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 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 Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 26, 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 II of this Report and Item IA 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. From our founding through
September 30, 2022, we have funded our operations primarily through proceeds
from the sale of our capital stock, the Business Combination (including the
related PIPE financing), the Private Placement in August 2022, debt financings,
the issuance of convertible notes and collaboration agreements.
In October 2022, we announced a corporate realignment to focus on key
anticipated near-term value drivers and extend the Company’s cash runway. With
the realignment, the Company is seeking to improve its organizational structure
through certain team integrations that are expected to allow the Company to more
efficiently support its research, development and commercialization goals.
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 $128.3 million and
$77.6 million for the nine months ended September 30, 2022 and 2021,
respectively. As of September 30, 2022 and December 31, 2021 we had an
accumulated deficit of $381.9 million and $253.6 million, respectively.
Notwithstanding our recent corporate realignment, we expect to continue to incur
significant expenses and operating losses as we pursue our remaining programs,
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 and/or replacement 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.
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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. The fundraising environment for
early-stage biotechnology companies like ours is becoming increasingly
challenging, and 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 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 further reduce or terminate our operations. The Company expects that its
existing cash and cash equivalents of $98.4 million as of September 30, 2022
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 continuing to evaluate a range of additional
opportunities to extend cash runway, including management of program spending,
platform licensing collaborations and potential financing activities.
Macroeconomic Conditions
Economic uncertainty in various global markets, including the U.S. and Europe,
caused by political instability and conflict and economic challenges caused by
the ongoing COVID-19 pandemic, have led to market disruptions, including
significant volatility in commodity prices, credit and capital market
instability and supply chain interruptions, which have caused record inflation
globally. 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 ongoing COVID-19 pandemic and current macroeconomic conditions, including
changes in inflation, interest rates and overall economic conditions and
uncertainties 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 these macroeconomic
conditions and the ongoing pandemic, our business, financial condition, and
results of operations ultimately could be materially adversely affected. We
continue to closely monitor the global economic and geopolitical conditions and
the ongoing COVID-19 pandemic as we evolve our business continuity plans,
clinical development plans and response strategy.
Recent Developments
Human Health Programs
Our ongoing focus remains on obtaining proof of concept of our technology
platform with our COVID-19 vaccine program and our shingles vaccine program,
each as further described below. Other potential product candidates in our human
health pipeline are in early stages of pre-clinical research and development and
have yet to reach the candidate selection phase. In order to achieve candidate
selection phase for our other potential product candidates in our human health
pipeline, we must successfully design and test the product candidates in animal
models, achieve positive results, select the product candidates to progress to
IND-enabling toxicology studies, develop chemistry, manufacturing, and controls
protocols and create a development plan to discuss with applicable regulatory
agencies as part of pre-submission consultations, and manufacture, fill and
finish the vaccine candidate material.
COVID-19 Vaccine Program
Our COVID-19 vaccine candidate, GLB-COV-2-043, which is based on the original
“Wuhan” strain of the SARS-CoV-2 virus, has successfully completed preclinical
testing and we are pursuing approval to begin Phase I/II clinical trials. In
April of 2022, we submitted 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
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specific benefits of our testing efforts and a resulting vaccine will bring to
South Africa considering the ready availability of other COVID-19 vaccines in
that country. After further review and discussions with SAHPRA, we have decided
not to amend or resubmit our CTA with SAHPRA in favor of identifying other
countries in which to begin clinical trials and consider whether to do so in
combination with a US-based Investigational New Drug, or IND, application with
the FDA. Subject to our ability to identify a viable country and obtain
applicable regulatory approvals, we are continuing to work towards initiating a
Phase I/II clinical trial by the first half of 2023. We can offer no assurance
that any 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 and pre-clinical evaluation in
small animals. 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, clinical and
manufacturing development, product registration and commercialization in the
licensed regions. We currently anticipate that we will select a candidate in
2023 to enable SIIPL to commence clinical development thereafter.
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 Federal Insectiside, Fungicide, and Rodenticide Act (“FIFRA”) dossier
for internal review. While we believe our projected timelines are reasonable,
given that we are introducing new modes of action for pest control, it is
difficult to predict when we will be able to obtain the regulatory approvals
required for commercial sales and our expected timelines may be subject to
change. 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.
Colorado Potato Beetle Program
Calantha, our product candidate for the Colorado potato beetle (Leptinotarsa
decemlineata), was submitted to the EPA for approval earlier this year. We are
aiming to commercially launch Calantha in 2023, assuming we are able to obtain
EPA and required state approvals by or before the first half of 2023 ahead of
the following growing season.
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 conducted and completed a Tier 2 toxicity study to enable us
to better satisfy the data requirements in preparation for submission to the
EPA. For the United States registration of our Varroa mite product, we expect to
make our submission for approval under the FIFRA
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regulations in the first half of 2023. In certain foreign jurisdictions,
including the European Union, we expect that we will be required to apply for
authorization of our Varroa mite product as an animal health product under
applicable veterinary medicine regulations.
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, subject
to receipt of 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, subject to
receipt of regulatory approval.
Fusarium Head Blight Program
We are preparing 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 have revised our timeline
accordingly.
Business Combination and Public Company Costs
On August 9, 2021, the Company and Merger Sub entered into the Business
Combination Agreement with GreenLight Biosciences, Inc. On February 2, 2022, the
Business Combination was consummated, pursuant to which Merger Sub merged with
and into GreenLight Biosciences, Inc., with GreenLight Biosciences, Inc.
surviving the Merger as a wholly owned subsidiary of the Company. On February 2,
2022, in connection with the consummation of the Merger, the Company changed its
name to GreenLight Biosciences Holdings, PBC and became a public benefit
corporation.
Immediately before the closing of the Business Combination, the Company held
approximately $207 million in a trust account for its public stockholders. In
connection with the Business Combination, the Company’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 the Company. In connection with the
Business Combination, the Company entered into agreements with new investors and
existing investors in GreenLight Biosciences, Inc. to subscribe for and purchase
an aggregate of approximately 12.4 million shares of the Company’s Class A
Common Stock (the “February 2022 PIPE Financing”). The February 2022 PIPE
Financing was consummated on February 2, 2022 and resulted in gross proceeds of
approximately $136.4 million (of which $35.3 million had been advanced to
GreenLight Biosciences, Inc. by the Prepaying PIPE Investors).
The Merger was accounted for as a reverse recapitalization, whereby for
accounting and financial reporting purposes, GreenLight Biosciences, Inc. was
the acquirer. A reverse recapitalization does not result in a new basis of
accounting, and the financial statements of the Company represent the
continuation of the consolidated financial statements of GreenLight Biosciences,
Inc. in many respects. The shares of the Company remaining after redemptions of
shares of the Company’s 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 Biosciences, Inc.
The Company retroactively applied the recapitalization to the Company’s equity
structure, including the consolidated statement of stockholders’ (deficit)
equity from January 1, 2020 to December 31, 2021, the total stockholders’
(deficit) equity within the Company’s consolidated balance sheet as of December
31, 2021 and 2020, and the weighted average outstanding shares (basic and
diluted) for the years ended December 31, 2021 and 2020. The retroactive
application reflects the equivalent number of shares of the Company’s common
stock, $0.0001 par value per share, issued to GreenLight’s stockholders in
connection with the Business Combination at the applicable exchange ratio of
.6656 (the “Exchange Ratio”). Additionally, GreenLight’s convertible preferred
stock previously classified as temporary equity was retroactively adjusted,
converted into common stock and reclassified to permanent equity as a result of
the reverse recapitalization.
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The most significant change in the Company’s financial position and results of
operations resulting from the consummation of the Business Combination
(including the February 2022 PIPE Financing) was an estimated cash inflow (as
compared to GreenLight Biosciences, Inc. 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 were treated as a
reduction of the cash proceeds with capital raising costs being deducted from
GreenLight Biosciences, Inc.’s additional paid-in capital.
As a consequence of the Business Combination, GreenLight Biosciences, Inc.
effectively became the successor to a publicly traded and Nasdaq-listed company,
which required it to hire additional personnel and is requiring it to implement
procedures and processes to address public company regulatory requirements and
customary practices. The Company 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 nine months ended September 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 nine months ended September 30, 2022, we recognized $1.7
million and $3.4 million, respectively 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 suppression of HIV in developing countries. We were
approved to receive a grant of $3.3 million in the aggregate. As of September
30, 2022, we had received the entire grant amount, of which $0.8 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 September 30, 2022 under the grant was related to
qualifying research and development expenditures that we incurred. The research
supported by this grant is expected to be completed by the end of 2023.
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;
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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 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.
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.
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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, state and
foreign 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. The Company has a provision for income taxes
for the three and nine months ended September 30, 2022, respectively related to
the foreign withholding taxes on payments made by SIIPL, pursuant to the
research and collaboration agreement. There is no provision for U.S. federal and
state income taxes for the three and nine months ended September 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
U.S. federal and state deferred tax assets.
Results of Operations
Comparison of the Three Months Ended September 30, 2022 and 2021
The following table summarizes our results of operations for the three months
ended September 30, 2022 and 2021:
THREE MONTHS ENDED
SEPTEMBER 30, INCREASE /
Dollars (in thousands) 2022 2021 (DECREASE)
License and collaboration revenue $ 1,689 $ – $ 1,689
Grant revenue 43 362 (319 )
Total revenue 1,732 362 1,370
Operating expenses:
Research and development 29,944 22,661 7,283
General and administrative 8,025 5,112 2,913
Total operating expenses 37,969 27,773 10,196
Loss from operations (36,237 ) (27,411 ) (8,826 )
Other expenses:
Interest income 240 4 236
Interest and other expense (1,069 ) (631 ) (438 )
Change in fair value of warrant liability – (1,143 ) 1,143
Total other income (expense), net (829 ) (1,770 ) 941
Net loss before income tax (37,066 ) (29,181 ) (7,885 )
Income tax expense 1,092 – 1,092
Net loss $ (38,158 ) $ (29,181 ) $ (8,977 )
License and Collaboration Revenue
For the three months ended September 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 September 30, 2021.
Grant Revenue
Grant revenue was $43 thousand for the three months ended September 30, 2022,
compared to grant revenue of $0.4 million for the three months ended September
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
THREE MONTHS ENDED
SEPTEMBER 30, INCREASE /
Dollars (in thousands) 2022 2021 (DECREASE)
Program expense $ 11,043 $ 8,593 $ 2,450
Personnel costs 11,416 9,407 2,009
Other 7,485 4,661 2,824
Total research and development expenses $ 29,944 $ 22,661 $ 7,283
Research and development expense was $29.9 million for the three months ended
September 30, 2022, compared to $22.7 million for the three months ended
September 30, 2021. The increase of $7.2 million resulted primarily from
increased program costs of $2.5 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 $2.0 million. Other research and
development costs increased by approximately $2.8 million, primarily related to
a $1.7 million increase in rental expense as we expanded our footprints and
entered into multiple leases during 2021 and 2022, and an increase of $0.4
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 $8.0 million for the three months ended
September 30, 2022, compared to $5.1 million for the three months ended
September 30, 2021. The increase of $2.9 million was primarily due to an
increase of $0.5 million in personnel-related costs in general and
administrative functions, which resulted from increased headcount supporting
general and administrative activities; a $1.5 million increase in professional
services fees associated with being a publicly traded company; and an increase
of $0.9 million related to facilities and other administrative expenses as we
expanded our footprints and entered into multiple leases during 2021 and 2022.
Interest Income
For the three months ended September 30, 2022, interest income increased by $0.2
million compared to the three months ended September 30, 2021. This increase in
our interest income was driven by an increase in our cash and cash equivalents
due to capital raises in 2022 and an increase in the interest rate yield on our
cash and cash equivalents.
Interest and Other Expense
Interest and other expense was $1.1 million for the three months ended September
30, 2022, compared to $0.6 million for the three months ended September 30,
2021. The increase of $0.5 million is primarily related to interest accrued on
the various loan agreements we entered into during the second half of 2021 as
well as an increase in interest rates on our variable rate debt.
Change in Fair Value of Warrant Liabilities
There was no change in fair value of warrant liabilities for the three months
ended September 30, 2022 compared to an expense of $1.1 million for the three
months ended September 30, 2021. The entire decrease of $1.1 million in the fair
value of our warrant liabilities was due to the decrease in the fair value of
the private placement warrants.
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Results of Operations
Comparison of the Nine Months Ended September 30, 2022 and 2021
The following table summarizes our results of operations for the nine months
ended September 30, 2022 and 2021:
NINE MONTHS ENDED
SEPTEMBER 30, INCREASE /
Dollars (in thousands) 2022 2021 (DECREASE)
License and collaboration revenue $ 3,437 $ – $ 3,437
Grant revenue 320 1,180 (860 )
Total revenue 3,757 1,180 2,577
Operating expenses:
Research and development 101,376 62,081 39,295
General and administrative 27,357 13,943 13,414
Total operating expenses 128,733 76,024 52,709
Loss from operations (124,976 ) (74,844 ) (50,132 )
Other expenses:
Interest income 301 20 281
Interest and other expense (3,480 ) (1,471 ) (2,009 )
Change in fair value of warrant liability 956 (1,343 ) 2,299
Total other expense, net (2,223 ) (2,794 ) 571
Net loss before income tax (127,199 ) (77,638 ) (49,561 )
Income tax expense 1,092 – 1,092
Net loss $ (128,291 ) $ (77,638 ) $ (50,653 )
License and Collaboration Revenue
For the nine months ended September 30, 2022, we recognized $3.4 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 nine months ended September 30, 2021.
Grant Revenue
Grant revenue was $0.3 million for the nine months ended September 30, 2022,
compared to grant revenue of $1.2 million for the nine months ended September
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
NINE MONTHS ENDED
SEPTEMBER 30, INCREASE /
Dollars (in thousands) 2022 2021 (DECREASE)
Program expense $ 42,706 $ 25,671 $ 17,035
Personnel costs 37,543 24,924 12,619
Other 21,127 11,486 9,641
Total research and development expenses $ 101,376 $ 62,081 $ 39,295
Research and development expense was $101.4 million for the nine months ended
September 30, 2022, compared to $62.1 million for the nine months ended
September 30, 2021. The increase of $39.3 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 $12.6 million. Other research
and development costs increased by approximately $9.6 million, primarily related
to a $6.0 million increase
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in rental expense as we expanded our footprints and entered into multiple leases
during 2021 and 2022, and an increase of $2.0 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 $27.4 million for the nine months ended
September 30, 2022, compared to $13.9 million for the nine months ended
September 30, 2021. The increase of $13.5 million was primarily due to an
increase of $4.6 million in personnel-related costs in general and
administrative functions, which resulted from increased headcount supporting
general and administrative activities; a $4.6 million increase in professional
services fees to support the Business Combination Agreement and costs associated
with being a publicly traded company; and an increase of $4.2 million related to
facilities and other administrative expenses as we expanded our footprints and
entered into multiple leases during 2021 and 2022.
Interest Income
For the nine months ended September 30, 2022, interest income increased by $0.3
million compared to the nine months ended September 30, 2021. This increase in
our interest income was driven by an increase in our cash and cash equivalents
due to capital raises in 2022 and an increase in the interest rate yield on our
cash and cash equivalents.
Interest and Other Expense
Interest and other expense was $3.5 million for the nine months ended September
30, 2022, compared to $1.5 million for the nine months ended September 30, 2021.
The increase of $2.0 million is primarily related to interest accrued on the
various loan agreements we entered into during the second half of 2021 as well
as an increase in interest rates on our variable rate debt.
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 nine months ended September 30, 2022, compared to an
expense of $1.3 million for the nine months ended September 30, 2021. The entire
decrease of $2.3 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 capital stock and to a lesser extent through debt financings, the
issuance of convertible notes and collaboration agreements. From our founding
through September 30, 2022, we have raised proceeds from the sale of our capital
stock, the Business Combination (including the related PIPE financing), the
August 2022 PIPE Financing, and from the issuance of debt and convertible notes.
As of September 30, 2022, we had cash and cash equivalents of $98.4 million.
Private Placement and Securities Subscription Agreement
On August 11, 2022, we entered into Securities Subscription Agreements (the
“August 2022 PIPE Subscription Agreements”) with certain institutional
accredited investors (collectively, the “August 2022 PIPE Investors”), providing
for the sale by us of 27,640,301 shares (the “August 2022 PIPE Shares”) of our
common stock (the “Common Stock”) at a purchase price of $3.92 per share, in a
private placement (the “August 2022 PIPE Financing”). The August 2022 PIPE
Shares were issued (the “Closing”) simultaneously with the execution and
delivery of the August 2022 PIPE Subscription Agreements. The aggregate gross
proceeds for the Private Placement were approximately $108.3 million. The gross
proceeds do not reflect transaction costs of $2.3 million. We intend to use the
net proceeds from the August 2022 PIPE Financing to fund ongoing clinical
development and commercialization of our existing product pipeline.
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.
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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 could 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 34,427 shares of GreenLight Common Stock
(assuming we borrow the entire $15.0 million from SVB and giving effect to the
reverse recapitalization). 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 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.
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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 $98.4
million as of September 30, 2022 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 these financial statements, as discussed
in Note 1 – Nature of Business and Basis of Presentation of the notes to our
condensed consolidated financial statements as of September 30, 2022 and for the
three and nine months ended September 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 continuing 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 and field 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;
•
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;
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•
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:
NINE MONTHS ENDED
SEPTEMBER 30, INCREASE /
2022 2021 (DECREASE)
Net cash (used in) operating activities $ (112,142 ) $ (67,241 ) $ (44,901 )
Net cash (used in) investing activities (22,907 ) (11,362 ) (11,545 )
Net cash provided by financing activities 202,915 18,376 184,539
Net increase (decrease) in cash, cash equivalents
and restricted cash $ 67,866 $ (60,227 ) $ 128,093
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.
During the nine months ended September 30, 2022, operating activities used
$112.1 million of cash, primarily resulting from our net loss of $128.3 million,
adjusted for non-cash items and the effect of changes in operating assets and
liabilities. Non-cash adjustments primarily include stock-based compensation
expense of $6.5 million and depreciation and amortization expense of $5.9
million offset by a change in the fair value of our warrant liabilities of $1.0
million. Net cash used by changes in our operating assets and liabilities
consisted primarily of a $4.0 million decrease in accounts payable, an increase
of $8.2 million in accrued expenses and other liabilities, a $9.0 million
increase in prepaid expenses and other current assets, partially offset by an
increase in deferred revenue of $6.4 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 nine months ended September 30, 2021, net cash used in operating
activities was $67.2 million. Net cash used in operating activities consists of
net loss of $77.6 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 $3.7 million, stock-based compensation
of
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$1.3 million, non-cash interest expense of $0.7 million and change in fair value
warrant liability of $1.3 million. Net cash provided by changes in our operating
assets and liabilities primarily consisted of a $4.3 million increase in
accounts payable and other current liabilities partially offset by a $0.9
million increase in prepaid expenses and other current assets. The increase in
accounts payable and other assets was related to timing of vendor invoicing and
payments. The increase in prepaid expenses and other current assets was
primarily due to our increased level of research collaborations and
manufacturing development activities related to our product candidates.
Investing Activities
During the nine months ended September 30, 2022, investing activities used $22.9
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 nine months ended September 30, 2021, investing activities used $11.4
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 and
laboratory construction in our facility in Woburn, Massachusetts.
Financing Activities
During the nine months ended September 30, 2022, financing activities provided
$202.9 million of cash, consisting primarily of $106.1 million of net proceeds
raised in the August 2022 PIPE financing, $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 $5.4
million of repayments on our secured debt, term loan payable, tenant improvement
allowance and capital lease obligations.
During the nine months ended September 30, 2021, financing activities provided
$18.4 million of cash, consisting primarily of $10.4 million of net proceeds
from a new secured debt agreement, $10.0 million of net proceeds from a term
loan and $0.1 million of proceeds from the exercise of options, partially offset
by $1.6 million of repayments on our secured debt and capital lease obligations
and $0.5 million of payments related to financing costs incurred on the business
combination.
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; 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 office, laboratory and
clean room 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.
In June 2022, we terminated our lease for manufacturing clean rooms in
Burlington, Massachusetts.
See Note 16, Commitments and Contingencies – Operating Leases, of the notes to
our condensed consolidated financial statements for the nine months ended
September 30, 2022 and 2021, for further information on our 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.
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
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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 nine months ended
September 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 nine months
ended September 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 engaged Samsung Biologics Co., Ltd. (“Samsung”) as a
contract development and manufacturing organization for scale up and commercial
scale production of our mRNA COVID-19 vaccine pursuant to a Master Services
Agreement and a Product Specific Agreement with Samsung (collectively, the
“Samsung Agreements”). 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
nine months ended September 30, 2022, the Company has incurred approximately
$5.7 million in costs under this service agreement. Based on our current
schedule, we expect to incur approximately $0.7 million of these expenses in the
fourth quarter of 2022 and the remainder in 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 requires 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 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
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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 to purchase
research and clinical trial data, developed by SIIPL, for 50% of the cost of the
research studies 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 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 September 30, 2022, and
commercial milestones and royalties will be recognized in the period the
underlying sales occur. For the three and nine months ended September 30, 2022,
$1.7 million and $3.4 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 September 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.
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
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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.
Prior to the reverse recapitalization, these independent third-party valuations
were performed at various dates, which resulted in estimated valuations of our
common stock by our board of directors (without giving effect to the reverse
recapitalization) 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.
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.
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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 – Summary of Significant Accounting Policies to our condensed
consolidated financial statements appearing elsewhere herein.
Effects of Inflation
Inflation generally affects us by increasing our cost of labor and research and
development contract costs. We do not believe that inflation currently has had a
material effect on our business, financial condition or results of operations.
Our operations may be affected by inflation in the future.
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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