | (79,130) | — | (79,130) | $17.71 | | **Outstanding at Sep 30, 2022** | **213,339** | **31,014,940** | **31,228,279** | **$1.53** | Reserved Shares for Future Issuance | Category | Sep 30, 2022 | Dec 31, 2021 | | :--------------------------------- | :----------- | :----------- | | Exercise of warrants | 31,228,279 | 10,735,980 | | Shares available for future stock incentive awards | 6,400,527 | 6,039,564 | | Unvested restricted stock units | 1,770,896 | 394,450 | | Outstanding common stock options | 15,172,715 | 11,039,873 | | **Total** | **54,572,417** | **28,209,867** | [11. Stock Incentive Plans](index=17&type=section&id=11.%20Stock%20Incentive%20Plans) This note describes the company's stock incentive plans and related compensation expenses - The Company maintains the 2016 Incentive Award Plan and the 2018 Employment Inducement Incentive Award Plan, with **1,086,951** and **1,675,858** shares available for future issuance, respectively, as of September 30, 2022[76](index=76&type=chunk)[77](index=77&type=chunk) Total Stock-based Compensation Expense (Amounts in thousands) | Category | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Research and development | $954 | $791 | $3,993 | $2,331 | | General and administrative | $1,647 | $1,113 | $4,925 | $3,136 | | **Total stock-based compensation expense** | **$2,601** | **$1,904** | **$8,918** | **$5,467** | - As of September 30, 2022, total unrecognized compensation expense for unvested employee stock options was **$18.4 million**, expected to be recognized over 2.7 years. For restricted stock units, unrecognized compensation expense was **$3.3 million**, also over 2.7 years[80](index=80&type=chunk)[84](index=84&type=chunk) [12. Revenue Arrangements](index=20&type=section&id=12.%20Revenue%20Arrangements) This note details collaboration and license agreements and their impact on revenue recognition - The Company has collaboration and license agreements with Takeda, Sobi, Sarepta, and AskBio. Revenue recognition for these agreements involves upfront payments, milestone payments, and royalties, with variable consideration often constrained until probable of achievement[87](index=87&type=chunk)[91](index=91&type=chunk)[103](index=103&type=chunk)[114](index=114&type=chunk) - For the Sobi License, the Company recognized **$20.7 million** and **$73.6 million** in revenue during the three and nine months ended September 30, 2022, respectively, including **$7.1 million** from prior periods due to a change in transaction price[102](index=102&type=chunk) - For the Sarepta Agreement, the Company received milestone payments of **$2.0 million** for an option extension and **$4.0 million** for preclinical study milestones during the three months ended September 30, 2022. **$10.2 million** in revenue was recognized for the nine months ended September 30, 2022[110](index=110&type=chunk)[111](index=111&type=chunk)[113](index=113&type=chunk) - The Spark License Agreement was mutually terminated on January 18, 2022, resulting in **$9.2 million** of short-term contract liability recognized as revenue during the nine months ended September 30, 2022[123](index=123&type=chunk) Changes in Contract Liabilities (Deferred Revenue) (Amounts in thousands) | Metric | Balance at Beginning of Period | Additions | Deductions | Balance at End of Period | | :--------------------------------- | :----------------------------- | :-------- | :--------- | :--------------------- | | Deferred revenue (Nine Months Ended Sep 30, 2022) | $65,300 | $16,000 | $(72,044) | $9,256 | | **Total contract liabilities** | **$65,300** | **$16,000** | **$(72,044)** | **$9,256** | [13. Related-party Transactions](index=24&type=section&id=13.%20Related-party%20Transactions) This note discloses related-party transactions, including equity purchases and consulting services Related-Party Purchases in April 2022 Offering | Name | Shares of Common Stock Purchased | 2022 Warrants Purchased | Total Aggregate Purchase Price | | :--------------------------------- | :------------------------------- | :---------------------- | :----------------------------- | | TAS Partners, LLC (affiliate of Timothy A. Springer, Ph.D.) | 6,681,600 | 5,011,200 | $9,421,056 | - The Company incurred less than **$0.1 million** and **$0.1 million** for consulting services from founders on its Scientific Advisory Board during the three and nine months ended September 30, 2021, respectively[128](index=128&type=chunk) [14. Collaboration and License Agreements](index=25&type=section&id=14.%20Collaboration%20and%20License%20Agreements) This note provides details on the company's various collaboration and license agreements with partners - The Company has collaboration agreements with Ginkgo Bioworks (First and Second Ginkgo Agreements) to develop IgA proteases and AAV capsids, respectively. Ginkgo is eligible for R&D fees, cash milestones (up to **$85 million** and **$207 million** per product, respectively), stock milestones, and royalties[129](index=129&type=chunk)[130](index=130&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) - In June 2022, the Company paid **$0.5 million** and issued 892,857 common shares (valued at **$1.0 million**) to Ginkgo for achieving a technical development milestone under the First Ginkgo Agreement[131](index=131&type=chunk)[184](index=184&type=chunk) - The Company licensed Xork enzyme technology from Genovis for therapeutic uses, with Genovis eligible for development/sales milestones and low double-digit royalties[132](index=132&type=chunk)[133](index=133&type=chunk)[186](index=186&type=chunk) - A collaboration with Cyrus Biotechnology focuses on protein engineering for an IL-2 protein agonist. The Company made an upfront payment and may pay up to **$1.5 billion** in milestones and royalties. A preclinical milestone was achieved in June 2022[134](index=134&type=chunk)[137](index=137&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) - The AskBio Collaboration Agreement for MMA gene therapy (SEL-302) remains in effect despite AskBio opting out of MMA development. The Company filed an IND for SEL-302, and the clinical hold was removed in March 2022[139](index=139&type=chunk)[140](index=140&type=chunk) - Collaboration expenses under the AskBio Collaboration Agreement were **$0.2 million** and **$0.8 million** for the three and nine months ended September 30, 2022, respectively, reflecting a 50% cost share[146](index=146&type=chunk) [15. Income Taxes](index=28&type=section&id=15.%20Income%20Taxes) This note discusses the company's income tax position, deferred tax assets, and net operating losses - The Company has a full valuation allowance against its net deferred tax assets, indicating that it is more likely than not that these assets will not be realized[152](index=152&type=chunk) - Effective January 1, 2022, IRC Section 174 requires capitalization of R&E expenditures over five years (U.S.) or 15 years (non-U.S.). The Company's analysis projects no income tax due for 2022[153](index=153&type=chunk) - The Company has **$51.1 million** in federal net operating losses and **$1.2 million** in federal tax credits as of December 31, 2021, subject to Section 382 and 383 limitations[153](index=153&type=chunk)[154](index=154&type=chunk) [16. Defined Contribution Plan](index=28&type=section&id=16.%20Defined%20Contribution%20Plan) This note describes the company's 401(k) plan and matching contributions - The Company's 401(k) Plan provides matching contributions that vest ratably over 2 years, while participant contributions vest immediately. Contributions totaled **$0.1 million** and **$0.3 million** for the three and nine months ended September 30, 2022, respectively[156](index=156&type=chunk) [17. Commitments and Contingencies](index=28&type=section&id=17.%20Commitments%20and%20Contingencies) This note outlines the company's commitments and potential contingent liabilities, including litigation - As of September 30, 2022, the Company was not a party to any litigation that could have a material adverse effect on its business or financial position[157](index=157&type=chunk) - A stockholder derivative action filed in August 2020, alleging breach of fiduciary duties related to a private placement, was settled and dismissed with prejudice on August 1, 2022[158](index=158&type=chunk)[159](index=159&type=chunk) - The Company indemnifies its officers, directors, and employees, and has indemnification arrangements under facility leases. No material losses related to these obligations have been experienced to date[160](index=160&type=chunk) [18. Subsequent Events](index=29&type=section&id=18.%20Subsequent%20Events) This note reports significant events occurring after the reporting period but before financial statements issuance - No subsequent events requiring disclosure have occurred through the date of issuance of the consolidated financial statements[162](index=162&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations for the three and nine months ended September 30, 2022, compared to the prior year. It covers business overview, product candidates, collaborations, global event impacts, financial performance, and liquidity, highlighting the Company's focus on its ImmTOR platform and its financial outlook [Overview](index=29&type=section&id=Overview) This section provides a high-level summary of Selecta Biosciences' business, its ImmTOR platform, and strategic focus - Selecta Biosciences is a clinical-stage biopharmaceutical company utilizing its ImmTOR platform, which encapsulates rapamycin, to induce antigen-specific immune tolerance. The platform is designed to enhance biologic therapies, improve gene therapies, and enable novel treatments for autoimmune diseases[164](index=164&type=chunk) - The Company is developing ImmTOR-IL™, a combination of ImmTOR with a Treg-selective IL-2 molecule, which has shown synergistic activity in preclinical studies for inducing and expanding antigen-specific Tregs, potentially offering a 'first-in-class' antigen-specific IL-2 therapy for autoimmune disease[164](index=164&type=chunk) [Our Product Candidates](index=30&type=section&id=Our%20Product%20Candidates) This section details the company's pipeline of product candidates across various therapeutic areas and development phases - The ImmTOR platform's development strategy focuses on three pillars: Biologic therapies (e.g., SEL-212 for chronic refractory gout, IgA nephropathy), Gene therapies (e.g., SEL-302 for MMA, SEL-313 for OTC Deficiency, SEL-018 (Xork) for AAV immunity), and Tolerogenic Therapies for Autoimmune Disease (e.g., proprietary IL-2 receptor agonist, Primary Biliary Cholangitis (PBC))[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) Summary of Ongoing Discovery, Research, and Development Programs | Program | Phase of Development | Anticipated Next Steps | Commercial Rights | | :--------------------------------- | :------------------- | :--------------------- | :---------------- | | **Biologic Therapies** | | | | | SEL-212 (Chronic Refractory Gout) | Phase 3 clinical trials | Top-line data Q1 2023 | Sobi | | IgA nephropathy | Preclinical | IND enabling studies, 2022 | Selecta | | **Gene Therapies** | | | | | SEL-302 (Methylmalonic acidemia (MMA)) | IND filed / Phase 1 | Study commencement, Q4 2022 | Selecta | | SEL-313 (Ornithine Transcarbamylase (OTC) Deficiency) | IND-enabling | Currently paused | Selecta | | SEL-018 (IgG protease (Xork)) | Preclinical | IND enabling studies, 2022 | Selecta | | Pompe disease | Preclinical | Plans to be announced by collaborator | AskBio | | Duchenne muscular dystrophy (DMD) | Preclinical | Plans to be announced by collaborator | Sarepta | | Limb-girdle muscular dystrophy (LGMD) | Preclinical | Plans to be announced by collaborator | Sarepta | | Two indications for lysosomal storage disorders | Preclinical | Plans to be announced by collaborator | Takeda | | **Tolerogenic Therapies for Autoimmune Disease** | | | | | Proprietary IL-2 receptor agonist | Preclinical | | Selecta | | Primary biliary cholangitis (PBC) | Preclinical | | Selecta | - The SEL-302 program for MMA, previously on clinical hold, received FDA clearance to proceed with its Phase 1/2 clinical trial in March 2022, with study commencement anticipated in Q4 2022[176](index=176&type=chunk) [Licenses and Collaborations](index=32&type=section&id=Licenses%20and%20Collaborations) This section outlines the company's various in-licensing and out-licensing agreements and collaborations - The Company has in-licenses with Ginkgo Bioworks (First and Second Ginkgo Agreements for IgA proteases and AAV capsids), Genovis (Xork enzyme technology), Cyrus Biotechnology (protein engineering for an IL-2 protein agonist), and IGAN Biosciences (IgA proteases, option term extended to 24 months from May 2022)[183](index=183&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk)[189](index=189&type=chunk)[191](index=191&type=chunk) - Out-licenses include agreements with Takeda (ImmTOR for lysosomal storage disorders, up to **$1.124 billion** in milestones), Sobi (SEL-212 for chronic refractory gout, up to **$630 million** in milestones, **$10 million** payment received in July 2022 for DISSOLVE II enrollment completion), and Sarepta (ImmTOR for Duchenne and Limb-Girdle Muscular Dystrophy, **$2 million** for option extension and **$4 million** for preclinical milestones received in August 2022)[192](index=192&type=chunk)[193](index=193&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) - The AskBio License Agreement grants AskBio exclusive worldwide rights to ImmTOR for Pompe Disease, with potential milestones up to **$237 million** and tiered royalties[199](index=199&type=chunk) [Impact of Global Events](index=34&type=section&id=Impact%20of%20Global%20Events) This section discusses the potential effects of global events, such as the COVID-19 pandemic and geopolitical situations, on the company's operations - The COVID-19 pandemic has not materially impacted clinical programs to date, but future developments could cause delays in trials, supply chain disruptions, and unforeseen costs. The Company is monitoring the situation closely[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk)[204](index=204&type=chunk) - In response to the geopolitical situation in Ukraine and Russia, the Company increased DISSOLVE II trial enrollment to 153 subjects to mitigate potential losses from subjects in those regions. Topline results for DISSOLVE II are still expected in Q1 2023[205](index=205&type=chunk) [Financial Operations](index=35&type=section&id=Financial%20Operations) This section provides an overview of the company's financial performance, funding strategies, and accumulated deficit - The Company has incurred significant operating losses since inception, with a net income of **$29.5 million** for the nine months ended September 30, 2022, compared to a net loss of **$37.9 million** for the same period in 2021. The accumulated deficit was **$400.8 million** as of September 30, 2022[207](index=207&type=chunk) - Future cash needs are expected to be financed through equity offerings, debt financings, and license/collaboration agreements, as the Company does not expect to generate product revenue for several years[207](index=207&type=chunk)[210](index=210&type=chunk) - Research and development expenses totaled **$417.4 million** from inception through September 30, 2022, primarily for SEL-212 and platform expansion. These costs are expensed as incurred, with SEL-212 clinical trial costs reimbursed by Sobi[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) This section analyzes the company's financial results, including revenue, expenses, and net income/loss, for the reported periods Collaboration and License Revenue (Amounts in thousands) | Period | 2022 | 2021 | Change | % Change | | :--------------------------------- | :----- | :----- | :----- | :------- | | Three Months Ended Sep 30 | $20,710 | $24,427 | $(3,717) | (15)% | | Nine Months Ended Sep 30 | $93,982 | $55,140 | $38,842 | 70% | - The decrease in Q3 revenue was primarily due to the Sobi license. The increase in YTD revenue was driven by Sobi, Sarepta, Spark termination, and Takeda agreements[222](index=222&type=chunk)[234](index=234&type=chunk) Research and Development Expenses (Amounts in thousands) | Period | 2022 | 2021 | Change | % Change | | :--------------------------------- | :----- | :----- | :----- | :------- | | Three Months Ended Sep 30 | $16,539 | $20,951 | $(4,412) | (21)% | | Nine Months Ended Sep 30 | $53,410 | $48,418 | $4,992 | 10% | - Q3 decrease primarily due to lower expenses for SEL-212, preclinical programs, and AskBio collaboration[223](index=223&type=chunk)[224](index=224&type=chunk) - YTD increase primarily due to preclinical programs, contract license/milestone payments, and increased personnel/stock compensation[235](index=235&type=chunk)[236](index=236&type=chunk) General and Administrative Expenses (Amounts in thousands) | Period | 2022 | 2021 | Change | % Change | | :--------------------------------- | :----- | :----- | :----- | :------- | | Three Months Ended Sep 30 | $5,770 | $5,445 | $325 | 6% | | Nine Months Ended Sep 30 | $17,538 | $15,397 | $2,141 | 14% | - Increases in both periods were primarily due to stock compensation and personnel expenses[225](index=225&type=chunk)[237](index=237&type=chunk) Net Income (Loss) (Amounts in thousands) | Period | 2022 | 2021 | | :--------------------------------- | :----- | :----- | | Three Months Ended Sep 30 | $(7,900) | $(17,900) | | Nine Months Ended Sep 30 | $29,500 | $(37,900) | - The nine-month period saw a significant swing from a net loss to net income, largely influenced by the **$7.3 million** income from the change in fair value of warrant liabilities in 2022 versus an **$11.3 million** charge in 2021, and the **$15.8 million** income tax expense in 2021 related to the Sobi license[232](index=232&type=chunk)[245](index=245&type=chunk)[241](index=241&type=chunk)[244](index=244&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to meet its short-term and long-term financial obligations, including funding sources and cash position - Since inception through September 30, 2022, the Company has raised **$716.4 million**, including **$243.3 million** from collaborations and license agreements and **$57.1 million** from at-the-market offerings[247](index=247&type=chunk) - As of September 30, 2022, cash, cash equivalents, restricted cash, and marketable securities totaled **$148.0 million**. This, combined with a **$6.9 million** receivable from Sobi, is expected to fund operations into mid-2024[248](index=248&type=chunk)[259](index=259&type=chunk) - The 2020 Term Loan has an outstanding principal balance of **$25.0 million** as of September 30, 2022, secured by substantially all assets (excluding intellectual property) and subject to customary covenants and events of default[64](index=64&type=chunk)[253](index=253&type=chunk)[255](index=255&type=chunk) - Future funding requirements are dependent on factors such as the number of product candidates, collaboration agreements, manufacturing costs, headcount, R&D progress, regulatory review, commercialization activities, intellectual property costs, and market developments[261](index=261&type=chunk) [Summary of Cash Flows](index=43&type=section&id=Summary%20of%20Cash%20Flows) This section provides a summary and analysis of the company's cash flows from operating, investing, and financing activities Summary of Cash Flows (Amounts in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Operating activities | $(19,782) | $(28,922) | | Investing activities | $(20,491) | $(26,862) | | Financing activities | $39,215 | $31,741 | | Effect of exchange rate changes on cash | $65 | $3 | | **Net change in cash, cash equivalents, and restricted cash** | **$(993)** | **$(24,040)** | - Cash used in operating activities decreased from **$28.9 million** in 2021 to **$19.8 million** in 2022, primarily due to net income (vs. net loss) adjusted for non-cash items, despite uses of cash for changes in operating assets and liabilities[262](index=262&type=chunk)[263](index=263&type=chunk) - Net cash used in investing activities decreased from **$26.9 million** in 2021 to **$20.5 million** in 2022, mainly driven by purchases and maturities of marketable securities. Net cash provided by financing activities increased from **$31.7 million** in 2021 to **$39.2 million** in 2022, primarily from equity offerings[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk) [Recent Accounting Pronouncements](index=44&type=section&id=Recent%20Accounting%20Pronouncements) This section discusses any new accounting standards or pronouncements and their potential impact on the financial statements - No new material accounting pronouncements were adopted or issued during the three and nine months ended September 30, 2022, beyond those discussed in Note 2 to the financial statements[267](index=267&type=chunk) [Off-Balance Sheet Arrangements](index=44&type=section&id=Off-Balance%20Sheet%20Arrangements) This section discloses any off-balance sheet transactions, arrangements, or obligations that could have a material effect on the company's financial condition - As of September 30, 2022, the Company did not have any off-balance sheet arrangements[268](index=268&type=chunk) [Critical Accounting Policies and Use of Estimates](index=44&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Estimates) This section highlights the accounting policies that require management's most difficult, subjective, or complex judgments and estimates - There were no material changes to the Company's critical accounting policies or use of estimates during the three and nine months ended September 30, 2022, from those described in its 2021 Annual Report on Form 10-K[269](index=269&type=chunk) [Smaller Reporting Company](index=44&type=section&id=Smaller%20Reporting%20Company) This section clarifies the company's status as a smaller reporting company and the associated disclosure accommodations - The Company qualifies as a 'smaller reporting company' and may take advantage of scaled disclosure requirements. It will retain this status until its public float exceeds **$700 million** or it meets specific revenue and public float thresholds[270](index=270&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the Company's exposure to market risk, primarily interest rate sensitivity, and concludes that an immediate 100 basis point change in interest rates would not materially affect the fair market value of its cash equivalents or short-term marketable securities due to their short-term and low-risk profile - The Company's primary market risk exposure is interest rate sensitivity, affecting its cash, cash equivalents, restricted cash, and marketable securities, which totaled **$148.0 million** as of September 30, 2022[271](index=271&type=chunk) - Due to the short-term and low-risk nature of its money market accounts and marketable securities, and the intent to hold marketable securities to maturity, a 100 basis point change in interest rates is not expected to have a material effect on their fair market value[271](index=271&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures as of September 30, 2022, based on management's evaluation. It also acknowledges the inherent limitations of any internal control system and states that no material changes occurred in internal control over financial reporting during the quarter - Management, with CEO and CFO participation, concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2022[272](index=272&type=chunk) - There were no material changes in the Company's internal control over financial reporting during the three months ended September 30, 2022[274](index=274&type=chunk) - The report acknowledges inherent limitations in any internal control system, meaning even effective systems can only provide reasonable assurance regarding financial statement preparation[273](index=273&type=chunk) [PART II. OTHER INFORMATION](index=46&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, and other required disclosures [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) This section details a stockholder derivative action filed in August 2020, alleging breach of fiduciary duties and corporate waste related to a private placement. The lawsuit was settled and dismissed with prejudice on August 1, 2022 - A stockholder derivative action, Franchi v. Barabe, et al., filed in August 2020, alleging breach of fiduciary duties and corporate waste related to a December 2019 private placement, was settled and dismissed with prejudice on August 1, 2022[276](index=276&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) This section refers to previously disclosed risk factors in the Company's Annual Report on Form 10-K for 2021 and Quarterly Report on Form 10-Q for Q2 2022, stating that no material changes have occurred - There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2021, and Quarterly Report on Form 10-Q for the quarter ended June 30, 2022[277](index=277&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section indicates that there were no unregistered sales of equity securities or use of proceeds to report - There were no unregistered sales of equity securities and use of proceeds to report[278](index=278&type=chunk) [Item 3. Defaults Upon Senior Securities](index=46&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities - There were no defaults upon senior securities[279](index=279&type=chunk) [Item 4. Mine Safety Disclosures](index=46&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that there were no mine safety disclosures - There were no mine safety disclosures[280](index=280&type=chunk) [Item 5. Other Information](index=46&type=section&id=Item%205.%20Other%20Information) This section states that there was no other information to report - There was no other information to report[281](index=281&type=chunk) [Item 6. Exhibits](index=47&type=section&id=Item%206.%20Exhibits) This section provides a comprehensive list of exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents, material agreements, certifications, and XBRL-related documents - The exhibit index includes corporate documents (Restated Certificate of Incorporation, Amended and Restated By-laws), material agreements (First Amendment to Lease, Third Amendment to Loan and Security Agreement), certifications (Principal Executive Officer, Principal Financial Officer), and Inline XBRL documents[284](index=284&type=chunk) [Signatures](index=48&type=section&id=Signatures) This section contains the signatures of the Company's President and Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), certifying the report's submission - The report is signed by Carsten Brunn, Ph.D., President and Chief Executive Officer, and Kevin Tan, Chief Financial Officer, on November 3, 2022[288](index=288&type=chunk)

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) Presents the company's unaudited consolidated balance sheets, statements of operations, changes in equity, and cash flows [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202022%20and%20December%2031%2C%202021) Details the company's assets, liabilities, and stockholders' equity at the end of the reporting period Balance Sheet Summary | Metric | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (in thousands) | Change (%) | | :----------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :--------- | | Total Assets | $188,068 | $159,883 | $28,185 | 17.63% | | Total Liabilities | $98,462 | $137,362 | $(38,900) | -28.32% | | Total Stockholders' Equity | $89,606 | $22,521 | $67,085 | 297.88% | [Consolidated Statements of Operations and Comprehensive Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)%20for%20the%20Three%20and%20Six%20Months%20ended%20June%2030%2C%202022%20and%202021) Summarizes revenues, expenses, and resulting net income or loss over the reporting periods Three-Month Performance | Metric (in thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | Change (3M) | Change (3M %) | | :-------------------- | :--------------------------- | :--------------------------- | :---------- | :------------ | | Collaboration & License Revenue | $39,273 | $19,663 | $19,610 | 99.73% | | R&D Expenses | $19,182 | $14,463 | $4,719 | 32.63% | | G&A Expenses | $6,231 | $4,748 | $1,483 | 31.24% | | Operating Income (Loss) | $13,860 | $452 | $13,408 | 2966.37% | | Net Income (Loss) | $8,601 | $4,565 | $4,036 | 88.41% | | Basic EPS | $0.06 | $0.04 | $0.02 | 50.00% | | Diluted EPS | $0.06 | $0.00 | $0.06 | - | Six-Month Performance | Metric (in thousands) | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | Change (6M) | Change (6M %) | | :-------------------- | :--------------------------- | :--------------------------- | :---------- | :------------ | | Collaboration & License Revenue | $73,272 | $30,713 | $42,559 | 138.57% | | R&D Expenses | $36,871 | $27,467 | $9,404 | 34.24% | | G&A Expenses | $11,768 | $9,952 | $1,816 | 18.25% | | Operating Income (Loss) | $24,633 | $(6,706) | $31,339 | -467.33% | | Net Income (Loss) | $37,379 | $(20,032) | $57,411 | -286.59% | | Basic EPS | $0.27 | $(0.18) | $0.45 | -250.00% | | Diluted EPS | $0.17 | $(0.18) | $0.35 | -194.44% | [Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity%20for%20the%20Three%20Months%20ended%20March%2031%2C%20and%20June%2030%2C%202022%20and%202021) Reports changes in the company's equity from net income, stock issuances, and other transactions - Total stockholders' equity significantly increased from **$22.5 million** at December 31, 2021, to **$89.6 million** at June 30, 2022, primarily driven by net income of **$37.4 million** and additional paid-in capital from equity financings[14](index=14&type=chunk)[16](index=16&type=chunk)[19](index=19&type=chunk) - Issuance of common stock and common warrants contributed **$21.5 million** to additional paid-in capital during the six months ended June 30, 2022[19](index=19&type=chunk) - Stock-based compensation expense for the six months ended June 30, 2022, was **$6.3 million**[19](index=19&type=chunk)[78](index=78&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Six%20Months%20ended%20June%2030%2C%202022%20and%202021) Outlines the cash inflows and outflows from operating, investing, and financing activities Cash Flow Summary | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Change (in thousands) | Change (%) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :--------- | | Operating Activities | $(24,135) | $(18,176) | $(5,959) | 32.79% | | Investing Activities | $9,446 | $(25,060) | $34,506 | -137.69% | | Financing Activities | $38,603 | $30,291 | $8,312 | 27.44% | | Net Change in Cash, Cash Equivalents, and Restricted Cash | $24,000 | $(12,936) | $36,936 | -285.53% | - Net cash provided by investing activities in 2022 was primarily due to proceeds from maturities of marketable securities, contrasting with net cash used for purchases of marketable securities in 2021[260](index=260&type=chunk) - Net cash provided by financing activities in both periods was mainly from net proceeds from underwritten and 'at-the-market' equity offerings[261](index=261&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed disclosures and explanations of the company's accounting policies and financial statement items [Note 1. Description of the Business](index=9&type=section&id=1.%20Description%20of%20the%20Business) Outlines the company's core operations, focus, and financial outlook - Selecta Biosciences, Inc. is a clinical-stage biopharmaceutical company focused on its **ImmTOR platform**, designed to induce antigen-specific immune tolerance using rapamycin-encapsulated biodegradable nanoparticles[28](index=28&type=chunk) - The company's product candidates are in early development, requiring significant R&D, preclinical/clinical testing, regulatory approval, and **substantial additional capital**[29](index=29&type=chunk)[31](index=31&type=chunk) - As of June 30, 2022, cash, cash equivalents, restricted cash, and marketable securities totaled **$143.4 million**, expected to fund operations for at least the next twelve months[33](index=33&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=10&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) Describes the key accounting principles and new standards adopted by the company - The company adopted ASU 2021-04 (Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options) in fiscal year 2022, with **no impact** on financial position or results[37](index=37&type=chunk) - The company is assessing the impact of ASU 2020-06 (Debt with Conversion and Other Options and Derivatives and Hedging) and ASU 2016-13 (Financial Instruments-Credit Losses), effective for smaller reporting companies after December 15, 2023, and December 15, 2022, respectively[38](index=38&type=chunk)[40](index=40&type=chunk) [Note 3. Marketable Securities and Investments](index=11&type=section&id=3.%20Marketable%20Securities%20and%20Investments) Details the composition and fair value of the company's short-term investments Marketable Securities Breakdown | Marketable Securities (in thousands) | June 30, 2022 | December 31, 2021 | | :----------------------------------- | :------------ | :---------------- | | Commercial paper | $3,999 | $11,992 | | Corporate bonds | — | $2,006 | | Total | $3,999 | $13,998 | - All marketable securities had maturities of **less than 12 months** when purchased and are classified as short-term[41](index=41&type=chunk) - The company holds a **$2.0 million investment** in Cyrus Biotechnology, Inc., limited to the carrying value of the investment[42](index=42&type=chunk) [Note 4. Net Income (Loss) Per Share](index=11&type=section&id=4.%20Net%20Income%20(Loss)%20Per%20Share) Explains the calculation of basic and diluted earnings per share Earnings Per Share (EPS) | EPS Metric | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :--------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic EPS | $0.06 | $0.04 | $0.27 | $(0.18) | | Diluted EPS | $0.06 | $0.00 | $0.17 | $(0.18) | - Potential dilutive shares of common stock excluded from diluted EPS calculation due to anti-dilutive effect were **47.7 million** for the three months ended June 30, 2022, and **37.5 million** for the six months ended June 30, 2022[44](index=44&type=chunk) [Note 5. Fair Value Measurements](index=12&type=section&id=5.%20Fair%20Value%20Measurements) Discloses the valuation methods for financial assets and liabilities measured at fair value Fair Value of Financial Instruments | Fair Value Item (in thousands) | June 30, 2022 (Total) | December 31, 2021 (Total) | | :----------------------------- | :-------------------- | :------------------------ | | Money market funds | $76,686 | $66,563 | | Marketable securities | $3,999 | $13,998 | | Warrant liabilities | $26,934 | $25,423 | - Warrant liabilities (2019 and 2022 Warrants) are classified as **Level 3** in the fair value hierarchy due to significant unobservable inputs (stock price volatility, expected life) in their Black-Scholes valuation[52](index=52&type=chunk) - The fair value of warrant liabilities increased by **$1.5 million** from December 31, 2021, to June 30, 2022, primarily due to new issuances (**$15.4 million**) offset by a change in fair value (**$13.9 million decrease**)[57](index=57&type=chunk) [Note 6. Property and Equipment](index=14&type=section&id=6.%20Property%20and%20Equipment) Reports the cost and accumulated depreciation of the company's tangible assets Property and Equipment, Net | Property and Equipment (in thousands) | June 30, 2022 | December 31, 2021 | | :------------------------------------ | :------------ | :---------------- | | Total property and equipment | $7,667 | $6,939 | | Less accumulated depreciation | $(4,834) | $(4,797) | | Property and equipment, net | $2,833 | $2,142 | - Net property and equipment increased by **$0.7 million** from December 31, 2021, to June 30, 2022[58](index=58&type=chunk) [Note 7. Accrued Expenses](index=15&type=section&id=7.%20Accrued%20Expenses) Breaks down short-term liabilities for expenses incurred but not yet paid Accrued Expenses Breakdown | Accrued Expenses (in thousands) | June 30, 2022 | December 31, 2021 | | :------------------------------ | :------------ | :---------------- | | Payroll and employee related | $2,223 | $3,179 | | Collaboration and licensing | $500 | — | | Accrued patent fees | $885 | $309 | | Accrued external R&D costs | $6,701 | $4,339 | | Accrued professional & consulting | $547 | $815 | | Accrued interest | $184 | $170 | | Other | $1,326 | $1,721 | | Total Accrued Expenses | $12,366 | $10,533 | - Accrued expenses increased by **$1.8 million**, primarily due to higher accrued external research and development costs and new collaboration and licensing accruals[60](index=60&type=chunk) - Other accrued expenses include a **$0.9 million** estimated liability for litigation settlement as of June 30, 2022[60](index=60&type=chunk) [Note 8. Leases](index=15&type=section&id=8.%20Leases) Details the company's lease obligations, costs, and related financial metrics Lease Cost Summary | Lease Cost (in thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Operating lease cost | $505 | $454 | $1,011 | $898 | | Variable lease cost | $205 | $182 | $425 | $470 | | Short-term lease cost | $2 | $2 | $5 | $5 | | Total lease cost | $712 | $638 | $1,441 | $1,373 | - Total operating lease liabilities as of June 30, 2022, were **$9.1 million**, with a weighted-average remaining lease term of **5.9 years**[61](index=61&type=chunk)[62](index=62&type=chunk) [Note 9. Debt](index=16&type=section&id=9.%20Debt) Outlines the terms, balance, and payment schedule of the company's outstanding debt - The company's 2020 Term Loan principal balance remained at **$25.0 million** as of June 30, 2022, and December 31, 2021[64](index=64&type=chunk) - A Second Amendment to the 2020 Term Loan extended the amortization payment commencement date by twelve months to **April 1, 2023**, with a $0.1 million fee recorded as a debt discount[63](index=63&type=chunk) Future Minimum Principal Payments | Future Minimum Principal Payments (in thousands) | Amount | | :----------------------------------------------- | :----- | | 2023 | $7,759 | | 2024 | $10,345 | | 2025 | $6,896 | | Total | $25,000 | [Note 10. Equity](index=16&type=section&id=10.%20Equity) Describes changes in the company's capital structure, including stock and warrant activity - Authorized common stock increased from **200,000,000 to 350,000,000 shares** on June 17, 2022[65](index=65&type=chunk) - An underwritten offering in April 2022 generated approximately **$36.9 million in net proceeds** from the sale of 27,428,572 common shares and warrants to purchase 20,571,429 shares[66](index=66&type=chunk) Warrant Activity Summary | Warrant Activity | Outstanding at Dec 31, 2021 | Issuance | Canceled | Outstanding at June 30, 2022 | | :--------------- | :-------------------------- | :------- | :------- | :--------------------------- | | Equity classified | 292,469 | — | (79,130) | 213,339 | | Liability classified | 10,443,511 | 20,571,429 | — | 31,014,940 | | Total Warrants | 10,735,980 | 20,571,429 | (79,130) | 31,228,279 | | Weighted average exercise price | $1.62 | $1.55 | $17.71 | $1.53 | [Note 11. Stock Incentive Plans](index=17&type=section&id=11.%20Stock%20Incentive%20Plans) Summarizes stock-based compensation programs for employees and related expenses Stock-based Compensation Expense | Stock-based Compensation Expense (in thousands) | 3 Months Ended June 30, 2022 | 3 Months Ended June 30, 2021 | 6 Months Ended June 30, 2022 | 6 Months Ended June 30, 2021 | | :---------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Research and development | $2,021 | $786 | $3,039 | $1,540 | | General and administrative | $1,543 | $997 | $3,278 | $2,023 | | Total | $3,564 | $1,783 | $6,317 | $3,563 | - Total unrecognized compensation expense for unvested employee stock options was **$16.9 million** as of June 30, 2022, to be recognized over **2.8 years**[80](index=80&type=chunk) - Unrecognized compensation expense for restricted stock units was **$2.6 million** as of June 30, 2022, to be recognized over **3.2 years**[83](index=83&type=chunk) [Note 12. Revenue Arrangements](index=20&type=section&id=12.%20Revenue%20Arrangements) Details revenue recognized from major collaboration and license agreements - **Takeda Agreement**: **$1.0 million** revenue recognized in H1 2022; the agreement includes a $3.0 million upfront payment and potential future payments up to **$1.124 billion**[86](index=86&type=chunk)[89](index=89&type=chunk) - **Sobi License**: **$29.2 million** and **$52.9 million** revenue recognized in Q2 and H1 2022, respectively; a **$10.0 million** development milestone was achieved for DISSOLVE II trial enrollment completion[99](index=99&type=chunk)[101](index=101&type=chunk) - **Sarepta Agreement**: **$10.1 million** and **$10.2 million** revenue recognized in Q2 and H1 2022, respectively; milestones achieved include a **$2.0 million** payment for option extension and a **$4.0 million** payment for preclinical study milestones[109](index=109&type=chunk)[110](index=110&type=chunk)[112](index=112&type=chunk) - **Spark License Agreement**: Mutually terminated on January 18, 2022, resulting in **$9.2 million** revenue recognition from short-term contract liability[121](index=121&type=chunk) - As of June 30, 2022, the aggregate amount of transaction price allocated to remaining performance obligations was **$23.1 million**[122](index=122&type=chunk) [Note 13. Related-party Transactions](index=24&type=section&id=13.%20Related-party%20Transactions) Discloses transactions conducted with company insiders or their affiliates - TAS Partners, LLC (an affiliate of Timothy A. Springer, Ph.D.) purchased 6,681,600 shares of common stock and 5,011,200 warrants for a total of **$9.4 million** in the April 2022 offering[125](index=125&type=chunk) - Consulting services from founders for the Scientific Advisory Board incurred **less than $0.1 million** in expenses for both three and six months ended June 30, 2021[126](index=126&type=chunk) [Note 14. Collaboration and License Agreements](index=25&type=section&id=14.%20Collaboration%20and%20License%20Agreements) Describes key partnerships for research, development, and commercialization - **Ginkgo Bioworks Agreements**: The Second Ginkgo Agreement (Jan 2022) focuses on AAV capsids, with potential milestones up to **$207 million** cash per product; a **$0.5 million** payment and **892,857 shares** ($1.0 million value) were issued to Ginkgo in Q2 2022 for a technical development milestone[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk) - **Genovis Agreement** (Oct 2021): Exclusive license for Xork enzyme technology for therapeutic uses, with development/sales milestones and **low double-digit royalties**[130](index=130&type=chunk)[131](index=131&type=chunk)[184](index=184&type=chunk) - **Cyrus Agreement** (Sep 2021): Collaboration for protein engineering combining ImmTOR with Cyrus's engineered protein therapeutics, with potential milestones up to **$1.5 billion**; a preclinical milestone was achieved in June 2022[132](index=132&type=chunk)[135](index=135&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk) - **AskBio Collaboration Agreement** (Aug 2019): FDA clinical hold on SEL-302 was removed in March 2022; collaboration expenses recognized were **$0.2 million** (Q2 2022) and **$0.6 million** (H1 2022)[138](index=138&type=chunk)[144](index=144&type=chunk) [Note 15. Income Taxes](index=28&type=section&id=15.%20Income%20Taxes) Explains the company's income tax position, including deferred tax assets and valuation allowances - The company maintains a **full valuation allowance** against its net deferred tax assets, as realization is not considered more likely than not[150](index=150&type=chunk) - As of December 31, 2021, the company had **$51.1 million** in federal net operating losses and **$1.2 million** in federal tax credits[151](index=151&type=chunk) - Research and experimental expenditures under IRC Section 174 must be capitalized, but the projected taxable loss for 2022 does not result in income tax due[151](index=151&type=chunk) [Note 16. Defined Contribution Plan](index=28&type=section&id=16.%20Defined%20Contribution%20Plan) Details the company's employee retirement savings plan and associated contributions - Company contributions to the 401(k) Plan were **less than $0.1 million** for each of the three months ended June 30, 2022 and 2021, and **$0.2 million** and **$0.1 million** for the six months ended June 30, 2022 and 2021, respectively[154](index=154&type=chunk) [Note 17. Commitments and Contingencies](index=28&type=section&id=17.%20Commitments%20and%20Contingencies) Discloses potential liabilities from legal proceedings and other commitments - A stockholder derivative action (Franchi v. Barabe, et al.) related to a 2019 private placement was settled in principle, with court approval on July 21, 2022; the company accrued an estimated liability of **$0.9 million**[157](index=157&type=chunk)[272](index=272&type=chunk) - The company indemnifies its officers and directors for certain events, with unlimited maximum potential payments, but insurance coverage limits exposure[158](index=158&type=chunk) [Note 18. Subsequent Events](index=29&type=section&id=18.%20Subsequent%20Events) Reports on significant events that occurred after the balance sheet date - No subsequent events requiring disclosure have occurred through the date of financial statement issuance[160](index=160&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's analysis of financial condition, operational results, liquidity, and key business developments [Overview](index=29&type=section&id=Overview) Summarizes the company's business focus as a clinical-stage biopharmaceutical entity - Selecta Biosciences is a clinical-stage biopharmaceutical company leveraging its **ImmTOR platform**, which encapsulates rapamycin to induce antigen-specific immune tolerance[162](index=162&type=chunk) - The company is developing **ImmTOR-IL™**, a combination of ImmTOR with Treg-selective IL-2 muteins, showing synergistic activity in expanding antigen-specific Tregs for autoimmune diseases[162](index=162&type=chunk) [Our Product Candidates](index=30&type=section&id=Our%20Product%20Candidates) Details the company's development pipeline across biologics, gene therapies, and autoimmune treatments - The product development strategy focuses on three pillars: **Biologic therapies** (SEL-212), **Gene therapies** (SEL-302, SEL-018), and **Tolerogenic Therapies for Autoimmune Disease** (ImmTOR-IL)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[169](index=169&type=chunk) - **SEL-212** is in Phase 3 clinical trials with top-line data anticipated in **Q1 2023**[169](index=169&type=chunk) - **SEL-302** for Methylmalonic Acidemia (MMA) had its clinical hold removed by the FDA in March 2022, with study commencement planned for **Q4 2022**[174](index=174&type=chunk) - The company has exclusively licensed **Xork**, an IgG-specific protease, for gene therapy applications to address pre-existing AAV immunity[176](index=176&type=chunk) [Licenses and Collaborations](index=32&type=section&id=Licenses%20and%20Collaborations) Outlines key strategic in-licensing and out-licensing agreements with partners - Key in-licenses include agreements with **Ginkgo Bioworks** (AAV capsids, IgA proteases), **Genovis** (Xork enzyme), **Cyrus Biotechnology** (IL-2 protein engineering), and **IGAN Biosciences** (IgA proteases)[181](index=181&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk)[187](index=187&type=chunk) - Key out-licenses involve **Takeda** (potential $1.124 billion milestones), **Sobi** (potential $630 million milestones), and **Sarepta** (potential milestones and royalties)[190](index=190&type=chunk)[191](index=191&type=chunk)[195](index=195&type=chunk) - Sobi paid a **$75 million upfront payment** and purchased **$25 million** in common stock; a **$10.0 million** receivable was recorded in June 2022 for DISSOLVE II trial enrollment completion[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk) - Sarepta extended its options for Duchenne and Limb-Girdle Muscular Dystrophies, resulting in a **$2.0 million** receivable, and a **$4.0 million** receivable for preclinical milestones[196](index=196&type=chunk) [Impact of Global Events](index=34&type=section&id=Impact%20of%20Global%20Events) Discusses the effects of the COVID-19 pandemic and geopolitical events on operations - **COVID-19 pandemic** has not materially impacted clinical programs to date, but poses risks of delays in trials, supply chain disruptions, and unforeseen costs[200](index=200&type=chunk)[201](index=201&type=chunk) - The geopolitical situation in Ukraine and Russia led to **increased enrollment** in the DISSOLVE II trial to replace subjects potentially lost from these regions, with topline results expected in **Q1 2023**[203](index=203&type=chunk) [Financial Operations](index=35&type=section&id=Financial%20Operations) Reviews the company's financing history, accumulated deficit, and capital runway - The company has financed operations through public/private equity offerings, debt, research grants, and collaboration/license agreements, with **no product revenue to date**[204](index=204&type=chunk) - Accumulated deficit was **$392.9 million** as of June 30, 2022, with expectations of continued operating losses[205](index=205&type=chunk)[252](index=252&type=chunk) - Existing cash and receivables are expected to fund operations into **mid-2024**[206](index=206&type=chunk)[244](index=244&type=chunk) - Research and development expenses totaled **$400.9 million** from inception through June 30, 2022[210](index=210&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Compares financial results for the three and six-month periods ended June 30, 2022 and 2021 [Comparison of the Three Months Ended June 30, 2022 and 2021](index=37&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202022%20and%202021) Analyzes revenue and expense variances for the second quarter - Collaboration and license revenue increased by **$19.6 million (100%)** to $39.3 million, driven by Sobi ($29.2 million) and Sarepta ($10.1 million) agreements[220](index=220&type=chunk) - Research and development expenses increased by **$4.7 million (33%)** to $19.2 million, mainly due to the SEL-212 clinical program, stock compensation, and salaries[221](index=221&type=chunk)[222](index=222&type=chunk) - General and administrative expenses increased by **$1.5 million (31%)** to $6.2 million, primarily due to 2022 equity offering issuance costs and stock compensation[223](index=223&type=chunk) - A **$4.6 million charge** was recognized from the increase in fair value of warrant liabilities in Q2 2022, compared to **$4.8 million income** in Q2 2021[227](index=227&type=chunk) - Net income for Q2 2022 was **$8.6 million**, up from **$4.6 million** in Q2 2021[229](index=229&type=chunk) [Comparison of the Six Months Ended June 30, 2022 and 2021](index=38&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030%2C%202022%20and%202021) Analyzes revenue and expense variances for the first half of the year - Collaboration revenue increased by **$42.6 million (139%)** to $73.3 million, primarily from Sobi ($52.9 million), Sarepta ($10.2 million), and Spark termination ($9.2 million)[230](index=230&type=chunk) - Research and development expenses increased by **$9.4 million (34%)** to $36.9 million, driven by SEL-212, preclinical programs, and personnel[232](index=232&type=chunk)[233](index=233&type=chunk) - General and administrative expenses increased by **$1.8 million (18%)** to $11.8 million, mainly due to equity offering costs and stock compensation[234](index=234&type=chunk) - A **$13.9 million income** was recognized from the decrease in fair value of warrant liabilities in H1 2022, compared to an **$11.9 million charge** in H1 2021[238](index=238&type=chunk) - Net income for H1 2022 was **$37.4 million**, a significant improvement from a net loss of **$20.0 million** in H1 2021[240](index=240&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Details the company's sources of funding, cash position, and future capital needs - From inception through June 30, 2022, the company raised **$692.1 million**, including **$219.4 million** from collaborations and **$241.7 million** from equity offerings[243](index=243&type=chunk) - As of June 30, 2022, cash, cash equivalents, restricted cash, and marketable securities totaled **$143.4 million**[244](index=244&type=chunk) - The 2020 Term Loan has an outstanding principal balance of **$25.0 million**, with amortization payments deferred to April 1, 2023[246](index=246&type=chunk)[247](index=247&type=chunk) - Future capital requirements depend on the product pipeline, clinical trial progress, manufacturing costs, and commercialization efforts[256](index=256&type=chunk) [Summary of Cash Flows](index=42&type=section&id=Summary%20of%20Cash%20Flows) Provides a high-level overview of cash movements from all activities Six-Month Cash Flow | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Operating activities | $(24,135) | $(18,176) | | Investing activities | $9,446 | $(25,060) | | Financing activities | $38,603 | $30,291 | | Net change in cash, cash equivalents, and restricted cash | $24,000 | $(12,936) | - Cash used in operating activities increased by **$5.9 million** to $24.1 million in H1 2022, primarily due to changes in operating assets and liabilities[258](index=258&type=chunk) - Net cash provided by investing activities was **$9.4 million** in H1 2022, a significant shift from **$25.1 million used** in H1 2021, mainly due to marketable securities maturities[260](index=260&type=chunk) - Net cash provided by financing activities increased by **$8.3 million** to $38.6 million in H1 2022, driven by proceeds from equity offerings[261](index=261&type=chunk) [Recent Accounting Pronouncements](index=42&type=section&id=Recent%20Accounting%20Pronouncements) Refers to disclosures on newly adopted or issued accounting standards - Refer to Note 2 for a discussion of recently adopted or issued accounting pronouncements[262](index=262&type=chunk) [Off-Balance Sheet Arrangements](index=42&type=section&id=Off-Balance%20Sheet%20Arrangements) Confirms the absence of any off-balance sheet arrangements - As of June 30, 2022, the company did not have any off-balance sheet arrangements[263](index=263&type=chunk) [Critical Accounting Policies and Use of Estimates](index=42&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Estimates) States there were no material changes to critical accounting policies - No material changes to critical accounting policies were reported during the three and six months ended June 30, 2022, from those described in the 2021 Annual Report on Form 10-K[264](index=264&type=chunk) [Smaller Reporting Company](index=42&type=section&id=Smaller%20Reporting%20Company) Discloses the company's status as a smaller reporting company - The company qualifies as a 'smaller reporting company' and may utilize scaled disclosure requirements[265](index=265&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Discusses the company's exposure to interest rate risk on its cash and investments - The company's primary market risk exposure is **interest rate sensitivity**, affecting its cash, cash equivalents, restricted cash, and marketable securities (**$143.4 million** as of June 30, 2022)[266](index=266&type=chunk) - An immediate **100 basis point change** in interest rates would not materially affect the fair market value of these assets due to their short-term and low-risk nature[266](index=266&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Reports on the effectiveness of the company's disclosure controls and internal financial reporting controls - Disclosure controls and procedures were evaluated and deemed **effective** at the reasonable assurance level as of June 30, 2022[267](index=267&type=chunk) - **No material changes** in internal control over financial reporting occurred during the three months ended June 30, 2022[269](index=269&type=chunk) - Internal controls have inherent limitations, providing only **reasonable assurance** for financial statement preparation[268](index=268&type=chunk) [PART II. OTHER INFORMATION](index=44&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) Details a stockholder derivative action that has been settled - A stockholder derivative action (Franchi v. Barabe, et al.) was filed in August 2020, alleging breach of fiduciary duties and corporate waste related to a 2019 private placement[272](index=272&type=chunk) - The litigation was stayed, and a settlement in principle was reached and **approved by the Court** of Chancery in Delaware on July 21, 2022[272](index=272&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) Highlights risks related to system failures and cybersecurity threats - The company's business and operations are vulnerable to material disruption from system failures, **security breaches**, data protection law violations, or data loss/damage[274](index=274&type=chunk) - **Cyber-attacks** are increasing in frequency and sophistication, posing risks to system security, data confidentiality, availability, and integrity[275](index=275&type=chunk) - General liability insurance may not cover all claims or be sufficient, and successful large claims could **materially adversely affect** the business[276](index=276&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) States there were no unregistered sales of equity securities to report - None[277](index=277&type=chunk) [Item 3. Defaults Upon Senior Securities](index=45&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) States there were no defaults upon senior securities to report - None[278](index=278&type=chunk) [Item 4. Mine Safety Disclosures](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) States there were no mine safety disclosures to report - None[279](index=279&type=chunk) [Item 5. Other Information](index=45&type=section&id=Item%205.%20Other%20Information) States there is no other information to report - None[280](index=280&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) Lists the exhibits filed with the quarterly report - The exhibit index includes the Restated Certificate of Incorporation, Amended and Restated By-laws, Form of Common Stock Purchase Warrant, Certifications of Principal Executive and Financial Officers, and Inline XBRL documents[283](index=283&type=chunk) [Signatures](index=47&type=section&id=Signatures) Contains the certifying signatures of the company's principal officers - The report was signed by Carsten Brunn, Ph.D., President and Chief Executive Officer, and Kevin Tan, Chief Financial Officer, on **August 8, 2022**[287](index=287&type=chunk)

Financial Data and Key Metrics Changes - For Q2 2022, Selecta reported collaboration and license revenue of $39.3 million, up from $19.7 million in Q2 2021, primarily driven by clinical supply shipments and reimbursements related to the Phase III DISSOLVE program [32] - Net cash used in operating activities was $24.1 million for the six months ended June 30, 2022, compared to $18.2 million for the same period in 2021 [32] - Selecta reported a net income of $8.6 million or basic net income per share of $0.06 for Q2 2022, compared to a net income of $4.6 million or basic net income per share of $0.04 for Q2 2021 [33] Business Line Data and Key Metrics Changes - The company completed enrollment of the DISSOLVE II trial, triggering a $10 million milestone payment from Sobi [5] - Sarepta extended their option and license agreement, resulting in anticipated payments of $6 million in Q3 2022 [6] - The company raised approximately $38.7 million through an underwritten offering, ending Q2 2022 with approximately $143.4 million in cash and equivalents [7][31] Market Data and Key Metrics Changes - Over 24 million Americans suffer from autoimmune diseases, with current treatments often leaving patients vulnerable to serious infections [10] - The company aims to address the unmet medical need in autoimmune diseases, particularly in primary biliary cholangitis (PBC), where existing treatments have limited efficacy [13][91] Company Strategy and Development Direction - Selecta is focused on advancing its proprietary pipeline, including the ImmTOR platform and gene therapy candidates [5][9] - The company plans to commence Phase I clinical trials for SEL-302 in Q4 2022 and expects to complete the Phase III DISSOLVE trial in collaboration with Sobi [7][8] - Selecta aims to leverage its precision immune tolerance platform to transform treatment paradigms in autoimmune diseases and enhance the efficacy of gene therapies [9][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the commercial opportunity for SEL-212, highlighting the differentiation of monthly dosing compared to competitors [40] - The company remains committed to addressing the challenges in autoimmune diseases and believes its technology could represent a generational leap forward [35] - Management anticipates multiple clinical readouts within its cash runway, including results from the Phase III DISSOLVE trials in Q1 2023 [31] Other Important Information - Selecta's proprietary IgG protease candidate, Xork, is being developed to enable repeat dosing of gene therapies by addressing preexisting antibodies [22][23] - The company is working with external partners to identify an IgA protease candidate for the treatment of IgA nephropathy [30] Q&A Session Summary Question: What could be driving the low uptake of KRYSTEXXA in the refractory gout market? - Management noted that compliance is a key driver, as SEL-212 would offer a monthly treatment compared to KRYSTEXXA's bi-monthly regimen, which could enhance patient adherence [40] Question: What is the total amount of milestone payments remaining for the Sobi partnership? - Management indicated that Selecta is eligible to receive $630 million in milestones, with $10 million already received for full enrollment in DISSOLVE II [43][46] Question: Are there plans to include IL-2 in the MMA study? - Management confirmed that IL-2 will not be included in the initial MMA trial but may be added in the future once safety studies are completed [52][54] Question: What are the biomarkers for PBC? - Management highlighted alkaline phosphatase levels as a validated biomarker for PBC, which will be monitored during trials [65] Question: What is the market opportunity for PBC? - Management emphasized the unmet medical need in PBC, as current therapies do not address the underlying immunologic causes of the disease [91]

| --- | --- | --- | |-------|-------|--------------------------------------------| | | | | | | | | | | | | | | | | | | | Selecta Biosciences Corporate Presentation | May 2022 Safe harbor / disclaimer Any statements in this presentation about the future expectations, plans and prospects of Selecta Biosciences, Inc. (the "Company"), including without limitation, statements regarding the Company's cash runway, the unique proprietary technology platform of the Company, and the unique proprietary platform of its ...

Selecta Biosciences, Inc. (SELB) Q1 2021 Earnings Conference Call May 5, 2022 8:30 AM ET Company Participants Carsten Brunn - President & Chief Executive Officer Kevin Tan - Chief Financial Officer Peter Traber - Chief Medical Officer Kei Kishimoto - Chief Scientific Officer Conference Call Participants John Newman - Canaccord Kristen Kluska - Cantor Fitzgerald Yun Zhong - BTIG Raju Prasad - William Blair Uy Ear - Mizuho Boobalan Pachaiyappan - HC Wainwright Chang Liu - Needham Operator 00:05 Good morning a ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ý 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: 001-37798 Selecta Biosciences, Inc. (Exact name of registrant as specified in its charter) Delaware 26-1622110 (I.R.S. Employe ...

Company Overview - Selecta Biosciences' ImmTOR platform has broad applicability in biologics and gene therapy, with a diversified pipeline expanding to autoimmune diseases and targeted partnerships to maximize platform potential[6] - The company's precision immune tolerance platform aims to restore self-tolerance in autoimmune disease and overcome immunogenicity of gene therapies and biologics[6] - Selecta Biosciences has funding into mid-2024 to support development across pipeline programs[6, 144] ImmTOR Platform & Technology - ImmTOR combines nanoparticle technology with an FDA-approved anti-inflammatory and immunomodulatory drug to generate antigen-specific immune tolerance[9] - Preclinical data indicates a potentially profound synergy of ImmTOR and engineered Treg-selective IL-2 (ImmTOR-IL) to expand antigen-specific Tregs and improve durability of immune tolerance[6] - ImmTOR, by inhibiting the formation of neutralizing antibodies, could make redosing of gene therapies possible[58] Clinical Programs & Pipeline - SEL-212 in chronic refractory gout has dosed over 400 patients, with Phase 3 DISSOLVE I expected readout in Q4 2022[6] - SEL-302: IND for gene therapy program in methylmalonic acidemia (MMA) was submitted in Q3 2021, with Phase 1 start expected in 2H 2022[6, 88] - In a Phase 2 trial, 66% of patients treated with SEL-212 (pegadricase + ImmTOR) maintained control of serum uric acid (SUA), compared to only 15% treated with pegadricase alone[112, 115] - In a study with healthy volunteers, 100% of subjects dosed with 0.3 mg/kg ImmTOR had NAb titers ≤1:25 at Day 30[77]

Financial Data and Key Metrics Changes - As of December 31, 2021, the company had $129.4 million in liquidity, down from $140.1 million a year earlier [29] - Net cash used for the fiscal year 2021 was $60.4 million, compared to a net cash provided by operating activities of $34.9 million in 2020 [30] - Collaboration and license revenue for Q4 2021 was $29.9 million, and for the full year, it was $85.1 million, significantly up from $12 million and $16.6 million in 2020 [31] - The company reported a net income of $12.2 million for Q4 2021, compared to a net loss of $15.4 million in Q4 2020, while the full-year net loss was $25.7 million, down from $68.9 million in 2020 [37][38] Business Line Data and Key Metrics Changes - Research and development expenses for Q4 2021 were $20.3 million, up from $15.1 million in Q4 2020, and for the full year, they were $68.7 million compared to $54.5 million in 2020 [32] - General and administrative expenses for Q4 2021 were $5.5 million, compared to $4.8 million in Q4 2020, with full-year expenses at $20.9 million versus $18.9 million in 2020 [33] Market Data and Key Metrics Changes - The company is focusing on the gene therapy market, particularly with the upcoming Phase 1 trial of SEL-302 for Methylmalonic acidemia (MMA), expected to start in the second half of 2022 [7][22] - The collaboration with Takeda aims to combine ImmTOR with targeted gene therapies for lysosomal storage disorders, indicating a strategic move into rare disease markets [16] Company Strategy and Development Direction - The company aims to advance its precision immune tolerance platform, particularly through the development of ImmTOR-IL, which combines ImmTOR with a Treg-selective IL-2 molecule [9][41] - The focus for 2022 includes accelerating the development of ImmTOR-IL and continuing IND enabling studies for the primary biliary cholangitis program [14] - The company is also exploring partnerships to enhance its gene therapy capabilities, particularly in addressing immunogenicity issues [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the broad applicability of the ImmTOR platform to restore self-tolerance in autoimmune diseases and mitigate immunogenicity in gene therapies and biologics [40] - The company anticipates multiple catalysts in 2022, including updates on gene therapy opportunities and the completion of the DISSOLVE Phase 3 trial for SEL-212 [42] Other Important Information - The company has taken proactive measures to address the impact of the geopolitical situation in Ukraine and Russia on its clinical trials, including temporarily closing sites in those regions [26][75] - The company is working closely with regulatory authorities to ensure the safety of patients and investigators amid the ongoing conflict [26] Q&A Session Summary Question: Can you discuss the CMC-related items for the hold and future studies? - Management indicated that the FDA had questions regarding the AAV capsid and additional analytics, which were addressed before starting the trial, providing a clearer regulatory path [47][48] Question: How will the FDA's draft guidance on immunogenicity impact physician behavior? - Management noted that their platform specifically addresses anti-drug antibodies (ADAs), which could foster more interest in their technology as it helps overcome challenges faced by many biologics [50] Question: What are the details of the SEL-302 study design for MMA? - The trial will involve administering MMA-101 with three doses of ImmTOR, with provisions for dose escalation based on antibody production [60][63] Question: How will the DISSOLVE II trial be affected by the conflict in Ukraine? - Management confirmed that DISSOLVE I has completed enrollment and is unaffected, while DISSOLVE II has faced disruptions, leading to the addition of U.S. sites to offset enrollment challenges [75] Question: Is there a plan for re-dosing in the SEL-302 trial? - The protocol does not currently include provisions for re-dosing within the first three months, but the FDA is open to discussions based on trial results [100]