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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2022
OR
| | | | | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 001-38596
REPLIMUNE GROUP, INC.
(Exact name of registrant as specified in its charter) | | | | | |
Delaware | 82-2082553 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
500 Unicorn Park
Woburn MA 01801
(Address of principal executive offices)
(Zip Code)
(781) 222-9600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, par value $0.001 per share | | REPL | | The Nasdaq Stock Market LLC (Nasdaq Global Select Market) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | |
Large accelerated filer ☐ | Accelerated filer ☐ |
Non-accelerated filer ☒ | Smaller reporting company ☒ |
| Emerging growth company ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No ☒
The number of shares of the registrant’s Common Stock, par value $0.001 per share, outstanding as of October 31, 2022 was 49,739,407.
REPLIMUNE GROUP, INC.
FORM 10-Q
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
REPLIMUNE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
| | | | | | | | | | | |
| September 30, 2022 | | March 31, 2022 |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 88,930 | | | $ | 105,948 | |
Short-term investments | 282,890 | | | 289,707 | |
Research and development incentives receivable | 2,589 | | | 3,055 | |
Prepaid expenses and other current assets | 4,981 | | | 5,267 | |
Total current assets | 379,390 | | | 403,977 | |
Property, plant and equipment, net | 7,910 | | | 7,933 | |
Research and development incentives receivable, non-current | 1,296 | | | — | |
Restricted cash | 1,636 | | | 1,636 | |
Right-to-use asset - operating leases | 4,984 | | | 5,552 | |
Right-to-use asset - financing leases | 40,879 | | | 42,094 | |
Total assets | $ | 436,095 | | | $ | 461,192 | |
| | | |
Liabilities and Stockholders' Equity | | | |
Current liabilities: | | | |
Accounts payable | $ | 3,996 | | | $ | 3,732 | |
Accrued expenses and other current liabilities | 15,939 | | | 13,392 | |
Operating lease liabilities, current | 1,002 | | | 1,070 | |
Financing lease liabilities, current | 2,600 | | | 2,562 | |
Total current liabilities | 23,537 | | | 20,756 | |
Operating lease liabilities, non-current | 4,280 | | | 4,801 | |
Financing lease liabilities, non-current | 24,206 | | | 24,406 | |
Total liabilities | $ | 52,023 | | | $ | 49,963 | |
Commitments and contingencies (Note 11) | | | |
Stockholders' equity | | | |
Common stock, $0.001 par value; 150,000,000 shares authorized as of September 30, 2022 and March 31, 2022; 49,739,407 and 47,338,660 shares issued and outstanding as of September 30, 2022 and March 31, 2022, respectively | 50 | | | 47 | |
Additional paid-in capital | 777,650 | | | 723,359 | |
Accumulated deficit | (396,559) | | | (311,204) | |
Accumulated other comprehensive income (loss) | 2,931 | | | (973) | |
Total stockholders' equity | 384,072 | | | 411,229 | |
Total liabilities and stockholders' equity | $ | 436,095 | | | $ | 461,192 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
REPLIMUNE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Operating expenses: | | | | | | | |
Research and development | $ | 28,834 | | | $ | 19,902 | | | $ | 58,312 | | | $ | 38,456 | |
Selling, general and administrative | 12,745 | | | 9,345 | | | 24,143 | | | 18,172 | |
Total operating expenses | 41,579 | | | 29,247 | | | 82,455 | | | 56,628 | |
Loss from operations | (41,579) | | | (29,247) | | | (82,455) | | | (56,628) | |
Other income (expense): | | | | | | | |
Research and development incentives | 574 | | | 725 | | | 1,425 | | | 1,513 | |
Investment income | 1,112 | | | 80 | | | 1,455 | | | 172 | |
Interest expense on finance lease liability | (550) | | | (557) | | | (1,102) | | | (1,115) | |
Other (expense) income | (2,659) | | | (356) | | | (4,678) | | | (608) | |
Total other (expense) income, net | (1,523) | | | (108) | | | (2,900) | | | (38) | |
Net loss | $ | (43,102) | | | $ | (29,355) | | | $ | (85,355) | | | $ | (56,666) | |
Net loss per common share, basic and diluted | $ | (0.79) | | | $ | (0.56) | | | $ | (1.57) | | | $ | (1.09) | |
Weighted average common shares outstanding, basic and diluted | 54,770,291 | | | 52,081,325 | | | 54,492,395 | | | 51,962,795 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
REPLIMUNE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Amounts in thousands)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Net loss | $ | (43,102) | | | $ | (29,355) | | | $ | (85,355) | | | $ | (56,666) | |
Other comprehensive loss: | | | | | | | |
Foreign currency translation gain | 2,330 | | | 219 | | | 4,067 | | | 443 | |
Net unrealized gain (loss) on short-term investments, net of tax of $0 | 81 | | | — | | | (163) | | | (40) | |
Comprehensive loss | $ | (40,691) | | | $ | (29,136) | | | $ | (81,451) | | | $ | (56,263) | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
REPLIMUNE GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands, except share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock | | Additional paid-in capital | | Accumulated deficit | | Accumulated other comprehensive loss | | Total stockholders’ equity |
| Shares | | Amount | | | | |
Balances as of March 31, 2022 | 47,338,660 | | | $ | 47 | | | $ | 723,359 | | | $ | (311,204) | | | $ | (973) | | | $ | 411,229 | |
Issuance of common stock through ATM sales, net of offering costs | 1,686,438 | | | 2 | | | 31,035 | | | — | | — | | 31,037 | |
Foreign currency translation adjustment | — | | | — | | — | | — | | 1,737 | | | 1,737 | |
Unrealized loss on short-term investments | — | | | — | | — | | — | | (244) | | | (244) | |
Exercise of stock options | 124,028 | | | — | | | 1,562 | | | — | | — | | 1,562 | |
Vesting of RSUs | 149,341 | | | — | | | — | | | — | | — | | — | |
Stock-based compensation expense | — | | | — | | 7,194 | | | — | | — | | 7,194 | |
Net loss | — | | | — | | — | | (42,253) | | | — | | (42,253) | |
Balances as of June 30, 2022 | 49,298,467 | | | 49 | | | 763,150 | | | (353,457) | | | 520 | | | 410,262 | |
Issuance of common stock through ATM sales, net of offering costs | 340,000 | | | 1 | | | 6,400 | | | — | | | — | | | 6,401 | |
Foreign currency translation adjustment | — | | | — | | | — | | | — | | | 2,330 | | | 2,330 | |
Unrealized loss on short-term investments | — | | | — | | | — | | | — | | | 81 | | | 81 | |
Exercise of stock options | 88,252 | | | — | | | 1,108 | | | — | | | — | | | 1,108 | |
Vesting of RSUs | 12,688 | | | — | | | — | | | — | | | — | | | — | |
Stock-based compensation expense | — | | | — | | | 6,992 | | | — | | | — | | | 6,992 | |
Net loss | — | | | — | | | — | | | (43,102) | | | — | | | (43,102) | |
Balances as of September 30, 2022 | 49,739,407 | | | 50 | | | 777,650 | | | (396,559) | | | 2,931 | | | 384,072 | |
| | | | | | | | | | | |
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| | | | | | | | | | | |
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| | | | | | | | | | | |
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Balances as of March 31, 2021 | 46,566,481 | | | $ | 47 | | | $ | 692,243 | | | $ | (193,168) | | | $ | (394) | | | $ | 498,728 | |
Foreign currency translation adjustment | — | | | — | | — | | — | | 224 | | | 224 | |
Unrealized loss on short-term investments | — | | | — | | — | | — | | (40) | | | (40) | |
Exercise of stock options | 163,970 | | | — | | | 1,173 | | | — | | — | | 1,173 | |
Stock-based compensation expense | — | | | — | | 6,250 | | | — | | — | | 6,250 | |
Net loss | — | | | — | | — | | (27,311) | | | — | | (27,311) | |
Balances as of June 30, 2021 | 46,730,451 | | | 47 | | | 699,666 | | | (220,479) | | | (210) | | | 479,024 | |
Foreign currency translation adjustment | — | | | — | | | — | | | — | | | 219 | | | 219 | |
Unrealized loss on short-term investments | — | | | — | | | — | | | — | | | — | | | — | |
Exercise of stock options | 124,880 | | | — | | | 1,211 | | | — | | | — | | | 1,211 | |
Stock-based compensation expense | — | | | — | | | 6,313 | | | — | | | — | | | 6,313 | |
Net loss | — | | | — | | | — | | | (29,355) | | | — | | | (29,355) | |
Balances as of September 30, 2021 | 46,855,331 | | | 47 | | | 707,190 | | | (249,834) | | | 9 | | | 457,412 | |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
REPLIMUNE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
| | | | | | | | | | | |
| Six Months Ended September 30, |
| 2022 | | 2021 |
Cash flows from operating activities: | | | |
Net loss | $ | (85,355) | | | $ | (56,666) | |
Adjustments to reconcile net loss to net cash used in operating activities: | | | |
Stock-based compensation expense | 14,186 | | | 12,563 | |
Depreciation | 1,237 | | | 1,050 | |
Net amortization of premiums and discounts on short-term investments | (161) | | | 1,284 | |
Changes in operating assets and liabilities: | | | |
Research and development incentives receivable | (1,417) | | | (1,513) | |
Prepaid expenses and other current assets | 159 | | | (1,252) | |
Operating lease, right-of-use-asset | 252 | | | 217 | |
Finance lease, right-of-use-asset | 1,214 | | | 1,214 | |
Accounts payable | 698 | | | 750 | |
Accrued expenses and other current liabilities | 2,779 | | | 1,293 | |
Operating lease liabilities | (257) | | | (215) | |
Net cash used in operating activities | (66,665) | | | (41,275) | |
Cash flows from investing activities: | | | |
Purchases of property, plant and equipment | (1,464) | | | (719) | |
Purchase of short-term investments | (193,685) | | | (111,356) | |
Proceeds from sales and maturities of short-term investments | 200,500 | | | 128,015 | |
Net cash provided by investing activities | 5,351 | | | 15,940 | |
Cash flows from financing activities: | | | |
Proceeds from issuance of common stock through ATM sales, net of offering costs | 37,438 | | | — | |
Principal payment of finance lease obligation | (163) | | | (114) | |
Proceeds from exercise of stock options | 2,670 | | | 2,384 | |
Net cash provided by financing activities | 39,945 | | | 2,270 | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 4,351 | | | 516 | |
Net decrease in cash, cash equivalents and restricted cash | (17,018) | | | (22,549) | |
Cash, cash equivalents and restricted cash at beginning of period | 107,584 | | | 184,154 | |
Cash, cash equivalents and restricted cash at end of period | $ | 90,566 | | | $ | 161,605 | |
| | | |
Supplemental disclosure of non-cash investing and financing activities: | | | |
Purchases of property and equipment included in accounts payable | 96 | | | 177 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
REPLIMUNE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share amounts)
(Unaudited)
1. Nature of the business
Replimune Group, Inc. (the “Company”) is a clinical-stage biotechnology company committed to applying its leading expertise in the field of oncolytic immunotherapy to transform the lives of cancer patients through its novel tumor-directed oncolytic immunotherapies. The Company's proprietary tumor-directed oncolytic immunotherapy product candidates are designed and intended to maximally activate the immune system against cancer. Replimune Group, Inc., whose predecessor was founded in 2015, is the parent company of its wholly owned, direct and indirect subsidiaries: Replimune Limited (“Replimune UK”); Replimune, Inc. (“Replimune US”); Replimune Securities Corporation; and Replimune (Ireland) Limited.
The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, third-party intellectual property, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance and reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.
Basis of presentation
The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Company has incurred recurring losses since its inception, including net losses of $43.1 million and $29.4 million for the three months ended September 30, 2022 and 2021, respectively and net losses of $85.4 million and $56.7 million for the six months ended September 30, 2022 and 2021, respectively. In addition, as of September 30, 2022, the Company had an accumulated deficit of $396.6 million. The Company expects to continue to generate operating losses for the foreseeable future. As of the issuance date of these consolidated financial statements, the Company expects that its cash and cash equivalents and short-term investments will be sufficient to fund its operating expenses and capital expenditure requirements through at least 12 months from the issuance of these consolidated financial statements.
Impact of the COVID-19 coronavirus
In December 2019, a novel strain of coronavirus, which causes the disease known as COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 coronavirus has spread globally. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic and the U.S. government imposed travel restrictions on travel between the United States, Europe and certain other countries. The impact of this pandemic has been, and may continue to be, extensive in many aspects of society, which has resulted, and may continue to result, in significant disruptions to the global economy as well as businesses and capital markets around the world.
The Company is continuing to generally monitor the spread of COVID-19 and, throughout the pandemic, has implemented measures designed to comply with applicable federal, state and local guidelines, as well as care for the Company's employee's health and well-being. The Company will continue to examine its protocols as the pandemic and health guidance evolves. The COVID-19 pandemic continues to affect the United States and global economies and has affected and may continue to affect the Company's operations and those of third parties on which it relies, including by causing disruptions in our raw material and supply of other materials, the manufacturing of its product candidates and its developing commercialization processes. However, the extent of these delays is currently unknown and has and will likely continue to vary. In addition, the Company may incur unforeseen costs as a result of disruptions in raw material supplies, clinical product supplies, and preclinical studies or clinical trial delays. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company's business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken in an effort to contain it or to potentially treat or continue to vaccinate against COVID-19 and the economic impact on local, regional, national and international markets. The Company continues to monitor this situation and the possible effects on its financial condition, liquidity, operations, suppliers, supplies, industry and workforce.
2. Summary of significant accounting policies
Principles of consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and include the accounts of the Company and its direct and indirect wholly owned subsidiaries, Replimune UK, Replimune US, Replimune Securities Corporation and Replimune (Ireland) Limited after elimination of all intercompany accounts and transactions.
Use of estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the accrual for research and development expenses and the valuation of stock-based awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances.
The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company's business, results of operations and financial condition, including, expenses, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19. The Company has made estimates of the impact of COVID-19 within the Company's financial statements and there may be changes to those estimates in future periods.
On an ongoing basis, management evaluates its estimates in light of reasonable changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates or assumptions.
Unaudited interim financial information
The accompanying consolidated balance sheet as of September 30, 2022, the consolidated statements of operations, of comprehensive loss and of stockholders’ equity for the three and six months ended September 30, 2022 and 2021 and the consolidated statements of cash flows for the six months ended September 30, 2022 and 2021 are unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of September 30, 2022 and the results of its operations for the three and six months ended September 30, 2022 and 2021 and its cash flows for the six months ended September 30, 2022 and 2021. The financial data and other information disclosed in these consolidated notes related to the three and six months ended September 30, 2022 and 2021 are unaudited. The results for the three and six months ended September 30, 2022 are not necessarily indicative of results to be expected for the year ending March 31, 2023, any other interim periods or any future year or period. The financial information included herein should be read in conjunction with the financial statements and notes in the Company's Annual Report on Form 10-K for the year ended March 31, 2022, which was filed with the Securities and Exchange Commission on May 19, 2022 (the "Annual Report").
During the three and six months ended September 30, 2022, there have been no changes to the Company’s significant accounting policies as described in the Annual Report, except as described below.
Recently adopted accounting pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments- Credit Losses (Topic 326). The standard changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. The Company adopted ASU 2016-13 as of April 1, 2022. The adoption of ASU 2016-13 did not have a material impact on the Company's consolidated financial statements.
3. Fair value of financial assets and liabilities
The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis:
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements as of September 30, 2022 Using: |
| Level 1 | | Level 2 | | Level 3 | | Total |
Assets | | | | | | | |
Money market funds | $ | — | | | $ | 43,170 | | | $ | — | | | $ | 43,170 | |
US Government Agency bonds | — | | | 46,944 | | | — | | | 46,944 | |
US Treasury bonds | — | | | 235,946 | | | — | | | 235,946 | |
| $ | — | | | $ | 326,060 | | | $ | — | | | $ | 326,060 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements as of March 31, 2022 Using: |
| Level 1 | | Level 2 | | Level 3 | | Total |
Assets | | | | | | | |
Money market funds | $ | — | | | $ | 75,117 | | | $ | — | | | $ | 75,117 | |
US Government Agency bonds | — | | | 26,688 | | | — | | | 26,688 | |
US Treasury bonds | — | | | 263,019 | | | — | | | 263,019 | |
| $ | — | | | $ | 364,824 | | | $ | — | | | $ | 364,824 | |
The underlying securities in the money market funds held by the Company are all government backed securities.
During the three and six months ended September 30, 2022 and 2021, there were no transfers between levels.
Valuation of cash equivalents and short-term investments
Money market funds, U.S. Government Agency bonds and U.S. Treasury bonds were valued by the Company using quoted prices in active markets for similar securities, which represent a Level 2 measurement within the fair value hierarchy. Cash equivalents consisted of money market funds at September 30, 2022 and March 31, 2022.
4. Short-term investments
As of September 30, 2022 and March 31, 2022, the Company's available-for-sale investments by type consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 |
| Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Credit Losses | | Fair value |
US Government agency bonds | $ | 47,268 | | | $ | 1 | | | $ | (325) | | | $ | — | | | $ | 46,944 | |
US Treasury bonds | 237,067 | | | 5 | | | (1,126) | | | — | | | 235,946 | |
Total | $ | 284,335 | | | $ | 6 | | | $ | (1,451) | | | $ | — | | | $ | 282,890 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2022 |
| Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Credit Losses | | Fair value |
US Government agency bonds | 26,827 | | | — | | | (139) | | | $ | — | | | 26,688 | |
US Treasury bonds | 264,162 | | | — | | | (1,143) | | | — | | | 263,019 | |
Total | $ | 290,989 | | | $ | — | | | $ | (1,282) | | | $ | — | | | $ | 289,707 | |
As of September 30, 2022, available-for-sale securities consisted of investments that mature within one year. As of March 31, 2022, available-for-sale securities consisted of investments that mature within one year, with the exception of certain U.S. Government agency bonds and U.S. Treasury bonds which had maturities between one and two years and an aggregate fair value of $7.6 million.
5. Property, plant and equipment, net
Property, plant and equipment, net consisted of the following:
| | | | | | | | | | | |
| September 30, 2022 | | March 31, 2022 |
Office equipment | $ | 995 | | | $ | 937 | |
Computer equipment | 1,893 | | | 1,667 | |
Plant and laboratory equipment | 8,285 | | | 7,720 | |
Leasehold improvements | 1,696 | | | 785 | |
Construction in progress | 1,073 | | | 1,619 | |
Total property, plant and equipment | 13,942 | | | 12,728 | |
Less: Accumulated depreciation | (6,032) | | | (4,795) | |
Property, plant and equipment, net | $ | 7,910 | | | $ | 7,933 | |
Depreciation expense was $617 and $1,237 for the three and six months ended September 30, 2022 and $532 and $1,050 for the three and six months ended September 30, 2021, respectively. Depreciation expense is recorded within research and development and selling, general and administrative expenses in the consolidated statement of operations.
6. Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consisted of the following:
| | | | | | | | | | | |
| September 30, 2022 | | March 31, 2022 |
Accrued research and development costs | $ | 8,224 | | | $ | 5,882 | |
Accrued compensation and benefits costs | 4,439 | | | 5,569 | |
Accrued professional fees | 760 | | | 621 | |
Other | 2,516 | | | 1,320 | |
Total accrued expenses and other current liabilities | $ | 15,939 | | | $ | 13,392 | |
7. Stockholders’ equity
Common stock
As of September 30, 2022 and March 31, 2022, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue up to 150,000,000 shares of common stock, par value $0.001 per share.
As of September 30, 2022 and March 31, 2022, the Company had reserved 18,862,638 and 16,605,804 shares of common stock for the exercise of outstanding stock options and the vesting of restricted share units, the number of shares remaining available for grant under the Company’s 2018 Omnibus Incentive Compensation Plan and the Company’s Employee Stock Purchase Plan (see Note 8) and the exercise of the outstanding warrants to purchase shares of common stock, respectively.
Undesignated preferred stock
As of September 30, 2022, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue up to 10,000,000 shares of undesignated preferred stock, par value $0.001 per share. There were no undesignated preferred shares issued or outstanding as of September 30, 2022.
ATM program
On August 11, 2020, the Company and the SVB Leerink LLC (the "Agent") entered into a sales agreement, which was subsequently amended on October 21, 2020 (as amended, the “2020 Sales Agreement”), pursuant to which the Company could sell, from time to time, at its option, up to an aggregate of $62.5 million of shares of the Company’s common stock, $0.001 par value per share, through the Agent, as the Company’s sales agent.
During the six months ended September 30, 2022, the Company settled transactions that occurred pursuant to the 2020 Sales Agreement, whereby the Company issued and sold an aggregate of 1,686,438 shares of its common stock, resulting in gross proceeds of $32.0 million, before deducting fees of $1.0 million. The Company did not issue or sell any shares under the 2020 Sales Agreement during the six months ended September 30, 2021.
On June 23, 2022, the 2020 Sales Agreement was terminated by the execution by the Company and the Agent of a new sales agreement (the “2022 Sales Agreement”). Under the 2022 Sales Agreement, the Company may sell, from time to time, at its option, up to an aggregate of $100.0 million of shares of the Company’s common stock, $0.001 par value per share (the “Shares”), through the Agent, as the Company’s sales agent.
Any Shares to be offered and sold under the 2022 Sales Agreement will be issued and sold (i) by methods deemed to be an “at the market offering” (“ATM”) as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, or if authorized by the Company, in negotiated transactions or block trades, and (ii) pursuant to a registration statement on Form S-3 filed by the Company with the Securities and Exchange Commission on June 23, 2022 for an offering of up to $400.0 million of various securities, including shares of the Company’s common stock, preferred stock, debt securities, warrants and/or units for sale to the public in one or more public offerings.
Subject to the terms of the 2022 Sales Agreement, the Agent will use reasonable efforts to sell the Shares from time to time, based upon the Company’s instructions (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company will pay the Agent a commission of up to 3.0% of the gross proceeds from the sale of the Shares. The Company has also agreed to provide the Agent with customary indemnification rights.
During the three months ended September 30, 2022, pursuant to the 2022 Sales Agreement, the Company issued and sold an aggregate of 340,000 shares of its common stock, resulting in gross proceeds of $6.7 million, before deducting fees of $0.2 million. The Company cannot provide any assurances that it will issue any additional Shares pursuant to the 2022 Sales Agreement.
Equity offerings
In June 2020, the Company completed a public offering of (a) 3,478,261 shares of the Company’s common stock (the “June 2020 Shares”), inclusive of the June 2020 Underwriters fully exercised 30-day option to purchase 652,173 shares of the Company's common stock at a public offering price of $23.00 per share, and (b) pre-funded warrants to purchase 1,521,738 shares of the Company’s common stock at a public offering price of $22.9999 per warrant. The Company received aggregate net proceeds of approximately $107,782 after deducting underwriting discounts, commissions and other offering expenses payable by the Company of approximately $7,217.
In October 2020, the Company completed a public offering of (a) 5,625,000 shares of the Company’s common stock, inclusive of the underwriters 30-day option to purchase up to an additional 937,500 shares of the Company’s common stock, at a public offering price of $40.00 per share and (b) pre-funded warrants to purchase 1,562,500 shares of the Company’s common stock at a public offering price of $39.9999 per warrant. The Company received aggregate net proceeds of approximately $269,975 after deducting underwriting discounts, commissions and other offering expenses payable by the Company of approximately $17,525.
The pre-funded warrants described above are exercisable at any time after the date of issuance. Unless otherwise modified by a holder of a pre-funded warrant, no holder may exercise a pre-funded warrant if such holder, together with its affiliates, would beneficially own more than 9.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to such exercise. A holder of a pre-funded warrant may increase or decrease this percentage up to 19.99% by providing at least 61 days’ prior notice to the Company. Certain holders have decreased the 9.99% threshold to a 4.99% threshold.
Other than as set forth in Note 8 and Note 9 to these consolidated financial statements, the 3,084,238 shares of the Company's common stock underlying the above described pre-funded warrants, and the 2,200,000 shares of the Company's common stock underlying pre-funded warrants that were issued by the Company in 2019, are not included in the number of issued and outstanding shares of the Company’s common stock set forth herein. As of September 30, 2022, no pre-funded warrants had been exercised.
8. Stock-based compensation
Stock-based compensation expense
Stock-based compensation expense was classified in the consolidated statements of operations as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Research and development | $ | 2,529 | | | $ | 2,227 | | | $ | 5,143 | | | $ | 4,685 | |
Selling, general and administrative | 4,463 | | | 4,086 | | | 9,043 | | | 7,878 | |
| $ | 6,992 | | | $ | 6,313 | | | $ | 14,186 | | | $ | 12,563 | |
The following table summarizes stock-based compensation expense by award type for the three months ended September 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Stock options | $ | 4,845 | | | $ | 5,093 | | | $ | 10,004 | | | $ | 10,268 | |
Restricted stock units | 2,147 | | | 1,220 | | | 4,182 | | | 2,295 | |
| $ | 6,992 | | | $ | 6,313 | | | $ | 14,186 | | | $ | 12,563 | |
2015 Enterprise Management Incentive Share Option Plan
The 2015 Enterprise Management Incentive Share Option Plan of Replimune UK (the “2015 Plan”) provided for Replimune UK to grant incentive stock options, non-statutory stock options, stock awards, stock units, stock appreciation rights and other stock-based awards. Incentive stock options were granted under the 2015 Plan only to the Company’s employees, including officers and directors who were also employees. Non-statutory stock options were granted under the 2015 Plan to employees, members of the board of directors, outside advisors and consultants of the Company.
2017 Equity Compensation Plan
In July 2017, in conjunction with reorganization by Replimune Limited, pursuant to which each shareholder thereof exchanged their outstanding shares in Replimune Limited for shares in Replimune Group, Inc., on a one-for-one basis (the "Reorganization"), the 2015 Plan was terminated, and all awards were cancelled with replacement awards issued under the 2017 Equity Compensation Plan (the “2017 Plan”). Subsequent to the Reorganization, no additional grants have been or will be made under the 2015 Plan and any outstanding awards under the 2015 Plan have continued, and will continue with their original terms. The Company concluded that the cancellation of the 2015 Plan and issuance of replacement awards under the 2017 Plan was a modification with no change in the material rights and preferences and therefore no recorded change in the fair value of each respective award.
The Company’s 2017 Plan provides for the Company to grant incentive stock options or non-statutory stock options, stock awards, stock units, stock appreciation rights and other stock-based awards. Incentive stock options were granted under the 2017 Plan only to the Company’s employees, including officers and directors who were also employees. Restricted stock awards and non-statutory stock options were granted under the 2017 Plan to employees, officers, members of the board of directors, advisors and consultants of the Company. The maximum number of common shares that may be issued under the 2017 Plan was 2,659,885, of which none remained available for future grants as of September 30, 2022. Shares with respect to which awards have expired, terminated, surrendered or cancelled under the 2017 Plan without having been fully exercised will be available for future awards under the 2018 Plan referenced below. In addition, shares of common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock available for the grant of awards.
2018 Omnibus Incentive Compensation Plan
On July 9, 2018, the Company’s board of directors adopted, and the Company’s stockholders approved the 2018 Omnibus Incentive Compensation Plan (the “2018 Plan”), which became effective immediately prior to the effectiveness of the registration statement filed in connection with the Company’s initial public offering. The 2018 Plan provides for the issuance of incentive stock options, non-qualified stock options, stock awards, stock units, stock appreciation rights and other stock-based
awards. The number of shares of common stock initially reserved for issuance under the 2018 Plan is 3,617,968 shares. If any options or stock appreciation rights, including outstanding options and stock appreciation rights granted under the 2017 Plan (up to 2,520,247 shares), terminate, expire, or are canceled, forfeited, exchanged, or surrendered without having been exercised, or if any stock awards, stock units or other stock-based awards, including outstanding awards granted under the 2017 Plan, are forfeited, terminated, or otherwise not paid in full in shares of common stock, the shares of the Company’s common stock subject to such grants will be available for purposes of the 2018 Plan. The number of shares reserved for issuance under the 2018 Plan will increase automatically on the first day of each April equal to 4.0% of the total number of shares of common stock outstanding on the last trading day in the immediately preceding fiscal year, which includes for these purposes, the 5,284,238 shares issuable upon exercise of those pre-funded warrants described in Note 7 to these consolidated financial statements, or such lesser amount as determined by the Board. On April 1, 2022, the number of shares reserved for issuance under the 2018 Plan automatically increased by 2,104,915 shares pursuant to the terms of the 2018 Plan and based on total number of shares of common stock outstanding on March 31, 2022. On April 1, 2021, the number of shares reserved for issuance under the 2018 Plan automatically increased by 2,074,028 shares pursuant to the terms of the 2018 Plan. As of September 30, 2022, 2,327,646 shares remained available for future grants under the 2018 Plan.
The 2015 Plan, the 2017 Plan and the 2018 Plan are administered by the board of directors or, at the discretion of the board of directors, by a committee of the board of directors. However, the board of directors shall administer and approve all grants made to non-employee directors. The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, except that the exercise price per share of incentive stock options may not be less than 100% of the fair market value of the common stock on the date of grant (or 110% of fair value in the case of an award granted to employees who hold more than 10% of the total combined voting power of all classes of stock at the time of grant) and the term of stock options may not be greater than five years for an incentive stock option granted to a 10% stockholder and greater than ten years for all other options granted. Stock options awarded under both plans expire ten years after the grant date, unless the board of directors sets a shorter term. Vesting periods for the plans are determined at the discretion of the board of directors. Incentive stock options granted to employees and non-statutory options granted to employees, officers, members of the board of directors, advisors, and consultants of the Company typically vest over four years. In 2021 the board of directors initiated the award of restricted stock units ("RSUs"), under the 2018 Plan in addition to stock option awards available as part of the Company's equity incentive for employees, officers, advisors and consultants of the Company. The RSUs typically vest over four approximately equal annual installments with the first such installment occurring on a designated vesting date that is approximately on the one year anniversary of the date of grant and the subsequent installments occurring on the subsequent three annual anniversaries of the designated vesting date.
Employee Stock Purchase Plan
On July 9, 2018, the Company’s board of directors adopted and the Company’s stockholders approved the Employee Stock Purchase Plan (the “ESPP”), which became effective immediately prior to the effectiveness of the registration statement that was filed in connection with the Company’s IPO. The total shares of common stock initially reserved for issuance under the ESPP is 348,612 shares. In addition, as of the first trading day of each fiscal year during the term of the ESPP (excluding any extensions), an additional number of shares of the Company’s common stock equal to 1% of the total number of shares outstanding on the last trading day in the immediately preceding fiscal year, which includes for these purposes, the 5,284,238 shares issuable upon exercise of those pre-funded warrants described in Note 7 to these consolidated financial statements, or 697,224 shares, whichever is less (or such lesser amount as determined by the Company’s board of directors) will be added to the number of shares authorized under the ESPP. In accordance with the terms of the ESPP, on April 1, 2022 and 2021, the number of shares reserved for issuance under the ESPP automatically increased by 526,228 and 518,507 shares respectively, for a total of 2,076,603 shares reserved for the ESPP. If the total number of shares of common stock to be purchased pursuant to outstanding purchase rights on any particular date exceed the number of shares then available for issuance under the ESPP, then the plan administrator will allocate the available shares pro-rata and refund any excess payroll deductions or other contributions to participants. The Company’s ESPP is not currently active.
Out-of-Plan Inducement Grant
In May 2021, the Company granted an equity award to a newly hired executive as a material inducement to enter into employment with the Company. The grant constitutes an "employment inducement grant" in accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules and was issued outside of the 2018 Plan and each of the other stock incentive plans described above. The inducement grant included a nonqualified stock option to purchase up to 125,000 shares of the Company's common stock, as well as a restricted stock unit grant representing 88,333 shares of the Company's common stock. These stock option and restricted stock unit inducement grants have terms and conditions consistent with those set forth under the 2018 Plan and vest under the same respective vesting schedules as stock option and restricted stock unit awards granted under the 2018 Plan. The inducement grant is included in the stock option and RSU award tables below.
Stock option valuation
The fair value of stock option grants is estimated using the Black-Scholes option-pricing model. As the Company has limited company-specific historical and implied volatility information, the expected stock volatility is based on a combination of Replimune volatility and the historical volatility of a publicly traded set of peer companies. For options with service-based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.
The following table presents, on a weighted-average basis, the assumptions that the Company used to determine the grant-date fair value of stock options granted to employees and directors:
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | Six Months Ended September 30, |
| 2022 | | 2021 | 2022 | | 2021 |
Risk-free interest rate | 3.08 | % | | 0.96 | % | 2.61 | % | | 1.11 | % |
Expected term (in years) | 6.1 | | 6.1 | 6.0 | | 6.0 |
Expected volatility | 74.5 | % | | 79.4 | % | 75.5 | % | | 80.2 | % |
Expected dividend yield | 0 | % | | 0 | % | 0 | % | | 0 | % |
Stock options
The following table summarizes the Company’s stock option activity:
| | | | | | | | | | | | | | | | | | | | | | | |
| Number of Shares | | Weighted Average Exercise Price | | Weighted Average Contractual Term (Years) | | Aggregate Intrinsic Value |
Outstanding as of March 31, 2022 | 6,514,334 | | | $ | 16.78 | | | 7.26 | | $ | 30,358 | |
Granted | 1,325,894 | | | $ | 18.15 | | | | | |
Exercised | (212,280) | | | $ | 12.58 | | | | | |
Cancelled | (214,482) | | | $ | 22.30 | | | | | |
Outstanding as of September 30, 2022 | 7,413,466 | | | $ | 16.98 | | | 7.31 | | $ | 30,477 | |
Options exercisable as of March 31, 2022 | 3,645,749 | | | $ | 10.85 | | | 6.31 | | $ | 24,875 | |
Options exercisable as of September 30, 2022 | 4,291,654 | | | $ | 13.50 | | | 6.31 | | $ | 26,428 | |
As of September 30, 2022, there was $41.7 million of unrecognized compensation cost related to unvested common stock options, which is expected to be recognized over a weighted average period of 2.5 years.
The weighted average grant-date fair value of stock options granted during the six months ended September 30, 2022 and 2021 was $12.20 and $22.25, respectively. The aggregate intrinsic value of stock options exercised during the six months ended September 30, 2022 was $1.2 million.
Restricted stock units
A summary of the changes in the Company's RSUs during the three months ended September 30, 2022 is as follows:
| | | | | | | | | | | |
| Number of Restricted Shares | | Weighted Average Grant Date Fair Value |
Outstanding as of March 31, 2022 | 826,213 | | | 31.38 | |
Granted | 657,142 | | | 18.11 | |
Vested | (162,029) | | | 32.82 | |
Cancelled | (57,985) | | | 27.12 | |
Outstanding as of September 30, 2022 | 1,263,341 | | | 24.49 | |
As of September 30, 2022, there was $27.1 million of unrecognized compensation cost related to unvested restricted stock units, which is expected to be recognized over a weighted average period of 3.2 years. As of September 30, 2021, there was $20.7 million unrecognized compensation cost related to unvested restricted stock units.
9. Net loss per share
Basic and diluted net loss per share attributable to common stockholders was calculated as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Numerator: | | | | | | | |
Net loss | $ | (43,102) | | | $ | (29,355) | | | $ | (85,355) | | | $ | (56,666) | |
Denominator: | | | | | | | |
Weighted average common shares outstanding, basic and diluted | 54,770,291 | | | 52,081,325 | | | 54,492,395 | | | 51,962,795 | |
Net loss per share, basic and diluted | $ | (0.79) | | | $ | (0.56) | | | $ | (1.57) | | | $ | (1.09) | |
The 5,284,238 share of the Company's common stock issuable upon exercise of the November 2019 Pre-Funded Warrants, the June 2020 Pre-Funded Warrants and the October 2020 Pre-Funded Warrants described in Note 7 to these consolidated financial statements are included as outstanding common stock in the calculation of basic and diluted net loss per share.
The Company’s potentially dilutive securities, which include stock options and warrants to purchase common stock have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:
| | | | | | | | | | | |
| Three and Six Months Ended September 30, |
| 2022 | | 2021 |
Options to purchase common stock | 7,413,466 | | | 6,998,097 | |
Warrants to purchase common stock | 497,344 | | | 497,344 | |
| 7,910,810 | | | 7,495,441 | |
10. Significant agreements
Agreement with Bristol-Myers Squibb Company
In February 2018, the Company entered into an agreement with Bristol-Myers Squibb Company (“BMS”). Pursuant to the agreement, BMS will provide to the Company, at no cost, a compound for use in the Company’s ongoing clinical trial of RP1. Under the agreement, the Company will sponsor, fund and conduct the clinical trial in accordance with an agreed-upon protocol. BMS granted the Company a non-exclusive, non-transferrable, royalty-free license (with a right to sublicense) under its intellectual property to its compound in the clinical trial and agreed to supply its compound, at no cost to the Company, for use in the clinical trial. In January 2020, this agreement was expanded to cover an additional cohort of 125 patients with anti-PD-1 failed melanoma.
Unless earlier terminated, the agreement will remain in effect until (i) the completion of the clinical trial, (ii) all related clinical trial data have been delivered to both parties and (iii) the completion of any statistical analyses and bioanalyses contemplated by the clinical trial protocol or any analysis otherwise agreed upon by the parties. The agreement may be terminated by either party (x) in the event of an uncured material breach by the other party, (y) in the event the other party is insolvent or in bankruptcy proceedings or (z) for safety reasons. Upon termination, the licenses granted to the Company to use BMS’s compound in the clinical trial will terminate.
In April 2019, the Company entered into a separate agreement with BMS on terms similar to the terms set forth in the agreement described above, pursuant to which BMS will provide to the Company, at no cost, nivolumab for use in the Company’s Phase 1 clinical trial of RP2 in combination with nivolumab.
Agreement with Regeneron Pharmaceuticals, Inc.
In May 2018, the Company entered into an agreement with Regeneron Pharmaceuticals, Inc. (“Regeneron”). The Company and Regeneron are each independently developing compounds for the treatment of certain tumor types. Pursuant to the agreement, the Company and Regeneron will undertake one or more clinical trials using a combination of the compounds being developed by each entity. Under the agreement, each clinical trial will be conducted under terms set out in a separately agreed upon study plan that will identify the name of the sponsor and which party will manage the particular clinical trial, and include the protocol, the budget and a schedule of clinical obligations. In June 2018, under the terms of the agreement between the Company and Regeneron, the parties agreed to the first study plan. The Company and Regeneron have agreed to the protocol, budget, sample testing and clinical obligations schedule under the study plan. Development and supply costs associated with the first study plan will be split equally between the Company and Regeneron.
Pursuant to the terms of the agreement, each party granted the other party a non-exclusive license under its respective intellectual property and agreed to contribute the necessary resources needed to fulfill its respective obligations, in each case, under the terms of the agreed-upon or to-be agreed upon study plans. Development costs of a particular clinical trial will be split equally between the Company and Regeneron in accordance with the agreed upon study plan.
The agreement may be terminated by either party if (i) there is no active study plan for which a final study report has not been completed and the parties have not entered into a study plan for an additional clinical trial within a period of time after the delivery of the most recent final study report or (ii) in the event of a material breach.
The agreement with Regeneron is accounted for under ASC 808, Collaborative Arrangements (“ASC 808”), as both parties are active participants and each party pays its own compound costs and shares equally in development costs in accordance with and up to the amount in the agreed upon first study plan. The Company will account for costs incurred as part of the study, including costs to supply compounds for use in the study, as research and development expenses within the consolidated statement of operations. The Company will recognize any amounts received from Regeneron in connection with this agreement as an offset to research and development expense within the consolidated statement of operations.
Under the terms of the agreement, on a quarterly basis the Company and Regeneron true-up costs of the study and make corresponding payments to the party that incurred the majority of the costs up to the amount in the study plan or modified version thereof agreed by the Joint Development Committee established to govern the collaboration. In July 2022, Regeneron informed the Company that the costs of the study have reached the initial budget for the initial study plan of June 2018 and that Regeneron's reimbursement of CERPASS study costs to the Company have completed in the period ending June 30, 2022 in relation to the initial study budget. The Company and Regeneron are in communication regarding receiving Regeneron's acknowledgement of the sharing of the study costs according to the current budget that superseded that of the initial study plan and initial budget. As a result of this notice from, and the ongoing communications with, Regeneron, the Company has not recorded any cost-sharing reimbursements from Regeneron in prepaid expenses and other current assets in the consolidated balance sheet or as an offset to research and development expense within the consolidated statement of operations since Regeneron informed the Company that Regeneron’s reimbursement of CERPASS study costs to the Company have completed.
During the six months ended September 30, 2022 and 2021, the Company recorded $1.1 million and $2.9 million, respectively as an offset to research and development expenses. During the three and six months ended September 30, 2022 and 2021, the Company did not make any payments to Regeneron under the terms of the agreement. During the six months ended September 30, 2022 and 2021, the Company received payments under the terms of the agreement from Regeneron of $2.0 million and $2.7 million, respectively. As of September 30, 2022 and March 31, 2022, the Company had a balance of $1.1 million and $2.0 million of receivables from Regeneron in connection with this agreement in prepaid expenses and other current assets in the consolidated balance sheet, respectively.
11. Commitments and contingencies
Leases
The table below presents the lease-related assets and liabilities recorded on the consolidated balance sheet as of September 30, 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Six Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Lease cost | | | | | | | |
Finance lease costs: | | | | | | | |
Amortization of right-to-use asset | $ | 607 | | | $ | 607 | | | $ | 1,214 | | | $ | 1,214 | |
Interest on lease liabilities | 550 | | | 557 | | | 1,102 | | | 1,115 | |
Operating lease costs | 252 | | | 245 | | | 511 | | | 487 | |
Total lease cost | $ | 1,409 | | | $ | 1,409 | | | $ | 2,827 | | | $ | 2,816 | |
The following table summarizes the classification of lease costs in the consolidated statement of operations for the three months ended September 30, 2022 and 2021 as follows:
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | Six Months Ended September 30, |
| 2022 | | 2021 | 2022 | | 2021 |
Finance Lease Costs | | | | | | |
Research and development | $ | 518 | | | $ | 518 | | $ | 1,035 | | | $ | 1,035 | |
Selling, general and administrative | 89 | | | 89 | | 179 | | | 179 | |
Other income (expense) | 550 | | | 557 | | 1,102 | | | 1,115 | |
Operating Lease Costs | | | | | | |
Research and development | 103 | | | 95 | | 213 | | | 189 | |
Selling, general and administrative | 149 | | | 150 | | 298 | | | 298 | |
Total lease cost | $ | 1,409 | | | $ | 1,409 | | $ | 2,827 | | | $ | 2,816 | |
The following table summarizes the maturity of the Company's lease liabilities on an undiscounted cash flow basis and a reconciliation to the operating and financing lease liabilities recognized on its balance sheet as of September 30, 2022:
| | | | | | | | | | | | | | | | | |
| September 30, 2022 |
| Operating leases | | Financing lease | | Total |
2023 (remaining six months) | $ | 500 | | | $ | 1,297 | | | $ | 1,797 | |
2024 | 1,007 | | | 2,639 | | | 3,646 | |
2025 | 1,016 | | | 2,718 | | | 3,734 | |
2026 | 1,026 | | | 2,799 | | | 3,825 | |
2027 | 997 | | | 2,883 | | | 3,880 | |
Thereafter | 2,755 | | | 38,022 | | | 40,777 | |
Total lease payments | 7,301 | | | 50,358 | | | 57,659 | |
Less: interest | 2,019 | | | 23,552 | | | 25,571 | |
Total lease liabilities | $ | 5,282 | | | $ | 26,806 | | | $ | 32,088 | |
The following table provides lease disclosure as of September 30, 2022 and March 31, 2022:
| | | | | | | | | | | |
| September 30, 2022 | | March 31, 2022 |
Leases | | | |
Right-to-use operating lease asset | $ | 4,984 | | | $ | 5,552 | |
Right-to-use finance lease asset | 40,879 | | | 42,094 | |
Total lease assets | $ | 45,863 | | | $ | 47,646 | |
| | | |
Operating lease liabilities, current | $ | 1,002 | | | $ | 1,070 | |
Finance lease liabilities, current | 2,600 | | | 2,562 | |
Operating lease liabilities, non-current | 4,280 | | | 4,801 | |
Finance lease liabilities, non-current | 24,206 | | | 24,406 | |
Total lease liabilities | $ | 32,088 | | | $ | 32,839 | |
The following table provides lease disclosure for the three months ended September 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended September 30, |
| 2022 | | 2021 |
Other information | | | | | | | |
Cash paid for amounts included in the measurement of lease liabilities: | | | | | | | |
Operating cash flows from operating leases | $ | 466 | | | | | $ | 487 | | | |
Operating cash flows from finance leases | $ | 1,102 | | | | | $ | 1,115 | | | |
Financing cash flows from finance leases | $ | 163 | | | | | $ | 114 | | | |
Weighted-average remaining lease term - operating leases | 7.1 | | years | | 8.3 | | years |
Weighted-average remaining lease term - financing leases | 16.8 | | years | | 17.8 | | years |
Weighted-average discount rate - operating leases | 9.8 | % | | | | 9.8 | % | | |
Weighted-average discount rate - financing leases | 8.3 | % | | | | 8.3 | % | | |
The variable lease costs and short-term lease costs were insignificant for three and six months ended September 30, 2022 and 2021.
Manufacturing commitments
The Company has entered into an agreement with a contract manufacturing organization to provide clinical trial products. As of September 30, 2022 and March 31, 2022, the Company had committed to minimum payments under these arrangements totaling $1,209 and $1,951, respectively.
Indemnification agreements
In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its executive management team and its board of directors that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is not aware of any claims under indemnification arrangements, and therefore it has not accrued any liabilities related to such obligations in its consolidated financial statements as of September 30, 2022 or March 31, 2022.
Legal proceedings
The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities.
12. Geographic information