Gritstone bio(GRTS) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited financial statements and management's analysis of its financial condition and operational results ITEM 1. FINANCIAL STATEMENTS (unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining the company's financial position, performance, liquidity, and significant accounting policies Condensed Consolidated Balance Sheets This table presents the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheets (in thousands) | Item | March 31, 2024 | December 31, 2023 | Change (2024 vs 2023) | | :---------------------------------- | :--------------- | :---------------- | :-------------------- | | Cash and cash equivalents | $42,395 | $62,986 | $(20,591) | | Marketable securities | $3,908 | $16,288 | $(12,380) | | Total current assets | $51,853 | $87,435 | $(35,582) | | Total assets | $137,212 | $177,769 | $(40,557) | | Total current liabilities | $25,870 | $27,339 | $(1,469) | | Total liabilities | $123,248 | $125,919 | $(2,671) | | Total stockholders' equity | $13,964 | $51,850 | $(37,886) | | Accumulated deficit | $(699,946) | $(659,561) | $(40,385) | Condensed Consolidated Statements of Operations and Comprehensive Loss This table outlines the company's revenues, expenses, and net loss over the reported periods Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (YoY) | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Collaboration and license revenues | $49 | $542 | $(493) | | Grant revenues | $1,693 | $1,901 | $(208) | | Total revenues | $1,742 | $2,443 | $(701) | | Research and development expenses | $33,041 | $30,514 | $2,527 | | General and administrative expenses | $8,502 | $6,745 | $1,757 | | Total operating expenses | $41,543 | $37,259 | $4,284 | | Loss from operations | $(39,801) | $(34,816) | $(4,985) | | Interest income | $712 | $1,678 | $(966) | | Interest expense | $(1,296) | $(844) | $(452) | | Net loss | $(40,385) | $(33,982) | $(6,403) | | Net loss per share, basic and diluted | $(0.34) | $(0.30) | $(0.04) | Condensed Consolidated Statements of Stockholders' Equity This table details changes in the company's equity components, including common stock, additional paid-in capital, and accumulated deficit Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Item | Balance at Dec 31, 2023 | Net Loss (Q1 2024) | Stock-based Compensation (Q1 2024) | Balance at Mar 31, 2024 | | :---------------------------------- | :---------------------- | :------------------ | :-------------------------------- | :---------------------- | | Common Stock Amount | $22 | — | — | $22 | | Additional Paid-In Capital | $711,386 | — | $3,246 | $713,889 | | Accumulated Deficit | $(659,561) | $(40,385) | — | $(699,946) | | Total Stockholders' Equity | $51,850 | $(40,385) | $3,246 | $13,964 | Condensed Consolidated Statements of Cash Flows This table summarizes the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (YoY) | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Net cash used in operating activities | $(33,567) | $(40,090) | $6,523 | | Net cash provided by investing activities | $12,303 | $21,173 | $(8,870) | | Net cash (used in) provided by financing activities | $(379) | $8,647 | $(9,026) | | Net decrease in cash, cash equivalents and restricted cash | $(21,643) | $(10,270) | $(11,373) | | Cash, cash equivalents and restricted cash at end of period | $48,932 | $54,495 | $(5,563) | Notes to Condensed Consolidated Financial Statements (unaudited) This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements Note 1. Organization This note describes the company's business, operational segment, and significant liquidity challenges, including its going concern status - Gritstone bio, Inc. is a clinical-stage biotechnology company developing vaccines, operating in one segment[20] Financial Performance and Liquidity (in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | As of March 31, 2024 | As of December 31, 2023 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :------------------- | :---------------------- | | Net Loss | $(40,385) | $(33,982) | N/A | N/A | | Cash used by operating activities | $(33,567) | $(40,090) | N/A | N/A | | Accumulated Deficit | N/A | N/A | $(699,946) | $(659,561) | | Cash, cash equivalents and marketable securities | N/A | N/A | $46,300 | N/A | - The company's cash, cash equivalents, and marketable securities of $46.3 million as of March 31, 2024, are insufficient to fund planned operations for 12 months from the financial statement issuance date, even after a $32.5 million public offering in April 2024[22] - Management expects to be in default of the minimum liquidity requirement of its Loan Agreement in Q3 2024 if unable to raise additional funds or renegotiate terms, which would limit funding to Q3 2024[23][24] Note 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and policies applied in preparing the interim condensed consolidated financial statements - Interim condensed consolidated financial statements are unaudited, prepared in accordance with U.S. GAAP and SEC rules, and include normal recurring adjustments[26][27][28] - Revenue recognition policies differentiate between customer contracts (ASC 606) for collaboration/license agreements and nonreciprocal contributions (ASC 958-605) for grant funding agreements[45][56] - The company did not record income tax expense for Q1 2024 and 2023 due to expected cumulative taxable losses and a full valuation allowance against net deferred tax assets[59] - Adoption of ASU 2020-06 (Debt with Conversion and Other Options) on January 1, 2024, did not materially impact financial statements. ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Tax Disclosures) are being evaluated for future impact[64][65][66] Note 3. Cash Equivalents and Marketable Securities This note details the composition and fair value of the company's cash equivalents and marketable securities Cash Equivalents and Marketable Securities (in thousands) | Description | March 31, 2024 Fair Value | December 31, 2023 Fair Value | Change (YoY) | | :---------------------------------- | :-------------------------- | :--------------------------- | :----------- | | Total cash equivalents | $38,086 | $45,977 | $(7,891) | | Total short-term marketable securities | $3,908 | $16,288 | $(12,380) | | Total | $41,994 | $62,265 | $(20,271) | - All marketable securities as of March 31, 2024, have contractual maturities of less than one year[68] Note 4. Fair Value Measurements This note provides information on the fair value hierarchy used for financial assets and liabilities Fair Value Measurements (in thousands) as of March 31, 2024 | Description | Total | Level 1 | Level 2 | Level 3 | | :---------------------------------- | :------ | :------ | :------ | :------ | | Money market funds | $38,086 | $38,086 | $— | $— | | U.S. government treasuries | $3,662 | $3,662 | $— | $— | | Commercial paper | $246 | $— | $246 | $— | | Total | $41,994 | $41,748 | $246 | $— | - There were no transfers between Level 1 and Level 2 during the periods presented[72] Note 5. Property and Equipment, Net This note presents the carrying value of the company's property and equipment, net of accumulated depreciation Property and Equipment, Net (in thousands) | Item | March 31, 2024 | December 31, 2023 | Change | | :---------------------------------- | :--------------- | :---------------- | :------- | | Total property and equipment, gross | $47,538 | $49,681 | $(2,143) | | Less accumulated depreciation and amortization | $(33,465) | $(32,415) | $(1,050) | | Total property and equipment, net | $14,088 | $17,281 | $(3,193) | - Depreciation and amortization expense was $1.7 million for the three months ended March 31, 2024, compared to $1.8 million for the same period in 2023[73] Note 6. Commitments and Contingencies This note discloses the company's lease obligations, guarantees, and indemnifications Leases This section details the company's operating lease commitments for office and laboratory spaces - The company leases office and laboratory space in Emeryville, Pleasanton, Cambridge, and Boston, with the Boston Lease being a significant 120-month operating lease[74][77][80][83] - The Boston Lease, commenced in April 2023, involved recognizing an ROU Asset of $59.3 million and a lease liability of $50.9 million[85] Lease Financing Obligation (in thousands) as of March 31, 2024 | Year Ending December 31, | Lease Financing Obligation | | :----------------------- | :------------------------- | | 2024 (remaining nine months) | $9,627 | | 2025 | $10,749 | | 2026 | $10,376 | | 2027 | $10,466 | | 2028 | $10,732 | | Thereafter | $41,615 | | Total minimum payments | $93,565 | | Present value of future minimum lease payments | $62,952 | Guarantees and Indemnifications This section outlines the company's indemnification obligations for officers and directors - The company indemnifies its officers and directors for certain events, with the maximum potential future indemnification being unlimited[89] - Director and officer liability insurance is held to limit the company's exposure, and no liabilities have been recognized for these obligations due to their minimal estimated fair value[89] Note 7. Balance Sheet Components This note provides a breakdown of specific balance sheet accounts, including prepaid expenses and long-term assets Prepaid Expenses and Other Current Assets This section details the components of prepaid expenses and other current assets Prepaid Expenses and Other Current Assets (in thousands) | Item | March 31, 2024 | December 31, 2023 | Change | | :---------------------------------- | :--------------- | :---------------- | :------- | | Prepaid research and development-related expenses | $2,462 | $3,904 | $(1,442) | | Total prepaid expenses and other current assets | $4,303 | $5,862 | $(1,559) | Deposits and Other Long-Term Assets This section outlines the company's long-term deposits and other non-current assets Deposits and Other Long-Term Assets (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :---------------------------------- | :--------------- | :---------------- | | Lease security deposits | $924 | $924 | Note 8. Debt This note describes the company's term loan facility, interest rates, and associated covenants - The company has an $80.0 million term loan facility, with $40.0 million drawn as of March 31, 2024[92][98] - The loan bears interest at a cash rate (greater of prime + 3.15% or 7.15%) and a 2.00% payment-in-kind rate, with an effective interest rate of 13%[93][98] - The company is subject to minimum liquidity requirements (0.55x outstanding balance if market cap <= $400 million) and expects to be in default in Q3 2024 if additional funds are not raised or terms renegotiated[95][218] Long-Term Debt Balance (in thousands) as of March 31, 2024 | Item | Amount | | :---------------------------------- | :----- | | Principal loan balance | $40,000 | | Final fee | $2,300 | | Unamortized debt discount, issuance costs, and unaccreted value of final fee | $(1,970) | | Long term debt, net | $40,330 | Note 9. Collaboration and License Agreements and Grant Revenue This note details the company's revenue-generating collaboration, license, and grant agreements 2seventy bio, Inc. This section outlines the collaboration agreement with 2seventy bio, including upfront payments and potential milestones - The company received a $20.0 million upfront payment and is eligible for up to $1.2 billion in milestones and single-digit royalties under the 2seventy Agreement[99] - Collaboration revenue of $0.4 million was recognized in Q1 2023, but no deferred revenue or receivables remained as of March 31, 2024, as revenue was fully recognized in 2023[103][212] Gilead Sciences, Inc. This section details the collaboration agreement with Gilead Sciences for HIV vaccine development - The company received a $30.0 million upfront payment and $30.0 million from common stock sale under the Gilead Collaboration Agreement for HIV vaccine development[106][108] - The company is eligible for a $40.0 million option fee and up to $685.0 million in clinical, regulatory, and commercial milestones, plus tiered royalties[106] - De minimis collaboration revenue was recorded in Q1 2024, compared to $0.1 million in Q1 2023, with variable consideration for milestones fully constrained[109][112][212] Arbutus Biopharma Corporation This section describes the exclusive license agreement with Arbutus Biopharma for immunotherapy intellectual property - The company has an exclusive license from Arbutus for immunotherapy IP, with potential milestone payments up to $123.5 million and royalties[114] - Milestone payments of $2.5 million (GRANITE) and $3.0 million (SLATE) were made in 2018 and 2019, respectively[114][115] - No research and development expense was recorded under this agreement for the three months ended March 31, 2024, and 2023[114][201] Non-Profit Hospital Cancer Center This section outlines the exclusive license agreement with a non-profit hospital cancer center for immunotherapy - The company has an exclusive license with a non-profit hospital cancer center for immunotherapy, with milestone payments and low single-digit royalties[116] - An insignificant milestone payment was made in 2019 for the GRANITE GO-004 clinical trial[116] Genevant Sciences GmbH This section details the company's license agreements with Genevant for LNP technology in oncology and infectious diseases - The company has three license agreements with Genevant for LNP technology, covering oncology and infectious disease applications[117][119][120] - Upfront payments and initial milestones under these agreements (totaling $7.0 million in upfront payments and $2.0 million in milestones) were recorded as R&D expense in prior years[117][119][120] - No new milestone events under any Genevant license agreements had occurred as of March 31, 2024[117][119][120] Coalition for Epidemic Preparedness Innovations (CEPI) This section describes the funding agreement with CEPI for the CORAL program, a COVID-19 vaccine - CEPI Funding Agreement provides up to $25.6 million for the CORAL program, a second-generation COVID-19 vaccine[121][124] - Grant revenue recognized was $1.0 million in Q1 2024, compared to $1.5 million in Q1 2023[126][212] CEPI Deferred Revenue (in thousands) | Item | Balance at Dec 31, 2023 | Additions (Q1 2024) | Deductions (Q1 2024) | Balance at Mar 31, 2024 | | :---------------------------------- | :---------------------- | :------------------ | :------------------- | :---------------------- | | Deferred Revenue | $2,291 | $— | $(1,057) | $1,234 | Gates Foundation This section outlines the grant agreement with the Gates Foundation for HPV vaccine development - The Gates Grant Agreement provides funding for HPV vaccine development, with an upfront payment of $2.2 million and an additional $0.7 million received in April 2023[128] - Grant revenue recognized was $0.3 million in Q1 2024, compared to $0.4 million in Q1 2023[129][212] Gates Foundation Deferred Revenue (in thousands) | Item | Balance at Dec 31, 2023 | Additions (Q1 2024) | Deductions (Q1 2024) | Balance at Mar 31, 2024 | | :---------------------------------- | :---------------------- | :------------------ | :------------------- | :---------------------- | | Deferred Revenue | $8 | $281 | $(275) | $14 | Biomedical Advanced Research and Development Authority (BARDA) This section details the BARDA contract for a Phase 2b COVID-19 vaccine clinical trial - The BARDA Contract could provide up to $433.0 million for a Phase 2b COVID-19 vaccine clinical trial, with a base period funding of up to $10.0 million[131][132][193][194] - Grant revenue of $0.4 million was recognized and received under the BARDA Contract for the three months ended March 31, 2024[133][212] - Future funding beyond the base period is contingent on a new award from the Rapid Response Partnership Vehicle (RRPV Consortium), which is not yet secured[132][194] Note 10. Stockholders' Equity This note provides information on the company's common stock, warrants, and equity financing activities Sale of Common Stock and Pre-Funded Warrants This section details the company's PIPE financings involving the issuance of common stock and pre-funded warrants - The company completed three PIPE financings (Dec 2020, Sep 2021, Oct 2022) issuing common stock and pre-funded warrants[136][139][142] - Aggregate net proceeds from these financings were approximately $119.8 million (First PIPE), $52.7 million (Second PIPE), and $42.4 million (Third PIPE)[136][139][142] - Warrants are equity-classified, immediately exercisable, and do not embody an obligation for the company to repurchase shares[138][144] Common Stock Warrants This section provides a summary of outstanding common stock warrants, including exercise prices and expiration dates Common Stock Warrants Outstanding as of March 31, 2024 | Issue Date | Expiration Date | Exercise Price | Number of Warrants Outstanding | | :---------------- | :-------------- | :------------- | :----------------------------- | | December 28, 2020 | None | $0.01 | 7,214,333 | | October 24, 2022 | None | $0.0001 | 13,274,923 | | Total | | | 20,489,256 | - No warrants were exercised during the three months ended March 31, 2024, and 2023[146] Note 11. Stock-Based Compensation This note details the company's stock-based compensation plans, activity, and expense recognition Award Incentive Plans This section describes the company's equity incentive plans for employees and directors - The 2018 Plan automatically increases reserved shares annually by 4% of outstanding stock[148] - The 2021 Plan is for new employee inducement awards and is exempt from Nasdaq shareholder approval rules[151] - The 2021 Plan's share reserve was increased by 700,000 shares in April 2022 and 1,300,000 shares in February 2023[153] Stock Option Activity This section summarizes the activity and status of stock options granted by the company Stock Option Activity as of March 31, 2024 | Item | Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (in thousands) | | :---------------------------------- | :--------------- | :------------------------------ | :------------------------------------------ | :--------------------------------------- | | Balance at December 31, 2023 | 7,273,461 | $7.50 | 7.26 | $264 | | Granted (Q1 2024) | 3,971,589 | $2.45 | N/A | N/A | | Balance at March 31, 2024 | 10,306,517 | $5.95 | 7.91 | $998 | | Vested and exercisable at March 31, 2024 | 5,146,980 | $8.29 | 6.61 | $352 | - $11.0 million of total unrecognized compensation cost related to non-vested options is expected to be recognized over a weighted-average period of 1.63 years[155] Restricted Stock Units This section details the activity of restricted stock units, including grants, vesting, and cancellations Restricted Stock Unit Activity for Three Months Ended March 31, 2024 | Item | Number of Shares | Weighted Average Grant Date Fair Value | | :---------------------------------- | :--------------- | :------------------------------------- | | Outstanding, unvested at December 31, 2023 | 3,088,970 | $3.29 | | Issued | 644,826 | $2.46 | | Vested | (826,642) | $3.28 | | Canceled/Forfeited | (324,626) | $3.09 | | Outstanding, unvested at March 31, 2024 | 2,582,528 | $3.11 | Performance-Based Restricted Stock Units This section outlines the performance-based restricted stock unit awards granted to executives - 1,117,020 performance-based restricted stock unit awards (PSUs) were granted to executives in March 2024, with vesting dependent on performance metrics through December 31, 2025[157] - No stock-based compensation expense was recorded for PSUs in Q1 2024, as achievement of performance metrics was not deemed probable[158] Stock-Based Compensation Expense This section presents the breakdown of stock-based compensation expense across different operating categories Stock-Based Compensation Expense (in thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (YoY) | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Research and development expenses | $1,660 | $1,613 | $47 | | General and administrative expenses | $1,586 | $1,278 | $308 | | Total | $3,246 | $2,891 | $355 | Note 12. Net Loss Per Common Share This note provides the calculation of basic and diluted net loss per common share Net Loss Per Common Share (in thousands, except per share amounts) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(40,385) | $(33,982) | | Weighted-average common shares outstanding, basic and diluted | 118,391,224 | 114,423,000 | | Net loss per share, basic and diluted | $(0.34) | $(0.30) | - Potentially dilutive securities, including options, ESPP shares, and restricted stock, totaling 14.2 million in Q1 2024 (vs. 10.6 million in Q1 2023), were excluded from diluted EPS calculations as they were anti-dilutive due to the net loss[161] Note 13. Severance and Other Costs This note details the costs associated with the company's workforce reduction in February 2024 - The company announced a 40% workforce reduction in February 2024 to reduce costs and preserve capital[162] Severance and Other Costs (in thousands) for Three Months Ended March 31, 2024 | Item | Amount | | :---------------------------------- | :----- | | Severance and Incentive Compensation | $2,198 | | Stock Based Compensation | $185 | | Asset Impairments | $1,483 | | Total Severance and Other Costs | $3,866 | - These charges were recorded to research and development ($3.7 million) and general and administrative ($0.2 million) operating expense categories[163] Note 14. Subsequent Event This note discloses significant events occurring after the balance sheet date, specifically a public offering - On April 4, 2024, the company completed a public offering of common stock and warrants[164] - The offering generated gross proceeds of $32.5 million before deducting underwriting discounts and estimated expenses[164] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial condition and results of operations, highlighting its clinical-stage biotechnology focus, ongoing operating losses, and significant liquidity challenges. It details program updates for oncology (GRANITE, SLATE) and infectious diseases (CORAL, HIV), and analyzes revenue and expense trends, emphasizing the need for additional funding to continue as a going concern Overview This section provides an overview of the company's clinical-stage biotechnology focus, key programs, and critical liquidity challenges - Gritstone bio is a clinical-stage biotechnology company focused on developing potent vaccine-based immunotherapies for cancer and infectious diseases, utilizing self-amplifying mRNA (samRNA) technology[166][168] - The company's clinical programs include GRANITE (individualized neoantigen vaccine), SLATE (off-the-shelf neoantigen vaccine), CORAL (next-generation SARS-CoV-2 vaccine), and an HIV vaccine collaboration with Gilead[169][171] - As of March 31, 2024, cash, cash equivalents, and marketable securities were $46.3 million. Even with $32.5 million from an April 2024 offering, funds are expected to last only into Q4 2024, and potentially only into Q3 2024 if minimum liquidity requirements of the Loan Agreement are not met or renegotiated[173][218] - Substantial doubt exists about the company's ability to continue as a going concern, necessitating additional financing to avoid delaying or eliminating R&D activities[174][218] Oncology Program Updates This section provides updates on the company's oncology vaccine programs, GRANITE and SLATE, including clinical trial progress and key findings GRANITE – Individualized Vaccine Program for Solid Tumors This section details the progress of the individualized neoantigen vaccine program for solid tumors, including FDA designation and clinical data - GRANITE, an individualized neoantigen-based immunotherapy, received FDA Fast Track designation for microsatellite stable colorectal cancer (MSS-CRC)[179] - Preliminary Phase 2 data showed a favorable trend in overall progression-free survival (PFS) (HR=0.82) and extended PFS in high-risk patients (HR=0.52), with median PFS of 12 months vs. 7 months in the control arm for high-risk patients[181][182] - GRANITE was generally well tolerated, with common mild systemic and local adverse events, and achieved a 100% vaccine manufacturing success rate[183] - Mature PFS data and additional long-term ctDNA data are expected in Q3 2024, with overall survival data in mid-2025[184] SLATE – "Off-the-shelf" Vaccine Program for Solid Tumors This section outlines the development of the off-the-shelf neoantigen vaccine program for solid tumors, highlighting its design and interim results - SLATE is an "off-the-shelf" neoantigen-directed immunotherapy designed to target common driver mutations, offering speed advantages over individualized vaccines[185] - Interim Phase 1 results published in Nature Medicine identified a novel immunodominance hierarchy of tumor neoantigens[186] - SLATE-KRAS demonstrated superior immunogenicity in a subsequent Phase 2 study and is being evaluated in a cell therapy-vaccine combination study with the NCI[186] Infectious Disease Programs This section provides updates on the company's infectious disease vaccine programs, CORAL and HIV, including clinical trial status and funding CORAL – Next-Generation COVID-19 Vaccine Program This section details the progress of the next-generation COVID-19 vaccine program, including clinical trial phases and BARDA contract funding - The CORAL program has completed three Phase 1 clinical trials, demonstrating induction and persistence of high neutralizing antibody levels and broad T cell responses against SARS-CoV-2[190] - The BARDA Contract, valued at up to $433.0 million, supports a 10,000-participant randomized Phase 2b comparative study for the company's next-generation COVID-19 vaccine[192][193] - Funding beyond the base period of the BARDA Contract (up to $10.0 million) is contingent on a new award from the RRPV Consortium, which is not yet certain[194] HIV Vaccine Collaboration with Gilead Sciences This section outlines the ongoing collaboration with Gilead Sciences for HIV vaccine development, including trial status and potential milestones - The HIV vaccine collaboration with Gilead Sciences is progressing, with a Phase 1 trial currently ongoing[195] - Preclinical data showed strong and broad CD8+ T cell immune responses induced by SIV, ChAd, and samRNA vaccines, enhanced by immune modulators[196] - Gilead has an exclusive option to advance development beyond Phase 1, which would result in a $40.0 million non-refundable option exercise fee[195] Components of Our Operating Results This section analyzes the key components contributing to the company's operating results, including revenue and expense categories Collaboration, License and Grant Revenue This section details the sources and trends of the company's collaboration, license, and grant revenues Total Revenues (in thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (YoY) | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Total revenues | $1,742 | $2,443 | $(701) | - Revenue sources include collaboration with Gilead, and grants from CEPI, BARDA, and Gates Foundation[212] - The company has not generated product sales revenue and does not expect to in the foreseeable future, with future revenue dependent on collaboration agreements and milestone payments[197][198] Operating Expenses This section provides an analysis of the company's research and development and general and administrative expenses Research and Development Expenses This section details the breakdown and changes in the company's research and development expenditures Research and Development Expenses (in thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (YoY) | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | GRANITE program external expenses | $2,947 | $5,409 | $(2,462) | | SLATE program external expenses | $172 | $616 | $(444) | | CORAL program external expenses | $4,025 | $2,133 | $1,892 | | Other program external R&D expenses | $4,615 | $5,752 | $(1,137) | | Personnel-related expenses | $11,502 | $11,851 | $(349) | | Severance and other costs | $3,678 | $— | $3,678 | | Other unallocated R&D expenses | $6,102 | $4,753 | $1,349 | | Total research and development expenses | $33,041 | $30,514 | $2,527 | - The increase in R&D expenses was primarily due to a $3.7 million one-time severance and other charge and increased facilities-related costs, partially offset by decreases in laboratory supplies and outside services[214] - R&D expenses are expected to increase substantially as product candidates advance through clinical studies and regulatory approval[206] General and Administrative Expenses This section outlines the components and changes in the company's general and administrative expenses General and Administrative Expenses (in thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (YoY) | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | General and administrative expenses | $8,502 | $6,745 | $1,757 | - The increase was primarily due to a $0.2 million one-time severance charge, and increases in personnel-related expenses ($0.7 million), facilities-related costs ($0.5 million), and outside services ($0.4 million)[215] - G&A expenses are expected to increase as the company expands operating activities and prepares for potential commercialization[208] Interest Income This section explains the trends and factors influencing the company's interest income Interest Income (in thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (YoY) | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Interest income | $712 | $1,678 | $(966) | - The decrease is primarily due to lower cash, cash equivalent, and investment balances in 2024 compared to 2023[216] Interest Expense This section details the company's interest expense, primarily related to its term loan facility Interest Expense (in thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (YoY) | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Interest expense | $1,296 | $844 | $452 | - The increase is due to a higher principal balance of $40.0 million outstanding under the Loan Agreement as of March 31, 2024, compared to $30.0 million outstanding as of March 31, 2023[217] Results of Operations This section summarizes the company's financial performance, including total revenues, operating expenses, and net loss Summary of Results of Operations (in thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (YoY) | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Total revenues | $1,742 | $2,443 | $(701) | | Total operating expenses | $41,543 | $37,259 | $4,284 | | Loss from operations | $(39,801) | $(34,816) | $(4,985) | | Net loss | $(40,385) | $(33,982) | $(6,403) | - Collaboration and license revenues decreased by $0.5 million, and grant revenues decreased by $0.2 million, contributing to the overall revenue decline[212] - Research and development expenses increased by $2.5 million, largely due to a one-time severance charge, while general and administrative expenses increased by $1.8 million[214][215] Liquidity and Capital Resources This section discusses the company's financial liquidity, capital sources, and future funding requirements Sources of Liquidity This section identifies the company's current cash position, marketable securities, and available financing options - As of March 31, 2024, cash, cash equivalents, and marketable securities were $46.3 million, and accumulated deficit was $699.9 million[218] - A $32.5 million public offering completed on April 4, 2024, is expected to fund operations into Q4 2024[218][225] - The company expects to default on its Loan Agreement's minimum liquidity requirement in Q3 2024 if additional funds are not raised or terms renegotiated, limiting funding to Q3 2024[218] - The company has $71.6 million available under its 2022 ATM Offering Program as of March 31, 2024[220] Future Funding Requirements This section outlines the company's anticipated capital needs for ongoing operations and development programs - The company does not expect positive cash flows from operations or meaningful product sales revenue in the foreseeable future[226] - Substantial additional funding is required for ongoing R&D, clinical trials, regulatory approvals, commercialization, and manufacturing investments[226] - Future funding will be sought through private and public equity offerings, debt financings, and potential collaboration agreements, but availability on acceptable terms is not assured[227] - Failure to raise additional capital could force the company to significantly reduce operating expenses, delay, or discontinue development programs[228] Cash Flows This section analyzes the company's cash flows from operating, investing, and financing activities Cash Used in Operating Activities This section details the cash outflows from the company's primary business operations Cash Used in Operating Activities (in thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (YoY) | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Net cash used in operating activities | $(33,567) | $(40,090) | $6,523 | - Non-cash charges in Q1 2024 totaled $10.1 million, including $1.7 million depreciation, $3.2 million stock-based compensation, and $1.5 million impairment of property and equipment[234] - Changes in operating assets and liabilities included decreases in accrued compensation ($5.0 million), lease liability ($3.1 million), and deferred revenue ($1.1 million), offset by increases in accounts payable ($3.5 million) and prepaid expenses ($1.6 million)[234] Cash Provided by Investing Activities This section outlines the cash flows generated or used by the company's investment activities Cash Provided by Investing Activities (in thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (YoY) | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Net cash provided by investing activities | $12,303 | $21,173 | $(8,870) | - Proceeds from marketable securities maturities were $12.7 million in Q1 2024, down from $38.6 million in Q1 2023[236][237] - Purchases of marketable securities were $0.4 million in Q1 2024, significantly lower than $15.9 million in Q1 2023[236][237] Cash (Used in) Provided by Financing Activities This section details the cash flows related to the company's debt and equity financing activities Cash (Used in) Provided by Financing Activities (in thousands) | Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (YoY) | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Net cash (used in) provided by financing activities | $(379) | $8,647 | $(9,026) | - Q1 2024 cash used was primarily due to financing/offering costs ($0.4 million) and tax payments for RSUs ($0.8 million)[238] - Q1 2023 cash provided was mainly from long-term debt proceeds ($9.9 million) and ATM equity offering proceeds ($1.9 million)[239] Contractual Obligations and Commitments This section discloses the company's significant contractual obligations, including lease payments and license agreements - Total future minimum lease payments are $93.6 million, with $9.6 million due in the remaining nine months of 2024[240] - License agreements obligate the company to make milestone payments and low-single-digit royalties on sales of licensed products, but no royalties were due in Q1 2024 or Q1 2023[241] - Contracts with CROs, CMOs, and other vendors are generally cancelable within 30 days and are not included in long-term obligations[242] Critical Accounting Policies and Use of Estimates This section highlights the accounting policies requiring significant management judgment and estimates - Financial statements require management estimates and judgments for items such as preclinical study accruals, fair value of assets/liabilities, and stock-based compensation[243] - No changes to critical accounting policies have occurred since the Annual Report on Form 10-K for the year ended December 31, 2023[244] Recent Accounting Pronouncements This section refers to disclosures regarding recently adopted or issued accounting standards - Refer to Note 2 for a discussion of recent accounting pronouncements[245] Item 3. Quantitative and Qualitative Disclosures About Market Risks There have been no material changes in market risk from the information provided in the Annual Report on Form 10-K for the year ended December 31, 2023 - No material changes in market risk from the Annual Report on Form 10-K for the year ended December 31, 2023[246] Item 4. Controls and Procedures As of March 31, 2024, management, with the participation of principal executive, financial, and accounting officers, evaluated the effectiveness of disclosure controls and procedures and concluded they were effective at a reasonable assurance level. No changes in internal control over financial reporting materially affected or are reasonably likely to materially affect internal control during Q1 2024 - Disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level as of March 31, 2024[247][248] - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2024[249] PART II. OTHER INFORMATION This section contains additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits ITEM 1. Legal Proceedings The company is not currently a party to any litigation or legal proceedings that management believes would have a material adverse effect on its business. However, litigation, regardless of outcome, can negatively impact the company due to costs and diversion of resources - The company is not currently involved in any legal proceedings deemed to have a material adverse effect on its business[251] - Litigation can adversely impact the company due to defense/settlement costs and diversion of management resources[251] ITEM 1A. Risk Factors Investing in the company's common stock involves a high degree of risk. There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023. These risks are exacerbated by current macroeconomic and geopolitical environments - Investing in the company's common stock involves a high degree of risk[252] - No material changes to the risk factors set forth in the Annual Report on Form 10-K for the year ended December 31, 2023[253] - Risks are exacerbated by current macroeconomic and geopolitical environments, including inflation, high interest rates, and market volatility[252] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is marked "Not applicable" for unregistered sales of equity securities and use of proceeds, as well as issuer purchases of equity securities - No unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities to report[254][255][256] ITEM 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - No defaults upon senior securities[257] ITEM 4. Mine Safety Disclosures This item is marked "Not applicable" for mine safety disclosures - Mine safety disclosures are not applicable[258] ITEM 5. Other Information The company reported no other information - No other information to report[259] ITEM 6. EXHIBITS This section lists the exhibits filed with the Form 10-Q, including corporate documents, common stock certificates, certifications of officers, and Inline XBRL documents - The report includes various exhibits such as corporate governance documents, common stock certificates, officer certifications (31.1, 31.2, 32.1), and Inline XBRL documents[261] - Exhibit 32.1 certification is not deemed filed with the SEC and is not incorporated by reference into other filings[261] SIGNATURES This section confirms the official signing and certification of the report by the company's executive officers Signatures This section confirms the official signing and certification of the report by the company's executive officers - The report was signed on May 9, 2024, by the President and CEO, Andrew Allen, and the CFO, Vassiliki Economides[265]