Sangamo Therapeutics, Inc: Form 10-Q for the period ended Mar 31, 2024

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, 2023 as filed with the Securities and Exchange Commission on March 13, 2024, or the 2023 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 2023 Annual Report.

Overview

We are a genomic medicine company committed to translating ground-breaking science into medicines that transform the lives of patients and families afflicted with serious neurological diseases. We believe our zinc finger epigenetic regulators are ideally suited to potentially address devastating neurology disorders and our capsid engineering platform has demonstrated the ability to expand delivery beyond currently available intrathecal delivery capsids, including in the central nervous system, or CNS, in preclinical studies.

Corporate Updates

Registered Direct Offering

In March 2024, we issued and sold in a registered direct offering with institutional investors, or the Registered Direct Offering, an aggregate of 24,761,905 shares of common stock of the Company, par value $0.01 per share, and pre-funded warrants to purchase up to an aggregate of 3,809,523 shares of common stock, together with accompanying warrants to purchase up to an aggregate of 28,571,428 shares of common stock, and received aggregate net proceeds of $21.8 million, net of placement agents’ fees of $1.4 million and other offering costs of $0.7 million. We anticipate using the net proceeds from this offering to fund the development of our neurology-focused genomic medicines pipeline, and novel adeno-associated virus, or AAV, capsid delivery technology and for other general corporate purposes.

France Restructuring

Consistent with our strategic transformation into a neurology-focused genomic medicine company, Sangamo has been actively seeking additional investors in, or collaboration partners for its Chimeric Antigen Receptor, or CAR, engineered regulatory T cell, or CAR-Treg, cell therapy programs located in Valbonne, France since the middle of 2023. As this search has been unsuccessful in securing additional funds to sustain these programs, on March 1, 2024, the Board of Directors of Sangamo approved a wind-down of Sangamo’s French operations and a corresponding reduction in workforce, including closure of Sangamo’s cell therapy manufacturing facility and research labs in Valbonne, France, or the France Restructuring. This restructuring commenced in April 2024 and is expected to be substantially complete by the fourth quarter of 2024.

Financial Position

Based on our current operating plan, our cash and cash equivalents as of March 31, 2024 are expected to allow us to meet our liquidity requirements only into the third quarter of 2024. Our ability to continue to operate as a going concern is dependent upon our ability to raise substantial additional capital to fund our operations and support our research and development endeavors, including to progress our preclinical and clinical programs as described in our 2023 Annual Report and in this Quarterly Report. Although we raised capital via the Registered Direct Offering as described above, we will still need substantial additional capital in order to continue to operate as a going concern and fund our operations. We have been actively seeking, and continue to actively seek, substantial additional capital, including through public or private equity or debt financing, royalty financing or other sources, such as strategic collaborations and other direct investments in our programs. However, we have been unsuccessful in securing any such additional capital to date. If we are unable to secure additional funding in the very near term, we will likely seek protection under the U.S. Bankruptcy Code. We have explored, and continue to explore, whether filing for bankruptcy protection is in the best interest of our Company and our stakeholders.

Core Preclinical Neurology Programs and Technologies

Our neurology preclinical development is focused on two innovative areas aligned with our strategic transformation: (i) development of epigenetic regulation therapies treating serious neurological diseases and (ii) development of novel engineered AAV capsids to deliver our therapies to the intended neurological targets. Indications for our wholly-owned preclinical programs include chronic neuropathic pain, prion disease and tauopathies.

Neurology Epigenetic Regulation Programs

• Investigational new drug, or IND, enabling toxicology studies are nearing completion in the Nav1.7 program to treat chronic neuropathic pain. An IND submission is expected in the fourth quarter of 2024, subject to our ability to secure adequate funding.
• Clinical trial authorization, or CTA, enabling activities continue to advance for our epigenetic regulation program to treat prion disease, leveraging our novel AAV capsid known as STAC-BBB. A CTA submission is expected in the fourth quarter of 2025, subject to our ability to secure adequate funding.
• We intend to resume development of our previously paused tau program, developing epigenetic regulation therapies treating tauopathies including Alzheimer’s disease. This program will leverage our STAC-BBB capsid. An IND submission for this zinc finger repressor program could occur as early as the fourth quarter of 2025, subject to our ability to secure adequate funding.
• We showcased 10 poster presentations at the American Society for Cell and Gene Therapy, or ASGCT, Annual Meeting demonstrating advances in epigenetic regulation for the treatment of various neurological diseases, including prion disease, tauopathies, Charcot-Marie-Tooth disease type 1A and 2A, or CMT1A and CMT2A, Dravet Syndrome, SOD1-mediated amyotrophic lateral sclerosis, or ALS, Phelan-McDermid syndrome, Parkinson’s disease, Angelman syndrome, and other neurology disorders.

Novel AAV Capsid Delivery Technology

• In March 2024, we announced preclinical data from STAC-BBB, our novel proprietary neurotropic AAV capsid variant, which demonstrated industry-leading blood-brain barrier, or BBB, penetration in non-human primates, or NHPs, following intravenous administration, with capsid-enabled delivery of zinc finger payloads targeting prion disease and tauopathies resulting in potent and widespread repression of target genes.
• STAC-BBB demonstrated robust penetration of the BBB with 700-fold higher transgene expression in neurons compared to the benchmark capsid AAV9 and outperformed all other known published capsid variants evaluated in the study.
• The data showed that STAC-BBB mediated robust expression of zinc finger cargo in neurons, with potent and widespread repression of prion and tau genes observed across key brain regions, demonstrating the potential for modification of disease progression in prion disease and various tauopathies.
• In May 2024, we presented two platform and four poster presentations at the 27th ASGCT Annual Meeting outlining developments in Sangamo’s AAV capsid delivery capabilities, as developed through our SIFTER capsid engineering platform.
• We are engaged in ongoing business development discussions with potential collaborators for STAC-BBB.

Next-Generation Genome Engineering

• In May 2024, we presented one platform and three poster presentations at the 27th ASGCT Annual Meeting showcasing our next-generation engineering capabilities, including the discovery of next-generation integrase technology. Our Modular Integrase, or MINT, platform builds on Sangamo’s deep expertise in protein-DNA interactions derived from its zinc finger platform that allows targeting of a serine recombinase engineered to enable large-scale genome editing to potentially treat – with a single medicine – patients who have unique mutations in the same gene.
• Our MINT platform, derived from compact Bxb1 variants, is intended to integrate entire genes into the genome, to avoid double-stranded DNA breaks and the need for assistance from ancillary genome editing or DNA-repair modulating cargo. The MINT platform could be deployed for neurology-focused indications, and also could provide potential partnering opportunities, both for human disease and in agricultural biotech settings.
• In May 2024, we published a manuscript in bioRxiv titled, “Systematic Development of Reprogrammed Modular Integrases Enables Precise Genomic Integration of Large DNA Sequences” further detailing the discovery and potential of our MINT platform.
• We are engaged in ongoing business development discussions with potential collaborators for Sangamo’s modular integrase capabilities.

Clinical Programs

Fabry Disease

• Since our last update in March 2024, we have dosed the final patient 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 33 patients dosed in the study. Screening, enrollment and dosing are now complete for this Phase 1/2 study.
• One additional treated patient has been withdrawn from enzyme replacement therapy, or ERT, resulting in a total of 14 patients withdrawn from ERT to date. The four patients dosed since February 2024 who began the study on ERT have plans in place to withdraw from ERT treatment at the appropriate time.
• In February 2024, we presented updated clinical data at the 20th Annual WORLDSymposium in San Diego, CA, showing sustained benefit and a differentiated safety profile for isaralgagene civaparvovec.
• In February 2024, we aligned with U.S. Food and Drug Administration, or FDA, on an abbreviated pathway to potential approval of isaralgagene civaparvovec. The FDA agreed in a Type D meeting that data from a single, adequate, and well-controlled study may form the primary basis of approval of a Biologics License Application, or BLA, for isaralgagene civaparvovec. The proposed study would enroll up to 25 patients, both male and female, without the need for a control arm. A head-to-head comparison with ERT is not part of the proposed study design deemed acceptable by the FDA. This approach enables a potentially more rapid, efficient and cost-effective pathway to BLA submission than originally anticipated. In addition, isaralgagene civaparvovec was also granted both priority medicine, or PRIME, eligibility from the European Medicines Agency, or EMA, and Innovative Licensing and Access Pathway, or ILAP, from the U.K. Medicines and Healthcare products Regulatory Agency, or MHRA.
• We are currently engaged in active discussions with potential collaboration partners for the Fabry disease program. We continue to defer additional investments in planning for a potential registrational trial until a collaboration partnership or financing for this program is secured.

Partnered Program

Hemophilia A

• The Phase 3 AFFINE trial of giroctocogene fitelparvovec, an investigational gene therapy that we are developing with Pfizer Inc., or Pfizer, for patients with moderately severe to severe hemophilia A, continues to progress. Dosing of all patients in the trial is now complete.
• A pivotal readout is expected in the middle of 2024, with Pfizer anticipating submitting a biologics license application, or BLA, and a marketing authorization application, or MAA, in early 2025 if the pivotal readout is supportive.
• We are eligible to earn from Pfizer up to $220.0 million in potential milestone payments upon the achievement of certain regulatory and commercial milestones for giroctocogene fitelparvovec and product royalties of 14% - 20% if giroctocogene fitelparvovec is approved and commercialized, subject to reduction due to patent expiration, entry of biosimilar products to the market and payment made under certain licenses for third-party intellectual property.

Collaborations

Our 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 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 $1.9 billion in potential future milestone payments from our ongoing collaborations, in addition to potential product royalties.

Manufacturing & Process Development

Following restructuring of our operations in 2023, we expect to be substantially reliant on external partners to manufacture clinical supply for our neurology portfolio. We are retaining our in-house analytical and process development capabilities.

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 conflicts in the Middle East, and economic or financial challenges caused by current and potential future bank failures or by general health crises, 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 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. In particular, our ability to raise the substantial additional capital we need in order to fund our business and to continue to operate as a going concern 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.

Going Concern

Based on our current operating plan, our cash and cash equivalents as of March 31, 2024 are expected to allow us to meet our liquidity requirements only into the third quarter of 2024. Our history of significant losses, negative cash flows from operations, limited liquidity resources currently on hand and dependence on our ability to obtain additional financing to fund our operations have resulted in management’s assessment that there is substantial doubt about our ability to continue as a going concern for at least the next 12 months from the date the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q are issued. Our ability to continue to operate as a going concern is dependent upon our ability to raise substantial additional capital to fund our operations and support our research and development endeavors, including to progress our preclinical and clinical programs as described in the 2023 Annual Report and this Quarterly Report on Form 10-Q. Although we raised capital via the Registered Direct Offering as described above, we will still need substantial additional capital in order to continue to operate as a going concern and fund our operations. We have been actively seeking, and continue to actively seek, substantial additional capital, including through public or private equity or debt financing, royalty financing or other sources, such as strategic collaborations and other direct investments in our programs. We may be unable to attract new investments as a result of the speculative nature of our newly reprioritized core neurology preclinical programs. We have been unsuccessful in securing such additional capital to date. Additional capital may not be available on acceptable terms 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 would have a material adverse effect on our business and prospects, or we may be required to cease operations entirely, liquidate all or a portion of our assets, and/or seek protection under the U.S. Bankruptcy Code, and you may lose all or part of your investment. If we are unable to secure additional funding in the very near term, we will likely seek protection under the U.S. Bankruptcy Code. We have explored, and continue to explore, whether filing for bankruptcy protection is in the best interest of our Company and our stakeholders.

Certain Components of Results of Operations

Our revenues have consisted primarily of revenues from collaboration agreements, which included upfront licensing fees, reimbursements for research services, and milestone achievements, and research grant funding. In 2022, our collaboration agreement with Sanofi S.A., or Sanofi, terminated. In 2023, 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, were terminated, and the collaboration agreement with Kite Pharma, Inc., a Gilead Sciences, Inc. subsidiary, or Kite, expired pursuant to its terms in April 2024. 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. For additional information concerning the terms of our ongoing and terminated collaboration agreements, see Note 5 – Major Customers, Partnerships and Strategic Alliances in the accompanying notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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.

Although we expect research and development expenses to decrease in the near-term in connection with the restructuring of operations and reduction in workforce and significant reduction in our internal manufacturing and allogeneic research footprints in California announced in April 2023, or the April 2023 Restructuring, the further restructuring of operations and corresponding reduction in workforce announced in November 2023, or the November 2023 Restructuring, and the France Restructuring, 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 termination and transition agreement with Sanofi, certain expenses related to research and development activities may be reimbursed to us. 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 and information technology expenses, patent prosecution expenses and other general corporate expenses. Although we expect general and administrative expenses to decrease in the near-term in connection with the April 2023 Restructuring, November 2023 Restructuring and France Restructuring, we expect the growth of our business to require increased general and administrative expenses as we continue to advance our product candidates into and through the clinic.

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 months ended March 31, 2024, 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 2023 Annual Report.

Results of Operations for the Three Months Ended March 31, 2024 and 2023

Revenues

(in thousands, except percentage values)

Revenues during the three months ended March 31, 2024 primarily consisted of royalties from our license agreements with Sigma-Aldrich Corporation, or Sigma, and Open Monoclonal Technology, Inc. (now Ligand Pharmaceuticals Inc.), or Ligand. We anticipate revenues in the future will be derived primarily from our license agreements. The terminations of our collaboration agreements with Biogen and 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 us the costs of any of the programs previously subject to the Biogen and Novartis collaborations. Further, our collaboration agreement with Kite expired pursuant to its terms in April 2024.

The decrease of $157.5 million in revenues for the three months ended March 31, 2024, compared to the same period in 2023, was primarily attributed to decreases of $132.3 million and $9.8 million in revenues relating to our collaboration agreements with Biogen and Novartis, respectively, due to the termination of collaboration agreements in June 2023, a decrease of $12.3 million in revenue relating to our collaboration agreement with Kite, and a decrease of $3.1 million in revenue relating to our license agreements with Sigma and Ligand.

Operating expenses

(in thousands, except percentage values)

Research and Development Expenses

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

The decrease of $27.3 million in research and development expenses for the three months ended March 31, 2024, compared to the same period in 2023, was primarily attributable to lower compensation and other personnel costs of $13.2 million which was mainly due to lower headcount as a result of restructuring of operations and a corresponding reduction in workforce announced during 2023 and a reduction in the bonus expense, lower preclinical and clinical expenses of $10.0 million primarily related to the termination of collaboration agreements with Biogen and Novartis, and deferral and reprioritization of certain programs, and lower facilities, infrastructure related expenses, and allocated overheads of $4.7 million. Stock-based compensation expense included in research and development expenses was $1.4 million and $4.9 million for the three months ended March 31, 2024 and 2023, 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 the April 2023 Restructuring, November 2023 Restructuring and France Restructuring and the related reprioritization of certain programs and deferral of certain new investments, 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 preclinical product candidates into clinical trials and/or if we are successful in securing new collaborations or other capital necessary to advance our clinical programs.

The length of time required to complete our development programs and our development costs for those programs may be impacted by the results of preclinical testing, 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 current focus is on our core neurology preclinical program, and we do not yet know whether and to what extent we will progress any resulting product candidates from our preclinical program into the clinic and in what therapeutic areas. In this regard, in connection with the April 2023 Restructuring and November 2023 Restructuring, we have paused further development of certain preclinical programs following conclusion of collaborations with Biogen and Novartis and are deferring new investments in registrational trial planning activities for our Fabry disease gene therapy program until we secure a collaboration partner or external investment in this program. We are actively seeking collaboration partners or a direct external investment, as applicable, to progress our Fabry disease, STAC-BBB and modular integrase programs. 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

2023 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 charges and stock-based compensation for executive, legal, finance and administrative personnel, professional fees, allocated facilities and information technology expenses, and other general corporate expenses.

The decrease of $6.4 million in general and administrative expenses for the three months ended March 31, 2024, compared to the same period in 2023, was primarily attributable to lower compensation and other personnel costs of $4.6 million which was mainly due to lower headcount as a result of restructuring of operations and a corresponding reduction in workforce announced during 2023 and a reduction in the bonus expense, lower Biogen contract cost asset amortization of $2.7 million primarily driven by a notification of termination of the collaboration agreement in March 2023, and lower facilities and infrastructure related costs of $1.8 million. These decreases were partially offset by higher allocated overheads of $2.9 million. Stock-based compensation expense included in general and administrative expenses was $1.3 million and $3.4 million for the three months ended March 31, 2024 and 2023, respectively.

While we anticipate that our general and administrative expenses will decrease modestly in the near-term in connection with the April 2023 Restructuring, November 2023 Restructuring and France Restructuring, we expect higher general and administrative expenses in the next several years if we are successful in advancing our clinical programs and if we are able to progress our preclinical product candidates into clinical trials and/or if we are successful in securing new collaborations or other capital.

Restructuring Charges

In 2023, we executed a series of restructurings of operations and corresponding reductions in workforce announced in April 2023 and November 2023. In 2024, we are executing a wind-down of our French operations and a corresponding workforce reduction announced in March 2024. These restructurings were designed to reduce overall costs and advance our strategic transformation into a neurology focused genomic medicine company focused on epigenetic regulation programs addressing serious neurological diseases and novel AAV capsid delivery technology. In connection with the April 2023 Restructuring, November 2023 Restructuring and France Restructuring, during the period ended March 31, 2024, we incurred approximately $0.9 million in expenses related to employee severance and notice period payments, benefits, and related restructuring charges, of which $0.7 million is included in research and development expense and $0.2 million is included in general and administrative expense in the accompanying Condensed Consolidated Statements of Operations included in this Quarterly Report on Form 10-Q. We did not incur any restructuring charges during the three months ended March 31, 2023.

For more information see Note 10 – Restructuring Charges in the accompanying notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Impairment of Goodwill and Long-lived Assets

During the three months ended March 31, 2024, our Board of Directors approved the France Restructuring, and we initiated several actions aimed at reducing costs, including actions to commence closing of our facility in Brisbane, California. As a result of these factors, we concluded our long-lived assets, primarily comprising right-of-use assets, related leasehold improvements, and certain manufacturing and laboratory equipment, were impaired. Based on our analyses, we recognized a pre-tax long-lived assets impairment charge of $4.3 million during the three months ended March 31, 2024.

During the three months ended March 31, 2023, we concluded our goodwill and certain long-lived assets were impaired due to a sustained decline in our stock price and related market capitalization, and termination of the collaboration agreements with Biogen and Novartis. Based on this analysis, we recognized a non-cash, 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.

For more information see Note 6 – Impairment of Goodwill and 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 $2.5 million and $3.3 million for the three months ended March 31, 2024 and 2023, respectively. The decrease of $0.8 million was primarily driven by a decrease of $1.9 million in interest income due to decrease in marketable securities, partially offset by $0.5 million related to fluctuations in foreign currency exchange rates, and $0.3 million in research tax credits.

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 March 31, 2024, we had cash and cash equivalents totaling $54.4 million, compared to cash, cash equivalents, and marketable securities of $81.0 million as of December 31, 2023. Our most significant use of capital during the year 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 March 31, 2024. No shares were sold during the three months ended March 31, 2024.

Under Accounting Standard Codification Topic 205-40, Presentation of Financial Statements—Going Concern, or ASC Topic 205-40, we have the responsibility to evaluate whether conditions and/or events raise substantial doubt about our ability to meet our future financial obligations as they become due within one year after the date that the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q are issued. As required under ASC Topic 205-40, management’s evaluation should initially not take into consideration the potential mitigating effects of management’s plans that have not been fully implemented as of the date the Condensed Consolidated Financial Statements are issued. When substantial doubt exists, management evaluates whether the mitigating effects of its plans sufficiently alleviate the substantial doubt about the company’s ability to continue as a going concern. The mitigating effects of management’s plans, however, are only considered if both (i) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (ii) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been approved by the company’s board of directors before the date that the financial statements are issued.

Based on our current operating plan, our cash and cash equivalents as of March 31, 2024 are expected to allow us to meet our liquidity requirements only into the third quarter of 2024. Our history of significant losses, negative cash flows from operations, limited liquidity resources currently on hand and dependence on our ability to obtain additional financing to fund our operations have resulted in management’s assessment that there is substantial doubt about our ability to continue as a going concern for at least the next 12 months from the date the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q are issued. Our ability to continue to operate as a going concern is dependent upon our ability to raise substantial additional capital to fund our operations and support our research and development endeavors, including to progress our preclinical and clinical programs as described in this Quarterly Report on Form 10-Q. Although we raised capital via the Registered Direct Offering for net proceeds of approximately $21.8 million after deducting placement agents’ fees and estimated offering expenses payable by us, we will still need substantial additional capital in order to continue to operate as a going concern and fund our operations. We have been actively seeking, and continue to actively seek, substantial additional capital, including through public or private equity or debt financing, royalty financing or other sources, such as strategic collaborations and other direct investments in our programs. We may be unable to attract new investments as a result of the speculative nature of our newly reprioritized core neurology preclinical programs. We have been unsuccessful in securing such additional capital to date. 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 would have a material adverse effect on our business and prospects, or we may be required to cease operations entirely, liquidate all or a portion of our assets, and/or seek protection under the U.S. Bankruptcy Code, and you may lose all or part of your investment. If we are unable to secure additional funding in the very near term, we will likely seek protection under the U.S. Bankruptcy Code. We have explored, and continue to explore, whether filing for bankruptcy protection is in the best interest of our Company and our stakeholders. Additional capital may not be available on acceptable terms or at all.

While we expect the April 2023 Restructuring, November 2023 Restructuring and France Restructuring to be complete by the third quarter of 2024, the second quarter of 2024, and fourth quarter of 2024, respectively, 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, each of the restructurings. 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, or we may use our available capital more quickly than we expect, which could otherwise accelerate our liquidity needs and could force us to further curtail or suspend, or entirely cease, 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, in June 2023 our collaboration agreements with Biogen and Novartis terminated, and in April 2024, our collaboration agreement with Kite expired. While we may identify new collaboration partners who can progress some of the programs that were the subject of these collaborations as well as our Fabry disease, STAC-BBB and modular integrase programs, we have not yet been, and may never 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, in which case, we will not receive any return on our investments in these programs. In any event, we need substantial additional funding in order to progress the programs that were the subject of these collaborations as well as our Fabry disease, STAC-BBB and modular integrase programs, and to otherwise execute on our current operating plan. 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 given our current stock price decline, 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. In particular, our ability to raise the substantial additional capital we need in order to fund our business 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 ongoing conflict between Russia and Ukraine and conflicts in the Middle East 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.

Cash Flows

Operating activities

Net cash used in operating activities was $48.7 million for the three months ended March 31, 2024, primarily due to:

• a net loss of $49.1 million, adjusted for non-cash long-lived asset impairment charges of $4.3 million, other non-cash expenses related to stock-based compensation of $2.7 million, depreciation and amortization of $1.4 million, and amortization of operating lease right-of-use assets of $1.1 million, offset by accretion of discounts and impairment of marketable securities of $0.3 million; and
• a decrease in accounts payable and other accrued liabilities by $4.9 million, a decrease in accrued compensation and employee benefits by $2.6 million, a decrease in lease liabilities by $1.2 million, and an increase in prepaid expenses and other assets by $0.8 million. These were partially offset by a decrease in interest receivable by $0.4 million, and a decrease in accounts receivable by $0.2 million.

Net cash used in operating activities was $66.3 million for the three months ended March 31, 2023, primarily reflecting our net income of $21.1 million, adjusted for non-cash goodwill and long-lived asset impairment charges of $38.1 million and $20.4 million, respectively, a decrease in prepaid expenses and other assets by $6.2 million, and $12.8 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. These increases were offset by a decrease in deferred revenues of $149.8 million mainly attributed to the impact of termination related contract modification for our collaboration agreement with Biogen and the change in estimate for our collaboration agreement with Kite, a decrease in accrued compensation and employee benefits by $8.6 million mainly attributed to bonus pay-outs, an increase in accounts receivable by $3.3 million, a decrease in accounts payable and other accrued liabilities by $1.9 million, and a decrease in lease liabilities by $1.2 million.

Investing activities

Net cash provided by investing activities was $35.8 million for the three months ended March 31, 2024, related to sales of marketable securities of $34.7 million, and maturities of marketable securities of $1.1 million.

Net cash provided by investing activities was $35.7 million for the three months ended March 31, 2023, related to maturities of marketable securities of $82.2 million, partially offset by purchases of marketable securities of $36.2 million, and purchases of property and equipment of $10.2 million.

Financing activities

Net cash provided by financing activities was $22.1 million for the three months ended March 31, 2024, related to $22.5 million of proceeds from issuance of common stock, net of offering expenses of $1.4 million, partially offset by taxes paid related to net share settlement of equity awards of $0.4 million.

Net cash provided by financing activities was $8.0 million for the three months ended March 31, 2023, mostly related to $9.4 million of proceeds from the at-the-market offering, net of offering expenses of $0.3 million, partially offset by taxes paid related to net share settlement of equity awards of $1.1 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 and conflicts in the Middle East, 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 third quarter of 2024, the period into which we expect our existing cash and cash equivalents, in combination with potential future cost reductions, will be sufficient to fund our planned operations, will be substantial, and we need to raise substantial additional capital to continue to operate as a going concern and to fund the development, manufacturing and potential commercialization of our product candidates. In this regard, we have been actively seeking, and continue to actively seek, substantial additional capital, including through public or private equity or debt financings, royalty financings or other sources, such as strategic collaborations and other direct investments in our programs. We have been unsuccessful in securing such additional capital to date. Additional capital may not be available on acceptable terms 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 would have a material adverse effect on our business and prospects, or we may be required to cease operations entirely, liquidate all or a portion of our assets, and/or seek protection under the U.S. Bankruptcy Code, and you may lose all or part of your investment. If we are unable to secure additional funding in the very near term, we will likely seek protection under the U.S. Bankruptcy Code. We have explored, and continue to explore, whether filing for bankruptcy protection is in the best interest of our Company and our stakeholders.

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. Our future capital requirements will depend on many forward-looking factors, including the following:

• the results of preclinical testing of our early-stage core neurology program product candidates;
• 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, 2023 were reported in the 2023 Annual Report. During the three months ended March 31, 2024, there have been no material changes outside the ordinary course of our business from the contractual obligations previously disclosed in our 2023 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 have in the past selected 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.

Our market risks have decreased materially from those discussed in Item 7A of our 2023 Annual Report due to decrease in our cash and cash equivalents balance as of March 31, 2024.

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 March 31, 2024 has not changed materially from that discussed in Item 7A of our 2023 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 March 31, 2024. Based on that evaluation, as of March 31, 2024, 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 March 31, 2024 that have materially affected, or are 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 2023 Annual Report. Our risk factors disclosed in Part I, Item 1A of the 2023 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 2023 Annual Report for a more complete understanding of the risks and uncertainties material to our business.

We have 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 $49.1 million for the three months ended March 31, 2024 and $257.8 million and $192.3 million for the years ended December 31, 2023 and 2022, 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 preclinical core neurology therapeutic programs and capsid engineering platform. 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, or entirely cease, our operations.

There is substantial doubt about our ability to continue to operate as a going concern. We need substantial additional funding to execute our operating plan and to continue to operate as a going concern. 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 would have a material adverse effect on our business and prospects, or we may be required to cease operations entirely, liquidate all or a portion of our assets, and/or seek protection under the U.S. Bankruptcy Code, and you may lose all or part of your investment. Future sales and issuances of equity securities would 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. Based on our current operating plan, we estimate that our available cash, cash equivalents and marketable securities as of March 31, 2024, in combination with potential future cost reductions, will be sufficient to fund our planned operations only into the third quarter of 2024. Our financial position raises substantial doubt about our ability to continue to operate as a going concern. Our ability to continue to operate as a going concern is dependent upon our ability to raise substantial additional capital to fund our operations and support our research and development endeavors, including to progress our preclinical and clinical programs as described in our 2023 Annual Report and in this Quarterly Report. In this regard, we have been seeking, and continue to actively seek substantial additional capital, including through public or private equity or debt financing, royalty financing or other sources, such as strategic collaborations and other direct investments in our programs. Although we raised capital via a registered direct offering of common stock and accompanying warrants in March 2024, or the 2024 Registered Direct Offering, for net proceeds of approximately $21.8 million after deducting placement agents’ fees and estimated offering expenses payable by us, we will still need substantial additional capital in order to continue to operate as a going concern and fund our operations. We have been unsuccessful in securing such additional capital to date. Additional capital may not be available on acceptable terms or at all. In particular, the perception of our ability to continue to operate as a going concern may make it more difficult to obtain financing for the continuation of our operations, particularly in light of currently challenging macroeconomic and market conditions. Further, we may be unable to attract new investments as a result of the speculative nature of our newly reprioritized core neurology preclinical programs. 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 would have a material adverse effect on our business and prospects, or we may be required to cease operations entirely, liquidate all or a portion of our assets, and/or or seek protection under the U.S. Bankruptcy Code, and you may lose all or part of your investment. If we are unable to secure additional funding in the very near term, we will likely seek protection under the U.S.

Bankruptcy Code. We have explored, and continue to explore, whether filing for bankruptcy protection is in the best interest of our Company and our stakeholders.

In April 2023, we announced a restructuring of operations and a reduction in force and a significant reduction in our internal manufacturing and allogeneic research footprints in California, or the April 2023 Restructuring, and in November 2023, we announced a further restructuring of operations and reduction in force, or the November 2023 Restructuring, including a strategic transformation to focus resources on our proprietary neurology-focused epigenetic regulation programs and AAV capsid delivery technology and move all U.S. operations, including our headquarters, to our Richmond, California facility. On March 1, 2024, our board of directors approved the wind-down of our operations in France and closure of our facility in Valbonne France by the end of 2024, or the France Restructuring. While we expect the April 2023 Restructuring, November 2023 Restructuring and France Restructuring to be complete by the third quarter of 2024, the second quarter of 2024 and the fourth quarter of 2024, respectively, 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, each of the restructurings. 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, or we may use our available capital more quickly than we expect, which could otherwise accelerate our liquidity needs and could force us to further curtail or suspend, or entirely cease, our operations. Moreover, we have historically relied in part on collaboration partners to provide funding for and otherwise advance our preclinical and clinical programs. However, in June 2022, our collaboration agreement with Sanofi terminated, in June 2023 our collaboration agreements with Biogen and Novartis terminated, and our collaboration agreement with Kite expired pursuant to its terms in April 2024. While we may identify new collaboration partners who can progress some of the programs that were the subject of these collaborations as well as our Fabry disease, STAC-BBB and modular integrase programs, we have not yet been, and may never 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 and our other programs ourselves, in which case, we will not receive any return on our investments in these programs. In any event, we need substantial additional funding in order to progress the programs that were the subject of these collaborations as well as our Fabry disease, STAC-BBB and modular integrase programs, and to advance our core neurology programs and otherwise execute on our current operating plan.

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 given our current stock price decline. For example, in the 2024 Registered Direct Offering, we issued 24,761,905 shares of common stock, pre-funded warrants to purchase 3,809,523 shares of common stock and accompanying warrants to purchase an aggregate of 28,571,428 shares of common stock at a price per share of common stock (or pre-funded warrant in lieu thereof) and accompanying warrant of $0.84 per share. In addition, the terms of any new equity securities we may issue 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. In particular, our ability to raise the substantial additional capital we need in order to fund our business 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. 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 to operate as a going concern and our ability to develop our technology and products candidates.

If we seek to reorganize under the U.S. Bankruptcy Code, our future operations are uncertain, and such reorganization could be unsuccessful and/or result in no recovery for holders of our common stock. If we are unable to successfully reorganize, we may be forced to pursue a liquidation of some or all of our assets.

Based on our current operating plan, our cash, cash equivalents and marketable securities as of March 31, 2024 are expected to allow us to meet our liquidity requirements only into the third quarter of 2024. Although we completed the 2024 Registered Direct Offering, we have continued to actively seek, substantial additional capital, including through public or private equity or debt financing, royalty financing or other sources, such as strategic collaborations and other direct investments in our programs, and we have been unsuccessful in securing any such additional capital to date. As a result, we have explored, and continue to explore, whether filing for bankruptcy protection is in the best interest of our Company and our stakeholders. In the event we file for relief under the U.S. Bankruptcy Code, our operations, our ability to develop our product candidates and execute on our operating plan, and our ability to continue as a going concern will be subject to the risks and uncertainties associated with bankruptcy proceedings, including, among others: our ability to execute, confirm and consummate a plan of reorganization; the additional, significant costs of bankruptcy proceedings and related fees; our ability to obtain sufficient financing to allow us to emerge from bankruptcy and execute our business plan thereafter, and our ability to comply with terms and conditions of any such financing; our ability to continue our operations in the ordinary course; our ability to maintain our relationships with our collaborators, counterparties, employees and other third parties; our ability to obtain, maintain or renew contracts that are critical to our operations on reasonably acceptable terms and conditions or at all; our ability to attract, motivate and retain key employees; the ability of third parties to use certain provisions of the U.S. Bankruptcy Code to terminate contracts without first seeking Bankruptcy Court approval; the ability of third parties to seek and obtain court approval to terminate or shorten the exclusivity period for us to propose and confirm a plan of reorganization, to appoint a trustee, or to convert a proceeding under Chapter 11 of the U.S. Bankruptcy Code to a proceeding under Chapter 7 of the U.S. Bankruptcy Code; and the actions and decisions of our stakeholders and other third parties who have interests in our bankruptcy proceedings that may be inconsistent with our operational and strategic plans. Any delays in our bankruptcy proceedings would increase the risks that we may not be able to reorganize our business and emerge from bankruptcy proceedings and may increase our costs associated with the bankruptcy process or result in prolonged operational disruption. In addition, we would need the prior approval of the Bankruptcy Court for transactions outside the ordinary course of business during the course of any bankruptcy proceedings, which may limit our ability to respond timely to certain events or take advantage of certain opportunities. Because of the risks and uncertainties associated with any bankruptcy proceedings, we cannot accurately predict or quantify the ultimate impact of events that could occur during any such proceedings. There can be no guarantees that if we seek protection under the U.S. Bankruptcy Code, we will emerge from any such proceedings as a going concern or that holders of our common stock will receive any recovery from any bankruptcy proceedings.

In the event we are unable to pursue protection under Chapter 11 of the U.S. Bankruptcy Code, or, if pursued, successfully emerge from such proceedings, it may be necessary for us to pursue protection under Chapter 7 of the U.S. Bankruptcy Code for all or a part of our businesses. In such event, a Chapter 7 trustee would be appointed or elected to liquidate our assets for distribution in accordance with the priorities established by the U.S. Bankruptcy Code. We believe that liquidation under Chapter 7 would result in significantly smaller distributions being made to our stakeholders than those we might obtain under Chapter 11, or no distribution at all, primarily because of the likelihood that the assets would have to be sold or otherwise disposed of in a distressed fashion over a short period of time rather than in a controlled manner and as a going concern. In such event, you may lose part or all of your investment.

We have fully impaired our goodwill and indefinite-lived intangible assets, have recorded significant impairment of our long-lived assets, and may be required to record significant additional charges if our long-lived assets become further impaired in the future.

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 fluctuations in our stock price, that indicates a reduction in carrying value may give rise to impairment in the period that the change becomes known. For example, during the year ended December 31, 2023 and the three months ended March 31, 2024, we recognized impairment charges of $155.0 million and $4.3 million, respectively. We have fully impaired our goodwill and indefinite-lived intangible assets and have significantly impaired our long-lived assets. The Company will continue to assess whether its long-lived assets are impaired in future periods. As the Company finalizes the wind-down of its France operations and corresponding reduction in force of all France employees, as well as the closure of its Brisbane facility, it is reasonably possible that additional impairment charges will be recognized, for example, if sublease rates of leased facilities or selling prices of the assets held for sale are less than those estimated. For additional information regarding these impairment charges, see Note 6 – Impairment of Goodwill and 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.

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.

We currently do not meet, and may not regain compliance with, the listing standards of the Nasdaq Stock Market LLC, or Nasdaq, and as a result 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 to operate as a going concern would be substantially impaired.

Our common stock is currently listed on the Nasdaq Global Select Market, which has minimum requirements that a company must meet in order to remain listed. These requirements include maintaining a minimum closing bid price of $1.00 per share, which closing bid price cannot fall below $1.00 per share for a period of more than 30 consecutive trading days, or the Bid Price Requirement. On April 24, 2024, we received a deficiency notice, or the Notice, from the Listing Qualifications Staff, or the Staff of Nasdaq notifying us that, for the last 30 consecutive business days, the bid price of our common stock had closed below $1.00 per share, thereby failing to satisfy the Bid Price Requirement set forth in the continued listing requirements of Nasdaq Listing Rule 5450(a)(1). The Notice has no immediate effect on the listing of our common stock on the Nasdaq Global Select Market. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have 180 calendar days, or until October 21, 2024, to regain compliance with the Bid Price Requirement by having shares of our common stock maintain a minimum closing bid price of at least $1.00 per share for a minimum of 10 consecutive trading days. In the event we do not regain compliance with the Bid Price Requirement prior to the expiration of the compliance period, unless Nasdaq exercises its discretion to extend this period, our common stock may be subject to a delisting action by Nasdaq.

A reverse stock split may allow us to meet the Bid Price Requirement, but we cannot assure you that a reverse stock split will be approved by our stockholders or that any reverse stock split, if implemented, will be sufficient to enable us to maintain our Nasdaq listing. Additionally, if a reverse stock split is implemented, there can be no assurance that the market price per new share of our common stock following the reverse stock split will remain unchanged or will increase in proportion to the reduction in the number of old shares of our common stock outstanding before the reverse stock split. The liquidity of the shares of our common stock may be affected adversely by any reverse stock split given the reduced number of shares of our common stock that will be outstanding following such reverse stock split. Furthermore, following any reverse stock split, the resulting market price of our common stock may not attract new investors and may not satisfy the investing requirements of those investors.

In the event that our common stock is delisted from Nasdaq as a result of our failure to regain compliance with the Bid Price Requirement, as a result of Nasdaq not granting us an extension or the panel not granting us a favorable decision or due to our failure to continue to comply with any other requirement for continued listing on Nasdaq, trading of our common stock could be conducted in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board, but there can be no assurance that our common stock will be eligible for trading on such alternative exchange or market.

Additionally, if our common stock is delisted from Nasdaq, the liquidity of our common stock would be adversely affected, the market price of our common stock could decrease, our ability to obtain sufficient additional capital to fund our operations and to continue to operate as a going concern would be substantially impaired and transactions in our common stock could lose federal preemption of state securities laws. Furthermore, there could also be a further reduction in our coverage by securities analysts and the news media and broker-dealers may be deterred from making a market in or otherwise seeking or generating interest in our common stock, which could cause the price of our common stock to decline further. Moreover, delisting may also negatively affect our collaborators’, vendors’, suppliers’ and employees’ confidence in us and employee morale.