alvr-10q_20210331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________to __________________

Commission File Number: 001-39409

 

ALLOVIR, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

83-1971007

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

139 Main Street, Suite 500

Cambridge, MA

 

02142

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (617) 433-2605

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

ALVR

 

The Nasdaq Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes       No  

As of April 30, 2021, the registrant had 65,106,873 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (unaudited)

4

 

Condensed Consolidated Balance Sheets

4

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

5

 

Condensed Consolidated Statements of Convertible Preferred Stock and Changes in Stockholders’ Equity (Deficit)

6

 

Condensed Consolidated Statements of Cash Flows

8

 

Notes to Condensed Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.

Controls and Procedures

29

 

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

30

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

75

Item 3.

Defaults Upon Senior Securities

75

Item 4.

Mine Safety Disclosures

75

Item 5.

Other Information

75

Item 6.

Exhibits

76

 

 

 

Signatures

77

 

 

 

i


 

Summary of Material Risks Associated with Our Business

Our business is subject to numerous risks and uncertainties that you should be aware of before making an investment decision, including those highlighted in the section entitled “Risk Factors.” These risks include, but are not limited to, the following:

 

Our business could be adversely affected by the effects of health epidemics, including the recent COVID-19 pandemic, in regions where third parties for which we rely, as in CROs or CMOs, have significant research, development or manufacturing facilities, concentrations of clinical trial sites or other business operations, causing disruption in supplies and services.

 

 

We are a late clinical-stage cell therapy company and we have incurred net losses since our inception. We anticipate that we will continue to incur significant losses for the foreseeable future, and may never achieve or maintain profitability.

 

 

Our business is highly dependent on our lead product candidate, Viralym-M, and we must complete clinical testing before we can seek regulatory approval and begin commercialization of any of our product candidates.

 

 

We depend substantially on intellectual property licensed from third parties, including Baylor College of Medicine, or BCM, and termination of any of these licenses could result in the loss of significant rights, which would harm our business.

 

 

If we are unable to obtain and maintain sufficient intellectual property protection for our product candidates and manufacturing process, or if the scope of the intellectual property protection is not sufficiently broad, our ability to commercialize our product candidates successfully and to compete effectively may be adversely affected.

 

 

We will need substantial additional funding, and if we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product discovery and development programs or commercialization efforts.

 

 

We have a limited operating history, which may make it difficult to evaluate the success of our business to date and to assess our future viability.

 

 

We are early in our development efforts and have only a small number of product candidates in clinical development. All of our other product candidates are still in preclinical development. If we or our collaborators are unable to successfully develop and commercialize product candidates or experience significant delays in doing so, our business may be materially harmed.

 

 

Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and the inability to successfully and timely conduct clinical trials and obtain regulatory approval for our product candidates would substantially harm our business.

 

 

The results of preclinical studies or earlier clinical trials are not necessarily predictive of future results. Our existing product candidates in clinical trials, and any other product candidate we advance into clinical trials, may not have favorable results in later clinical trials or receive regulatory approval.

 

 

Our product candidates, the methods used to deliver them or their dosage levels may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label or result in significant negative consequences following any regulatory approval.

 

 

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

 

 

We and our third-party partners are subject to a multitude of manufacturing risks, any of which could substantially increase our costs and limit supply of our product candidates.

 

 

We intend to develop an efficient and highly productive manufacturing supply chain for our allogeneic, off-the-shelf single- and multi-VST-cell therapies. Delays in process performance qualification to validate the drug product manufacturing process could delay regulatory approvals, our development plans and thereby limit our ability to generate revenues.

 

 

We are highly dependent on our key personnel and anticipate hiring new key personnel. If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

 

 

The trading price of our common stock may be volatile.

The summary risk factors described above should be read together with the text of the full risk factors below, in the section entitled “Risk Factors” and the other information set forth in this Quarterly Report on Form 10-Q, including our consolidated financial statements and the related notes, as well as in other documents that we file with the SEC. The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not precisely known to us, or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, results of operations and future growth prospects.

1


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements, including but not limited to, statements about:

 

the success, cost, timing and potential indications of our product development activities and clinical trials, including the ongoing and future clinical trials of Viralym-M, ALVR106 and ALVR109;

 

the timing of our planned Investigational New Drug (IND) submissions to the FDA for our product candidates, including ALVR109, ALVR107 and ALVR108;

 

the timing of the initiation, enrollment and completion of planned clinical trials;

 

our plans to research, develop and commercialize our product candidates, including Viralym-M, ALVR106, ALVR109, ALVR107 and ALVR108;

 

the timing of the initiation, completion and outcomes of our preclinical studies;

 

the costs of development of any of our product candidates or clinical development programs and our ability to obtain funding for our operations, including funding necessary to complete the clinical trials of any of our product candidates;

 

our ability to successfully manufacture and distribute Viralym-M and ALVR106 or any other future product or product candidate, including under the Development and Manufacturing Services Agreement with ElevateBio BaseCamp, Inc.;

 

the potential benefits of and our ability to maintain our collaboration with our existing collaborators, including BCM, and establish or maintain future collaborations or strategic relationships or obtain additional funding;

 

the ability to maintain our existing license agreements, including BCM, and to license additional intellectual property relating to any future product candidates and to comply with our existing license agreements;

 

our ability to attract and retain collaborators with development, regulatory and commercialization expertise;

 

risks associated with the COVID-19 pandemic, which may adversely impact our business and clinical trials;

 

the size of the markets for our VST product candidates, and our ability to serve those markets;

 

whether the results of our clinical trials will be sufficient to support domestic or foreign regulatory approvals for any of our product candidates;

 

our ability to successfully commercialize our product candidates, including Viralym-M, ALVR106 and ALVR109;

 

the rate and degree of market acceptance of our product candidates, including Viralym-M, ALVR106 and ALVR109;

 

our ability to obtain and maintain regulatory approval of our product candidates in any of the indications for which we plan to develop them, and any related restrictions, limitations or warnings in the label of any approved product we develop;

 

our ability to develop and maintain sales and marketing capabilities, whether alone or with potential future collaborators;

 

regulatory developments in the United States and foreign countries with respect to our product candidates or our competitors’ products and product candidates;

 

our reliance on third-party contract manufacturers and the performance of our third-party suppliers and manufacturers to manufacture and supply our product candidates for us;

 

the success of competing therapies that are or become available;

 

our ability to attract and retain key scientific or management personnel;

 

our expectation about the period of time over which our existing capital resources will be sufficient to fund our operating expenses and capital expenditures;

 

our expectations regarding the time during which we will be an emerging growth company under the JOBS Act;

 

our financial performance;

2


 

 

the impact of laws and regulations;

 

developments and projections relating to our competitors or our industry;

 

the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing; and

 

our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates and our ability to operate our business without infringing on the intellectual property rights of others.

In some cases, you can identify forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” or “would,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

You should read the section titled “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q, if any, for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

3


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

ALLOVIR, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED

 

(in thousands, except share and per share amounts)

 

March 31,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

168,645

 

 

$

122,661

 

Short-term investments

 

 

168,347

 

 

 

233,663

 

Accrued interest

 

 

469

 

 

 

450

 

Prepaid expenses and other current assets

 

 

2,203

 

 

 

4,543

 

Total current assets

 

 

339,664

 

 

 

361,317

 

Property and equipment, net

 

 

869

 

 

 

812

 

Operating lease right-of-use assets

 

 

10,748

 

 

 

8,692

 

Total assets

 

$

351,281

 

 

$

370,821

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,057

 

 

$

963

 

Accrued expenses

 

 

7,879

 

 

 

7,530

 

Operating lease liability, current

 

 

4,785

 

 

 

3,229

 

Amount due to related party

 

 

779

 

 

 

572

 

Total current liabilities

 

 

15,500

 

 

 

12,294

 

Operating lease liability, long term

 

 

5,412

 

 

 

5,463

 

Total liabilities

 

 

20,912

 

 

 

17,757

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value: 10,000,000 shares authorized at March 31, 2021 and December 31, 2020, respectively; 0 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

 

 

 

 

 

 

Common stock, $0.0001 par value: 150,000,000 shares authorized at March 31, 2021 and December 31, 2020, respectively; 65,106,873 shares issued at March 31, 2021 and December 31, 2020, respectively; and 62,451,094 and 61,931,255 shares outstanding at March 31, 2021 and December 31, 2020, respectively

 

 

7

 

 

 

7

 

Additional paid-in capital

 

 

486,375

 

 

 

478,272

 

Accumulated other comprehensive income (loss)

 

 

13

 

 

 

(112

)

Accumulated deficit

 

 

(156,026

)

 

 

(125,103

)

Total stockholders’ equity

 

 

330,369

 

 

 

353,064

 

Total liabilities and stockholders’ equity

 

$

351,281

 

 

$

370,821

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


 

ALLOVIR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

UNAUDITED

 

 

 

Three Months Ended

March 31,

 

(in thousands, except share and per share amounts)

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

20,393

 

 

 

6,839

 

General and administrative

 

 

10,470

 

 

 

3,001

 

Total operating expenses

 

 

30,863

 

 

 

9,840

 

Loss from operations

 

 

(30,863

)

 

 

(9,840

)

Total other income (loss), net:

 

 

 

 

 

 

 

 

Interest income

 

 

505

 

 

 

457

 

Other income (loss), net

 

 

(565

)

 

 

44

 

Net loss

 

$

(30,923

)

 

$

(9,339

)

Net loss per share — basic and diluted

 

$

(0.50

)

 

$

(4.21

)

Weighted-average common shares outstanding — basic and diluted

 

 

62,193,734

 

 

 

2,215,958

 

Comprehensive loss:

 

 

 

 

 

 

 

 

Net loss

 

$

(30,923

)

 

$

(9,339

)

Other comprehensive income, net of tax:

 

 

 

 

 

 

 

 

Unrealized gain on available-for-sale securities

 

 

42

 

 

 

176

 

Foreign currency translation adjustment

 

 

83

 

 

 

 

Total other comprehensive income

 

 

125

 

 

 

176

 

Comprehensive loss

 

$

(30,798

)

 

$

(9,163

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


 

ALLOVIR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

UNAUDITED

 

 

 

Series B

Preferred Stock

 

 

Series A

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

(in thousands, except share amounts)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Deficit

 

Balance at December 31, 2019

 

 

14,877,697

 

 

$

120,923

 

 

 

44,520,653

 

 

$

52,204

 

 

 

 

2,099,740

 

 

$

 

 

$

3,748

 

 

$

68

 

 

$

(55,319

)

 

$

(51,503

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

646

 

 

 

 

 

 

 

 

 

646

 

Issuance of common stock, upon vesting of restricted stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

292,644

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

176

 

 

 

 

 

 

176

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,339

)

 

 

(9,339

)

Balance at March 31, 2020

 

 

14,877,697

 

 

$

120,923

 

 

 

44,520,653

 

 

$

52,204

 

 

 

 

2,392,384

 

 

$

 

 

$

4,394

 

 

$

244

 

 

$

(64,658

)

 

$

(60,020

)

6


 

ALLOVIR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

UNAUDITED

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

(in thousands, except share amounts)

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2020

 

 

61,931,255

 

 

$

7

 

 

$

478,272

 

 

$

(112

)

 

$

(125,103

)

 

$

353,064

 

Stock-based compensation

 

 

 

 

 

 

 

 

8,103

 

 

 

 

 

 

 

 

 

8,103

 

Issuance of common stock, upon vesting of restricted stock

 

 

519,839

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

42

 

 

 

 

 

 

42

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

83

 

 

 

 

 

 

83

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30,923

)

 

 

(30,923

)

Balance at March 31, 2021

 

 

62,451,094

 

 

$

7

 

 

$

486,375

 

 

$

13

 

 

$

(156,026

)

 

$

330,369

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

7


 

 

ALLOVIR, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

 

 

 

Three Months Ended

March 31,

 

(in thousands)

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(30,923

)

 

$

(9,339

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

18

 

 

 

18

 

Non-cash lease expense

 

 

54

 

 

 

 

Amortization and accretion of discounts on short-term investments

 

 

456

 

 

 

(24

)

Stock compensation expense

 

 

8,103

 

 

 

646

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Unbilled grant receivables

 

 

 

 

 

(48

)

Accrued interest

 

 

(19

)

 

 

(49

)

Prepaid expenses and other current assets

 

 

1,735

 

 

 

(284

)

Accounts payable, accrued expenses and amount due to related party

 

 

1,650

 

 

 

(1,463

)

Net cash used in operating activities

 

 

(18,926

)

 

 

(10,543

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(75

)

 

 

 

Purchase of short-term investments

 

 

(30,098

)

 

 

(21,161

)

Maturities of short-term investments

 

 

95,000

 

 

 

35,000

 

Net cash provided by investing activities

 

 

64,827

 

 

 

13,839

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Net cash provided by financing activities

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

83

 

 

 

 

Net increase in cash and cash equivalents

 

 

45,984

 

 

 

3,296

 

Cash and cash equivalents at beginning of period

 

 

122,661

 

 

 

61,084

 

Cash and cash equivalents at end of period

 

$

168,645

 

 

$

64,380

 

Non-cash investing and financing activities

 

 

 

 

 

 

 

 

Unrealized gain on available-for-sale securities

 

$

42

 

 

$

176

 

Right-of-use assets obtained in exchange for operating lease liability

 

$

3,099

 

 

$

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

8


 

ALLOVIR, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

1. Nature of the Business

AlloVir, Inc. (“AlloVir” or “the Company”, formerly known as ViraCyte, Inc.) is a leading late clinical-stage cell therapy company developing highly innovative allogeneic T-cell therapies to treat and prevent devastating viral diseases. The Company’s innovative and proprietary virus-specific T-cell, or VST, therapy platform allows AlloVir to generate off-the-shelf VSTs designed to restore immunity in patients with T-cell deficiencies who are at risk from the life-threatening consequences of viral diseases. There is an urgent medical need for therapies to treat a large number of patients suffering from viral diseases who currently have limited or no treatment options. To date, the Company has generated five innovative, allogeneic, off-the-shelf VST therapy candidates targeting 12 different devastating viruses. The most advanced is Viralym-M, for which the Company has an ongoing pivotal trial for the treatment of virus-associated hemorrhagic cystitis and ongoing proof-of-concept, or POC, clinical trials for multi-virus prevention in HSCT and BKV in kidney transplant.

The Company’s lead product candidate, Viralym-M, is a multi-VST-cell therapy that targets five viruses: BK virus, cytomegalovirus, adenovirus, Epstein-Barr virus and human herpesvirus 6. To fully explore the clinical benefit of Viralym-M, the Company plans to initiate an additional two Phase 3 pivotal and one Phase 2 proof-of-concept trials by the end of 2021 for the treatment and prevention of life-threatening viral diseases in pediatric and/or adult patients, each representing a potential meaningful commercial opportunity.  In addition, ALVR106 is the Company’s second multi-virus-targeted off-the-shelf VST product candidate targeting devastating respiratory diseases caused by respiratory syncytial virus, or RSV, influenza, parainfluenza virus, or PIV, and human metapneumovirus, or hMPV. An Investigational New Drug, or IND, application with the FDA for ALVR106 was cleared in the fourth quarter of 2020 and the Company plans to initiate a Phase 1/2 clinical study in autologous and allogeneic HSCT patients with respiratory viral diseases in the second half of 2021. Pursuant to the sponsored research agreement with Baylor College of Medicine (“BCM”), BCM initiated a proof-of-concept trial for ALVR109, an allogeneic, off-the-shelf VST therapy designed to target SARS-CoV-2, the virus that causes the severe and life-threatening viral disease, COVID-19. ALVR109 is being developed to arrest the progression of COVID-19 by eradicating SARS-CoV-2 virus-infected cells.  BCM initiated the POC clinical trial in the fourth quarter of 2020 and the trial is ongoing. Lastly, the Company is advancing ALVR107 designed to target hepatitis B, or HBV, infected cells and treat chronic HBV infections and ALVR108 to treat human herpesvirus-8, or HHV-8, associated diseases including Kaposi Sarcoma, or KS, primary effusion lymphoma, or PEL, and multicentric Castleman’s disease, or MCD. The Company plans to complete pre-clinical IND enabling studies for ALVR107 and ALVR108 in the second half of 2021.

The Company was formed on August 16, 2013 as a Delaware limited liability company (“LLC”) under the name AdCyte LLC and on July 29, 2014 the Company changed its name to ViraCyte LLC. On September 17, 2018, the Company converted from a Delaware LLC to a Delaware corporation (“LLC Conversion”) and changed its name to ViraCyte, Inc. On May 22, 2019, the Company changed its name to AlloVir, Inc. The Company has principal offices in Houston, Texas and Cambridge, Massachusetts.

On August 8, 2019, AlloVir formed AlloVir International Designated Activity Company (“AlloVir International”), a wholly-owned subsidiary established in Ireland.

On October 9, 2019, AlloVir Securities Corporation was incorporated as a Massachusetts Security Corporation, a wholly-owned subsidiary of AlloVir.

On November 10, 2019, AlloVir International formed AlloVir Italia S.R.L. (“AlloVir Italia”), a wholly-owned subsidiary in Italy.

On August 3, 2020, the Company completed an initial public offering (“IPO”) in which the Company issued and sold 18,687,500 shares of its common stock, at a public offering price of $17.00 per share, resulting in gross proceeds of $317.7 million. The Company received $292.0 million in net proceeds after deducting underwriting discounts and commissions and offering costs.

Upon the closing of the IPO, all of the then-outstanding shares of convertible preferred stock automatically converted into 39,859,139 shares of common stock at the applicable conversion ratio then in effect. Subsequent to the closing of the IPO, there were no shares of convertible preferred stock outstanding.

9


 

ElevateBio, LLC

On September 17, 2018, the Company executed a Series A2 Preferred Stock Purchase Agreement (“Series A2 Agreement”) with ElevateBio, LLC, a Delaware LLC (“ElevateBio”) concurrent with the LLC Conversion. ElevateBio was formed on November 29, 2017 and is headquartered in Cambridge, Massachusetts with a focus on the development of a portfolio of novel cell therapy programs acquired through business development activities with biotechnology companies. ElevateBio is structured as a holding company, comprised of asset-specific subsidiaries focused on the development of pipeline assets, as well as a manufacturing subsidiary with the expertise to provide drug development and manufacturing services. As a result of the purchase of the Company’s Series A2 Preferred Stock, ElevateBio acquired an ownership interest in the Company. The Chief Executive Officer, Chief Financial Officer, and other executives of ElevateBio currently serve in similar management roles with AlloVir. On March 17, 2021, our Board of Directors appointed Diana M. Brainard M.D., as the Company’s Chief Executive Officer and principal executive officer, effective May 17, 2021.

Going Concern

In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the condensed consolidated financial statements are issued.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance and reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. Through March 31, 2021, the Company has funded its operations primarily with proceeds received from the sale of common stock, research grants, and from the sale of preferred stock. The Company has incurred recurring losses since its inception, including net losses attributable to common stockholders of $30.9 million and $9.3 million for the three months ended March 31, 2021 and 2020, respectively. In addition, at March 31, 2021, the Company had an accumulated deficit of $156.0 million. The Company expects to continue to generate operating losses for the foreseeable future.

The Company believes that its $168.6 million of cash and cash equivalents and $168.3 million of short-term investments held at March 31, 2021, are sufficient to fund planned operations for at least twelve months from the date that these condensed consolidated financial statements are available to be issued.

COVID-19 Considerations

The development of product candidates could be disrupted and materially adversely affected in the future by a pandemic, epidemic or outbreak of an infectious disease, such as the recent COVID-19 pandemic. The spread of COVID-19 has impacted the global economy and has impacted the Company’s operations, including the interruption of preclinical and clinical trial activities and potential interruption to the Company’s supply chain. For example, the COVID-19 pandemic has delayed clinical trials. If the disruption due to the COVID-19 pandemic continues, planned pivotal clinical trials also could be delayed due to government orders and site policies on account of the pandemic, and some patients may be unwilling or unable to travel to study sites, enroll in trials or be unable to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services, which would delay the Company’s ability to conduct preclinical studies and clinical trials or release clinical trial results and could delay the Company’s ability to obtain regulatory approval and commercialize product candidates. Furthermore, COVID-19 could affect the Company’s employees or the employees of research sites and service providers on whom the Company relies on as well as those of companies with which the Company does business, including suppliers and contract manufacturing organizations or CMOs, thereby disrupting business operations. Quarantines and travel restrictions imposed by governments in the jurisdictions in which the Company and the companies with which it does business operate could materially impact the ability of employees to access preclinical and clinical sites, laboratories, manufacturing sites and offices. The Company has implemented work-at-home policies and only employees essential to the development and research of product candidates remain on-site at the Company’s research and manufacturing facilities; accordingly, the Company may experience limitations in employee resources. The outbreak and any other preventative or protective actions that the Company, its suppliers or other third parties with which it has business relationships, or governments may take in respect of the COVID-19 pandemic, could disrupt, delay or otherwise adversely impact the business.

10


 

The Company is still assessing business plans and the impact the COVID-19 pandemic may have on its ability to advance the testing, development and manufacturing of drug candidates, including as a result of adverse impacts on the research sites, service providers, vendors, or suppliers on whom the Company relies on, or to raise financing to support the development of our drug candidates. No assurances can be given that this analysis will enable the Company to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally or this sector in particular. The Company cannot presently predict the scope and severity of any potential business shutdowns or disruptions, but if the Company or any of the third parties on whom it relies on or with whom it conducts business, were to experience shutdowns or other business disruptions, the Company’s ability to conduct business in the manner and on the timelines presently planned could be materially and adversely impacted.

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2020 (“annual financial statements”), which are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on February 12, 2021. Since the date of those financial statements, there have been no changes to the Company’s significant accounting policies, except as noted below.

 

Interim Financial Information

The accompanying condensed consolidated balance sheet at March 31, 2021, and the condensed consolidated statements of operations and comprehensive loss, statements of convertible preferred stock and changes in stockholders’ equity (deficit) for the three months ended March 31, 2021 and 2020 and condensed consolidated statements of cash flows for the three months ended March 31, 2021 and 2020 are unaudited. The condensed consolidated interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial position at March 31, 2021 and the results of its operations for the three months ended March 31, 2021 and 2020 and its cash flows for the three months ended March 31, 2021 and 2020. The financial data and other information disclosed in these notes related to the three months ended March 31, 2021 and 2020 are also unaudited. The results for the three months ended March 31, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021 or for any other subsequent interim period.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”), or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial statements upon adoption. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with certain new or revised accounting standards pursuant to Section 107(b) of the JOBS Act.

Since December 31, 2020, there have been no new accounting pronouncements adopted by the Company or issued by FASB that are applicable to the Company, except as noted below.

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12 – Income Taxes (Topic 740) (“ASU 2019-12”), which removes certain exceptions from the guidance and simplifies the accounting for income taxes in certain areas. The Company adopted ASU 2019-12 on January 1, 2021. There was no material impact to the Company’s consolidated financial statements as a result of adopting this new standard.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 significantly changes the impairment model for most financial assets and certain other instruments. ASU 2016-13 will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, which will generally result in earlier recognition of allowances for credit losses on loans and other financial instruments. ASU 2016-13 is effective for the Company’s fiscal year beginning after December 15, 2022 and subsequent interim periods. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

11


 

3. Short-Term Investments

The following tables summarize the amortized cost and estimated fair value of the Company’s marketable securities, which are considered to be available-for-sale investments and were included in short-term investments on the condensed consolidated balance sheets:

 

 

 

March 31, 2021

 

(in thousands)

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

U.S. government treasury securities

 

 

168,329

 

 

 

18

 

 

 

 

 

 

168,347

 

Totals

 

$

168,329

 

 

$

18

 

 

$

 

 

$

168,347

 

 

 

 

December 31, 2020

 

(in thousands)

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

U.S. government treasury securities

 

$

233,687

 

 

 

 

 

$

(24

)

 

$

233,663

 

Totals

 

$

233,687

 

 

$

0

 

 

$

(24

)

 

$

233,663

 

 

Certain short-term debt securities with original maturities of less than 90 days are included in cash and cash equivalents on the condensed consolidated balance sheets and are not included in the tables above. At March 31, 2021 and December 31, 2020, all investments had contractual maturities within one year.

4. Fair Value Measurements

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis:

 

 

 

March 31, 2021

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market fund

 

$

114,896

 

 

 

 

 

 

 

 

 

 

$

114,896

 

U.S. government treasury securities

 

$

39,999

 

 

 

 

 

 

 

 

 

 

$

39,999

 

Totals

 

$

154,895

 

 

$

 

 

$

 

 

$

154,895

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government treasury securities

 

$

168,347

 

 

 

 

 

 

 

 

 

 

$

168,347

 

Totals

 

$

168,347

 

 

$

 

 

$

 

 

$

168,347

 

 

 

 

December 31, 2020

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market fund

 

$

55,505

 

 

$

 

 

$

 

 

$

55,505

 

U.S. government treasury securities

 

 

39,998

 

 

 

 

 

 

 

 

 

39,998

 

Totals

 

$

95,503

 

 

$

 

 

$

 

 

$

95,503

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government treasury securities

 

$

233,663

 

 

$

 

 

$

 

 

$

233,663

 

Totals

 

$

233,663

 

 

$

 

 

$

 

 

$

233,663

 

 

During the three months ended March 31, 2021 and the year ended December 31, 2020, there were no transfers between levels. The Company classifies its money market fund and U.S. government treasury securities as Level 1 assets under the fair value hierarchy, as these assets have been valued using quoted market prices in active markets without any valuation adjustment.

The carrying amounts of prepaid expenses and other current assets, accounts payable, amount due to related party and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

12


 

5. Leases

Short-term leases

The Company leases an office space in Houston, Texas under an operating lease that expires in September 2021. The Company also sub-leases from ElevateBio a portion of its office space in Cambridge, Massachusetts on a month-to-month basis. Total expense recognized under short-term leases was $0.1 million (including approximately $17 thousand for non-lease costs such as utilities and cleaning), and $0.1 million (including approximately $15 thousand for non-lease costs such as utilities and cleaning) during the three months ended March 31, 2021 and 2020, respectively.

Operating leases

Operating lease liabilities and their corresponding right-of-use (“ROU”) assets are recorded based on the present value of future lease payments over the expected remaining lease term. The Company has elected to account for the lease and non-lease components together for existing classes of underlying assets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term. The Company uses an incremental borrowing rate based on information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate represents the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. The Company estimates this rate based on prevailing market conditions, comparable company and credit analysis, the impact of collateralization, and the term of each of the Company’s lease agreements.

In March 2019, the Company entered into an interim services agreement which ultimately led to a Development and Manufacturing Services Agreement (“DMS Agreement”) with a third-party supplier in July 2019. The DMS Agreement specifies a dedicated manufacturing suite for the manufacture of AlloVir’s products at the facility. The DMS Agreement will expire upon the later of: 1) two years from the Effective Date, or July 2021, and 2) the completion of services under all Statements of Work (SOWs). The term may be extended by agreement of the parties for additional two-year periods upon written notice to the supplier at least 30 days prior to expiration of the then-current term. The DMS Agreement (or any individual SOW) may be terminated earlier by AlloVir at any time by providing 190 days’ notice. The Company estimates that the exercise of one of the two-year renewal options is reasonably certain to occur, and that early termination is not reasonably certain to occur, providing for a total estimated lease term of 4.25 years expiring in July 2023. In March 2019, at the inception of this lease, the Company recorded a ROU asset and lease liability of $6.9 million. In September 2019, the Company executed a SOW for another dedicated manufacturing suite under the DMS Agreement with substantially the same terms as the original SOW. The SOW calls for a fixed monthly payment through July 2023, with additional two-year renewal options. The use of this manufacturing suite qualifies as a lease under ASC 842, as it includes an identified asset for exclusive use by the Company at its direction.

 

In May 2020, the Company entered into a new Development and Manufacturing Services Agreement (“2020 DMS Agreement”) with ElevateBio BaseCamp, Inc. and signed a statement of work (SOW) in November 2020. The DMS Agreement and related SOW contained an embedded lease for a dedicated manufacturing suite for the manufacture of AlloVir’s products at the facility because the Company directs how and for what purpose the suite is used for and obtains substantially all of the economic benefit of the suite. In exchange for this dedicated manufacturing suite, AlloVir will pay the supplier a monthly fixed suite utilization fee, and other related fixed costs, totaling $3.2 million over the two-year lease term (one year lease with a one-year renewal option), that covers costs associated with reserving capacity for AlloVir, as well as cleaning services, utilities, handling and maintenance of the manufacturing suite. The Company estimates that the exercise of the one-year renewal option is reasonably certain to occur, and the Company is reasonably certain that it will not exercise its early termination right, providing for a total estimated lease term of two years expiring in January 2023. As part of the arrangement, there were also variable costs for materials, non-fixed batch payments, storage, knowledge and tech transfer and other common area maintenance fees that were not included in the measurement of the lease. The lease of the facility was determined to be classified as an operating lease and commenced in February 2021, the point at which the new facility area was substantially complete and available for use by the Company. Accordingly, during the three months ended March 31, 2021, the Company recorded a ROU asset of $3.1 million and a lease liability of $2.5 million. The Company prepaid $0.6 million of the suite utilization fee, which was reclassified from prepaid expense to the ROU asset upon lease commencement.

13


 

Maturities of operating lease liabilities at March 31, 2021 are as follows (in thousands):

 

2021 (remaining 9 months)

 

$

4,020

 

2022

 

 

4,560

 

2023

 

 

2,175

 

Total lease payments

 

 

10,755

 

Less: interest (3.40% - 5.75%)

 

 

(558

)

Total lease liability

 

$

10,197

 

Lease liability – current

 

$

4,785

 

Lease liability – long-term

 

$

5,412

 

 

 

Total lease costs were $1.3 million and $1.0 million for the three months ended March 31, 2021 and 2020, respectively. Cash paid for operating leases was $1.1 million and $1.2 million for the three months ended March 31, 2021 and 2020, respectively. The Company’s total variable non-lease costs, such as materials, non-fixed batch payments, storage, knowledge and tech transfer and other common area maintenance fees, related to the operating leases was $0.9 million and $0.8 million for the three months ended March 31, 2021 and 2020, respectively. The weighted average remaining lease term is 2.22 years at March 31, 2021. The weighted average discount rate is 4.76% at March 31, 2021.

6. Accrued Expenses

Accrued expenses consisted of the following:

 

(in thousands)

 

March 31,

2021

 

 

December 31,

2020

 

Employee compensation and benefits

 

$

1,296

 

 

$

3,314

 

Professional fees

 

 

864

 

 

 

696

 

Research and development

 

 

5,490

 

 

 

3,347

 

Other

 

 

229

 

 

 

173

 

Total accrued expenses

 

$

7,879

 

 

$

7,530

 

 

7. Sponsored Research, Collaboration and License Agreements

Amended and Restated Exclusive License Agreement with BCM

In June 2017, the Company signed a License Agreement (the “License Agreement”) with BCM, whereby the Company acquired a royalty-bearing, worldwide, exclusive license to BCM’s rights in Subject Technology and related patent rights in the field of viral infection. In May 2020, the Company amended and restated the License Agreement (the “A&R License Agreement”), pursuant to which the Company obtained (a) an exclusive worldwide license, with the right to sublicense, under certain patent rights and other intellectual property rights of BCM, to make, have made, use, market, sell, offer to sell, lease, import and export products in a particular field, except that such license is non-exclusive within a particular subfield, and in addition with respect to certain patent rights such license is limited to two particular subfields, and (b) an exclusive, worldwide sublicense, with the right to further sublicense, under all patent rights and other intellectual property rights that are exclusively licensed to BCM by a certain third party licensor, to make, have made, use, market, sell, offer to sell, lease, import and export products in the same field. The Company’s rights are subject to the rights of the U.S. government and certain rights retained by BCM.

Unless earlier terminated, the A&R License Agreement will expire on a country-by-country basis with respect to a product upon the later of (a) the expiration of the last to expire valid claim of a patent or patent application covering such product in such country or (b) 10 years after the first commercial sale of such product in such country. The Company may terminate the A&R License Agreement in its entirety at any time for convenience upon a certain number of days’ written notice. BCM may terminate the A&R License Agreement in its entirety for the Company’s uncured material default.

BCM maintains control of all filing, prosecution and maintenance of its patent rights licensed by the Company, and the Company is responsible for all related costs and expenses during the term of the agreement. The Company also reimbursed BCM for costs and expenses (including reasonable legal fees and expenses) incurred prior to the effective date of the agreement with respect to the filing, prosecution and maintenance of the patent rights licensed by the Company. If BCM licenses the patent rights licensed by the Company to third parties for additional fields of use, the Company’s responsibility for patent related costs and expenses will be reduced on a pro-rata basis.

14


 

Under the A&R License Agreement, the Company must use commercially reasonable efforts to develop and commercialize one or more products in certain countries. As partial consideration for the rights conveyed by BCM under the original agreement executed in June 2017, the Company paid BCM a non-refundable license fee of $250,000. During the term of the A&R License Agreement, the Company is obligated to pay BCM a non-refundable annual license maintenance fee, but beginning with the fifth year after the original agreement date, license maintenance fees are fully creditable against royalty revenue due in the applicable year. The Company is required to pay certain milestone payments upon the achievement of specified clinical, regulatory, and sales milestones. In the event that the Company is able to successfully develop, launch and commercialize a product under the A&R License Agreement, total milestone payments could exceed $40.0 million. BCM is also eligible to receive tiered royalties at percentage rates ranging from less than 1% to the low single-digits, on net sales of any products that are commercialized by the Company or its sublicensees that incorporate, utilize or are made with the use of, the intellectual property licensed by the Company. To the extent the Company sublicenses its license rights under the A&R License Agreement, BCM would be eligible to receive tiered sublicense income at percentage rates in the mid-single to low double-digits.

In November 2020, the Company also entered into the First Amendment (the “License Amendment”) to the A&R License Agreement. Under the License Amendment, the Company assumed responsibility from BCM for the filing, prosecution and maintenance of the patent rights licensed by the Company from BCM under the A&R License Agreement that are in common with the License Agreement. Further, BCM also transferred to the Company the right of enforcement against third parties for any suspected infringement of any claims in such patent rights or misuse, misappropriation, theft or breach of confidence of other proprietary rights.

Exclusive License Agreement with BCM

In November 2020, the Company signed a second License Agreement (the “Second License Agreement) with BCM, whereby the Company acquired a royalty-bearing, worldwide, exclusive license to BCM’s rights in Subject Technology and related patent rights outside the field of viral infection (all fields other than those covered by the A&R License Agreement).

Unless earlier terminated, the Second License Agreement will expire on a country-by-country basis with respect to a product upon the later of (a) the expiration of the last to expire valid claim of a patent or patent application covering such product in such country or (b) 10 years after the first commercial sale of such product in such country, provided that the Second License Agreement shall not expire later than March 25, 2040. The Company may terminate the Second License Agreement in its entirety at any time for convenience upon a certain number of days’ written notice. BCM may terminate the Second License Agreement in its entirety for the Company’s uncured material default.

Under the Second License Agreement, BCM transferred to the Company control of all filing, prosecution and maintenance of the patent rights licensed by the Company, and the Company is responsible for all related costs and expenses during the term of the Second License Agreement. BCM also transferred to the Company the right of enforcement against third parties for any suspected infringement of any claims in the patent rights or misuse, misappropriation, theft or breach of confidence of other proprietary rights. The Company also reimbursed BCM for costs and expenses (including reasonable legal fees and expenses) incurred prior to the effective date of the Second License Agreement with respect to the filing, prosecution and maintenance of the patent rights licensed by the Company, to the extent not already paid by the Company under the A&R License Agreement.

Under the Second License Agreement, the Company must use commercially reasonable efforts to develop and commercialize one or more products in certain countries. As partial consideration for the rights conveyed by BCM under the Second License Agreement, the Company paid BCM a non-refundable license fee of $125,000. During the term of the Second License Agreement, the Company is obligated to pay BCM a non-refundable annual license maintenance fee of (a) $20,000 for the first through fourth anniversary of the effective date of the Second License Agreement, and (b) $40,000 for the fifth anniversary of the effective date and continuing thereafter, but beginning with the fifth year, license maintenance fees are fully creditable against royalty revenue due in the applicable year. The Company is required to pay certain milestone payments upon the achievement of specified clinical, regulatory, and sales milestones. In the event that the Company is able to successfully develop, launch and commercialize multiple products under the Second License Agreement, total milestone payments could exceed $30.0 million. BCM is also eligible to receive tiered royalties at percentage rates ranging from less than 1% to the low single-digits, on net sales of any products that are commercialized by the Company or its sublicensees that incorporate, utilize or are made with the use of, the intellectual property licensed by the Company. To the extent the Company sublicenses its license rights under the Second License Agreement, BCM would be eligible to receive tiered sublicense income at percentage rates in the mid-single to low double-digits.

Sponsored Research Agreement with BCM

In June 2019, the Company entered into a sponsored research agreement (“SRA-2”) with BCM, under which the Company agreed to pay BCM for performing certain research activities related to virus specific T-cell manufacturing for a one-year period, renewable for an additional one-year term upon written consent of both parties. SRA-2 requires the Company to make payments to BCM totaling $1.0 million, payable in four equal installments. SRA-2 was amended in March 2020 to include the discovery and development of allogeneic, off-the-shelf, virus specific T-cell therapies to combat SARS-CoV-2, the virus that causes COVID-19. In June 2020, a second amendment was entered into resulting in a no cost extension through November 30, 2020, upon which the agreement terminated.

15


 

Collaboration Agreement with BCM

In November 2020, the Company also entered into a Research Collaboration Agreement (the “Research Agreement”) with BCM, under which the Company agreed to pay BCM for performing certain research activities under the direction of Dr. Ann Leen commencing on January 1, 2021 and continuing for a three-year period thereafter. The Research Agreement requires the Company to make payments to BCM totaling approximately $2.0 million per year, for a total of approximately $6.0 million over the term of the Research Agreement.

Collectively under the agreements above and for services provided by BCM the Company paid $0.9 million and $0.4 million during the three months ended March 31, 2021 and 2020, respectively. These costs are classified in research and development expense in the condensed consolidated statements of operations and comprehensive loss.

CPRIT Grant

In August 2017, the Company was awarded a $9.0 million grant (the “CPRIT Grant”) from the Cancer Research and Prevention Institute of Texas (“CPRIT”) to perform a phase IIB clinical trial to establish the safety and effectiveness of Viralym-M, in adults and children with a common, very severe virus infection (BK Virus) after stem cell transplant. The grant period was three years beginning September 1, 2017 through August 31, 2020. This grant had a matching requirement where the Company was obligated to match 50% of the grant funds used on the project. In addition, the grant included other compliance requirements including the obligation for the Company to operate with a principal place of business in Texas. There were no costs incurred to obtain or fulfill the contract. In November 2019, the Company provided CPRIT with written notice of its intent to terminate the grant. In December 2019, the Company returned $2.6 million of grant funds received, including interest relating to these funds in the amount of $0.1 million, and decreased its deferred revenue balance to zero. The Company received acknowledgment of the termination from CPRIT in January 2020. The CPRIT Grant also required that the Company grant CPRIT a non-commercial license to technology developed under the grant and pay CPRIT a share of revenue on sales of commercial products developed using CPRIT funds equal to low single digits of revenue until such time as CPRIT has been paid an aggregate amount equal to 400% of the grant award proceeds. No royalty payments were made under this license agreement during the three months ended March 31, 2021 and 2020, respectively.

 

8. Funding Arrangements

SBIR Grant

In June 2017, the Company was awarded a Small Business Innovation Research (“SBIR”) grant by the National Institute of Health (“NIH”) in the amount of $3.0 million. This grant was effective from September 15, 2017 to June 30, 2020 and in April 2020, the Company received an extension through June 30, 2021. The grant is funded on an ongoing basis based on periodic reports of qualifying expenditures reported by the Company to NIH. Under this grant, the Company received proceeds of $0 during the three months ended March 31, 2021 and 2020, respectively. The Company recognized income of $0 and approximately $48,000 on expenses incurred during the three months ended March 31, 2021 and 2020, respectively. At December 31, 2020, the Company had received the full amount awarded under the SBIR grant.

The SBIR grant does not fall within the scope of ASC 606 as NIH does not meet the definition of a customer, and the grant from NIH was given for the benefit of public health rather than for monetary compensation. Accordingly, funding received under this grant is recognized in “Other income (loss), net” in the condensed consolidated statements of operations and comprehensive loss.

9. Stockholder’s Equity

On August 3, 2020, in connection with the closing of the Company’s IPO, the Company filed its amended and restated certificate of incorporation, which authorizes the Company to issue up to 10,000,000 shares of preferred stock, $0.0001 par value per share. There are no shares of preferred stock issued or outstanding at March 31, 2021.

At March 31, 2021 and December 31, 2020, the Company’s amended and restated certificate of incorporation authorized the Company to issue 150,000,000 shares of common stock at a par value of $0.0001 per share. In conjunction with the Company's IPO closing on August 3, 2020, the Company issued and sold 18,687,500 shares of its common stock, including 2,437,500 shares pursuant to the full exercise of the underwriters' option to purchase additional shares, at a public offering price of $17.00 per share, for aggregate net proceeds of $292.0 million after deducting underwriting discounts and commissions and offering costs. In connection with the Company’s IPO, all outstanding shares of preferred stock converted into 39,859,139 shares of common stock.

The following is a summary of the rights and privileges of the holders of the Company’s common stock at March 31, 2021 and December 31, 2020:

16


 

Voting Rights

 

The holders of the common stock are entitled to one vote for each share of common stock held at all meetings of stockholders (and written actions in lieu of meetings), and there are not any cumulative voting rights. The number of authorized shares of common stock may be increased or decreased by the affirmative vote of the holders of shares of capital stock of the Company; however, the issuance of common stock may be subject to the vote of the holders of one or more series of preferred stock that may be required by terms of the Third Amended and Restated Certificate of Incorporation.

Dividends

 

Subject to preferences that may be applicable to any then-outstanding preferred stock, holders of common stock are entitled to receive ratably those dividends, if any, as may be declared from time to time by the Board out of legally available funds. At March 31, 2021 and December 31, 2020, no cash dividends have been declared or paid.

 

Liquidation Preference

 

In the event of a liquidation, dissolution or winding up, holders of common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all debts and other liabilities and the satisfaction of any liquidation preference granted to the then-outstanding shares of preferred stock.

 

Rights and Preferences

 

Holders of common stock have no preemptive, conversion or subscription rights and there are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that the Company may designate in the future.

The Company has reserved shares of common stock for issuance as follows:

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Unvested restricted stock

 

 

3,519,753

 

 

 

3,410,979

 

Options to purchase common stock

 

 

5,145,047

 

 

 

3,972,909

 

Stock available for grant under the 2020 Stock Option and Grant Plan

 

 

5,350,553

 

 

 

3,895,961

 

Total

 

 

14,015,353

 

 

 

11,279,849

 

 

10. Stock-Based Compensation

2018 Equity Incentive Plan

The Company’s 2018 Plan provided for the Company to issue restricted stock, restricted stock units, incentive stock options, and non-statutory stock options and other stock-based awards to employees, officers, members of the Board, consultants and advisors of the Company. The 2018 Plan was most recently amended in July 2020. The awards granted under this plan generally vest over a four-year period and have a 10-year contractual term.    

At March 31, 2021, the Company had granted 6,715,415 shares of common stock under the 2018 Plan, including an aggregate of 98,643 shares of common stock issuable upon the exercise of outstanding options under the 2018 Plan. Of the awards granted, none have been forfeited or cancelled during the three months ended March 31, 2021 No shares remained available for future issuance under the 2018 Plan. Any options or awards outstanding under the 2018 Plan remain outstanding and effective.  

2020 Stock Option and Grant Plan

On July 2, 2020, the Company’s Board of Directors adopted and in July 2020 the stockholders approved the 2020 Stock Option and Grant Plan (the “2020 Plan”) which became effective on July 28, 2020, the date immediately prior to the date on which the registration statement related to the IPO was declared effective, and as a result no further awards will be made under the 2018 Plan thereafter. Initially, the aggregate number of shares of our common stock that may be issued pursuant to stock awards under the 2020 Plan was 8,008,734 shares. The number of shares of our common stock reserved for issuance under the 2020 Plan shall be cumulatively increased on January 1, 2021 and each January 1 thereafter by 5% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year or a lesser number of shares determined by our board of directors. Unless our board of directors elects not to increase the number of shares available for future grant each year, our stockholders may experience additional dilution, which could cause our stock price to fall. Accordingly, on January 1, 2021, 3,255,343 shares were added to the number of available shares under the 2020 Plan. The awards granted under this plan generally vest over a four-year period and have a 10-year contractual term. 

17


 

At March 31, 2021, there were an aggregate of 5,085,404 shares of common stock issuable upon the exercise of outstanding options under the 2020 Plan and 886,620 shares of restricted common stock granted under the 2020 Plan. Additionally, there were an aggregate of 5,350,553 shares reserved for future issuance under the 2020 Plan.

Restricted Common Stock

The following table summarizes restricted common stock activity for the three months ended March 31, 2021:

 

 

 

Shares

 

 

Weighted

Average

Grant Date

Fair Value

 

Unvested at January 1, 2021

 

 

3,410,979

 

 

$

3.55

 

Granted

 

 

635,613

 

 

 

42.32

 

Forfeited

 

 

(7,000

)

 

 

36.80

 

Vested

 

 

(519,839

)

 

 

1.86

 

Unvested at March 31, 2021

 

 

3,519,753

 

 

$

10.74

 

 

  At March 31, 2021, there was $34.8 million of unrecognized stock-based compensation cost related to the restricted stock, which is expected to be recognized over a weighted average period of 3.53 years.

Stock Options

The following table summarizes stock option activity (in thousands, except share and per share data):

 

 

 

Shares

 

 

Weighted

Average

Exercise

Price

 

 

Weighted

Average

Contractual

Life (in years)

 

 

Aggregate

Intrinsic

Value

 

Options outstanding at January 1, 2021

 

 

3,972,909

 

 

$

17.84

 

 

 

9.6

 

 

$

81,822

 

Granted

 

 

1,186,138

 

 

 

42.30

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(14,000

)

 

 

36.80

 

 

 

 

 

 

 

Options outstanding at March 31, 2021

 

 

5,145,047

 

 

$

23.43

 

 

 

9.4

 

 

$

24,616

 

Options vested and exercisable at March 31, 2021

 

 

28,009

 

 

$

6.76

 

 

 

8.8

 

 

$

466

 

 

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the common stock as of the end of the period. 

The weighted-average grant date fair value of the Company’s stock options granted during the three months ended March 31, 2021 was $32.39. At March 31, 2021, there was $80.3 million of unrecognized stock-based compensation expense related to unvested stock options, which is being recognized over a period of 3.50 years.

The fair value was estimated on the date of grant using the Black Scholes option-pricing model, with the following weighted-average assumptions:

 

 

 

Three Months Ended

March 31, 2021

 

Expected term (in years)

 

 

6.10

 

Expected volatility

 

 

95

%

Risk-free interest rate

 

 

0.64

%

Expected dividend yield

 

 

 

Fair value of common stock

 

$

42.30

 

 

18


 

 

Stock-Based Compensation Expense

Stock-based compensation expense was as follows:

 

 

 

Three Months Ended

March 31,

 

(in thousands)

 

2021

 

 

2020

 

Research and development

 

$

3,311

 

 

$

214

 

General and administrative

 

 

4,792

 

 

 

432

 

Total stock-based compensation expense

 

$

8,103

 

 

$

646

 

 

2020 Employee Stock Purchase Plan

In July 2020, the 2020 Employee Stock Purchase Plan (the “2020 ESPP”) was also adopted by the Board of Directors and approved by the stockholders. The purpose of the 2020 ESPP is to provide eligible employees of the Company and other designated companies, with opportunities to purchase shares of the Company’s common stock, par value $0.0001 per share. 611,354 shares of common stock in the aggregate have been approved and reserved for this purpose, plus on January 1, 2021 and each January 1 thereafter until January 1, 2030, the number of shares of common stock reserved and available for issuance under the Plan shall be cumulatively increased by the least of (i) 1,222,707 shares of common stock, (ii) 1% of the number of shares of common stock issued and outstanding on the immediately preceding December 31, and (iii) such number of shares of common stock as determined by the Administrator. The Board of Directors elected not to increase the number of available shares as of January 1, 2021.

 

11. Income Taxes

The Company’s income tax provision is computed based on the federal statutory rate and the average state statutory rates, net of the related federal benefit. For the three months ended March 31, 2021 and 2020, the Company did not record a current or deferred income tax expense or benefit due to current and historical losses incurred by the Company. The Company’s losses before income taxes consist solely of losses from domestic operations.

The Company’s estimate of the realizability of the deferred tax asset is dependent on estimates of projected future levels of taxable income. In analyzing future taxable income levels, the Company considered all evidence currently available, both positive and negative.

12. Net Loss per Share

The following table summarizes the computation of basic and diluted net loss per share attributable to common stockholders of the Company:

 

 

 

Three Months Ended

March 31,

 

(in thousands, except share and per share data)

 

2021

 

 

2020

 

Numerator:

 

 

 

 

 

 

 

 

Net loss – basic and diluted

 

$

(30,923

)

 

$

(9,339

)

Denominator:

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding – basic and diluted

 

 

62,193,734

 

 

 

2,215,958

 

Net loss per share – basic and diluted

 

$

(0.50

)

 

$

(4.21

)

 

19