Sangamo Therapeutics, Inc: Form 10-Q for the period ended Jun 30, 2023

The discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains trend analysis, estimates and other forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements include, without limitation, statements containing the words “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “seeks,” “should,” “will,” and other words of similar import or the negative of those terms or expressions. Such forward-looking statements are subject to known and unknown risks, uncertainties, estimates and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Actual results could differ materially from those set forth in such forward-looking statements as a result of, but not limited to, the “Risk Factors” described in Part I, Item 1A our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on February 23, 2023, or the 2022 Annual Report, as supplemented by the risks described under “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q. You should also read the following discussion and analysis in conjunction with our Condensed Consolidated Financial Statements and accompanying notes included in this Quarterly Report and the Consolidated Financial Statements and accompanying notes thereto included in our 2022 Annual Report.

Overview

We are a clinical-stage genomic medicine company committed to translating ground-breaking science into medicines that transform the lives of patients and families afflicted with serious diseases. We plan to deliver on this mission through development of our clinical and preclinical product candidates leveraging our novel science and our in-house manufacturing capabilities.

Corporate Updates

• In July 2023, we entered into a research evaluation and option agreement with Prevail Therapeutics, or Prevail, a wholly owned subsidiary of Eli Lilly and Company, which granted Prevail rights to evaluate certain proprietary engineered cerebrospinal fluid, or CSF, -administered adeno-associated virus, or AAV, capsids developed by us in exchange for an upfront payment. Under the agreement, Prevail has an option to obtain an exclusive license to use the capsids for certain neurological targets. If Prevail exercises its option for all targets, and a Prevail product is approved in both the United States and Europe for each target, we would be eligible to receive exercise fees and developmental milestones of up to approximately $415.0 million and commercial milestones of up to approximately $775.0 million, in addition to tiered royalties based on net sales of Prevail products incorporating the licensed capsids. If Prevail exercises its option for a target, Prevail would lead and fund all further research, development, manufacturing and commercialization of Prevail products incorporating the licensed capsids for that target.
• In July 2023, we entered into a research evaluation, option and license agreement with Chroma Medicine, or Chroma, to develop epigenetic medicines leveraging our zinc finger proteins, or ZFPs, for sequence-specific DNA recognition of targets outside of the central nervous system, in exchange for an upfront payment. If Chroma exercises its option for any or all targets following a research evaluation period, we would be eligible to receive an option exercise payment, in addition to potential development and commercial milestone payments, as well as tiered royalties on any Chroma products incorporating the licensed ZFPs. If Chroma exercises its option for a target, Chroma would lead and fund all further research, development, manufacturing, and commercialization of Chroma products incorporating the licensed Sangamo ZFPs for that target.

Clinical Programs Updates

Fabry Disease

• Since our last update on April 26, 2023, an additional two patients have been dosed in the Phase 1/2 STAAR study of isaralgagene civaparvovec, our investigational gene therapy for the treatment of Fabry disease, resulting in a total of 22 patients dosed to date. A total of 22 sites are now active and recruiting. Progress in the study continues with additional male and female patients currently in screening.
• In May 2023, we received U.S. FDA Fast Track Designation for isaralgagene civaparvovec. U.S. FDA Fast Track Designation aims to facilitate the development and expedite the review of new potential therapeutics that are intended to treat serious or life-threatening conditions and that demonstrate the potential to address unmet medical needs. Companies granted this designation are given the opportunity for more frequent interactions with the FDA. These clinical programs may also be eligible to apply for Accelerated Approval and Priority Review if relevant criteria are met. The FDA has previously granted Orphan Drug Designation to isaralgagene civaparvovec.
• In August 2023, we received productive written feedback from the FDA on our proposed Phase 3 trial strategy that seeks to maximize the potential patient population for isaralgagene civaparvovec using two studies. Based on feedback received from the FDA to date, we do not expect that a head-to-head comparison with enzyme replacement therapy would be required in the study of naïve and pseudo-naïve patients.
• We are currently seeking additional regulatory feedback from the FDA, and we expect to submit a proposed Phase 3 trial protocol to the FDA as early as the end of 2023.

Renal Transplant Rejection

• The Phase 1/2 STEADFAST study evaluating TX200, our wholly-owned autologous CAR-Treg cell therapy candidate for renal transplant rejection, continues to progress. The product candidate continues to be generally well tolerated in all three patients dosed to date.
• A total of six study sites in four countries are now actively enrolling patients with additional patients in pre-screening for potential enrollment in the study.
• The Safety Monitoring Committee endorsed moving to cohort 2 after reviewing the safety data from cohort 1.
• Manufacturing of the dose has been completed for the first patient in the second cohort, who recently received a kidney transplant. Dosing of this fourth patient is expected to occur in the third quarter of 2023.
• We continue to explore opportunities to accelerate dose escalation with regulators. Scientific advice has been received and the protocol amendment to accelerate dose escalation has been submitted to regulatory authorities. We have recently received one country full approval of the protocol amendment and other approvals have been received. We plan to share initial data from this study by the end of 2023.

Hemophilia A

• The Phase 3 AFFINE trial of giroctocogene fitelparvovec, an investigational gene therapy we are developing with Pfizer Inc., or Pfizer, for patients with moderately severe to severe hemophilia A, continues to progress following the dosing of all patients required to support the primary analysis.
• A pivotal readout is expected in the middle of 2024, with Pfizer anticipating submitting a biologics license application and a marketing authorization application in the second half of 2024 if the pivotal readout is supportive.

Preclinical Programs

Our preclinical development is focused in two innovative priority areas: (i) epigenetic regulation for neurological diseases and (ii) CAR-Treg cell therapies for autoimmune disorders. Other indications for our preclinical programs include inflammatory bowel disease, multiple sclerosis, cancer, amyotrophic lateral sclerosis, and Huntington’s disease, some of which are the subject of collaboration agreements.

We made a strategic decision earlier this year to increase focus on certain of our preclinical programs as one of the key areas of our business, including Nav1.7 and prion disease as the cornerstones to the neurology epigenetic regulation portfolio. The Nav1.7 pathway to potentially treat chronic neuropathic pain has been identified as our flagship program in our newly prioritized wholly owned neurology pipeline, with an investigational new drug application, or IND, submission expected in 2024. The first data from this program was presented in a platform presentation at the American Society for Cell and Gene Therapy (ASGCT) 26th Annual Meeting in May 2023. The data demonstrated potent and specific repression of Nav1.7 expression without impacting other sodium channels and that the zinc finger repressors, or ZF-Rs, were well tolerated in nonhuman primates. We have identified the human-specific lead candidate ZF-R and have found no off-target activity.

We also presented updated animal model data from our wholly owned prion disease program at ASGCT, showing that Sangamo’s ZF-Rs significantly reduce expression of the prion protein in the brain, extend lifespan and limit formation of toxic prion aggregates. In June 2023, we entered into a license agreement with Voyager Therapeutics, or Voyager, for a capsid that we expect to use in our prion disease program. Under the terms of the agreement, we received a non-exclusive license to combine an intravenously, or IV-administered Voyager capsid with a Sangamo ZF-R designed to treat prion disease. Voyager’s IV-administered capsid has been shown in animal models to achieve the specific central nervous system coverage we believe is required for this indication. We are solely responsible for leading and funding the research, development and manufacture and commercialization of any Sangamo product candidates using the Voyager capsid. Voyager is eligible to receive certain license fees and royalties on potential commercial sales of any Sangamo products using the Voyager capsid, and, in the event the prion program is out-licensed by us, a portion of all licensing revenues received with respect to this program. We continue to expect to submit an IND for a product candidate treating prion disease in 2025.

Identification and selection of our own novel engineered AAV capsids enhanced for central nervous system delivery continues to progress. Data presented at ASGCT described the identification of multiple novel AAV capsids exhibiting characteristics consistent with enhanced blood brain barrier transit.

Collaborations

Our multiple collaborations with biopharmaceutical companies bring us important financial and strategic benefits and reinforce the potential of our research and development efforts and our zinc finger, or ZF, technology platform. They leverage our collaborators’ therapeutic and clinical expertise and commercial resources with the goal of bringing our medicines more rapidly to patients. We believe these collaborations reflect the value of our ZF technology platform and will potentially expand the addressable markets of our product candidates. To date, we have received approximately $817.0 million in upfront licensing fees, milestone payments and proceeds from sale of our common stock to collaborators and have the opportunity to earn up to $2.0 billion in potential future milestone payments and exercise fees from our active collaborations and research evaluation and option agreements, assuming all options are exercised and targets are selected, in addition to potential product royalties.

In-House Manufacturing

We currently operate an AAV manufacturing facility in Brisbane, California and a cell therapy manufacturing facility in Valbonne, France. Our manufacturing strategy is to provide greater flexibility, quality and control by building a balanced and necessary capacity achieved through our in-house manufacturing and contract manufacturing organization, or CMO, partnerships, investing in manufacturing processes and analytics and developing a strong supply chain.

For additional information regarding our business, see “Business” in Part I, Item 1 of the 2022 Annual Report.

Macroeconomic Conditions

Our business and operations and those of our collaborators may continue to be affected by financial instability and a general decline in economic conditions in the United States and other countries caused by political instability and conflict, including the ongoing conflict between Russia and Ukraine, and economic or financial challenges caused by current and potential future bank failures or by general health crises such as the COVID-19 pandemic, which have led to market disruptions, including significant volatility in commodity prices, credit and capital markets instability, including disruptions in access to bank deposits and lending commitments, supply chain interruptions, rising interest rates and global inflationary pressures. These macroeconomic factors could materially and adversely affect our ability to continue to operate as a going concern and other could otherwise have a material adverse effect on our business, operations, operating results and financial condition as well as the price of our common stock. For example, our ability to raise additional capital may be adversely impacted by these macroeconomic factors and we cannot be certain that we will be able to obtain financing on terms acceptable to us, or at all. Our failure to obtain adequate and timely funding will adversely affect our ability to continue as a going concern and our ability to develop our technology and products candidates.

See the section titled “Risk Factors” included in Part I, Item 1A of the 2022 Annual Report for additional information on risks and uncertainties related to the COVID-19 pandemic.

Certain Components of Results of Operations

Our revenues have consisted primarily of revenues from upfront licensing fees, reimbursements for research services, milestone achievements and research grant funding. We expect revenues to continue to fluctuate from period to period and there can be no assurance that new collaborations or partner reimbursements will continue beyond their initial terms or that we are able to meet the milestones specified in these agreements.

We have incurred net losses since inception and expect to incur losses for at least the next several years as we continue our research and development activities. To date, we have funded our operations primarily through the issuance of equity securities and revenues from collaborations and research grants.

We expect to continue to devote substantial resources to research and development in the future and expect research and development expenses to increase in the next several years if we are successful in advancing our product candidates from research stage through clinical trials. Pursuant to the terms of our collaboration agreement with Kite Pharma Inc., or Kite, and our termination and transition agreement with Sanofi S.A., or Sanofi, certain expenses related to research and development activities may be reimbursed to us. Any reimbursement funds received from Kite through the end of the collaboration agreement will be recognized as revenue as the related costs are incurred and collection is reasonably assured. Any reimbursement funds to be received from Sanofi will decrease our research and development expense.

General and administrative expenses consist primarily of salaries and personnel related expenses for executive, finance and administrative personnel, stock-based compensation expense, professional fees, allocated facilities expenses, patent prosecution expenses and other general corporate expenses. As we continue to advance our product candidates into and through the clinic, we expect the growth of our business to require increased general and administrative expenses.

Critical Accounting Policies and Estimates

Our Condensed Consolidated Financial Statements and the related disclosures have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these Condensed Consolidated Financial Statements requires us to make estimates, assumptions and judgments that affect the reported amounts in our Condensed Consolidated Financial Statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be 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. Actual results may differ from these estimates under different assumptions or conditions. We believe the following policies to be the most critical to an understanding of our financial condition and results of operations because they require us to make estimates, assumptions and judgments about matters that are inherently uncertain.

We believe our critical accounting policies and estimates relating to revenue recognition and valuation of long-lived assets including goodwill and indefinite-lived intangible assets are the most significant estimates and assumptions used in the preparation of our Condensed Consolidated Financial Statements. See Note 1 – Organization, Basis of Presentation and Summary of Significant Accounting Policies in the accompanying notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

There have been no significant changes in our critical accounting policies and estimates during the three and six months ended June 30, 2023, as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7 of the 2022 Annual Report.

Results of Operations for the Three and Six Months Ended June 30, 2023 and 2022

Revenues

(in thousands, except percentage values)

(in thousands, except percentage values)

Revenues primarily consisted of amounts earned from our collaboration agreements. We anticipate revenues in the future will be derived primarily from our collaboration agreements. The terminations of our collaboration agreements with Biogen MA, Inc. and Biogen International GmbH, which we refer to together as Biogen, and Novartis Institutes for BioMedical Research, Inc., or Novartis, became effective in June 2023 following which we are not entitled to any further milestone payments or royalties from either Biogen or Novartis, nor does either Biogen or Novartis have any further obligations to develop or to reimburse the costs of any of the programs subject to the Biogen and Novartis collaborations.

The decrease of $22.5 million in revenues for the three months ended June 30, 2023, compared to the same period in 2022, was primarily attributed to decreases of $8.5 million and $7.8 million in revenue relating to our collaboration agreements with Novartis and Biogen, respectively, due to the termination of collaboration agreements in June 2023, a decrease of $5.1 million in revenue relating to our collaboration agreement with Kite, and a decrease of $1.8 million in revenue relating to our collaboration agreement with Sanofi, due to the termination of collaboration agreement in June 2022. These decreases were partially offset by an increase of $0.6 million in revenue relating to our license agreements with Sigma-Aldrich Corporation and Open Monoclonal Technology, Inc. (now Ligand Pharmaceuticals Inc.).

The increase of $107.2 million in revenues for the six months ended June 30, 2023, compared to the same period in 2022, was primarily attributed to:

• an increase of $113.3 million in revenue relating to our collaboration agreement with Biogen, primarily due to the impact of termination of the collaboration agreement, which resulted in an increase in the measure of proportional cumulative performance;
• an increase of $2.7 million in revenue relating to our license agreement with Sigma-Aldrich Corporation;
• an increase of $1.1 million in revenue relating to our license agreement with Open Monoclonal Technology, Inc. (now Ligand Pharmaceuticals Inc.); and
• an increase of $0.9 million in revenue relating to our collaboration agreement with Kite, primarily due to a reduction in the estimated future level of the research and development services and as a result, future project costs, which resulted in an adjustment to the measure of proportional cumulative performance.

These increases were partially offset by a decrease of $7.6 million in revenue relating to our collaboration agreement with Novartis and a decrease of $3.3 million in revenue relating to our collaboration agreement with Sanofi, due to the termination of such collaboration agreements in June 2023 and June 2022, respectively.

Operating expenses

(in thousands, except percentage values)

(in thousands, except percentage values)

Research and Development Expenses

Research and development expenses consisted primarily of compensation related expenses, including restructuring, stock-based compensation, laboratory supplies, preclinical and clinical studies, manufacturing clinical supply, contracted research, and allocated facilities and information technology expenses.

The increase of $3.0 million in research and development expenses for the three months ended June 30, 2023, compared to the same period in 2022, was primarily attributable to higher compensation and other personnel costs mainly due to restructuring-related charges, higher depreciation expense, and higher facilities and infrastructure-related costs as we advance our preclinical and clinical pipeline. The increases were partially offset by lower lab supply expenses primarily due to the termination of collaboration agreements with Biogen and Novartis, and reimbursement of certain research and development expenses by Sanofi. Stock-based compensation expense included in research and development expenses was $3.9 million and $4.6 million for the three months ended June 30, 2023 and 2022, respectively.

The increase of $7.7 million in research and development expenses for the six months ended June 30, 2023, compared to the same period in 2022, was primarily attributable to higher compensation and other personnel costs mainly due to restructuring-related charges, higher facilities, infrastructure and information technology costs, and depreciation expense as we advance our preclinical and clinical pipeline. Stock-based compensation expense included in research and development expenses was $8.8 million and $9.3 million for the six months ended June 30, 2023 and 2022, respectively.

We expect to continue to devote substantial resources to research and development in the future. While we anticipate that our research and development expenses will decrease in the near-term in connection with our restructuring of operations and corresponding reduction in workforce, or the Restructuring, we ultimately expect research and development expenses to increase in the next several years if we are successful in advancing our clinical programs and if we are able to progress our earlier stage product candidates into clinical trials.

The length of time required to complete our development programs and our development costs for those programs may be impacted by the scope and timing of enrollment in clinical trials for our product candidates, our decisions to pursue development programs in other therapeutic areas, whether we pursue development of our product candidates with a partner or collaborator or independently and our ability to secure the necessary funding to progress the development of our programs. For example, our product candidates are being developed in multiple therapeutic areas, and we do not yet know how many of those therapeutic areas we will continue to pursue. In this regard, in connection with the Restructuring, we have paused further development of certain preclinical programs following conclusion of collaborations with Biogen and Novartis. Furthermore, the scope and number of clinical trials required to obtain regulatory approval for each pursued therapeutic area is subject to the input of the applicable regulatory authorities, and we have not yet sought such input for all potential therapeutic areas that we may elect to pursue, and even after having given such input, applicable regulatory authorities may subsequently require additional clinical studies prior to granting regulatory approval based on new data generated by us or other companies, or for other reasons outside of our control. As a condition to any regulatory approval, we may also be subject to post-marketing development commitments, including additional clinical trial requirements. As a result of the uncertainties discussed above, we are unable to determine the duration of or complete costs associated with our development programs.

Our potential therapeutic products are subject to a lengthy and uncertain regulatory process that may not result in our receipt of any necessary regulatory approvals. Failure to receive the necessary regulatory approvals would prevent us from commercializing the product candidates affected. In addition, clinical trials of our product candidates may fail to demonstrate safety and efficacy, which could prevent or significantly delay regulatory approval. A discussion of the risks and uncertainties with respect to our research and development activities, including completing the development of our product candidates, and the consequences to our business, financial position and growth prospects can be found in “Risk Factors” in Part I, Item 1A of the 2022 Annual Report, as supplemented by the risks described under “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

General and Administrative Expenses

General and administrative expenses consist primarily of compensation related expenses including restructuring, stock-based compensation for executive, legal, finance and administrative personnel, professional fees, facilities and information technology expenses, and other general corporate expenses.

The increase of $0.9 million in general and administrative expenses for the three months ended June 30, 2023, compared to the same period in 2022, was primarily attributable to higher compensation and other personnel costs mainly due to restructuring-related charges. Stock-based compensation expense included in general and administrative expenses was $2.9 million and $3.3 million for the three months ended June 30, 2023 and 2022, respectively.

The increase of $4.1 million in general and administrative expenses for the six months ended June 30, 2023, compared to the same period in 2022, was primarily attributable to Biogen contract cost asset amortization primarily due to a change in estimate driven by a notification of termination of the collaboration agreement, which resulted in increase in the measure of proportional cumulative performance, higher compensation and other personnel costs mainly due to restructuring-related charges, and higher external professional service costs. Stock-based compensation expense included in general and administrative expenses was $6.3 million and $6.3 million for the six months ended June 30, 2023 and 2022, respectively.

While we anticipate that our general and administrative expenses will decrease modestly in the near-term in connection with the Restructuring, as we continue to build out our product portfolio and advance our product candidates into the clinic, we expect higher general and administrative expenses to support the growth of the business.

Impairment of Goodwill, Indefinite-lived Intangible Assets and Other Long-lived Assets

During the three and six months ended June 30, 2023, we recognized impairment charges of $51.3 million and $109.9 million, respectively. During the three months ended March 31, 2023, we experienced a sustained decline in our stock price and related market capitalization, our collaboration agreements with Biogen and Novartis terminated, and equity values in the biotechnology industry continued to decline. As a result of these factors, we concluded our goodwill and certain long-lived assets were impaired. Based on this analysis, we recognized a pre-tax goodwill impairment charge of $38.1 million and long-lived asset impairment charge of $20.4 million during the three months ended March 31, 2023.

During the three months ended June 30, 2023, we experienced a continued decline in our stock price and related market capitalization, we initiated actions including seeking external financing or deferral and reprioritization of certain research and development programs, and equity values in the biotechnology industry continued to decline. As a result, we concluded our indefinite-lived intangible assets were impaired due to reassessment of the fair value of the asset taking into consideration the factors discussed above. Based on this analysis, we recognized a pre-tax impairment charge of $51.3 million along with the income tax benefit from the reduction of the associated deferred tax liability of $6.3 million. For more information see Note 6 – Impairment of Goodwill, Indefinite-lived Intangible Assets and Other Long-lived Assets in the accompanying notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Interest and other income, net

Interest and other income, net was $2.8 million and $2.6 million for the three months ended June 30, 2023 and 2022, respectively. The increase of $0.2 million for the three months ended June 30, 2023, compared to the same period in 2022, was primarily driven by an increase of $1.7 million in interest income reflecting increases in market interest rates and an increase of $1.1 million related to fluctuations in foreign currency exchange rates. These increases were partially offset by a $2.6 million benefit received in 2022 from Employee Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act.

Interest and other income, net was $6.1 million and $4.0 million for the six months ended June 30, 2023 and 2022, respectively. The increase of $2.1 million for the six months ended June 30, 2023, compared to the same period in 2022, was primarily driven by an increase of $3.7 million in interest income reflecting increase in market interest rates and $1.8 million related to fluctuations in foreign currency exchange rates. These increases were partially offset by a $3.0 million benefit received in 2022 from Employee Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act and a decrease of $0.3 million in research tax credits.

Income tax (benefit) expense

Income tax benefit was $6.3 million and $6.1 million for the three and six months ended June 30, 2023, respectively, and the income tax expense was $0.1 million for the three and six months ended June 30, 2022. The increase for the three and six months ended June 30, 2023, compared to the same period in 2022, was primarily driven by the reduction of the deferred tax liability due to impairment of the associated indefinite-lived intangible assets.

Liquidity and Capital Resources

Liquidity

Since inception, we have incurred significant net losses, and we have funded our operations primarily through the issuance of equity securities, payments from corporate collaborators and strategic partners and research grants.

As of June 30, 2023, we had cash, cash equivalents, and marketable securities totaling $182.1 million, compared to $307.5 million as of December 31, 2022. Our most significant use of capital during the quarter was for employee compensation and external research and development expenses, such as manufacturing, clinical trials and preclinical activity related to our therapeutic programs. Our cash and investment balances are held in a variety of interest-bearing instruments, including U.S. government-sponsored entity debt securities, commercial paper securities, money market funds, corporate debt securities, asset-backed securities and certificates of deposit. Cash in excess of immediate requirements is invested in accordance with our investment policy with a view toward capital preservation and liquidity.

In August 2020, we entered into an Open Market Sale Agreement℠, or the sales agreement, with Jefferies LLC, providing for the sale of up to $150.0 million of our common stock from time to time in ‘at-the-market’ offerings under an existing shelf registration statement. In December 2022, we entered into Amendment No. 2 to the Open Market Sale Agreement℠, which increased the aggregate offering price under the sales agreement by an additional $175.0 million. Approximately $194.5 million remained available under the sales agreement as of June 30, 2023. During the three and six months ended June 30, 2023, we sold 4,286,831 and 8,249,261 shares of its common stock for net proceeds of approximately $5.4 million and $15.1 million respectively.

Under Accounting Standards Codification, or ASC, Topic 205-40, Presentation of Financial Statements—Going Concern, we have the responsibility to evaluate whether conditions and/or events could raise substantial doubt about our ability to meet our future financial obligations as they become due within twelve months after the date that the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q are issued. We initiated a number of cost reduction measures in the second quarter of 2023 including a reduction in force, reduction of our manufacturing and allogenic research footprints, reduction of new hires, and reduction in capital and ancillary expenditures. We have also identified several further potential actions that could be initiated in a timely manner to address our liquidity needs, as follows:

• Deferral and reprioritization of certain additional research and development programs that would involve reduced program and headcount spend;
• Further reduction in force intended to extend the cash runway necessary to fund operations;
• Realignment of operating infrastructure including closing or downsizing facilities;
• Reduction in ancillary expenses such as travel and recruitment expenses; and
• Further reduction in discretionary, non-critical capital and operating expenditures including personnel costs, additional equipment, lab improvements, efficiency projects, and business support spend.

We believe management’s plans, as described above, sufficiently alleviate the risk of substantial doubt about our ability to continue as a going concern for at least twelve months from the date that the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q are issued. We make assumptions about the probability that management's plans will be effectively implemented and alleviate substantial doubt and our ability to continue as a going concern. However, such assumptions are inherently uncertain and actual results could differ materially from those estimates. In this regard, we could use our available capital resources sooner than we currently expect and changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.

We will be required to raise substantial additional capital to fund our operations and support our research and development endeavors. In this regard, we are actively seeking substantial additional capital, including through public or private equity or debt financings, royalty financings or other sources, such as strategic collaborations. However, additional capital may not be available to us, on terms that are acceptable or at all. If adequate funds are not available to us on a timely basis, or at all, we will be required to take additional actions to address our liquidity needs, including additional cost reduction measures such as further reducing operating expenses and delaying, reducing the scope of, discontinuing or altering our research and development activities, which could have a material adverse effect on our business. While we expect a majority of the cash payments related to the Restructuring to be substantially completed in the third quarter of 2023, and the Restructuring to be complete by the end of the third quarter of 2024, we may also incur other charges or cash expenditures not currently contemplated due to events that may occur as a result of, or associated with, the Restructuring. In addition, we may not achieve the expected benefits of these cost reduction measures and other cost reduction plans on the anticipated timeline, or at all, which could otherwise accelerate our liquidity needs and could force us to further curtail or suspend our operations. Moreover, we rely in part on our collaboration partners to provide funding for and otherwise advance our preclinical and clinical programs. However, in June 2022, our collaboration agreement with Sanofi terminated, and in June 2023, our collaboration agreements with Biogen and Novartis terminated. While we may identify new collaboration partners who can progress some of the programs that were the subject of these collaborations, we may not be successful in doing so in a timely manner, on acceptable terms or at all, and we may otherwise fail to raise sufficient additional capital in order to progress these programs ourselves or we may determine that for internal resource allocation purposes or for other reasons to abandon development of these programs. In any event, we would require substantial additional funding in order to progress the programs that were the subject of these collaborations.

If we raise additional capital through public or private equity offerings, including sales pursuant to our at-the-market offering program with Jefferies LLC, the ownership interest of our existing stockholders will be diluted, and such dilution may be substantial, and the terms of any new equity securities may have a preference over, and include rights superior to, our common stock. If we raise additional capital through royalty financings or other collaborations, strategic alliances or licensing arrangements with third parties, we may need to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable. If we raise additional capital through debt financing, we may be subject to specified financial covenants or covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or pursuing certain transactions, any of which could restrict our ability to commercialize our product candidates or operate as a business.

Cash Flows

Operating activities

Net cash used in operating activities was $127.0 million for the six months ended June 30, 2023, primarily due to:

• net loss of $93.4 million, adjusted for non-cash goodwill, indefinite-lived intangible assets, and long-lived asset impairment charges of $109.9 million, other non-cash expenses related to stock-based compensation of $15.1 million, depreciation and amortization of $7.7 million, and amortization of operating lease right-of-use assets of $4.0 million, offset by income tax benefit of $6.4 million related to reversal of the deferred tax liability as a result of impairment on the associated indefinite-lived intangible assets and accretion of discount on marketable securities of $1.9 million; and
• decrease in deferred revenues of $154.3 million, mainly attributed to the impact of the termination related contract modification for our collaboration agreement with Biogen and a change in estimate for our collaboration agreement with Kite, a decrease in accrued compensation and employee benefits by $8.5 million, mainly attributed to bonus pay-outs, a decrease in accounts payable and other accrued liabilities by $3.1 million, and a decrease in lease liabilities by $2.5 million. These were partially offset by decrease in prepaid expenses and other assets by $5.5 million, and a decrease in accounts receivable by $1.0 million.

Net cash used in operating activities was $113.0 million for the six months ended June 30, 2022, primarily reflecting our net loss of $87.2 million, a decrease in deferred revenues of $43.8 million, a decrease in accrued compensation and employee benefits by $6.6 million, an increase in prepaid expenses and other assets by $5.0 million, and a decrease in lease liabilities by $2.1 million. These decreases were partially offset by $25.8 million of non-cash expenses related to stock-based compensation, depreciation and amortization, amortization of premium on marketable securities, and amortization of operating lease right-of-use assets, and a $5.8 million increase in accounts payable and other accrued liabilities.

Investing activities

Net cash provided by investing activities was $78.2 million for the six months ended June 30, 2023, related to maturities of marketable securities of $146.0 million, partially offset by purchases of marketable securities of $52.1 million, and purchases of property and equipment of $15.7 million.

Net cash provided by investing activities was $30.1 million for the six months ended June 30, 2022, related to maturities of marketable securities of $168.3 million, partially offset by purchases of marketable securities of $129.9 million, and purchases of property and equipment of $8.3 million.

Financing activities

Net cash provided by financing activities was $14.5 million for the six months ended June 30, 2023, mostly related to $15.1 million of proceeds from the at-the-market offering, net of offering expenses of $0.4 million, and proceeds from purchases of common stock under the employee stock purchase plan of $0.7 million, partially offset by taxes paid related to net share settlement of equity awards of $1.3 million.

Net cash provided in financing activities was $21.3 million for the six months ended June 30, 2022, mostly related to $22.5 million of proceeds from the at-the-market offering, net of offering expenses of $0.6 million, and proceeds from purchases of common stock under the employee stock purchase plan of $1.1 million, partially offset by taxes paid related to net share settlement of equity awards of $1.8 million.

Operating Capital and Capital Expenditure Requirements

We anticipate continuing to incur operating losses for at least the next several years and need to raise substantial additional capital. The effects of the current macroeconomic environment, including the effects of war in Ukraine, financial and liquidity challenges associated with current and potential future bank failures, inflation, climate change, rising interest rates and other economic uncertainty and volatility, has resulted and may continue to result in significant disruption of global financial markets, which could impair our ability to access capital on terms that are acceptable or at all, and in turn could negatively affect our liquidity and our ability to continue to operate as a going concern. Future capital requirements beyond the next 12 months will be substantial, and we need to raise substantial additional capital to fund the development, manufacturing and potential commercialization of our product candidates. In this regard, we are actively seeking substantial additional capital, including through public or private equity or debt financings, royalty financings or other sources, such as strategic collaborations. However, additional capital may not be available to us, on terms that are acceptable or at all. If adequate funds are not available to us on a timely basis, or at all, we will be required to take additional actions to address our liquidity needs, including additional cost reduction measures such as further reducing operating expenses and delaying, reducing the scope of, discontinuing or altering our research and development activities, which could have a material adverse effect on our business.

As we focus our efforts on proprietary human therapeutics, we will need to seek FDA approvals of our product candidates, a process that could cost in excess of hundreds of millions of dollars per product. If adequate funds are not available, or if the terms of potential funding sources are unfavorable, our business and our ability to advance our product candidate pipeline would be harmed. Our future capital requirements will depend on many forward-looking factors, including the following:

• the initiation, progress, timing and completion of clinical trials for our product candidates and potential product candidates;
• the outcome, timing and cost of regulatory approvals;
• the success of our collaboration agreements;
• delays that may be caused by changing regulatory requirements;
• the number of product candidates that we pursue;
• the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims;
• the timing and terms of future in-licensing and out-licensing transactions;
• the cost and timing of establishing sales, marketing, manufacturing and distribution capabilities;
• the cost of procuring clinical and commercial supplies of our product candidates;
• the extent to which we acquire or invest in businesses, products or technologies, including the costs associated with such acquisitions and investments; and
• the costs of potential disputes and litigation.

Contractual Obligations

Our future minimum contractual obligations as of December 31, 2022 were reported in the 2022 Annual Report. During the six months ended June 30, 2023, there have been no other material changes outside the ordinary course of our business from the contractual obligations previously disclosed in our 2022 Annual Report.

Our exposure to market risk relates to our cash, cash equivalents, and marketable securities. The goals of our investment policy are preservation of capital, fulfillment of liquidity needs and capturing a market rate of return based on our investment policy parameters and market conditions. We select investments that maximize interest income to the extent possible within these guidelines. To achieve our goals, we maintain a portfolio of cash equivalents and investments in securities of high credit quality and with varying maturities to match projected cash needs.

The securities in our investment portfolio are not leveraged and are classified as available-for-sale. The majority of these available-for-sale securities are short-term in nature and subject to minimal interest rate risk. Our investments currently consist of U.S. government-sponsored entity debt securities, commercial paper securities, corporate debt securities, asset-backed securities and certificates of deposit. Our investment policy, approved by our Board of Directors, limits the amount we may invest in any one type of investment issuer, thereby reducing credit risk concentrations. All investments are carried at market value, which approximates cost. We do not use derivative financial instruments in our investment portfolio. Our market risks at June 30, 2023 have not changed materially from those discussed in Item 7A of our 2022 Annual Report.

Foreign Currency Exchange Risk

We have operations in the United States as well as in Europe. The functional currency of each foreign subsidiary is the local currency. We are exposed to foreign currency risk, primarily through operations of our subsidiaries in Europe which conduct business primarily in Euros. We record gains and losses within our stockholders’ equity due to the translation of our subsidiaries’ financial statements into U.S. dollars. Our foreign currency exchange risk at June 30, 2023 has not changed materially from that discussed in Item 7A of our 2022 Annual Report.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision of our principal executive officer and principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of June 30, 2023. Based on that evaluation, as of June 30, 2023, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Inherent Limitations on Controls and Procedures

Our management, including the principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures and our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well designed and operated, can only provide reasonable assurances that the objectives of the control system are met. The design of a control system reflects resource constraints; the benefits of controls must be considered relative to their costs. Because there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, for our company have been or will be detected. As these inherent limitations are known features of the disclosure and financial reporting processes, it is possible to design into the processes safeguards to reduce, though not eliminate, these risks. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events. While our disclosure controls and procedures and our internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives, there can be no assurance that any design will succeed in achieving its stated goals under all future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Below we are providing, in supplemental form, changes to our risk factors from those previously disclosed in Part I, Item 1A of the 2022 Annual Report. Our risk factors disclosed in Part I, Item 1A of the 2022 Annual Report provide additional discussion about these supplemental risks and we encourage you to read and carefully consider the risk factors disclosed in Part I, Item 1A of the 2022 Annual Report for a more complete understanding of the risks and uncertainties material to our business.

We may use our financial and human resources to pursue a particular research program or product candidate and fail to capitalize on other programs or product candidates that may be more profitable or for which there is a greater likelihood of success.

We have limited resources and may forego or delay pursuit of certain research programs or product candidates that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities or pursue collaborations rather than retain sole responsibility for development. Our current and future research and development programs for product candidates may not yield any commercially viable products. The evaluation of the commercial potential or target market for a particular product candidate is forward-looking and based upon assumptions involving, for example and not limited to, market evolution, advances in disease standard of care, competition and reimbursement. This reliance on assumptions means that, if our assumptions prove to be inaccurate or incomplete, we may pursue opportunities that end up having a number of competitors that are more advanced than our product candidates, or we may relinquish valuable rights to a product candidate through strategic collaboration, licensing or other royalty arrangements in cases where it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate. For example, we made the strategic decision in 2022 to halt further material investments in our BIVV003 sickle cell disease program beyond completion of the Phase 1/2 PRECIZN-1 study in order to prioritize deployment of resources to our Fabry and TX200 programs. While we have launched a search for a collaboration partner who can progress this program to a potential Phase 3 trial, we may not be successful in doing so in a timely manner, on acceptable terms or at all, and as a result, we could miss valuable opportunities to capitalize on the potential of the BIVV003 program. Likewise, in March 2023, Biogen and Novartis notified us of their respective terminations for convenience of our collaboration agreements with them, and in April 2023, we made the strategic decision to pause further development of the programs that were the subject of these collaborations. While we may identify new collaboration partners who can progress some of the programs that were the subject of these collaborations, we may not be successful in doing so in a timely manner, on acceptable terms or at all, and we may otherwise fail to raise sufficient additional capital in order to progress these programs ourselves or we may determine that for internal resource allocation purposes or for other reasons to abandon development of these programs. As a result, we could miss valuable opportunities to capitalize on the potential of the programs. We may also allocate internal resources to a product candidate in a therapeutic area in which it would have been more advantageous to enter into a collaboration or that does not prove to have viable commercial opportunities. Any failure to use our financial and human resources efficiently could harm our business and operations.

Unfavorable global economic conditions could have a negative impact on our operations, which could materially and adversely affect our ability to continue to operate as a going concern and otherwise have a material adverse effect on our business, financial condition, results of operations, prospects and market price of our common stock.

Financial instability and a general decline in economic conditions in the United States and other countries caused by political instability and conflict, including the ongoing conflict between Russia and Ukraine, and economic or financial challenges caused by current and potential future bank failures or by general health crises such as the COVID-19 pandemic, have led to market disruptions, including significant volatility in commodity prices, credit and capital markets instability, including disruptions in access to bank deposits and lending commitments, supply chain interruptions, rising interest rates and global inflationary pressures. These macroeconomic factors could materially and adversely affect our ability to continue to operate as a going concern and other could otherwise have a material adverse effect on our business, operations, operating results and financial condition as well as the price of our common stock. For example, the recent closures of Silicon Valley Bank, or SVB, Signature Bank and First Republic Bank have resulted in broader financial institution liquidity risk and concerns. Although we were able to access all of the funds we had in deposit with SVB, future adverse developments with respect to specific financial institutions or the broader financial services industry may lead to market-wide liquidity shortages. The failure of any bank in which we deposit our funds could reduce the amount of cash we have available for our operations or delay our ability to access such funds. Any such failure may increase the possibility of a sustained deterioration of financial market liquidity, or illiquidity at clearing, cash management and/or custodial financial institutions. In the event we have a commercial relationship with a bank that has failed or is otherwise distressed, we may experience delays or other issues in meeting our financial obligations. If other banks and financial institutions fail or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to access our cash and cash equivalents and investments may be threatened and our ability to raise additional capital when needed could be substantially impaired, which could have a material adverse effect on our business, operations, operating results and financial condition as well as the price of our common stock. In particular, failure to secure any necessary financing in a timely manner and on favorable terms could require us to delay or abandon clinical development plans or we may be forced to further curtail or suspend our operations. In addition, any or all of these factors could disrupt our and our collaborators’ supply chains and adversely affect our and our collaborators’ ability to conduct ongoing and future clinical trials of our product candidates.

We have historically incurred significant operating losses since inception and anticipate that we will incur continued losses for the foreseeable future.

We have a history of recurring net losses, including $93.4 million, $192.3 million and $178.3 million for the six months ended June 30, 2023, and years ended December 31, 2022 and 2021, respectively, and we have otherwise generated operating losses since we began operations in 1995. The extent of our future losses and the timing of profitability are uncertain, and we expect to incur losses for the foreseeable future. We have been engaged in developing our ZF technology since inception, which has and will continue to require significant research and development expenditures. To date, we have generated our funding from issuance of equity securities, revenues derived from collaboration agreements, other strategic partnerships in non-therapeutic applications of our technology, federal government research grants and grants awarded by research foundations. We expect to continue to incur additional operating losses for the next several years as we continue to develop our product candidates. If the time required to generate significant product revenues and achieve profitability is longer than we currently anticipate or if we are unable to generate liquidity through equity financing or other sources of funding, we may be forced to further curtail or suspend our operations.

We will need substantial additional funding to execute our operating plan and continue to operate as a going concern. We may be unable to raise additional capital on favorable terms, if at all, which would harm or preclude our ability to develop our technology and product candidates and could delay or terminate some or all of our programs. Future sales and issuances of equity securities could also result in substantial dilution to our stockholders.

We have incurred significant operating losses and negative operating cash flows since inception and have not achieved profitability. We expect capital outlays and operating expenditures to increase over the next several years as we expand our infrastructure and research and product development activities. Moreover, we have concluded that there exists substantial doubt about our ability to continue to operate as a going concern. While we currently believe that management’s plans sufficiently alleviate the risk of substantial doubt about our ability to continue as a going concern for at least twelve months from the date that the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q are issued, we make assumptions about the probability that management's plans will be effectively implemented and alleviate substantial doubt about our ability to continue as a going concern. However, such assumptions are inherently uncertain and actual results could differ materially from those estimates. In this regard, we could use our available capital resources sooner than we currently expect and changing circumstances, some of which may be beyond our control, could cause us to consume capital significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.

Regardless, in order to remove substantial doubt about our ability to continue as a going concern, we will be required to raise substantial additional capital to fund our operations and support our research and development endeavors. In this regard, we are actively seeking substantial additional capital, including through public or private equity or debt financings, royalty financings or other sources, such as strategic collaborations. However, additional capital may not be available to us, on terms that are acceptable or at all. If adequate funds are not available to us on a timely basis, or at all, we will be required to take additional actions to address our liquidity needs, including additional cost reduction measures such as further reducing operating expenses and delaying, reducing the scope of, discontinuing or altering our research and development activities, which could have a material adverse effect on our business, or we may be required to cease operations. In this regard, in April 2023, we announced a restructuring of operations and a reduction in force, or the Restructuring, and a significant reduction in our internal manufacturing and allogeneic research footprints in California. While we expect the Restructuring to be complete by the end of the third quarter of 2024, we may also incur other charges or cash expenditures not currently contemplated due to events that may occur as a result of, or associated with, the Restructuring. However, we may not achieve the expected benefits of these cost reduction measures and other cost reduction plans on the anticipated timeline, or at all, which could otherwise accelerate our liquidity needs and could force us to further curtail or suspend our operations. Moreover, we rely in part on our collaboration partners to provide funding for and otherwise advance our preclinical and clinical programs. However, in June 2022, our collaboration agreement with Sanofi terminated, and in June 2023 our collaboration agreements with Biogen and Novartis terminated. While we may identify new collaboration partners who can progress some of the programs that were the subject of these collaborations, we may not be successful in doing so in a timely manner, on acceptable terms or at all, and we may otherwise fail to raise sufficient additional capital in order to progress these programs ourselves or we may determine that for internal resource allocation purposes or for other reasons to abandon development of these programs. In any event, we would require substantial additional funding in order to progress the programs that were the subject of these collaborations.

If we raise additional capital through public or private equity offerings, including sales pursuant to our at-the-market offering program with Jefferies LLC, the ownership interest of our existing stockholders will be diluted, and such dilution may be substantial, and the terms of any new equity securities may have a preference over, and include rights superior to, our common stock. If we raise additional capital through royalty financings or other collaborations, strategic alliances or licensing arrangements with third parties, we may need to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable. If we raise additional capital through debt financing, we may be subject to specified financial covenants or covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or pursuing certain transactions, any of which could restrict our ability to commercialize our product candidates or operate as a business.

In addition, as we focus our efforts on proprietary human therapeutics, we will need to seek regulatory approvals of our product candidates from the FDA or other comparable foreign regulatory authorities, a process that could cost in excess of hundreds of millions of dollars per product. We may experience difficulties in accessing the capital markets due to external factors beyond our control, such as volatility in the equity markets for emerging biotechnology companies and general economic and market conditions both in the United States and abroad. For example, our ability to raise additional capital may be adversely impacted by global economic conditions and disruptions to and volatility in the credit and financial markets in the United States and worldwide, such as has been experienced recently due in part to, among other things, the impacts of the COVID-19 pandemic, the ongoing conflict between Russia and Ukraine, and disruptions in access to bank deposits and lending commitments due to bank failure. We cannot be certain that we will be able to obtain financing on terms acceptable to us, or at all. Our failure to obtain adequate and timely funding will adversely affect our ability to continue as a going concern and our ability to develop our technology and products candidates.

Our collaborators control certain aspects of our product development efforts, including certain of our clinical trials, which could result in unanticipated delays and other obstacles in the commercialization of our product candidates.

We depend on collaborators to design and conduct certain of our clinical trials for some of our product candidates. As a result, these clinical trials may not be conducted in the manner or on the timeline we desire, which may negatively impact our product development efforts. For example, Pfizer is the trial sponsor of the Phase 3 AFFINE trial of giroctocogene fitelparvovec and we depended on the efforts of Pfizer to diligently seek to lift the clinical hold on the Phase 3 AFFINE trial and resume the trial. Although dosing in the AFFINE trial has now resumed, we cannot guarantee that we will not experience future delays in this trial or that the trial will be completed on the anticipated timeframe or at all.

Our lack of control over aspects of product development in our collaborations could cause delays or other difficulties in the development and commercialization of our product candidates, which may prevent us from receiving any milestone, royalty payments and other benefits under the agreement. In addition, under their respective agreements, our third-party collaborators have certain rights to terminate the agreements by providing us with advance notices, therefore, the actual milestone payments that we may receive under these agreements may be substantially lower than the full amounts provided for under these agreements. For example, in June 2022, our collaboration agreement with Sanofi terminated, and in June 2023, our collaborations with Biogen and Novartis terminated. As a result, we will not be entitled to any further milestone payments or royalties from any of Sanofi, Biogen or Novartis.

Our collaborators licensing our ZF technologies may decide to adopt alternative technologies or products or may be unable or unwilling to develop commercially viable products with our ZF technologies, which would negatively impact our revenues and our strategy to develop product candidates using ZF technologies.

Several of our ongoing collaborations leverage our ZF technology platform. These collaborators may elect to adopt alternative technologies in the future, which could decrease the value of our ZF technology platform and impede the development of product candidates using the platform. Additionally, because many of our collaborators are likely to be working on more than one development project, they could choose to shift their resources to projects other than those they are working on with us. If they do so, this would delay our ability to test and develop our ZF technology platform and would delay or terminate the development of our product candidates using the platform. Further, our collaborators may elect not to develop product candidates arising out of our collaborations or not to devote sufficient resources to the development, manufacturing, marketing or sale of these product candidates. If they terminate the collaborations with us, such as the recent terminations for convenience of our collaboration agreements with Biogen and Novartis, and we wish to continue developing the product candidates, we will be required to seek the support of other collaborators or develop the products ourselves. We may not be able to identify a suitable partner or negotiate a favorable collaboration agreement, and we may not have sufficient resources and expertise internally, to allow us to continue the development of these product candidates.

Commercialization of our technologies will depend, in part, on collaborations with other companies. If we are not able to find collaborators in the future or if our collaborators do not diligently pursue product development efforts, we may not be able to develop our technologies or product candidates, which could slow our growth and decrease the market value of our common stock.

We do not have financial resources ourselves to fully develop, obtain regulatory approval for and commercialize our product candidates. We rely significantly on our collaborations with other biopharmaceutical companies to provide funding for our research and development efforts, including preclinical studies and clinical tests, and expect to rely significantly on such collaborations to provide funding for the lengthy regulatory approval processes required to commercialize our product candidates.

For example, we have collaborations with Pfizer to develop product candidates to treat hemophilia A and amyotrophic lateral sclerosis and frontotemporal lobar degeneration linked to mutations of the C9ORF72 gene. Any delays to or discontinuances of these collaborations could have a material adverse effect on our business, results of operations, financial condition and prospects.

We were also party to collaboration agreements with Novartis to develop product candidates to treat certain neurodevelopment disorders, including autism and intellectual disability and with Biogen to develop product candidates to treat tauopathies including Alzheimer’s disease, alpha-synuclein related diseases including Parkinson’s disease and other neurological diseases. In June 2023, our collaboration agreements with Novartis and Biogen terminated. As a result of these terminations, we are no longer entitled to any milestone payments or royalties from Novartis or Biogen, and Novartis and Biogen have no further obligations to develop or to reimburse the costs of any of the programs under the applicable agreement. In April 2023, we made the strategic decision to pause further development of the programs that were the subject of these collaborations. In the future, we may identify alternative options to advance some of the programs that were subject to such agreements, including potential development internally or with a collaboration partner. However, we cannot guarantee that we will be able to successfully secure any such options, including identifying an alternative suitable collaboration partner or negotiate a favorable alternative collaboration agreement. In such case, we may be unable or unwilling to continue developing the programs subject to these collaboration agreements due to the lack of adequate capital resources or otherwise.

In June 2022, we completed the transition of the rights and obligations of Sanofi, under our prior collaboration agreement back to us. Although we expect to complete the Phase 1/2 PRECIZN-1 study of BIVV003, our product candidate to treat SCD, we cannot guarantee that we will be able to complete this study in a timely manner or at all. Also, we do not expect to make additional material investments in our SCD program and, accordingly, do not plan to continue developing BIVV003 beyond completion of this study. Although we are currently seeking a potential collaboration partner to advance the development of BIVV003 beyond this study, we cannot guarantee that we will be able to successfully secure any such collaboration in a timely manner, on acceptable terms or at all. In such case, the continued development of BIVV003 could be further delayed or precluded altogether, in which case may choose to discontinue the BIVV003 program. Any further delays to or discontinuance of this program could have an adverse impact on our business, results of operations, financial condition and prospects.

If we are unable to secure additional collaborations or if our collaborators are unable or unwilling to diligently advance the development, regulatory approval and commercialization of our product candidates, our growth may slow and adversely affect our ability to generate funding for development of our technologies and product candidates as well as our ability to continue to operate as a going concern. In addition, our ongoing collaborators may sublicense or abandon development programs with little advance notice, or we may have disagreements or disputes with our collaborators, which would cause associated product development to slow or cease. In addition, the business or operations of our collaborators may change significantly through restructurings, acquisitions, other strategic transactions that may negatively impact their ability to advance our programs.

Under typical collaborations, we expect to receive revenue for the research and development of our product candidates based on achievement of specific milestones, as well as royalties based on a percentage of sales of any commercialized products. Achieving these milestones will depend, in part, on the efforts of our collaborators, which we have no control over, as well as our own efforts. In addition, business combinations, changes in a collaborator’s business strategy and financial difficulties or other factors could result in that collaborator abandoning or delaying development of any product candidates covered by our collaboration agreement with that collaborator. For example, the transition back to us of the rights and obligations of Sanofi related to BIVV003 and the related termination for convenience by Sanofi of our prior collaboration agreement followed a change in Sanofi’s strategic direction to focus on allogeneic universal genomic medicine approaches rather than autologous personalized cell therapies. In addition, Novartis’s and Biogen’s decisions to terminate their respective collaboration agreements with us each related to a recent strategic review. Further, if we fail or any collaboration partner fails to meet specific milestones, then the collaboration agreement may be terminated, which would preclude our ability to earn any additional milestone payments under that collaboration agreement and would reduce our revenues. In addition, even if a collaboration product candidate is successfully developed and approved for marketing by relevant regulatory authorities, if sales of the commercialized product fails to meet expectations, we could receive lower royalties than expected. In any event, the milestone and royalty payment opportunities associated with our collaborations involve a substantial degree of risk to achieve and may never be received. Accordingly, investors should not assume that we will receive all of the potential milestone payments provided for under our ongoing collaborations, and it is possible that we may never receive any further significant milestone payments or any royalty payments under our collaborations.

Special regulatory designations, such as RMAT, orphan drug designations or fast track designation, may not be available for our product candidates or may not lead to a faster development or regulatory review or approval process.

We have received RMAT designation for our product candidate to treat severe hemophilia A. Additionally, some of our product candidates, including our product candidate to treat Fabry disease, have also been granted Orphan Drug Designation by the FDA, and some have also been designated Orphan Medicinal Products by the EMA. Regulatory authorities in some jurisdictions, including the United States and the EU, may designate drugs for relatively small patient populations as orphan drugs. In addition, our product candidate to treat Fabry disease was granted FDA Fast Track Designation in May 2023. For additional information regarding these special regulatory designations, see “Business-Government Regulation” in our 2022 Annual Report.

If we request such designations for our other current or future product candidates, there can be no assurances that the FDA, the European Commission or comparable foreign regulatory authorities will grant any of our product candidates such designations. Additionally, such designations do not guarantee that any regulatory agency will accelerate regulatory review of, or ultimately approve, those product candidates, nor does it limit the ability of any regulatory agency to grant such designations to product candidates of other companies that treat the same indications as our product candidates prior to our product candidates receiving marketing approval. Such designations can also be revoked. RMAT designation can be revoked if the criteria for eligibility cease to be met as clinical data emerges. Orphan drug exclusivity may be revoked if any regulatory authority determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of patients with the rare disease or condition. In addition, the FDA may withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program. Fast Track designation alone does not guarantee qualification for the FDA’s priority review procedures.

Our recent restructuring may not result in anticipated savings, could result in total costs and expenses that are greater than expected and could disrupt our business.

In April 2023, we announced a restructuring designed to reduce costs and increase focus on our key strategic priorities. We may incur additional expenses not currently contemplated due to events associated with the reduction in force, and our restructuring activities may subject us to reputational risks and litigation risks and expenses. We may not fully realize the anticipated benefits and savings from this restructuring due to unforeseen difficulties, disruptions, delays or unexpected costs, which could adversely affect our financial condition.

If we fail to meet continued listing standards of the Nasdaq Stock Market LLC, our common stock may be delisted. Delisting could adversely affect the liquidity of our common stock and the market price of our common stock could decrease, and our ability to obtain sufficient additional capital to fund our operations and to continue as a going concern would be substantially impaired.

Our common stock is currently listed on the Nasdaq Global Select Market. The Nasdaq Stock Market LLC, or Nasdaq, has minimum requirements that a company must meet in order to remain listed on the Nasdaq Global Select Market. These requirements include maintaining a minimum closing bid price of $1.00 per share, or the Bid Price Requirement. While the closing price of our common stock has remained above the minimum closing bid price of $1.00 per share from January 1, 2023 through the date of filing of this report, on June 1, 2023, our common stock traded as low as $1.07 per share and in the future, the closing bid price of our common stock may fall below $1.00 per share. If the closing bid price of our common stock were to remain below $1.00 per share for 30 consecutive trading days, or we do not meet other Nasdaq listing requirements, we would fail to be in compliance with Nasdaq’s listing standards. There can be no assurance that we will continue to meet the Bid Price Requirement, or any other Nasdaq continued listing requirement, in the future. If we fail to meet these requirements, including the Bid Price Requirement and requirements to maintain minimum levels of stockholders' equity or market values of our common stock, Nasdaq may notify us that we have failed to meet the minimum listing requirements and initiate the delisting process. If our common stock is delisted, the liquidity of our common stock would be adversely affected and the market price of our common stock could decrease, and our ability to obtain sufficient additional capital to fund our operations and to continue as a going concern would be substantially impaired.

We have recently recorded significant impairment charges, and we may be required to record in the future significant additional charges if our long-lived assets become impaired.

We test goodwill, indefinite-lived intangible assets and long-lived assets for impairment annually or more frequently if changes in circumstances or the occurrence of events suggest impairment exists. Any significant change in market conditions, including a sustained decline in our stock price, that indicate a reduction in carrying value may give rise to impairment in the period that the change becomes known. For example, during the three and six months ended June 30, 2023, we recognized impairment charges of $51.3 million and $109.9 million, respectively. We have now fully impaired our goodwill and indefinite-lived intangible assets. For additional information regarding these impairment charges, see “Note 6 – Impairment of Goodwill, Indefinite-lived Intangible Assets and Other Long-lived Assets” in Part I, Item 1 of this Quarterly Report on Form 10‑Q.

It is possible that changes in circumstances, many of which are outside of our control, or in the numerous variables associated with the assumptions and estimates used in assessing the appropriate valuation of our long-lived assets, could in the future result in significant additional impairment charges to our long-lived assets, which could adversely affect our results of operations.