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 audited consolidated
financial statements, together with the related notes thereto, included
elsewhere in this Annual Report on Form 10-K (this "Report"). This discussion
contains forward-looking statements that involve numerous risks and
uncertainties, including, but not limited to, those described under the heading
"Risk Factors" in Item 1A of Part I of this Report. 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 December
31, 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.
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 $167.1 million and
$112.3 million for the years ended December 31, 2022 and 2021, respectively. As
of December 31, 2022 and 2021, we had an accumulated deficit of $420.6 million
and $253.6 million, respectively. Notwithstanding our corporate restructuring
and realignment in October 2022, 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.
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 continues to be extremely
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
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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 $68.1 million as of December 31, 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 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
We are currently operating in a period of economic uncertainty and capital
markets disruption, which has been significantly impacted by geopolitical
instability, including in Europe, and record inflation. GreenLight's business,
financial condition and results of operations could be materially and adversely
affected by any negative impact on the global economy and capital markets
resulting from these global economic conditions, particularly if such conditions
are prolonged or worsen.
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. While we recognize that the United States public health emergency for
Covid is planned to end in May 2023, the full impact of the ongoing COVID-19
pandemic to date 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 its impact on our
field trial completion, clinical trial initiation and 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, including potential uncertainty with the stability of
banks and other financial institutes in light of the Silicon Valley Bank closure
in March 2023, it is impossible to predict the extent to which GreenLight's
operations will be impacted in the short and long term, or the ways in which
such instability could impact our business and results of operations. The extent
and duration of these market disruptions, whether as a result of the military
conflict between Russia and Ukraine, geopolitical tensions, record inflation or
otherwise, are impossible to predict, but could be substantial. Furthermore, the
impacts from the COVID-19 pandemic have resulted and will likely continue to
result in significant disruptions to the global economy and capital markets
around the world. GreenLight cannot predict the future progression or full
impact of the outbreak and its effects on GreenLight's business and operations.
We continue to closely monitor the global economic and geopolitical conditions
as we evolve our business continuity plans, clinical development plans and
response strategy.
Recent Developments
Human Health Programs
COVID-19 Vaccine Program
As previously announced, GreenLight received approval from the Rwanda Food and
Drugs Authority (Rwanda FDA) to initiate a Phase I/II study of its GLB-CoV2-043
(monovalent) vaccine booster candidate in February 2023. However, given the
global shift in the standard of care for COVID-19 vaccination to the
Wuhan/Omicron bivalent vaccine and new availability of the bivalent vaccine in
Rwanda, GreenLight has decided to update its clinical strategy to proceed with
its pan-sarbecovirus vaccine candidate instead of the GLB-COV2-043 (monovalent)
vaccine candidate as originally planned. GreenLight is accelerating the
development of its pan-sarbecovirus vaccine candidate, which is designed to
provide broader coverage against current circulating and future emerging
variants of SARS-CoV-2 and support future pandemic preparedness and is planning
a follow-up filing on this candidate
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to the Rwanda FDA and the Rwanda National Ethics Committee (RNEC). GreenLight
will be working expeditiously and closely with its Rwandan partners to advance
these efforts over the coming months and is also starting conversations with
potential partners in other countries that have expressed interest in supporting
the clinical development of a broader pan-sarbecovirus vaccine. GreenLight
Biosciences has completed the design and in vitro selection of the
pan-sarbecovirus vaccine candidates and is currently evaluating them in animal
studies for subsequent progression to clinical development subject to those
study results.
Shingles Vaccine Program
GreenLight has selected a lead candidate to progress towards clinical
development after evaluation of multiple antigen designs and formulations in
animal studies. Based on immunological response evaluations in pre-clinical
studies of three potential candidates, the pre-clinical data from these studies
showed that the lead vaccine candidate: (a) induced antibody levels similar to
comparator vaccine (current standard of care), (b) was more potent than
comparator vaccine at inducing strong cellular immune response, and (c)
maintained memory B and T cells responses at levels similar to comparator
vaccine, 3 months after vaccine candidate administration, demonstrating
durability of the immune response. The Serum Institute of India Private Limited
(SIIPL) will be responsible for the clinical development, manufacturing, and
commercialization of the vaccine candidate in lower- and middle- income
countries under its license agreement with GreenLight while GreenLight retains
the clinical development, manufacturing, and commercial rights in the developed
world. We are in active discussions with SIIPL regarding potential plans forward
for this vaccine candidate.
Plant Health Programs
Colorado Potato Beetle Program - CalanthaTM
Subject to receiving regulatory approval and applicable state registrations in
the US, we anticipate and are in active preparations for commercial launch prior
to the end of 2023. As part of this effort, we are in active discussions with
territory-relevant distributors across the US as potential partners to support
our planned commercial launch. Furthermore, we are planning to submit CalanthaTM
for regulatory approval in the EU, UK, Mexico, Canada and Ukraine.
Varroa Mite Program
In February 2023, GreenLight submitted a registration dossier to the EPA for our
RNA solution that targets the varroa destructor mite, which threatens the role
of honeybees in pollinating more than 100 crops annually. We are also planning
to submit this solution for regulatory approval in Canada, New Zealand, the EU,
and UK, with other potential territories under consideration. As previously
described, our field trial data has shown that there are >40% fewer Varroa
destructor mites at 12 and 18 weeks in hives compared with a leading chemical
control product and with higher hive survival rates compared to the chemical
control. Through our ongoing mode of action studies with Victoria University of
Wellington (NZ), data shows that the average number of mite offspring decreased
approximately 95% compared to control with no detectable negative impact on the
growth and development of juvenile bees. Furthermore, our 2022 trials showed
that our varroa mite solution used in spring and fall will more than double the
rate of hive survival compared to not treating for varroa mite.
Multitarget Solutions
GreenLight is expanding certain dsRNA-based fungal, insecticide, and acaricide
programs into solutions that are designed to address multiple targets.
Powdery Mildew Complex
A complex of diseases that impacts a wide range of crops and plants consisting
of multiple species that are slightly genetically diverse. GreenLight has
further developed its powdery mildew solution by modifying our lead sequence to
enable potential control of multiple targets (i.e. cucurbits PM, cereal PM, and
ornamentals PM in addition to original target of vine PM). Our field trials have
demonstrated that sprayed unformulated (naked) dsRNA decreases disease severity
in grapes and performed similarly to the biological standard in field trials. In
a similar field trial on zucchini, data showed that our naked dsRNA sequences
performed well but inferior to field trial standards. However, when formulated
with adjuvants, our trial results showed that our formulated dsRNA provided a
larger reduction in disease severity compared to the industry standard. We are
targeting the first regulatory submission of our powdery mildew program in 2024
in the US.
Gray Mold +
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Gray mold is a disease that impacts a wide range of crops and plants. GreenLight
has modified its lead sequences to add additional target species (i.e.
sclerotinia sclerotiorum in addition to original target of botrytis cinerea as
described above). Data from recent field trials show that dsRNA can provide
multi-species control with commercially relevant spray intervals and naked dsRNA
applied on snap beans performed similar to the chemical standard. We are
targeting our first regulatory submission of our gray mold program for 2025.
Systemic Delivery
We are in the very early stages of development of potential systemic delivery
solutions. Through data from early experiments and subsequent field trial
studies conducted last year, GreenLight has demonstrated stability of RNA
through a standard seed treatment process and dsRNA delivery into plants,
showing decreased fusarium disease severity in lettuce seed treatment field
trials across two locations and three lettuce varieties and very preliminary
indications of herbicidal activity.
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. (the "Business
Combination Agreement" and the transactions contemplated by the Business
Combination Agreement, the "Business Combination"). 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 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 year ended December 31, 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
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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
License revenue is related to our license agreement with Serum Institute of
India Private Limited ("SIIPL") which was entered into in March 2022, 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. The first licensed
product target will be a shingles product target, and SIIPL has an option to
select the additional two licensed product targets through the end of 2024.
Under the terms of the Agreement with SIIPL, the Company will provide research
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.
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. For the year ended December
31, 2022, we recognized $6.4 million of revenue primarily related to the
delivery of IP and research services, which includes manufacturing technology
transfer services.
Grant Revenue
In July 2020, we entered into a grant agreement with the Bill & Melinda Gates
Foundation to advance research in in vivo gene therapy for sickle cell disease
and to explore new, low-cost capabilities for the in vivo functional cure of
sickle cell and/or durable suppression of HIV in developing countries. We were
approved to receive a grant of $3.3 million in the aggregate. As of December 31,
2022, we had received the entire grant amount. 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 consolidated balance sheets and
later recognized as revenue when qualified costs are incurred. The revenue
recognized through December 31, 2022 under the grant was related to qualifying
research and development expenditures that we incurred. As previously announced,
we paused work on our gene therapy program for sickle cell disease, and as a
result, we ceased any ongoing research work under the Gates Grant and are in the
process of closing out all related activities. We are in the process of
delivering the final report to the Gates Foundation and returning any remaining
unused funds to the Gates Foundation.
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 have incurred 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.
Other Income, net
Other income, net primarily 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 year ended December 31, 2022, 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 year ended
December 31, 2021, 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 Years Ended December 31, 2022 and 2021
The following table summarizes our results of operations for the years ended
December 31, 2022 and 2021:
YEARS ENDED
DECEMBER 31, INCREASE /
2022 2021 (DECREASE)
($ in thousands)
License and collaboration revenue $ 6,384 $ - $ 6,384
Grant revenue 396 1,595 (1,199 )
Total revenue 6,780 1,595 5,185
Operating expenses:
Research and development 133,810 89,832 43,978
General and administrative 35,930 20,321 15,609
Restructuring expenses 959 - 959
Total operating expenses 170,699 110,153 60,546
Loss from operations (163,919 ) (108,558 ) (55,361 )
Other income (expenses):
Other income, net 895 37 858
Interest expense (4,123 ) (2,419 ) (1,704 )
Change in fair value of warrant liability 1,184 (1,370 ) 2,554
Total other expense, net (2,044 ) (3,752 ) 1,708
Net loss before income tax (165,963 ) (112,310 ) (53,653 )
Income tax expense 1,092 - 1,092
Net loss $ (167,055 ) $ (112,310 ) $ (54,745 )
License and Collaboration Revenue
For the year ended December 31, 2022, we recognized $6.4 million of revenue from
our license agreement with SIIPL primarily related to the delivery of IP and
research services, which includes manufacturing technology transfer services. As
the license and collaboration agreement was executed in March 2022, we did not
recognize any revenue under this agreement for the year ended December 31, 2021.
Grant Revenue
Grant revenue was $0.4 million for the year ended December 31, 2022, compared to
grant revenue of $1.6 million for the year ended December 31, 2021. All of our
grant revenue is derived from a grant made by the Bill & Melinda Gates
Foundation in July 2020. The decrease in grant revenue is due to a decrease of
costs incurred under this grant.
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Research and Development Expenses
YEARS ENDED
DECEMBER 31, INCREASE /
2022 2021 (DECREASE)
($ in thousands)
Program expense $ 57,143 $ 36,323 $ 20,820
Personnel costs 48,875 35,844 13,031
Other 27,792 17,665 10,127
Total research and development expenses $ 133,810 $ 89,832 $ 43,978
Research and development expense was $133.8 million for the year ended December
31, 2022, compared to $89.8 million for the year ended December 31, 2021. The
increase of $44.0 million resulted primarily from increased program costs
related to commercial-scale engineering run, specifically costs of approximately
$17.7 million related to research and development materials, manufacturing 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 $13.0 million. Other research
and development costs increased by approximately $10.1 million, primarily
related to a $7.6 million increase in rental expense as we expanded our
footprints and entered into multiple leases during 2022 and 2021, and an
increase of $2.4 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 $35.9 million for the year ended December
31, 2022, compared to $20.3 million for the year ended December 31, 2021. The
increase of $15.6 million was primarily due to an increase of $5.8 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;
a $3.2 million increase in insurance for directors and officers coverage; and an
increase of $0.9 million related to facilities as we expanded our footprints and
entered into multiple leases during 2022 and 2021.
Restructuring Expenses
Restructuring expense was $1.0 million for the year ended December 31, 2022,
primarily related to severance benefits. This was a result of a restructuring
plan to realign operating costs to better focus on near-term value drivers
announced in October 2022.
Other Income, net
For the year ended December 31, 2022, other income was $0.9 million for the year
ended December 31, 2022 compared to $37 thousand for the year ended December 31,
2021. This increase 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 Expense
Interest expense was $4.1 million for the year ended December 31, 2022, compared
to $2.4 million for the year ended December 31, 2021. The increase of $1.7
million is primarily related to interest accrued on the various loan agreements
we entered into during the second half of 2021 as well as increases in interest
rates on our variable rate debt throughout 2022.
Change in Fair Value of Warrant Liabilities
Other income attributable to the change in fair value of warrant liabilities was
$1.2 million for the year ended December 31, 2022, compared to an expense of
$1.4 million for the year ended December 31, 2021. The entire decrease of $2.6
million in the fair value of our warrant liabilities was due to the decrease in
the fair value of the private placement warrants driven by a decrease in our
stock price during 2022.
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Income Tax Expense
For the year ended December 31, 2022, income tax expense was $1.1 million for
the year ended December 31, 2022 related to foreign withholding tax from the
Agreement with SIIPL. There was no income tax expense recorded for the year
ended December 31, 2021.
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 December 31, 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 December 31, 2022, we had cash and cash equivalents of $68.1 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 at a purchase price of $3.92 per share, in a private placement (the
"August 2022 PIPE Financing" and together with the February 2022 PIPE Financing,
the "PIPE Financings"). 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.
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 the 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, 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
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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 the obligation to maintain all of its cash in
accounts at SVB, including at all times amounts sufficient to repay all loan
obligations, which if not met constitute an event of default under the
agreement) and customary events of default; it does not contain a financial
covenant. We granted a first-priority, perfected security interest in
substantially all of our present and future personal property and assets,
excluding intellectual property, to secure our obligations to SVB.
In April 2021, we entered into a joinder agreement and first amendment to loan
and security agreement with SVB pursuant to which the Company became a party to
the SVB loan agreements as a borrower. Under these agreements, the Company also
granted SVB a continuing security interest in its existing and after-acquired
personal property and assets, excluding intellectual property. These agreements
also amended certain terms of the original SVB loan agreement to, among other
things, add representations, affirmative and negative covenants, and events of
default regarding the Company's obligations as a public benefit corporation.
Under the amended terms, it is an event of default for there to be any pending
or threatened litigation by a shareholder alleging that we or our directors
failed to satisfy any obligations under Delaware law regarding our status as a
public benefit corporation, if the litigation is likely to result in a final
monetary judgment against us in excess of $250,000. In addition, if any action,
investigation, or proceeding is pending or known to be threatened in writing
against us with respect to such a claim, the bank may not need to make further
loans to us.
On March 10, 2023, SVB was closed by the California Department of Financial
Protection and Innovation, and the Federal Deposit Insurance Corporation
("FDIC") was appointed as receiver and SVB was subsequently transferred into a
new entity, Silicon Valley Bridge Bank, N.A ("SVB Bridge Bank").
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.
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Funding Future Operations; Going Concern
The Company estimates that its existing cash and cash equivalents of $68.1
million as of December 31, 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 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 consolidated financial
statements as of December 31, 2022 and for the year ended December 31, 2022,
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 have
incurred and 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;
•
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
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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:
YEARS ENDED
DECEMBER 31, INCREASE /
2022 2021 (DECREASE)
($ in thousands)
Net cash (used in) operating activities $ (136,731 ) $ (91,832 ) $ (44,899 )
Net cash (used in) investing activities (26,510 ) (15,039 ) (11,471 )
Net cash provided by financing
activities
200,851 43,531 157,320
Net increase (decrease) in cash, cash
equivalents
and restricted cash $ 37,610 $ (63,340 ) $ 100,950
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 2022, net cash used in operating activities was $136.7 million of cash,
primarily resulting from our net loss of $167.1 million, adjusted for non-cash
items and the effect of changes in operating assets and liabilities. Non-cash
adjustments primarily include stock-based compensation expense of $8.8 million,
depreciation and amortization expense of $8.1 million, and non-cash lease
expense of $5.6 million; offset by a change in the fair value of our warrant
liabilities of $1.2 million. Net cash used by changes in our operating assets
and liabilities consisted primarily of a $6.6 million decrease in accounts
payable, an increase of $12.9 million in accrued expenses, lease liabilities and
other liabilities, a $1.5 million increase in prepaid expenses, other current
assets and other non-current assets, partially offset by an increase in deferred
revenue of $3.6 million. The decrease in accounts payable is related to timing
of vendor invoicing and payments. The increase in accrued expenses, lease
liabilities and other liabilities and prepaid expenses and other assets was due
to our increased level of research collaborations and manufacturing development
activities related to our product candidates. The increase in deferred revenue
was due to our license agreement we entered into with SIIPL in 2022.
During 2021, net cash used in operating activities was $91.8 million. Net cash
used in operating activities consists of net loss of $112.3 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 $5.8 million, stock-based compensation of $2.0 million,
change in fair value of warrant liabilities of $1.4 million, and non-cash
interest expense of $0.8 million. Net cash provided by changes in our operating
assets and liabilities for the year ended December 31, 2021, consisted of a
$11.9 million increase in accounts payable and other current liabilities,
partially offset by a $0.9 million increase in prepaid expenses, other current
assets and other non-current assets. The increase in accounts payable and other
liabilities related to the timing of vendor invoicing and payments. The increase
in prepaid expenses, other current assets and other non-current assets was
primarily due to our increased level of research collaborations and
manufacturing development activities related to our product candidates.
Investing Activities
During 2022, investing activities used $26.5 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 2021, investing activities used $15.0 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 plant in
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Rochester, New York, construction of cleanrooms and preclinical manufacturing
capacity in our facility in Burlington, Massachusetts, and laboratory
construction in our facility in Woburn, Massachusetts.
Financing Activities
During 2022, financing activities provided $200.9 million of cash, consisting
primarily of $106.0 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 $7.2 million of repayments on our debt
and finance lease obligations.
During 2021, financing activities provided $43.5 million of cash, consisting
primarily of $24.9 million of net proceeds from secured term loans, $13.5
million of net proceeds from convertible debt issuances, and net proceeds of
$10.4 million from a new secured debt agreement, partially offset by $2.9
million of deferred offering costs, $1.8 million of repayments on our secured
debt, and $0.6 million of payments related to our capital lease obligations.
Contractual Obligations and Commitments
Operating Lease Obligations
We have non-cancelable operating lease obligations, consisting primarily of
lease payment obligations for our facilities, including our headquarters in
Lexington, Massachusetts, comprised of office and laboratory space; office,
laboratory and greenhouse space in Durham, North Carolina; laboratory and office
space in Medford and Woburn, Massachusetts; our manufacturing facilities in
Rochester, New York; and farm land located in Spain. The leases for these
facilities expire on various dates through 2042, 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 approximately
$3.9 million per year, subject to a 3% increase each year.
In March 2022, the Company entered into a lease for land in Spain. The lease
term expires in March 2042. The base rent for this lease is approximately $0.1
million per year.
In June 2022, we terminated our lease for manufacturing clean rooms in
Burlington, Massachusetts.
In December 2022, the Company entered into a lease for farm land located in
Colusa County, California, which commences in January 2023. The lease term
expires in December 2032. The base rent for this lease is approximately $0.1
million per year, subject to annual increases based on the consumer price index
beginning on January 1, 2024.
See Note 16, Leases, of the notes to our consolidated financial statements for
the years ended December 31, 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 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 year ended December 31, 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
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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 year ended December 31,
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 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 $8.8 million in service fees
under the Samsung Agreements, excluding the cost of raw materials. For the year
ended December 31, 2022, the Company has incurred approximately $5.9 million in
costs under this service agreement. Based on our current schedule, we expect to
incur the remainder of the costs throughout 2023.
Critical Accounting Policies and Significant Judgments and Estimates
Our consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States. The preparation
of these 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 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
License and Collaboration Revenue
In March 2022, we entered into a License Agreement (the "Agreement") with Serum
Institute of India Private Limited ("SIIPL"), pursuant to which we granted SIIPL
an exclusive, sub-licensable, royalty-bearing license to use our 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 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, we
will provide research services related to the shingles product target to develop
a "proof of concept" and will provide manufacturing technology transfer
services. In addition, we retain 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 our own development.
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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 us 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 us an upfront license fee of
$5.0 million, as well as payments upon additional target selection and
reservation of exclusivity. We 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 us or the tenth
anniversary of the first commercial sale of the applicable product(s) in the
applicable country.
We have 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. We have
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. We use key assumptions in recognizing
revenue, which include estimated development timelines, actual internal and
external costs incurred, estimated costs to be incurred, and probabilities of
technical success.
Research and Development Expense
We have committed significant resources into the research and development of our
product candidates and intend to continue to do so for the foreseeable future.
Research and development expenses are generally expensed as incurred.
Research and development expenses are comprised of costs incurred in performing
research and development activities, including salary, benefits, share-based
compensation, and other employee-related expenses; laboratory supplies and other
direct expenses; facilities expenses; third-party contractual costs relating to
nonclinical studies and clinical trial activities and related contract
manufacturing expenses, development of manufacturing processes and other outside
expenses.
Clinical trial expenses include expenses associated with contract research
organizations, or CROs. The invoicing from CROs for services rendered can lag
several months. We accrue the cost of services rendered in connection with CRO
activities based on our estimate of site management, monitoring costs, project
management costs, and investigator fees. We maintain regular communication with
our CRO vendors to gauge the reasonableness of our estimates. We make estimates
of our clinical trial accrued expenses as of each balance sheet date in our
financial statements based on facts and circumstances known to us. If timelines
or contracts are modified based upon changes in the clinical trial protocol or
scope of work to be performed, we assess our estimates of accrued expenses
accordingly. Differences between actual clinical trial expenses and estimated
clinical trial expenses recorded have not been material and are adjusted for in
the period in which they become known. However, if we incorrectly estimate
activity levels associated with the CRO services at a given point in time, we
could be required to record material adjustments in future periods.
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 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. The computation of
expected volatility is based on an average historical share price volatility
based on an analysis of reported data for a peer group of comparable publicly
traded companies,
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which were selected based upon industry similarities. However, these estimates
are neither predictive nor indicative of the future performance of the our
stock. Due to our limited operating history and a lack of company specific
historical and implied volatility data, we have based our estimate of expected
volatility on the historical volatility of stock of companies within our defined
peer group. The interest rate for periods within the expected term of the award
is based on the U.S. Treasury risk-free interest rate in effect at the time of
grant.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have any
off-balance sheet arrangements, as defined in the rules and regulations of the
SEC.
Recently Adopted Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially
impact our financial position, results of operations or cash flows is provided
in Note 2 - Summary of Significant Accounting Policies to our consolidated
financial statements appearing elsewhere herein.
We adopted ASC 842 during the quarter ended December 31, 2022, with an effective
date of January 1, 2022, using the modified retrospective approach and utilizing
the effective date as its date of initial application. As a result, prior period
financial statements continue to be presented in accordance with ASC 840. The
Company used the optional transition method to the modified retrospective
approach in which Topic 842 will not be applied to comparative periods presented
and incremental disclosures are not required for periods before the Company's
adoption of Topic 842. As a result of implementing this guidance, the Company
recorded a right-of-use asset of $15.2 million and an operating lease liability
of $15.9 million, respectively, as of January 1, 2022 and also derecognized
total deferred rent liabilities and unamortized lease incentives of $0.7 million
that existed as of December 31, 2021 on the Company's Balance Sheets.
Emerging Growth Company and Smaller Reporting Company Status
The Company 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. The Company 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, The Company, 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 the Company's financial statements with
certain other public companies difficult or impossible because of the potential
differences in accounting standards used.
The Company 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 the Company has total annual
gross revenue of at least $1.235 billion, or (c) in which the Company 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 the Company 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
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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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