initiate and conduct clinical trials for exoSTING, exoIL-12 and exoASO-STAT6 and any other engEx product candidates we identify and choose to develop;

continue our current research programs and preclinical development of our potential engEx product candidates;

seek to identify additional research programs and additional engEx product candidates;

further develop and expand the capabilities of our engEx Platform;

secure supply chain capacity sufficient to support our planned preclinical studies and early-stage clinical trials;

maintain, expand and protect our intellectual property portfolio;

hire additional clinical, scientific, manufacturing, and general and administrative personnel;

acquire or in-license other biologically active molecules, potential engEx product candidates or technologies;

seek regulatory approvals for any engEx product candidates that successfully complete clinical trials;

establish a sales, marketing and distribution infrastructure to commercialize any engEx products for which we may obtain regulatory approval;


take temporary precautionary measures to minimize the risk of COVID-19 to our employees, contractors and those who may participate in our studies.
Revenue
The following is a summary of revenue recognized for the years ended December 31, 2021 and 2020 (in thousands):
Operating expenses
Research and development expense
The nature of our business and primary focus of our activities generate a significant amount of research and development costs. Research and development expenses represent costs incurred by us for the following:

initiation of the clinical development of exoSTING in a Phase 1/2 clinical trial;

initiation of the clinical development of exoIL-12 in a Phase 1 clinical trial;

Initiation of the clinical development of exoASO-STAT6 in a Phase 1 clinical trial;

costs to develop our engEx Platform;

discovery efforts leading to the selection and advancement of engEx product candidates for clinical development;

preclinical development costs for our programs; and

costs to develop our manufacturing technology and infrastructure.
The costs above comprise the following categories:

personnel-related expenses, including salaries, benefits and stock-based compensation expense;

expenses incurred under agreements with third parties, such as contract research organizations, or CROs, that conduct our preclinical studies;

licensing costs;

costs of acquiring, developing and manufacturing materials for preclinical studies, including both internal manufacturing and third-party contract manufacturing organizations, or CMOs;

costs of outside consultants and advisors, including their fees, stock-based compensation and related travel expenses;

expenses incurred for the procurement of materials, laboratory supplies and non-capital equipment used in the research and development process; and

facilities, depreciation, amortization and other direct and allocated expenses incurred as a result of research and development activities.
11,420
73,981

our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize, our engEx product candidates;

our successful enrollment in and completion of clinical trials, including our ability to generate positive data from any such clinical trials;

the costs associated with the development of any additional development programs we identify in-house or acquire through collaborations;

our ability to add and retain key research and development personnel;

our ability to establish an appropriate safety profile with IND-enabling toxicology and other preclinical studies;

our ability to discover, develop and utilize biomarkers to demonstrate target engagement, pathway engagement and the impact on disease progression, as applicable, of our engEx product candidates;



our ability to maintain our collaborative arrangements with Jazz and earn milestone payments thereunder;

the terms and timing of any additional collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder;


our receipt of marketing approvals from applicable regulatory authorities; and

the continued acceptable safety profiles of any engEx product following approval.
A change in any of these variables with respect to the development of any of our engEx product candidates would significantly change the costs, timing and viability associated with the development of that engEx product candidate.
General and administrative expense
Other income (expense), net
Gain on Disposition
Interest income consists of interest income earned from our cash, cash equivalents and investments.
Interest expense
Interest expense consists of interest expense incurred from our term loan facility with Hercules.
Other income
Other income primarily consists of the sublease income under the sublease portion of our 35 CambridgePark Drive office and laboratory space and 4 Hartwell Place manufacturing facility.
Income taxes
The following table summarizes our consolidated statements of operations for the years ended December 31, 2021 and 2020 (in thousands):
Collaboration revenue
Research and development expense
The decrease in research and development expenses was primarily attributable to the following:

$4.6 million increase in personnel-related costs primarily driven by an increase in headcount to support increased research and development activities;


$2.2 million increase in expenses incurred to advance exoIL-12, driven primarily by an increase in manufacturing costs related to the exoIL-12 resupply manufacturing run;



$1.3 million increase in other research and development costs, including rent, depreciation, and other miscellaneous costs, primarily due to increased depreciation on new equipment
General and administrative expense
General and administrative expenses increased $7.8 million from $19.9 million for the year ended December 31, 2020 to $27.6 million for the year ended December 31, 2021.
The increase in general and administrative expenses was primarily attributable to the following:



Gain on disposition
Interest income
Interest expense
Other income
Hercules Loan Agreement
under the Amended Term Loan Facility. With respect to the first tranche, an end of term charge of $1.4 million will be payable upon any prepayment or repayment.
Historical cash flows
Investing activities
During the year ended December 31, 2021, net cash used in investing activities was $3.2 million for purchases of property and equipment.
Plan of operation and future funding requirements

the rate of progress in the development of our engEx Platform, engEx product candidates and development programs;

the scope, progress, results and costs of preclinical studies and clinical trials for any engEx product candidates and development programs;

the number and characteristics of programs and technologies that we develop or may in-license;

the costs and timing of future commercialization activities, including manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;



the continuation of our existing strategic collaborations and licensing arrangements and entry into new collaborations and licensing arrangements;

the costs we incur in maintaining business operations;

the costs associated with being a public company;

the revenue, if any, received from commercial sales of our engEx product candidates for which we receive marketing approval;

the effect of competing technological and market developments; and

the extent to which we acquire or invest in businesses, products and technologies, including entering into licensing or collaboration arrangements for product candidates.
(1)
Kayla may terminate the license agreement for the other’s material breach that remains uncured for 60 days after receiving notice thereof.
While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report, we believe the following accounting policies used in the preparation of our consolidated financial statements require the most significant judgments and estimates.
Revenue recognition
Research and development expenses and related accruals

CROs in connection with performing research services, clinical and preclinical studies;

other providers and vendors in connection with clinical and preclinical development activities; and

vendors related to product manufacturing, development and distribution of clinical and preclinical supplies.
Disposition of Business
Stock-based compensation
We classify stock-based compensation expense in our consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s salary and related costs are classified or in which the award recipient’s service payments are classified. In future periods, we expect stock-based compensation expense to increase, due in part to our existing unrecognized stock-based compensation expense and as we grant additional stock-based awards to continue to attract and retain our employees.
Fair value of stock-based awards
Determination of fair value of common stock
Determination of fair value of common stock prior to our IPO
In addition to considering the results of these third-party valuations, our board of directors, or compensation committee thereof, considered various objective and subjective factors to determine the fair value of our equity instruments as of each grant date, which may be later than the most recently available third-party valuation date, including:

the lack of liquidity of our equity as a private company;


the progress of our research and development efforts, including the status of preclinical studies for our engEx exosomes and product candidates;

our stage of development and business strategy and the material risks related to our business and industry;

the achievement of enterprise milestones, including entering into strategic alliance and license agreements;

the valuation of publicly traded companies in the life sciences and biotechnology sectors, as well as recently completed mergers and acquisitions of peer companies;

any external market conditions affecting the biotechnology industry, and trends within the biotechnology industry;

the likelihood of achieving a liquidity event, such as an initial public offering, or IPO, or a sale of our Company, given prevailing market conditions; and

the analysis of IPOs and the market performance of similar companies in the biopharmaceutical industry.
Determination of fair value of common stock after our IPO
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Published On: March 10, 2022 / Categories: Uncategorized /

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