The following discussion and analysis of the financial condition and results of
operations of GreenLight Biosciences Holdings
PBC and its consolidated subsidiaries should be read together with the Company's
unaudited condensed consolidated financial statements, together with the related
notes thereto, included elsewhere in this Quarterly Report on Form 10-Q (this
"Report") and the Company's audited consolidated financial statements, together
with the related notes thereto (the "2021 Consolidated Financial Statements"),
included as Exhibit 99.1 to the Company's Amendment No. 1 to Current Report on
Form 8-K filed with the Securities and Exchange Commission on March 31, 2022.
This discussion contains forward-looking statements that involve numerous risks
and uncertainties, including, but not limited to, those described under the
heading "Risk Factors" in Item 1A of Part I of the Company's Annual Report for
the year ended December 31, 2021. See "Cautionary Note Regarding Forward-Looking
Statements" at the beginning of this Report. All references to years, unless
otherwise noted, refer to the Company's fiscal years, which end on December 31.
For purposes of this section, all references to "we," "us," "our," "New
GreenLight" or the "Company" refer to GreenLight Biosciences Holdings PBC and
its consolidated subsidiaries.
Overview
GreenLight Biosciences Holdings, PBC is a pre-commercial stage biotechnology
company with a proprietary cell-free ribonucleic acid (RNA) production platform
for the discovery, development, and commercialization of high-performing
products to promote healthier plants, foods, and people. Our vision is to pave
the way for a sustainable planet through widely available and affordable RNA
products. We are developing RNA products for plant and life science applications
to advance crop management, plant protection, animal health, vaccine development
and pandemic preparation. We have a pipeline of product candidates across
various stages of development.
Since our inception in 2008, we have devoted substantially all of our efforts
and financial resources to conducting research and development activities for
our programs, acquiring, in-licensing, and discovering product candidates,
securing related intellectual property rights, raising capital, and organizing
and staffing our company. We do not have any products approved for sale and have
not generated any revenue from product sales. We have funded our operations
primarily with proceeds from the sale of capital stock and to a lesser extent
proceeds from the issuance of collaboration agreements, convertible notes and
debt financings. From our founding through June 30, 2022, we have raised funds
through proceeds from the sale of our capital stock, from the Business
Combination including the PIPE prepayment and from the issuance of debt.
We have incurred significant operating losses since inception. Our ability to
generate product revenue sufficient to achieve profitability will depend heavily
on the successful development and eventual commercialization of one or more of
our current or future product candidates. Our net losses were $90.1 million and
$48.5 million for the six months ended June 30, 2022 and 2021, respectively. As
of June 30, 2022 and December 31, 2021 we had an accumulated deficit of $343.7
million and $253.6 million, respectively. We expect to continue to incur
significant expenses and increasing operating losses. If we continue with all of
our current programs, we expect that our expenses and capital requirements may
increase substantially in connection with our ongoing activities, particularly
if and as we:
•
conduct field and clinical trials for our product candidates;
•
continue to develop additional product candidates;
•
maintain, expand, and protect our intellectual property portfolio;
•
hire additional clinical, scientific manufacturing and commercial personnel;
•
expand external and/or establish internal commercial manufacturing sources and
secure supply chain capacity sufficient to provide commercial quantities of any
product candidates for which we may obtain regulatory approval;
•
acquire or in-license other product candidates and technologies;
•
seek regulatory approvals for any product candidates that successfully complete
field trials or clinical trials;
•
establish a sales, marketing, and distribution infrastructure to commercialize
any products for which we may obtain regulatory approval; and
•
add operational, financial and management information systems and personnel to
support our product development, clinical execution and planned future
commercialization efforts, as well as to support our operations as a public
company.
As a result, we will need substantial additional funding to support our
continuing operations and pursue our growth strategy. We expect to finance our
operations through the sale of equity securities, debt financings or other
capital sources, which may continue to include collaborations with other
companies or other strategic transactions. We may be unable to raise additional
funds or enter into such other agreements or arrangements when needed on
favorable terms, or at all. If we fail to raise sufficient capital or enter into
such agreements or arrangements as and when needed, we may have to significantly
delay, scale back, or discontinue the development and
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commercialization of one or more of our product candidates and delay or
discontinue the pursuit of potential in-license or acquisition opportunities.
Because of the numerous risks and uncertainties associated with product
development, we are unable to predict the timing or amount of increased expenses
or when or if we will be able to achieve or maintain profitability. Even if we
are able to generate product sales, we may not become profitable. If we fail to
become profitable or are unable to sustain profitability on a continuing basis,
then we may be unable to continue our operations at planned levels and be forced
to reduce or terminate our operations. The Company expects that its existing
cash and cash equivalents of $44.1 million as of June 30, 2022 in combination
with proceeds of $108.4 million received as of August 12, 2022 pursuant to the
Subscription Agreements, will last through the second quarter of 2023 but will
not be sufficient to fund its operations for twelve months from the date these
interim financial statements are issued. We are evaluating a range of
opportunities to extend cash runway, including management of program spending,
platform licensing collaborations and potential financing activities.
Response to COVID-19
In response to the ongoing global COVID-19 pandemic, we established a
cross-functional task force and have implemented business continuity plans
designed to address and mitigate the impact of the COVID-19 pandemic on our
employees and our business. Our operations are considered an essential business
and we have been allowed to continue operating under governmental restrictions
during this period. We have taken measures to continue our research and
development activities, while work in laboratories and facilities has been
organized to reduce risk of COVID-19 transmission. The extent of the impact of
the COVID-19 pandemic on our business, operations and product development
timelines and plans remains uncertain, and will depend on certain developments,
including the duration and spread of the outbreak and its impact on our field
trial completion, clinical trial enrollment, trial sites, contract research
organizations ("CROs"), contract manufacturing organizations ("CMOs"), and other
third parties with whom we do business, as well as its impact on regulatory
authorities and our key scientific and management personnel. While we are
experiencing limited financial and operational impacts at this time, given the
global economic slowdown, the overall disruption of global healthcare systems
and the other risks and uncertainties associated with the pandemic, our
business, financial condition, and results of operations ultimately could be
materially adversely affected. We continue to closely monitor the COVID-19
pandemic as we evolve our business continuity plans, clinical development plans
and response strategy.
Recent Developments
Human Health Programs
COVID-19 Vaccine Program
Our COVID-19 vaccine candidate, GLB-CoV-2-043, which is based on the original
"Wuhan" strain of the COVID-19 virus has successfully completed preclinical
testing and we are pursuing approval to begin clinical trials. In April of 2022,
we applied for a Clinical Trials Application, or CTA, with the South African
Health Products Regulatory Authority, or SAHPRA for a phase I/II
single-vaccination booster study. That application was rejected with the
recommendation that the resubmission include more detail on the specific
benefits our testing efforts and a resulting vaccine will bring to South Africa
considering the ready availability of other COVID-19 vaccines in that country.
We plan on amending and resubmitting our CTA with that data in August and are
also reviewing other countries in which to begin clinical trials and whether to
do so in combination with a US-based Investigational New Drug, or IND,
application with the FDA. We can offer no assurance that our resubmitted CTA or
other clinical trial applications will be accepted by regulatory authorities.
Shingles Vaccine Program
Since March 2022, our shingles vaccine program has progressed from the stage of
concept evaluation to the stage of antigen design. In March 2022 we granted
Serum Institute of India Private Limited, or SIIPL, an exclusive license to use
our proprietary technology platform to develop, manufacture and commercialize an
mRNA shingles product and up to two other mRNA products in all territories other
than the United States, the 27 member states of the European Union, the United
Kingdom, Australia, Japan, New Zealand, Canada, South Korea, China, Hong Kong,
Macau, and Taiwan. Pursuant to our arrangement with SIIPL, we are performing the
design and preclinical research work to develop a shingles vaccine candidate.
Once a candidate is selected, SIIPL will undertake toxicology testing,
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clinical and manufacturing development, product registration and
commercialization in the licensed regions. We currently project that we will
select a candidate in 2023 to enable SIIPL to commence clinical development
thereafter.
Seasonal Flu Vaccine Program
We continue to pursue antigen design to enable candidate selection for our
seasonal flu vaccine program and remain in the early stages of evaluation. We
have begun to design and test mRNA formulations for influenza vaccine and will
proceed to preclinical toxicology testing if our research indicates we have a
formulation we believe is promising.
Gene Therapy and Other Early-Stage R&D Programs
Our early-stage research programs include efforts to develop gene therapy for
sickle cell disease, as well as programs for antibody therapy and supra-seasonal
flu. All of these programs are still in the early stages of concept development.
We have recently decided to pause work on our these early-stage research
programs to concentrate our efforts on the research and development of our more
promising and later-stage product candidates.
Plant Health Programs
The success of our Plant Health product pipeline will depend on us inventing and
bringing to market new uses of RNA in agriculture. Since our product candidates
are first of a kind, we typically do not project the timing of a product
candidate coming to market until Phase 3 of our development process when we
draft a FIFRA dossier for internal review. Our initial experience with bringing
RNA-based agricultural products to market were based on the conception,
development and testing of Calantha and we continue to grow our development and
regulatory experience as we develop RNA solutions to manage a range of target
pests.
Varroa Mite Program
We are in the process of preparing a registration for our Varroa mite product
for submission to the EPA and are conducting studies necessary for that
submission using the EPA's Guidance on Exposure and Effects Testing for
Assessing Risks to Bees. The viscosity of our formulation makes it difficult for
us to rely solely on Tier 1 toxicity study under the EPA guidance and we have
therefore recently decided to conduct Tier 2 toxicity studies, which we expect
will delay our registration to late in the last half of 2022.
Diamond Back Moth Program
We continue to adjust the formulation of our Diamond Back Moth candidate based
on data from field testing and now target commercialization after 2026, assuming
regulatory approval.
Botrytis Program
We continue to adjust the formulation of our Botrytis candidate based on data
from field testing and now target commercialization after 2025, assuming
regulatory approval.
Fusarium Head Blight
We are about to begin early field testing of our Fusarium product candidates and
expect that we will need to complete 2 seasons of field testing given the
importance of mycotoxin control for public health and thus we have revised our
timeline accordingly.
Facilities
In August of 2021, we entered into a lease for cleanroom space at a facility in
Burlington, Massachusetts for production of clinical trial materials and
produced the first batch of our Covid-19 vaccine at that facility. We terminated
the Burlington lease without fees or
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write-offs in June 2022 in favor of a 10-year lease for 59,000 square feet in
Lexington, Massachusetts which we entered into in March of 2022. We anticipate
reestablishing our ability to produce GMP level clinical trial vaccine material
in Lexington in the second half of 2023.
Business Combination and Public Company Costs
On August 9, 2021, GreenLight entered into the Business Combination Agreement
with ENVI and Merger Sub. On February 2, 2022, GreenLight consummated the
Business Combination, pursuant to which Merger Sub merged with and into
GreenLight, with GreenLight surviving the Merger as a wholly owned subsidiary of
ENVI. On February 2, 2022, in connection with the consummation of the Merger,
ENVI changed its name to GreenLight Biosciences Holdings, PBC and became a
public benefit corporation.
Immediately before the closing of the Business Combination, ENVI held
approximately $207.0 million in a trust account for its public stockholders. In
connection with the Business Combination, ENVI's public stockholders redeemed
shares of public common stock for $194.9 million, and the funds remaining after
such redemptions became available to finance transaction expenses and the future
operations of New GreenLight. In connection with the Business Combination, ENVI
entered into agreements with new investors and existing GreenLight investors to
subscribe for and purchase an aggregate of approximately 12.4 million shares of
ENVI Class A Common Stock (the "PIPE Financing"). The PIPE Financing was
consummated on February 2, 2022 and resulted in gross proceeds of approximately
$124.3 million (of which $35.3 million was advanced to GreenLight by the
Prepaying PIPE Investors).
The Merger was accounted for as a reverse recapitalization, whereby for
accounting and financial reporting purposes, GreenLight was the acquirer. A
reverse recapitalization does not result in a new basis of accounting, and the
financial statements of the combined entity will represent the continuation of
the consolidated financial statements of GreenLight in many respects. The shares
of ENVI remaining after redemptions of shares of ENVI public common stock and
the unrestricted net cash and cash equivalents on the date the Business
Combination was consummated were accounted for as a capital infusion to
GreenLight.
The most significant change in GreenLight's financial position and results of
operations resulting from the consummation of the Business Combination
(including the PIPE Financing) was an estimated cash inflow (as compared to
GreenLight's balance sheet at December 31, 2021) of approximately $136.4
million, prior to payment of the transaction costs. Total direct and incremental
transaction costs of $26.7 million was treated as a reduction of the cash
proceeds with capital raising costs being deducted from GreenLight's additional
paid-in capital. Cash on hand after giving effect to the Merger will be used for
general corporate purposes, including advancement of our product development
efforts.
As a consequence of the Business Combination, GreenLight effectively became the
successor to a publicly traded and Nasdaq-listed company, which is requiring
GreenLight to hire additional personnel and implement procedures and processes
to address public company regulatory requirements and customary practices.
GreenLight expects to incur additional annual expenses as a public company for,
among other things, directors' and officers' liability insurance, director fees
and additional internal and external accounting, legal and administrative
resources, including increased audit and legal fees.
Financial Overview
Components of Our Results of Operations
Revenue
For the six months ended June 30, 2022, we have not recognized any revenue from
product sales. If our development efforts for our product candidates are
successful and result in regulatory approval, or license agreements with third
parties, we may generate revenue in the future from product sales or license
agreements. However, there can be no assurance as to when we will generate such
revenue, if at all.
License and Collaboration Revenue
Collaboration revenue is related to our collaboration agreement with Serum
Institute of India Private Limited ("SIIPL") which was entered into in March
2022. For the three and six months ended June 30, 2022, we recognized $1.7
million of revenue primarily related to the delivery of IP and research
services, which includes manufacturing technology transfer services.
Grant Revenue
In July 2020, we entered into a grant agreement with the Bill & Melinda Gates
Foundation to advance research in in vivo gene therapy for sickle cell disease
and to explore new, low-cost capabilities for the in vivo functional cure of
sickle cell and/or durable
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suppression of HIV in developing countries. We were approved to receive a grant
of $3.3 million in the aggregate. As of June 30, 2022, we had received the
entire grant amount, of which $0.7 million was recorded as deferred revenue as
of that date. The grant agreement provides for payments to reimburse qualifying
costs, including general and administrative costs, incurred to perform our
obligations under the agreement. Revenue from this grant agreement is recognized
as the qualifying costs related to the grant are incurred, and any amounts
received in excess of revenue recognized are initially recorded as deferred
revenue on our condensed consolidated balance sheets and later recognized as
revenue when qualified costs are incurred. The revenue recognized through June
30, 2022 under the grant was related to qualifying research and development
expenditures that we incurred. The research supported by this grant is expected
be completed by the end of 2022.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our
research activities, including our discovery efforts and the development of our
product candidates. We expense research and development costs as incurred. These
expenses include:
Program expenses
•
external research and development expenses incurred under agreements with CMOs,
CROs, universities and research laboratories that conduct our field trials,
preclinical studies and development services;
•
costs related to manufacturing material for our field trials and preclinical
studies;
•
laboratory supplies and research materials;
•
payments made in cash or equity securities under third-party licensing
agreements and acquisition agreements;
•
costs to fulfill our obligations under the grant agreement with the Bill &
Melinda Gates Foundation; and
•
costs related to compliance with regulatory requirements;
Personnel expenses
•
employee-related expenses, including salaries, bonuses, benefits, stock-based
compensation, and other related costs for employees involved in research and
development efforts;
Facilities and other expenses
•
costs of outside consultants engaged in research and development functions,
including their fees and travel expenses; and
•
facilities, depreciation, and other allocated expenses, which include direct and
allocated expenses for rent, utilities, and insurance.
Costs for certain activities are recognized based on an evaluation of the
progress to completion of specific tasks using data such as information provided
to us by our vendors and analyzing the progress of our field trials and
preclinical studies or other services performed.
This process involves reviewing open contracts and purchase orders,
communicating with our personnel to identify services that have been performed
on our behalf and estimating the level of service performed and the associated
cost incurred for the service when we have not yet been invoiced or otherwise
notified of actual costs. Nonrefundable advance payments for goods or services
to be received in the future for use in research and development activities are
recorded as prepaid expenses. Such amounts are recognized as an expense as the
goods are delivered or the related services are performed, or until it is no
longer expected that the goods will be delivered, or the services rendered.
Our direct research and development expenses are not tracked on a
program-by-program basis for our product candidates and consist primarily of
external costs, such as fees paid to outside consultants, CROs, CMOs and
research laboratories in connection with our pre-clinical development, field
trials, process development, manufacturing, and clinical development activities.
Our direct research and development expenses by program also include fees
incurred under license, acquisition, and option agreements. We do not allocate
costs associated with our discovery efforts, laboratory supplies, employee costs
or facility expenses, including depreciation or other indirect costs, to
specific programs because these costs are deployed across multiple programs and,
as such, are not separately classified. We use internal resources primarily to
conduct our research and discovery as well as for managing our pre-clinical
development, field trials, process development, manufacturing, and clinical
development activities.
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General and Administrative Expenses
General and administrative expense consists primarily of employee-related costs,
including salaries, bonuses, benefits, stock-based compensation, and other
related costs. General and administrative expense also includes professional
services, including legal, accounting and audit services, consulting fees and
facility costs not otherwise included in research and development expenses,
insurance, and other general administrative expenses.
We anticipate that our general and administrative expenses will increase
commensurate with future commercialization of our products and expansion of
research collaboration work. We also anticipate that we will incur significantly
increased accounting, audit, legal, regulatory, compliance and director and
officer insurance costs as well as investor and public relations expenses
associated with operating as a public company.
Other (Expense) Income, Net
Other (expense) income, net consists of interest income, interest expense and
any change in the fair value of our warrant liabilities.
Interest Income
Interest income consists of income earned in connection with our investments in
money market funds.
Interest Expense
Interest expense consists of interest on outstanding borrowings under our loan
agreements with Trinity Capital, Silicon Valley Bank and Horizon Technology
Finance, our convertible debt and tenant improvement loans payable with our
lessors. Interest expense also includes amortization of debt discount and debt
issuance costs.
Fair Value of Warrant Liabilities
Change in fair value of warrant liabilities consists of the remeasurement gains
or losses associated with changes in the fair value of the warrant liabilities.
Until settlement, fluctuations in the fair value of our warrant liabilities are
based on the remeasurement at each reporting period.
Provision for Income Taxes
Our income tax provision consists of an estimate for U.S. federal and state
income taxes based on enacted rates, as adjusted for allowable credits,
deductions, uncertain tax positions, changes in deferred tax assets and
liabilities and changes in tax law. There is no provision for income taxes for
the three and six months ended June 30, 2022 and 2021, respectively, as we have
historically incurred net operating losses, and expect to continue to generate
net operating losses. Based on this history of net operating losses, we also
maintain a full valuation allowance against our deferred tax assets.
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Results of Operations
Comparison of the Three Months Ended June 30, 2022 and 2021
The following table summarizes our results of operations for the three months
ended June 30, 2022 and 2021:
THREE MONTHS ENDED
JUNE 30, INCREASE /
Dollars (in thousands) 2022 2021 (DECREASE)
License and collaboration revenue $ 1,748 $ - $ 1,748
Grant revenue 20 493 (473 )
Total revenue 1,768 493 1,275
Operating expenses:
Research and development 44,151 22,009 22,142
General and administrative 9,577 4,933 4,644
Total operating expenses 53,728 26,942 26,786
Loss from operations (51,960 ) (26,449 ) (25,511 )
Other expenses:
Interest income 57 5 52
Interest and other expense (1,338 ) (529 ) (809 )
Change in fair value of warrant liability 1,315 (201 ) 1,516
Total other income (expense), net
34 (725 ) 759
Net loss $ (51,926 ) $ (27,174 ) $ (24,752 )
License and Collaboration Revenue
For the three months ended June 30, 2022, we recognized $1.7 million of revenue
from our license and collaboration agreement with SIIPL primarily related to the
delivery of IP and research services, which includes manufacturing technology
transfer services. Because the license and collaboration agreement was executed
in March 2022, we did not recognize any revenue under this agreement for the
three months ended June 30, 2021.
Grant Revenue
Grant revenue was $20,000 for the three months ended June 30, 2022, compared to
grant revenue of $0.5 million for the three months ended June 30, 2021. All of
our grant revenue is derived from a grant made by the Bill & Melinda Gates
Foundation in July 2020. The decrease in grant revenue is due to a decrease of
costs incurred under this grant.
Research and Development Expenses
THREE MONTHS ENDED
JUNE 30, INCREASE /
Dollars (in thousands) 2022 2021 (DECREASE)
Program expense $ 23,675 $ 9,956 $ 13,719
Personnel costs 13,499 8,476 5,023
Other 6,977 3,577 3,400
Total research and development expenses $ 44,151 $ 22,009 $ 22,142
Research and development expense was $44.2 million for the three months ended
June 30, 2022, compared to $22.0 million for the three months ended June 30,
2021. The increase of $22.2 million resulted primarily from increased program
costs related to commercial-scale engineering run, specifically costs of
approximately $15.0 million related to R&D materials and service fees supporting
the commercial-scale engineering run, pre-clinical trial activities and
personnel expenses, as well as facilities costs such as rent and depreciation
expenses.
Our headcount supporting research and development activities increased, which
generated additional personnel-related costs of $5.0 million. Other research and
development costs increased by approximately $3.4 million, primarily related to
a $2.6 million increase in rental expense as we expanded our footprints and
entered into multiple leases during 2021 and 2022, and an increase of $0.7
million in depreciation expense due to an increase in capitalized expenditures
for lab equipment and lab space leasehold improvements.
General and Administrative Expenses
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General and administrative expense was $9.6 million for the three months ended
June 30, 2022, compared to $4.9 million for the three months ended June 30,
2021. The increase of $4.7 million was primarily due to an increase of $1.4
million in personnel-related costs in general and administrative functions,
which resulted from increased headcount supporting general and administrative
activities; a $1.3 million increase in professional services fees; and an
increase of $2.0 million related to facilities and other administrative
expenses.
Interest Income
For the three months ended June 30, 2022, interest income increased by an
insignificant amount.
Interest Expense
Interest expense was $1.3 million for the three months ended June 30, 2022,
compared to $0.5 million for the three months ended June 30, 2021. The increase
of $0.8 million is primarily related to interest accrued on the various loan
agreements we entered into during the second half of 2021.
Change in Fair Value of Warrant Liabilities
Other income attributable to the change in fair value of warrant liabilities was
$1.3 million for the three months ended June 30, 2022 compared to an expense of
$0.2 million for the three months ended June 30, 2021. The entire decrease of
$1.5 million in the fair value of our warrant liabilities was due to the
decrease in the fair value of the private placement warrants.
Results of Operations
Comparison of the Six Months Ended June 30, 2022 and 2021
The following table summarizes our results of operations for the six months
ended June 30, 2022 and 2021:
SIX MONTHS ENDED
JUNE 30, INCREASE /
Dollars (in thousands) 2022 2021 (DECREASE)
License and collaboration revenue $ 1,748 $ - $ 1,748
Grant revenue 277 818 (541 )
Total revenue 2,025 818 1,207
Operating expenses:
Research and development 71,432 39,420 32,012
General and administrative 19,332 8,831 10,501
Total operating expenses 90,764 48,251 42,513
Loss from operations (88,739 ) (47,433 ) (41,306 )
Other expenses:
Interest income 61 16 45
Interest and other expense (2,411 ) (840 ) (1,571 )
Change in fair value of warrant liability 956 (200 ) 1,156
Total other expense, net (1,394 ) (1,024 ) (370 )
Net loss $ (90,133 ) $ (48,457 ) $ (41,676 )
License and Collaboration Revenue
For the six months ended June 30, 2022, we recognized $1.7 million of revenue
from our license and collaboration agreement with SIIPL primarily related to the
delivery of IP and research services, which includes manufacturing technology
transfer services. Because the license and collaboration agreement was executed
in March 2022, we did not recognize any revenue under this agreement for the six
months ended June 30, 2021.
Grant Revenue
Grant revenue was $0.3 million for the six months ended June 30, 2022, compared
to grant revenue of $0.8 million for the six months ended June 30, 2021. All of
our grant revenue is derived from a grant made by the Bill & Melinda Gates
Foundation in July 2020. The decrease in grant revenue is due to a decrease of
costs incurred under this grant.
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Research and Development Expenses
SIX MONTHS ENDED
JUNE 30, INCREASE /
Dollars (in thousands) 2022 2021 (DECREASE)
Program expense $ 31,663 $ 17,078 $ 14,585
Personnel costs 26,127 15,517 10,610
Other 13,642 6,825 6,817
Total research and development expenses $ 71,432 $ 39,420 $ 32,012
Research and development expense was $71.4 million for the six months ended June
30, 2022, compared to $39.4 million for the six months ended June 30, 2021. The
increase of $32.0 million resulted primarily from increased program costs
related to commercial-scale engineering run, specifically costs of approximately
$15.0 million related to R&D materials and service fees supporting the
commercial-scale engineering run, pre-clinical trial activities and personnel
expenses, as well as facilities costs such as rent and depreciation expenses.
Our headcount supporting research and development activities increased, which
generated additional personnel-related costs of $10.6 million. Other research
and development costs increased by approximately $6.8 million, primarily related
to a $4.3 million increase in rental expense as we expanded our footprints and
entered into multiple leases during 2021 and 2022, and an increase of $1.6
million in depreciation expense due to an increase in capitalized expenditures
for lab equipment and lab space leasehold improvements.
General and Administrative Expenses
General and administrative expense was $19.3 million for the six months ended
June 30, 2022, compared to $8.8 million for the six months ended June 30, 2021.
The increase of $10.5 million was primarily due to an increase of $4.1 million
in personnel-related costs in general and administrative functions, which
resulted from increased headcount supporting general and administrative
activities; a $3.1 million increase in professional services fees to support the
Business Combination Agreement; and an increase of $3.4 million related to
facilities and other administrative expenses.
Interest Income
For the six months ended June 30, 2022, interest income increased by an
insignificant amount.
Interest Expense
Interest expense was $2.4 million for the six months ended June 30, 2022,
compared to $0.8 million for the six months ended June 30, 2021. The increase of
$1.6 million is primarily related to interest accrued on the various loan
agreements we entered into during the second half of 2021.
Change in Fair Value of Warrant Liabilities
Other income attributable to the change in fair value of warrant liabilities was
$1.0 million for the six months ended June 30, 2022, compared to an expense of
$0.2 million for the six months ended June 30, 2021. The entire decrease of $1.2
million in the fair value of our warrant liabilities was due to the decrease in
the fair value of the private placement warrants.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have generated recurring net losses. We do not have any
products approved for sale and have not yet commercialized any product. Since
our inception, we have funded our operations primarily through proceeds from the
issuance of preferred stock and to a lesser extent through the issuance of
convertible notes and debt financings. From our founding through June 30, 2022,
we have raised an aggregate of approximately $330.2 million of net proceeds from
the sale of our preferred stock, the Business Combination including the PIPE
prepayment, and from founding through June 30, 2022 we have raised $67.0 million
from the issuance of debt and convertible notes. As of June 30, 2022, we had
cash and cash equivalents of $44.1 million.
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Business Combination and PIPE Financing
In February 2022, we consummated the Business Combination with ENVI, which
generated gross proceeds to New GreenLight of approximately $136.4 million,
including $124.3 million from the PIPE Financing and $12.1 million from the
trust account (after redemptions). The gross proceeds do not reflect transaction
costs of $26.7 million. For more information, see "-Recent Developments-Business
Combination and Public Company Costs" above.
Private Placement and Securities Subscription Agreement
On August 11, 2022, we entered into Securities Subscription Agreements (the
"Subscription Agreements") with certain institutional accredited investors
(collectively, the "Purchasers"), providing for the sale by us of 27,640,301
shares (the "Shares") of our common stock (the "Common Stock") at a purchase
price of $3.92 per share, in a private placement (the "Private Placement"). The
Shares were issued (the "Closing") simultaneously with the execution and
delivery of the Subscription Agreements. The aggregate gross proceeds for the
Private Placement were approximately $108.4 million. The gross proceeds do not
reflect transaction costs. We intend to use the net proceeds from the Private
Placement to fund ongoing clinical development and commercialization of our
existing product pipeline.
Horizon Loan Agreement
In December 2021, we entered into a loan and security agreement with Horizon
Technology Finance Corporation and Powerscourt Investments XXV, LP (together,
"Horizon"), which provided for a term loan facility in an aggregate principal
amount of up to $25.0 million, $15.0 million of which was borrowed at the
closing and the remainder of which may be borrowed following the achievement of
certain milestones, but not after June 30, 2022. As of June 30, 2022, we had not
borrowed, and may no longer borrow the remainder of the term loan. Under the
agreement, in January 2022 the lenders were granted 10-year warrants to purchase
shares of common stock of GreenLight. The warrants are exercisable in the
aggregate for a number of shares equal to 3% of the total term loan facility
(assuming we borrow the full facility amount of $25.0 million) divided by the
exercise price of the warrants. Upon the closing of the Business Combination,
the warrants became warrants to purchase shares of New GreenLight Common Stock
based on the exchange ratio under the Business Combination Agreement.
Accrued interest is payable monthly. Under the terms of our agreement, this loan
accrues interest at a floating rate per annum equal to one-month prime rate as
reported in the Wall Street Journal on a date that is 5 business days prior to
the funding date of the Loan plus 5.75%. The principal of each term loan must be
repaid in equal monthly installments beginning February 1, 2023 (or August 1,
2023 if we borrow any of the remaining $10.0 million), with a scheduled final
maturity date of July 1, 2025. We may prepay the term loans in full, but not in
part, without premium or penalty, other than a premium equal to (i) 3% of the
principal amount of any prepayment made within 12 months after the applicable
funding date, (ii) 2% of the principal amount of any prepayment made between 12
and 24 months after the applicable funding date and (iii) 1% of the principal
amount of any prepayment made more than 24 months after the applicable funding
date. On the earlier of the scheduled final maturity date and the prepayment in
full of the term loans, we must pay a final payment fee equal to 3.0% of the
original principal amount of the funded term loans.
The agreement contains customary affirmative and negative covenants (including
an obligation to maintain certain amounts of cash in accounts subject to
springing control in favor of the lenders) and customary events of default; it
does not contain a financial covenant. We granted a second-priority, perfected
security interest in substantially all of our present and future personal
property and assets, excluding intellectual property, to secure our obligations
to the lenders, which security interest is subordinated to the security interest
granted to Silicon Valley Bank.
In April 2021, we entered into a joinder agreement with Horizon pursuant to
which the Company became a party to the Horizon loan agreements as a
co-borrower. Under the joinder agreement, the Company also granted Horizon a
continuing security interest in its existing and after-acquired personal
property and assets, excluding intellectual property.
Silicon Valley Bank Loan Agreement
In September 2021, we entered into a loan and security agreement with Silicon
Valley Bank, or SVB, providing for a term loan facility in an aggregate
principal amount of up to $15.0 million, $10.0 million of which we borrowed at
the closing and the remainder of which we may borrow following the achievement
of certain milestones, but not after March 31, 2022. We did not borrow any
additional amounts from SVB before March 31, 2022. At the closing, we granted
SVB a 10-year warrant to purchase up to 51,724 shares of GreenLight Common Stock
(assuming we borrow the entire $15.0 million from SVB). Upon the closing of the
Business Combination, the warrants became warrants to purchase shares of New
GreenLight Common Stock based on the exchange ratio under the Business
Combination Agreement.
Accrued interest is payable monthly. Under the terms of our agreement, this loan
accrues interest at a floating rate per annum equal to the greater of (i) three
and one half of one percent (3.50%) and (ii) the prime rate (as stated in the
Wall Street Journal) plus the prime
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rate margin of one quarter of one percent (0.25%). The principal of each term
loan must be repaid in equal monthly installments beginning April 1, 2022 (or
October 1, 2022, if the Company borrows any of the remaining $5.0 million), with
a scheduled final maturity date of September 1, 2024. On the earlier of the
scheduled final maturity date and the prepayment in full of the term loans, the
Company must pay a final payment fee equal to 4.0% of the original principal
amount of the term loans. The Company may prepay the term loans in increments of
$5.0 million and without premium or penalty, other than a premium equal to (i)
with respect to any prepayment made on or before September 22, 2022, 3% of the
principal so prepaid, (ii) with respect to any prepayment made after September
22, 2022 and on or before September 22, 2023, 2% of the principal so prepaid and
(iii) with respect to any prepayment made after September 22, 2023 and on or
before September 1, 2024, 1% of the principal so prepaid.
The loan and security agreement with SVB contains customary affirmative and
negative covenants (including an obligation to maintain cash in accounts at SVB
sufficient to repay all loan obligations) and customary events of default; it
does not contain a financial covenant. We granted a first-priority, perfected
security interest in substantially all of our present and future personal
property and assets, excluding intellectual property, to secure our obligations
to SVB.
In April 2021, we entered into a joinder agreement and first amendment to loan
and security agreement with SVB pursuant to which the Company became a party to
the SVB loan agreements as a borrower. Under these agreements, the Company also
granted SVB a continuing security interest in its existing and after-acquired
personal property and assets, excluding intellectual property. These agreements
also amended certain terms of the original SVB loan agreement to, among other
things, add representations, affirmative and negative covenants, and events of
default regarding the Company's obligations as a public benefit corporation.
Under the amended terms, it is an event of default for there to be any pending
or threatened litigation by a shareholder alleging that we or our directors
failed to satisfy any obligations under Delaware law regarding our status as a
public benefit corporation, if the litigation is likely to result in a final
monetary judgment against us in excess of $250,000. In addition, if any action,
investigation, or proceeding is pending or known to be threatened in writing
against us with respect to such a claim, the bank may not need to make further
loans to us.
Trinity Capital Equipment Financing Agreement
In March 2021, we entered into a master equipment financing agreement with
Trinity Capital (Trinity) authorizing equipment financing with an aggregate
borrowing capacity of $11.3 million, with up to $5.0 million available
immediately and the remaining principal balance available to be drawn before
September 2021. We entered into this loan to finance our capital purchases
associated primarily with our research and manufacturing programs. The monthly
payment factors for each draw are determined by Trinity based on the Prime Rate
reported in the Wall Street Journal on the first day of the month in which an
equipment financing schedule for such draw is executed. As of December 31, 2021,
the Company had drawn the entire $11.3 million, which is repayable in monthly
installments starting April 2021.
Funding Future Operations; Going Concern
The Company estimates that its existing cash and cash equivalents of $44.1
million as of June 30, 2022 in combination with proceeds of $108.4 million
received as of August 12, 2022 pursuant to the Subscription Agreements, will
last through the second quarter of 2023 but will not be sufficient to fund its
operations for twelve months from the date these interim financial statements
are issued. As a result, there is substantial doubt about our ability to
continue as a going concern for at least one year from the date of issuance of
our financial statements, as discussed in Note 1 of the notes to our condensed
consolidated financial statements as of June 30, 2022 and for the three and six
months ended June 30, 2022 and 2021, included elsewhere herein.
Based on our existing cash and cash equivalents, we are evaluating a range of
opportunities to extend cash runway, including management of program spending,
platform licensing collaborations and potential financing activities.
We expect to incur significant expenses and operating losses for the foreseeable
future as we advance our product candidates through preclinical and clinical
development and field trials, seek regulatory approval, and pursue
commercialization of any approved product candidates. We anticipate that our
general and administrative expenses will increase commensurate with future
commercialization of our products and expansion of research collaboration work.
In addition, in light of the completion of the Business Combination, we expect
to incur additional costs associated with operating as a public company. Because
of the numerous risks and uncertainties associated with research, development,
and commercialization of our product candidates, we are unable to estimate the
exact amount of our working capital requirements. Our future capital
requirements will depend on many factors, including:
•
the design, initiation, timing, costs, progress, and results of our planned
clinical trials;
•
the progress of preclinical development and possible clinical trials of our
current and future earlier- stage programs;
•
the scope, progress, results and costs of our research programs and preclinical
development of any additional product candidates that we may pursue;
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•
the development requirements of other product candidates that we may pursue;
•
our headcount and associated costs and establish a commercial infrastructure;
•
the timing and amount of milestone and royalty payments that we are required to
make or eligible to receive under our current or future collaboration and
license agreements;
•
the outcome, timing and cost of meeting regulatory requirements established by
the FDA, EPA and other regulatory authorities;
•
the costs and timing of future commercialization activities, including product
manufacturing, marketing, sales and distribution, for any of our product
candidates for which we receive marketing approval;
•
the cost of expanding, maintaining, and enforcing our intellectual property
portfolio, including filing, prosecuting, defending, and enforcing our patent
claims and other intellectual property rights;
•
the cost of defending potential intellectual property disputes, including patent
infringement actions brought by third parties against us or any of our product
candidates;
•
the effect of competing technological and market developments;
•
the cost and timing of completion of commercial-scale manufacturing activities;
•
the extent to which we partner our programs, acquire or in-license other product
candidates and technologies or enter into additional collaborations;
•
the revenue, if any, received from commercial sales of any future product
candidates for which we receive marketing approval; and
•
the costs of operating as a public company.
Until we can generate product revenues to support our cost structure, if any, we
expect to finance our cash needs through a combination of equity offerings, debt
financings, collaborations, and other similar arrangements. To the extent that
we raise additional capital through the sale of equity or convertible
securities, the ownership interest of our stockholders will be or could be
diluted, and the terms of these securities may include liquidation, dividend,
redemption, and other preferences that adversely affect the rights of our common
stockholders. Debt financing and equity financing, if available, may involve
agreements that include covenants limiting or restricting our ability to take
specific actions, such as incurring additional debt, making capital
expenditures, or declaring dividends. If we raise funds through collaborations,
or other similar arrangements with third parties, we may have to relinquish
valuable rights to our technologies, future revenue streams, research programs
or product candidates or grant licenses on terms that may not be favorable to us
and/or may reduce the value of our common stock. If we are unable to raise
additional funds through equity or debt financings when needed, we may be
required to delay, limit, reduce or terminate our product development or future
commercialization efforts or grant rights to develop and market our product
candidates even if we would otherwise prefer to develop and market such product
candidates ourselves.
Cash Flows
The following table summarizes our cash flows for each of the periods presented:
SIX MONTHS ENDED
JUNE 30, INCREASE /
2022 2021 (DECREASE)
Net cash (used in) operating activities $ (72,165 ) $ (42,300 ) $ (29,865 )
Net cash (used in) investing activities (12,833 ) (6,786 ) (6,047 )
Net cash provided by financing activities 98,643 6,445 92,198
Net increase (decrease) in cash, cash equivalents
and restricted cash $ 13,645 $ (42,641 ) $ 56,286
Operating Activities
Cash flows from operating activities represent the cash receipts and
disbursements related to all our activities other than investing and financing
activities. Operating cash flow is derived by adjusting our net loss for
non-cash operating items such as depreciation, amortization, and stock-based
compensation as well as changes in operating assets and liabilities, which
reflect timing differences between the receipt and payment of cash associated
with transactions and when they are recognized in our results of operations.
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During the six months ended June 30, 2022, operating activities used $72.2
million of cash, primarily resulting from our net loss of $90.1 million,
adjusted for non-cash items and the effect of changes in operating assets and
liabilities. Non-cash adjustments primarily include stock-based compensation of
$3.8 million and depreciation and amortization expense of $4.1 million. Net cash
used by changes in our operating assets and liabilities consisted primarily of a
$3.0 million decrease in accounts payable, an increase of $21.7 million in
accrued expenses and other liabilities, a $7.5 million increase in prepaid
expenses and other current assets, and an increase of $10.0 million in accounts
receivable, partially offset by an increase in deferred revenue of $8.0 million.
The decrease in accounts payable is related to timing of vendor invoicing and
payments. The increase in accrued expenses and prepaid expenses and other assets
was due to our increased level of research collaborations and manufacturing
development activities related to our product candidates.
During the six months ended June 30, 2021, net cash used in operating activities
was $42.3 million. Net cash used in operating activities consists of net loss of
$48.5 million, adjusted for non-cash items and the effect of changes in
operating assets and liabilities. Non-cash adjustments primarily include
depreciation and amortization expense of $2.3 million and stock-based
compensation of $0.8 million. Net cash used by changes in our operating assets
and liabilities primarily consisted of a $4.0 million increase in accounts
payable and a $1.9 million increase in prepaid expenses. The increase in
accounts payable is related to timing of vendor invoicing and payments. The
increase in prepaid expenses was primarily due to our increased level of
research collaborations and manufacturing development activities related to our
product candidates.
Investing Activities
During the six months ended June 30, 2022, investing activities used $12.8
million of cash, consisting primarily of purchases of property and equipment, of
which a substantial majority related to laboratory and facilities improvements
in Durham, North Carolina and Lexington, Massachusetts as well as purchases of
laboratory equipment and facilities improvements for our manufacturing facility
in Rochester, New York.
During the six months ended June 30, 2021, investing activities used $6.8
million of cash consisting of purchases of property and equipment, of which a
substantial majority related to purchases of laboratory equipment and facilities
improvements for our manufacturing facility in Rochester, New York, construction
of cleanrooms and preclinical manufacturing capacity in our facility in
Burlington, Massachusetts, and laboratory construction in our facility in
Woburn, Massachusetts.
Financing Activities
During the six months ended June 30, 2022, financing activities provided $98.6
million of cash, consisting primarily of $78.5 million of net proceeds from the
Business Combination, net of transaction costs, $21.8 million in proceeds from
issuance of convertible debt from PIPE Investors, and $1.2 million of proceeds
from the exercise of public warrants, which were partially offset by $2.7
million of repayments on our secured debt and term loan payable.
During the six months ended June 30, 2021, financing activities provided $6.4
million of cash, consisting primarily of $7.1 million of proceeds from secured
debt offset by repayments of our capital lease obligations.
Contractual Obligations and Commitments
Operating Lease Obligations
We have non-cancelable operating lease obligations, consisting primarily of
lease payment obligations for our facilities, including our headquarters in
Medford, Massachusetts; a clean room in Burlington, Massachusetts; office,
laboratory and greenhouse space in Durham, North Carolina; laboratory and office
space in Woburn, Massachusetts; office and laboratory space in Lexington,
Massachusetts, and our manufacturing facilities in Rochester, New York. The
leases for these facilities expire on various dates through 2026, unless
extended.
In March 2022, the Company entered into a lease for new laboratory space in
Lexington, Massachusetts, which commenced in May 2022. The lease term expires in
July 2033. The base rent for this lease is $3.9 million per year, subject to a
3% increase each year.
See Note 16, Commitments and Contingencies - Operating Leases, of the notes to
our condensed consolidated financial statements for the six months ended June
30, 2022 and 2021, for further information on our future operating lease
obligations.
Purchase Obligations
In the normal course of business, we enter into contracts with third parties for
field trials, preclinical studies and research and development supplies. These
contracts generally do not contain minimum purchase commitments and provide for
termination on notice, and therefore are cancellable contracts.
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License Agreement Obligations
In December 2020, we entered into an assignment and license agreement with Bayer
CropScience LLP ("Bayer") under which we may be obligated to make milestone and
royalty payments. These payment obligations are contingent upon future events,
such as achieving certain development, regulatory, and commercial milestones or
generating product sales. The timing of these events is uncertain; accordingly,
we cannot predict the period during which these payments may become due. We have
agreed to pay up to $2.0 million in milestone payments under this assignment and
license agreement when certain development milestones are met. The Company
assessed the milestones for the three and six months ended June 30, 2022 and
concluded no such milestone payments were deemed probable nor due.
In August 2020, we entered into a license agreement with Acuitas Therapeutics,
Inc. ("Acuitas") under which we are obligated to make potential milestone
payments, royalty payments, or both. These payment obligations are contingent
upon future events, such as achieving certain clinical and regulatory milestones
and generating product sales. Such payments are dependent upon the development
of products using the intellectual property licensed under the agreements and
are contingent upon the occurrence of future events. The potential clinical and
regulatory milestone payments that Acuitas is entitled to receive is in the low
double-digit millions for the first option exercised. With respect to the sale
of each licensed products, the Company is also obligated to pay Acuitas
royalties in the low single digit percentages on net sales of the licensed
products by the Company and its affiliates and sublicensees in a given country
until the last to occur, in such country, of (i) the expiration or abandonment
of all licensed patent rights covering the licensed product, (ii) expiration of
any regulatory exclusivity for the licensed product, or (iii) ten years from the
first commercial sale of the licensed product. For the three and six months
ended June 30, 2022, none of these events were deemed probable and hence no
expenses were recorded.
Debt Obligations
See Note 10, Debt, of the notes to our condensed consolidated financial
statements included elsewhere in this filing for further information on our
future debt repayment obligations.
Manufacturing Commitments and Obligations
In November 2021, we entered into the Samsung Agreements, pursuant to which we
engaged Samsung as a contract development and manufacturing organization for our
mRNA COVID-19 vaccine. Pursuant to the Samsung Agreements, we must, among other
things, (a) pay Samsung service fees for its pharmaceutical development and
manufacturing services, (b) purchase certain minimum quantities of drug
products, and (c) pay Samsung, on a minimum take-or-pay basis for each year
under the agreement, for our minimum purchase commitments, as determined under
the terms of the Samsung Agreements. Based on our minimum purchase commitments,
we expect to pay Samsung a minimum of approximately $11.5 million in service
fees under the Samsung Agreements, excluding the cost of raw materials. For the
six months ended June 30, 2022, the Company has incurred approximately $3.9
million in costs under this service agreement. Based on our current schedule, we
expect to incur approximately $2.5 million of these expenses in the second half
of 2022 and approximately $4.8 million throughout 2023.
Critical Accounting Policies and Significant Judgments and Estimates
Our condensed consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States. The
preparation of these condensed consolidated financial statements require us to
make judgments and estimates that affect the reported amounts of assets,
liabilities, revenues and expenses, and the disclosure of contingent assets and
liabilities in our financial statements. We base our estimates on historical
experience, known trends and events and various other factors that we believe
are reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Our actual results may differ from
these estimates under different assumptions or conditions. On a recurring basis,
we evaluate our judgments and estimates in light of changes in circumstances,
facts, and experience. The effects of material revisions in an estimate, if any,
will be reflected in the condensed consolidated financial statements
prospectively from the date of the change in the estimate.
We believe that the following accounting policies are those most critical to the
judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
Contract Revenue
In March 2022, the Company entered into a License Agreement (the "Agreement")
with Serum Institute of India Private Limited ("SIIPL"), pursuant to which the
Company granted SIIPL an exclusive, sub-licensable, royalty-bearing license to
use the Company's proprietary technology platform to develop, manufacture and
commercialize up to three mRNA products in all territories other than the
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United States, the 27 member states of the European Union, the United Kingdom,
Australia, Japan, New Zealand, Canada, South Korea, China, Hong Kong, Macau, and
Taiwan (the "SIIPL Territory"). The first licensed product target will be a
shingles product target, and SIIPL has an option to select the additional two
licensed product targets through the end of 2024. Under the terms of the
Agreement with SIIPL, the Company will provide research search services related
to the shingles product target to develop a "proof of concept" and will provide
manufacturing technology transfer services. In addition, GreenLight retains the
option purchase research plan and clinical trial data, developed by SIIPL, for
50% of the cost of the research plan and clinical trials for use in the
Company's own development.
SIIPL is responsible for the development, formulation, filling and finishing,
registration and commercialization of the products in the SIIPL Territory,
subject to oversight from a joint steering committee composed of representatives
of the Company and SIIPL. SIIPL will use commercially reasonable efforts to
develop and obtain regulatory approval for the products in the countries in the
SIIPL Territory. The License Agreement includes terms customary in the industry
for provisions related to sublicensing, intellectual property, and termination,
and customary representations and warranties of GreenLight and SIIPL, along with
certain customary covenants, including confidentiality, limitation of liability
and indemnity provisions.
Pursuant to the License Agreement, SIIPL will pay the Company an upfront license
fee of $5.0 million, as well as payments upon additional target selection and
reservation of exclusivity. The Company may receive up to a total of an
additional $17.0 million in development, regulatory and commercial (net sales)
based milestone payments across all three product targets, as well as
manufacturing technology transfer payments up to $10.0 million. SIIPL shall pay
royalty payments in the mid-double digits, based on the net sales of products
resulting from the licensed technology for the term of the License Agreement.
The License Agreement shall terminate on a product-by product and
country-by-country basis on the later of the expiration of the patent rights
owned by the Company or the tenth anniversary of the first commercial sale of
the applicable product(s) in the applicable country. The Company has recorded a
receivable of $10 million as of June 30, 2022 for the amounts billed to SIIPL in
accordance with the terms of the Agreement.
The Company has determined that the Agreement falls within the scope of ASC 606,
Revenue Recognition, ("ASC 606") as it includes a customer-vendor relationship
as defined by ASC 606 and thus represents a contract with a customer. The
Company has determined that the license of IP granted is not distinct from the
research services, which includes manufacturing technology transfer services,
and thus should be combined. The Agreement contains a single performance
obligation for the combined License of IP and research services. Revenue from
the contract will be recognized over time, using an input-method based on labor
costs as a percentage of total expected labor costs. The Company has determined
that variable consideration from the development and regulatory payments, as
well as the $5.0 million of the manufacturing technology transfer payment, in
the Agreement should be fully constrained as of June 30, 2022, and commercial
milestones and royalties will be recognized in the period the underlying sales
occur. For the three and six months ended June 30, 2022, $1.7 million had been
recorded from the Agreement and the remaining amount of billed and unconstrained
consideration is recorded as deferred revenue. Based on current estimated
timelines, the Company expects to recognize the deferred revenue over
approximately 12 months and is classified as current in the condensed
consolidated balance sheets as of June 30, 2022.
Grant Revenue
In July 2020, we entered into a grant agreement with the Bill & Melinda Gates
Foundation to advance research in in vivo gene therapy for sickle cell disease
and to explore new, low-cost capabilities for the in vivo functional cure of
sickle cell and/or durable suppression of HIV in developing countries. The grant
agreement provides for payments to reimburse qualifying costs, including,
general and administrative costs. As we are performing services under the
agreement that are consistent with the Company's ongoing central activities and
we have determined that we are the principal in the agreement, we recognize
grant revenue as we perform services under this agreement when the funding is
committed, which occurs as underlying costs are incurred. Revenues and related
expenses are presented gross in the condensed consolidated statement of
operations as we have determined that we are the primary obligor under the
agreement relative to the research and development services we perform as the
lead technical expert.
Stock-Based Compensation
We measure stock-based awards granted to employees, non-employees and directors
based on their fair value on the date of the grant using the Black-Scholes
option-pricing model for options and the fair value of our common stock for
restricted common stock awards. Compensation expense for those awards is
recognized over the requisite service period, which is generally the vesting
period of the respective award for employees and directors and the period during
which services are performed for non-employees. We use the straight-line method
to record the expense of awards with service-based vesting conditions. We
recognize stock-based compensation for performance awards based on grant date
fair value over the service period to the extent achievement of the performance
condition is probable.
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The fair value of our stock option awards is estimated using a Black-Scholes
option-pricing model that uses the following inputs: (1) fair value of our
common stock, (2) assumptions we make for the expected volatility of our common
stock, (3) the expected term of our stock option awards, (4) the risk-free
interest rate for a period that approximates the expected term of our stock
option awards, and (5) our expected dividend yield, if any.
Determination of the Fair Value of Common Stock
Since the consummation of the Business Combination, the fair value of our common
stock has been based on the quoted market price on the Nasdaq Global Market.
Prior to becoming a public company as there has not been a public market for our
common stock, the estimated fair value of our common stock was determined by our
board of directors as of the date of grant of each option or restricted stock
award, considering our most recently available third-party valuations of common
stock and our board of directors' assessment of additional objective and
subjective factors that it believed were relevant and which may have changed
from the date of the most recent valuation through the date of the grant. These
third-party valuations were performed in accordance with the guidance outlined
in the American Institute of Certified Public Accountants' Accounting and
Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as
Compensation. Our common stock valuations were prepared using either an option
pricing method ("OPM") or a hybrid method, both of which used market approaches
to estimate our enterprise value. The OPM treats common stock and preferred
stock as call options on the total equity value of a company, with exercise
prices based on the value thresholds at which the allocation among the various
holders of a company's securities changes. Under this method, the common stock
has value only if the funds available for distribution to stockholders exceed
the value of the preferred stock liquidation preferences at the time of the
liquidity event, such as a strategic sale or a merger. A discount for lack of
marketability of the common stock is then applied to arrive at an indication of
value for the common stock. The hybrid method is a probability-weighted expected
return method ("PWERM") where the equity value in one or more scenarios is
calculated using an OPM. The PWERM is a scenario-based methodology that
estimates the fair value of common stock based upon an analysis of future values
for the company, assuming various outcomes. The common stock value is based on
the probability-weighted present value of expected future investment returns
considering each of the possible outcomes available as well as the rights of
each class of stock. The future value of the common stock under each outcome is
discounted back to the valuation date at an appropriate risk-adjusted discount
rate and probability weighted to arrive at an indication of value for the common
stock. A discount for lack of marketability of the common stock is then applied
to arrive at an indication of value for the common stock.
These independent third-party valuations were performed at various dates, which
resulted in estimated valuations of our common stock by our board of directors
of $0.46 per share as of December 31, 2019, $0.65 per share as of August 1,
2020, $0.82 per share as of December 31, 2020, $1.74 per share as of May 1,
2021, $5.26 per share as of September 30, 2021, and $5.89 per share as of
December 31, 2021. In addition to considering the results of these third-party
valuations, our board of directors considered various objective and subjective
factors to determine the fair value of our common stock as of each grant date,
including:
•
the prices at which we sold shares of preferred stock and the superior rights
and preferences of the preferred stock relative to our common stock at the time
of each grant;
•
the progress of our research and development programs, including the status and
results of our product candidates;
•
our stage of development and commercialization and our business strategy;
•
external market conditions affecting the biotechnology industry and trends
within the biotechnology industry;
•
our financial position, including cash on hand, and our historical and
forecasted performance and operating results;
•
the lack of an active public market for our common stock and our preferred
stock;
•
the likelihood of achieving a liquidity event given prevailing market
conditions; and
•
the analysis of IPOs and the market performance of similar companies in the
biotechnology industry.
The assumptions underlying these valuations represented management's best
estimate, which involved inherent uncertainties and the application of
management's judgment. As a result, if we had used different assumptions or
estimates, the fair value of our common stock and our stock-based compensation
expense could have been materially different. Following the consummation of the
Business Combination, the fair value of New GreenLight Common Stock is
determined based on the quoted market price on the Nasdaq Global Market.
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Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have any
off-balance sheet arrangements, as defined in the rules and regulations of the
SEC.
Recently Adopted Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially
impact our financial position, results of operations or cash flows is provided
in Note 2 to our condensed consolidated financial statements appearing elsewhere
herein.
Emerging Growth Company and Smaller Reporting Company Status
New GreenLight is an "emerging growth company," as defined in Section 2(a) of
the Securities Act, as modified by the Jumpstart Our Business Startups Act of
2012 (the "JOBS Act"), and it may take advantage of certain exemptions from
various reporting requirements that are applicable to other public companies
that are not emerging growth companies, including, but not limited to, not being
required to comply with the auditor attestation requirements of Section 404 of
the Sarbanes Oxley Act, reduced disclosure obligations regarding executive
compensation in its periodic reports and proxy statements, and exemptions from
the requirements of holding nonbinding stockholder advisory votes on executive
compensation and any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies
from being required to comply with new or revised financial accounting standards
until private companies (that is, those that have not had a Securities Act
registration statement declared effective, have not filed and not withdrawn a
Securities Act registration statement that has not become effective or do not
have a class of securities registered under the Exchange Act) are required to
comply with the new or revised financial accounting standards. The JOBS Act
provides that a company can elect to opt out of the extended transition period
and comply with the requirements that apply to non-emerging growth companies but
any such election to opt out is irrevocable. New GreenLight has elected not to
opt out of such extended transition period, which means that when a standard is
issued or revised and it has different application dates for public or private
companies, New GreenLight, as an emerging growth company, can adopt the new or
revised standard at the time private companies adopt the new or revised
standard. This may make comparison of New GreenLight's financial statements with
certain other public companies difficult or impossible because of the potential
differences in accounting standards used.
New GreenLight will remain an emerging growth company until the earlier of: (i)
the last day of the fiscal year (a) following the fifth anniversary of the
closing of ENVI's initial public offering, (b) in which New GreenLight has total
annual gross revenue of at least $1.1 billion, or (c) in which New GreenLight is
deemed to be a large accelerated filer, which means the market value of its
common equity that is held by non-affiliates exceeds $700 million as of the last
business day of its most recently completed second fiscal quarter; and (ii) the
date on which New GreenLight has issued more than $1.0 billion in
non-convertible debt securities during the prior three-year period. References
herein to "emerging growth company" have the meaning associated with it in the
JOBS Act.
We are also a "smaller reporting company" as defined in the Exchange Act. We may
continue to be a smaller reporting company even after we are no longer an
emerging growth company. We may take advantage of certain of the scaled
disclosures available to smaller reporting companies and will be able to take
advantage of these scaled disclosures for so long as the market value of our
voting and non-voting Common Stock held by non-affiliates is less than $250.0
million measured on the last business day of our second fiscal quarter, or our
annual revenue is less than $100.0 million during the most recently completed
fiscal year and the market value of our voting and non-voting Common Stock held
by non-affiliates is less than $700.0 million measured on the last business day
of our second fiscal quarter.
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