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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2024

OR

 

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

For the transition period from to

Commission File Number: 001-39941

 

Sana Biotechnology, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

83-1381173

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

188 East Blaine Street, Suite 400

Seattle, Washington

98102

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (206) 701-7914

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

SANA

 

The Nasdaq Stock Market LLC

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

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

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

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

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

 

As of May 3, 2024, the registrant had 221,502,908 shares of common stock, $0.0001 par value per share, outstanding.

 

 


 

TABLE OF CONTENTS

 

 

 

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

5

Condensed Consolidated Balance Sheets

5

Condensed Consolidated Statements of Operations

6

Condensed Consolidated Statements of Comprehensive Loss

7

 

Condensed Consolidated Statements of Stockholders’ Equity

8

Condensed Consolidated Statements of Cash Flows

9

Notes to Unaudited Condensed Consolidated Financial Statements

10

Item 2.

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

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

32

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

33

Item 1A.

Risk Factors

33

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

106

Item 3.

Defaults Upon Senior Securities

106

Item 4.

Mine Safety Disclosures

106

Item 5.

Other Information

106

Item 6.

Exhibits

108

Signatures

109

 

 


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (Quarterly Report) contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report could be deemed forward-looking statements, including those statements highlighted below. In some cases, you can identify these statements by forward-looking words such as “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “should,” “would,” or “will,” the negative of these terms, and other comparable terminology. These forward-looking statements, which are subject to risks, include, but are not limited to, statements about:

our expectations regarding the potential market size and size of the potential patient populations for our product candidates and any future product candidates, if approved for commercial use;
our clinical and regulatory development plans;
our expectations with regard to our preclinical studies, clinical trials, and research and development programs, including the impact, timing, and availability of data from such studies and trials;
the timing of commencement of future preclinical studies, clinical trials, and research and development programs;
our ability to acquire, discover, and develop product candidates and timely advance them into and through clinical data readouts and successful completion of clinical trials;
our expectations regarding the potential safety, efficacy, or clinical utility of our product candidates;
our intentions with respect to and our ability to establish collaborations or partnerships;
the timing or likelihood of regulatory filings and approvals for our product candidates;
our commercialization, marketing, and manufacturing expectations, including with respect to the buildout of our manufacturing facility and capabilities and the timing thereof;
impact of future regulatory, judicial, and legislative changes or developments in the United States and foreign countries;
our intentions with respect to the commercialization of our product candidates;
the pricing and reimbursement of our product candidates, if approved;
the potential effects of public health crises on our preclinical and clinical programs and business;
our expectations regarding the impact of global events and macroeconomic conditions on our business;
the implementation of our business model and strategic plans for our business and product candidates, including additional indications that we may pursue;
our ability to effectively manage our growth, including our ability to retain and recruit personnel and maintain our culture;
the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates, including the projected terms of patent protection;
estimates of our expenses, future revenue, capital requirements, needs for additional financing, and ability to obtain additional capital;
our expected use of proceeds from our initial public offering and our existing cash, cash equivalents, and marketable securities;
the performance of our third-party suppliers and manufacturers;
our future financial performance;
our expectations regarding the duration for which we will be an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (JOBS Act); and
developments and projections relating to our competitors and our industry, including competing products.

 


 

We have based these forward-looking statements largely on our current expectations, estimates, forecasts, and projections about future events, our business, the industry in which we operate, and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. In light of the significant uncertainties in these forward-looking statements, you should not rely upon forward-looking statements as predictions of future events. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur in a timely manner or at all. You should refer to the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Other sections of this Quarterly Report may include additional factors that could harm our business and financial performance. New risk factors may emerge from time to time, and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward-looking statements. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.

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

 


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Sana Biotechnology, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except per share amounts)

 

 

 

March 31, 2024

 

 

December 31, 2023

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

177,054

 

 

$

133,517

 

Marketable securities

 

 

134,028

 

 

 

71,678

 

Restricted cash

 

 

3,832

 

 

 

3,832

 

Prepaid expenses and other current assets

 

 

6,349

 

 

 

4,488

 

Total current assets

 

 

321,263

 

 

 

213,515

 

Property and equipment, net

 

 

81,649

 

 

 

70,689

 

Operating lease right-of-use assets

 

 

71,565

 

 

 

74,903

 

Intangible asset

 

 

59,195

 

 

 

59,195

 

Goodwill

 

 

140,627

 

 

 

140,627

 

Other non-current assets

 

 

7,078

 

 

 

6,370

 

TOTAL ASSETS

 

$

681,377

 

 

$

565,299

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

6,095

 

 

$

4,108

 

Accrued compensation

 

 

13,965

 

 

 

23,722

 

Accrued expenses and other current liabilities

 

 

19,674

 

 

 

23,462

 

Operating lease liabilities

 

 

13,167

 

 

 

13,195

 

Total current liabilities

 

 

52,901

 

 

 

64,487

 

Operating lease liabilities, net of current portion

 

 

92,922

 

 

 

90,901

 

Contingent consideration

 

 

114,990

 

 

 

109,606

 

Success payment liabilities

 

 

45,422

 

 

 

12,799

 

Total liabilities

 

 

306,235

 

 

 

277,793

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 50,000 shares authorized; zero shares issued and outstanding as of March 31, 2024 and December 31, 2023

 

 

-

 

 

 

-

 

Common stock, $0.0001 par value; 750,000 shares authorized; 221,286 and 197,857 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

22

 

 

 

20

 

Additional paid-in capital

 

 

1,820,701

 

 

 

1,625,637

 

Accumulated other comprehensive loss

 

 

(15

)

 

 

(60

)

Accumulated deficit

 

 

(1,445,566

)

 

 

(1,338,091

)

Total stockholders' equity

 

 

375,142

 

 

 

287,506

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

681,377

 

 

$

565,299

 

 

See accompanying notes.

 

5


 

Sana Biotechnology, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except per share amounts)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

56,448

 

 

$

67,166

 

Research and development related success payments and contingent consideration

 

 

38,007

 

 

 

120

 

General and administrative

 

 

16,269

 

 

 

16,766

 

Total operating expenses

 

 

110,724

 

 

 

84,052

 

Loss from operations

 

 

(110,724

)

 

 

(84,052

)

Interest income, net

 

 

3,034

 

 

 

1,976

 

Other income (expense), net

 

 

215

 

 

 

(47

)

Net loss

 

$

(107,475

)

 

$

(82,123

)

Net loss per common share – basic and diluted

 

$

(0.49

)

 

$

(0.43

)

Weighted-average number of common shares – basic and diluted

 

 

217,290

 

 

 

191,228

 

 

See accompanying notes.

6


 

Sana Biotechnology, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(unaudited)

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Net loss

 

$

(107,475

)

 

$

(82,123

)

Other comprehensive income, net of tax:

 

 

 

 

 

 

Unrealized gain on marketable securities, net

 

 

45

 

 

 

2,188

 

Total comprehensive loss

 

$

(107,430

)

 

$

(79,935

)

 

See accompanying notes.

7


 

Sana Biotechnology, Inc.

 

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(in thousands)

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2023

 

 

197,857

 

 

$

20

 

 

$

1,625,637

 

 

$

(60

)

 

$

(1,338,091

)

 

$

287,506

 

Issuance of common stock from at the market offering, net of issuance costs of $113

 

 

150

 

 

 

-

 

 

 

1,037

 

 

 

-

 

 

 

-

 

 

 

1,037

 

Issuance of common stock from follow-on offering and accompanying pre-funded warrants, net of issuance costs of $9,741

 

 

21,773

 

 

 

2

 

 

 

180,006

 

 

 

-

 

 

 

-

 

 

 

180,008

 

Vesting of restricted stock

 

 

386

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Exercise of stock options

 

 

1,120

 

 

 

-

 

 

 

4,929

 

 

 

-

 

 

 

-

 

 

 

4,929

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

9,092

 

 

 

-

 

 

 

-

 

 

 

9,092

 

Unrealized gain on marketable
securities, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

45

 

 

 

-

 

 

 

45

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(107,475

)

 

 

(107,475

)

Balance as of March 31, 2024

 

 

221,286

 

 

 

22

 

 

 

1,820,701

 

 

 

(15

)

 

 

(1,445,566

)

 

 

375,142

 

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2022

 

 

191,022

 

 

$

19

 

 

$

1,558,459

 

 

$

(4,327

)

 

$

(1,054,836

)

 

$

499,315

 

Fees incurred related to issuance of common stock from at the market offering

 

 

-

 

 

 

-

 

 

 

(200

)

 

 

-

 

 

 

-

 

 

 

(200

)

Vesting of restricted stock

 

 

154

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Exercise of stock options

 

 

233

 

 

 

-

 

 

 

331

 

 

 

-

 

 

 

-

 

 

 

331

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

8,751

 

 

 

-

 

 

 

-

 

 

 

8,751

 

Unrealized gain on marketable
securities, net

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,188

 

 

 

-

 

 

 

2,188

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(82,123

)

 

 

(82,123

)

Balance as of March 31, 2023

 

 

191,409

 

 

$

19

 

 

$

1,567,341

 

 

$

(2,139

)

 

$

(1,136,959

)

 

$

428,262

 

 

 

See accompanying notes.

8


 

Sana Biotechnology, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

OPERATING ACTIVITIES:

 

 

 

 

 

 

Net loss

 

$

(107,475

)

 

$

(82,123

)

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

 

 

 

 

 

 

Depreciation and impairment of long-lived assets

 

 

3,746

 

 

 

4,346

 

Stock-based compensation expense

 

 

9,092

 

 

 

8,751

 

Change in the estimated fair value of contingent consideration

 

 

5,384

 

 

 

5,460

 

Change in the estimated fair value of success payment liabilities

 

 

32,623

 

 

 

(5,340

)

Non-cash expense for operating lease right-of-use assets

 

 

3,338

 

 

 

3,354

 

Other non-cash items, net

 

 

(4,879

)

 

 

(2,913

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(2,380

)

 

 

(106

)

Operating lease right-of-use assets and liabilities

 

 

5,804

 

 

 

(8

)

Accounts payable

 

 

(1,064

)

 

 

(354

)

Accrued expenses and other liabilities

 

 

(9,821

)

 

 

(10,339

)

Net cash used in operating activities

 

 

(65,632

)

 

 

(79,272

)

INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of marketable securities

 

 

(114,393

)

 

 

(20,431

)

Proceeds from maturities of marketable securities

 

 

53,010

 

 

 

85,334

 

Purchases of property and equipment

 

 

(15,845

)

 

 

(2,176

)

Net cash provided by (used in) investing activities

 

 

(77,228

)

 

 

62,727

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from employee stock purchase plan and exercise of stock options

 

 

4,929

 

 

 

236

 

Proceeds from issuance of common stock from equity financings, net

 

 

181,468

 

 

 

-

 

Net cash provided by financing activities

 

 

186,397

 

 

 

236

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

43,537

 

 

 

(16,309

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

137,349

 

 

 

187,273

 

Cash, cash equivalents, and restricted cash at end of period

 

$

180,886

 

 

$

170,964

 

SUPPLEMENTAL CASH FLOW INFORMATION:

 

 

 

 

 

 

Operating lease right-of-use assets obtained in exchange for lease obligations

 

$

-

 

 

$

8,984

 

Purchases of property and equipment included in accounts payable and accrued liabilities

 

$

8,375

 

 

$

968

 

Cash received for tenant improvement allowances

 

$

6,121

 

 

$

-

 

 

 

See accompanying notes.

9


 

Sana Biotechnology, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Organization

Sana Biotechnology, Inc. (the Company or Sana) is a biotechnology company focusing on utilizing engineered cells as medicines. The Company’s operations to date have included identifying and developing potential product candidates, executing preclinical studies, establishing manufacturing capabilities, preparing for and executing clinical trials of its product candidates and supporting clinical trials of product candidates developed using its technologies, acquiring technology, organizing and staffing the Company, business planning, establishing and maintaining the Company’s intellectual property portfolio, raising capital, and providing general and administrative support for these operations.

Liquidity and capital resources

The Company is subject to a number of risks and uncertainties similar to other biotechnology companies in the development stage, including, but not limited to, those related to the need to obtain adequate additional funding, possible failure of preclinical testing or clinical trials, the need to obtain marketing approval for its product candidates, building out internal and external manufacturing capabilities, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s products, the need to protect the Company’s intellectual property and proprietary technologies, and the need to attract and retain key scientific and management personnel. If the Company does not successfully commercialize or partner any of its product candidates, it will be unable to generate product revenue or achieve profitability. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations with the proceeds from additional equity or debt financings or capital obtained in connection with strategic collaborations or licensing or other arrangements. In the event that additional financing is required, the Company may not be able to raise it on terms acceptable to it or at all.

In February 2024, the Company completed an underwritten public offering pursuant to which it sold 21.8 million shares of its common stock, including 4.5 million shares pursuant to the full exercise of the underwriters' option to purchase additional shares, and pre-funded warrants to purchase 12.7 million shares of its common stock for net proceeds of approximately $180.0 million, after deducting underwriting discounts and commissions and offering expenses.

In August 2022, the Company entered into a sales agreement with Cowen and Company, LLC (Cowen), acting as sales agent, pursuant to which it may offer and sell through Cowen up to $150.0 million in shares of the Company’s common stock from time to time in a series of one or more at the market equity offerings (collectively, the ATM facility). As of March 31, 2024, the Company has sold an aggregate of 4.9 million shares of the Company's common stock under the ATM facility for net proceeds of $28.7 million, after deducting commissions and expenses.

The Company has incurred operating losses each year since inception and expects such losses to continue for the foreseeable future. As of March 31, 2024, the Company had cash, cash equivalents, and marketable securities of $311.1 million, and an accumulated deficit of $1.4 billion, which includes cumulative non-cash charges related to the revaluation of the success payment liabilities and contingent consideration of $43.0 million and $63.7 million, respectively.

2. Summary of significant accounting policies

Basis of presentation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, and have been prepared in accordance with generally accepted accounting principles in the United States (GAAP). Certain prior period amounts have been reclassified to conform to current period presentation.

The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (SEC) on February 29, 2024 (2023 Annual Report).

Significant accounting policies

The significant accounting policies used in the preparation of these condensed consolidated financial statements as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 are consistent with those discussed in Note 2 in the 2023 Annual Report.

10


 

Use of estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from those estimates. The most significant estimates in the Company’s condensed consolidated financial statements relate to success payment liabilities, contingent consideration, business combinations, accrued expenses, and operating lease right-of-use assets and liabilities.

Recent accounting pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard-setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed, the Company does not believe that the adoption of any recently issued standards has had or may have a material impact on its condensed consolidated financial statements or disclosures.

In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740) Improvements to Income Tax Disclosures that requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. This ASU is effective for the Company's fiscal year 2025. Early adoption is permitted. The Company is currently evaluating income tax disclosures related to its annual report for fiscal year 2025.

 

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280). The amendments in this update expand segment disclosure requirements, including new segment disclosure requirements for entities with a single reportable segment among other disclosure requirements. This update is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

3. Acquisitions

Cobalt Biomedicine, Inc.

In February 2019, the Company acquired 100% of the outstanding equity of Cobalt Biomedicine, Inc. (Cobalt), a privately held early-stage biotechnology company developing a platform technology using its fusogen technology to specifically and consistently deliver various biological payloads to cells (the Cobalt acquisition).

As part of the Cobalt acquisition, the Company recorded an intangible asset of $59.2 million, which consists of in-process research and development that is classified as indefinite-lived until the successful completion of the associated research and development technology, at which point it becomes a finite-lived asset and will be amortized over its estimated useful life. If the research and development technology is abandoned, an impairment charge will be recorded. The Company is actively developing the fusogen technology and, accordingly, the intangible asset is not complete. Amortization will begin when regulatory approval of a product candidate developed using the fusogen technology is obtained in a major market, typically either the United States or the European Union.

The Company recognized $140.6 million of goodwill as a result of the Cobalt acquisition, which is primarily attributable to the value the acquisition provides the Company by complementing the Company’s ex vivo portfolio with in vivo fusogen cell engineering technology and furthering the Company’s research in using engineered cells as medicines. The goodwill is not deductible for income tax purposes. There were no impairments of the intangible asset or goodwill since the acquisition.

Pursuant to the terms and conditions in the Cobalt acquisition agreement, the Company has an obligation to pay to certain former Cobalt stockholders contingent consideration (Cobalt Contingent Consideration) of up to an aggregate of $500.0 million upon the achievement of certain specified development milestones and a success payment (Cobalt Success Payment) of up to $500.0 million, each of which is payable in cash or stock. The Cobalt Success Payment is payable if, at pre-determined valuation measurement dates, the Company’s market capitalization equals or exceeds $8.1 billion, and the Company is advancing a program based on the fusogen technology in a clinical trial pursuant to an investigational new drug (IND) application, or has filed, or received approval for, a biologics license application or new drug application for a product developed using the fusogen technology. The Cobalt Success Payment can be achieved over a maximum of 20 years from the date of the acquisition, but this period could be shorter upon the occurrence of certain events. A valuation measurement date would also be triggered upon a change of control of the Company if at least one of the Company’s programs based on the fusogen technology is an active research program at the time of such change of control. If the Company’s market capitalization is below $8.1 billion as of the date of a change of control, the amount of the potential Cobalt Success Payment will decrease, and the amount of potential Cobalt Contingent Consideration will increase. As of March 31, 2024, a Cobalt Success Payment had not been triggered.

11


 

The following table sets forth various thresholds for the Company’s market capitalizations as of the date of a change of control and the resulting potential Cobalt Success Payment and additional potential Cobalt Contingent Consideration:

 

Sana market capitalization upon a change of control and resulting impact to Cobalt Success
Payment and additional potential Cobalt Contingent Consideration

 

Cobalt Success
Payment

 

 

Additional
potential Cobalt
Contingent
Consideration

 

 

 

(in millions)

 

Equal to or exceeds $8.1 billion

 

$

500

 

 

$

-

 

Equal to or exceeds $7.4 billion, but less than $8.1 billion

 

 

150

 

 

 

350

 

Equal to or exceeds $6.8 billion, but less than $7.4 billion

 

 

100

 

 

 

400

 

Less than $6.8 billion

 

 

-

 

 

 

500

 

The Cobalt Success Payment and Cobalt Contingent Consideration liabilities are carried at fair value, with changes in fair value recognized in research and development related success payments and contingent consideration. As of March 31, 2024 and December 31, 2023, the estimated fair value of the Cobalt Success Payment liability was $39.1 million and $11.2 million, respectively, and was recorded in long-term liabilities. In connection with the change in the estimated fair value of the Cobalt Success Payment, the Company recognized an expense of $27.9 million and a gain of $4.8 million for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024 and December 31, 2023, the estimated fair value of the Cobalt Contingent Consideration was $115.0 million and $109.6 million, respectively, and was recorded in long-term liabilities. In connection with the change in the estimated fair value of the Cobalt Contingent Consideration, the Company recognized expenses of $5.4 million and $5.5 million for the three months ended March 31, 2024 and 2023, respectively.

4. License and collaboration agreements

Beam Therapeutics Inc.

In October 2021, the Company entered into an option and license agreement with Beam Therapeutics Inc. (Beam), pursuant to which the Company was granted a non-exclusive license to use Beam’s proprietary CRISPR Cas12b nuclease editing technology to research, develop, and commercialize engineered cell therapy products that (i) are directed to certain antigen targets, with respect to the Company’s allogeneic T cell programs, or (ii) comprise certain human cell types, with respect to the Company’s stem cell-derived programs. The Company made an upfront payment of $50.0 million to Beam, which was recorded in research and development expense for the year ended December 31, 2021. Additionally, under the terms of the agreement, the Company may be obligated to pay up to $65.0 million in specified developmental and commercial milestone payments and royalties on licensed products for each licensed product. At the time of the entry into the option and license agreement, a member of the Company’s board of directors was a beneficial owner of greater than 10% of the outstanding shares of Beam. This director is also affiliated with a member of the board of directors of Beam.

President and Fellows of Harvard College

In March 2019, the Company entered into an exclusive license agreement with the President and Fellows of Harvard College (Harvard) to access certain intellectual property for the development of hypoimmune-modified cells.

Under the terms of the agreement, the Company paid to Harvard aggregate consideration of $12.0 million, comprising $9.0 million in common stock and $3.0 million in cash. Additionally, the Company may be required to pay to Harvard up to an aggregate of $175.0 million in success payments, payable in cash, based on increases in the fair value of the Company’s common stock (Harvard Success Payments). The potential Harvard Success Payments are based on multiples of increased value ranging from 5x to 40x, based on a comparison of the fair market value of the Company’s common stock relative to the original issuance price of $4.00 per share at ongoing pre-determined valuation measurement dates. The Harvard Success Payments can be achieved over a maximum of 12 years from the effective date of the agreement. If a higher success payment tier is first met at the same time a lower tier is first met, both tiers will be owed. Any previous success payments made to Harvard would be credited against the success payment owed as of any valuation measurement date so that Harvard does not receive multiple success payments in connection with the same threshold. As of March 31, 2024, a Harvard Success Payment had not been triggered.

The following table summarizes the potential success payments and common stock price required for payment:

 

Multiple of Equity Value at Issuance

 

5x

 

 

10x

 

 

20x

 

 

30x

 

 

40x

 

Per share common stock price required for payment

 

$

20.00

 

 

$

40.00

 

 

$

80.00

 

 

$

120.00

 

 

$

160.00

 

Success payment(s) (in millions)

 

$

5.0

 

 

$

15.0

 

 

$

30.0

 

 

$

50.0

 

 

$

75.0

 

 

12


 

The Harvard Success Payment liabilities are carried at fair value, with the initial value and changes in fair value recognized in research and development related success payments and contingent consideration. As of March 31, 2024 and December 31, 2023, the estimated fair value of the Harvard Success Payment liability was $6.3 million and $1.6 million, respectively, and was recorded in long-term liabilities. In connection with the change in the estimated fair value of the Harvard Success Payment liability, the Company recognized an expense of $4.7 million and a gain of $0.6 million for the three months ended March 31, 2024 and 2023 respectively.

5. Restricted cash

The Company maintains standby letters of credit that are collateralized with a bank account at a financial institution in accordance with certain lease agreements. The aggregate amount of such standby letters of credit was $3.8 million as of each of March 31, 2024 and December 31, 2023.

 

6. Fair value measurements

The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis based on the three-tier fair value hierarchy:

 

 

 

 

 

March 31, 2024

 

 

 

Valuation
Hierarchy

 

Amortized Cost

 

 

Gross
Unrealized
Holding Gains

 

 

Gross
Unrealized
Holding Losses

 

 

Estimated
Fair Value

 

 

 

 

 

(in thousands)

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

Level 1

 

$

85,137

 

 

$

-

 

 

$

-

 

 

$

85,137

 

U.S. government and agency securities

 

Level 2

 

 

79,179

 

 

 

1

 

 

 

(1

)

 

 

79,179

 

Corporate debt securities

 

Level 2

 

 

514

 

 

 

-

 

 

 

-

 

 

 

514

 

Total cash equivalents

 

 

 

 

164,830

 

 

 

1

 

 

 

(1

)

 

 

164,830

 

Short-term marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency securities

 

Level 2

 

 

122,671

 

 

 

8

 

 

 

(22

)

 

 

122,657

 

Corporate debt securities

 

Level 2

 

 

11,372

 

 

 

1

 

 

 

(2

)

 

 

11,371

 

Total short-term marketable securities

 

 

 

 

134,043

 

 

 

9

 

 

 

(24

)

 

 

134,028

 

Other assets

 

Level 3

 

 

381

 

 

 

-

 

 

 

-

 

 

 

381

 

Total financial assets

 

 

 

$

299,254

 

 

$

10

 

 

$

(25

)

 

$

299,239

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

Level 3

 

 

114,990

 

 

 

-

 

 

 

-

 

 

 

114,990

 

Success payment liabilities

 

Level 3

 

 

45,422

 

 

 

-

 

 

 

-

 

 

 

45,422

 

Total long-term financial liabilities

 

 

 

 

160,412

 

 

 

-

 

 

 

-

 

 

 

160,412

 

Total financial liabilities

 

 

 

$

160,412

 

 

$

-

 

 

$

-

 

 

$

160,412

 

 

13


 

 

 

 

 

 

December 31, 2023

 

 

 

Valuation
Hierarchy

 

Amortized Cost

 

 

Gross
Unrealized
Holding Gains

 

 

Gross
Unrealized
Holding Losses

 

 

Estimated
Fair Value

 

 

 

 

 

(in thousands)

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

Level 1

 

$

70,315

 

 

$

-

 

 

$

-

 

 

$

70,315

 

U.S. government and agency securities

 

Level 2

 

 

33,091

 

 

 

3

 

 

 

-

 

 

 

33,094

 

Corporate debt securities

 

Level 2

 

 

1,062

 

 

 

-

 

 

 

-

 

 

 

1,062

 

Total cash equivalents

 

 

 

 

104,468

 

 

 

3

 

 

 

-

 

 

 

104,471

 

Short-term marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency securities

 

Level 2

 

 

57,924

 

 

 

7

 

 

 

(78

)

 

 

57,853

 

Corporate debt securities

 

Level 2

 

 

13,817

 

 

 

9

 

 

 

(1

)

 

 

13,825

 

Total short-term marketable securities

 

 

 

 

71,741

 

 

 

16

 

 

 

(79

)

 

 

71,678

 

Other assets

 

Level 3

 

 

359

 

 

 

-

 

 

 

-

 

 

 

359

 

Total financial assets

 

 

 

$

176,568

 

 

$

19

 

 

$

(79

)

 

$

176,508

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

Level 3

 

 

109,606

 

 

 

-

 

 

 

-

 

 

 

109,606

 

Success payment liabilities

 

Level 3

 

 

12,799

 

 

 

-

 

 

 

-

 

 

 

12,799

 

Total long-term financial liabilities

 

 

 

 

122,405

 

 

 

-

 

 

 

-

 

 

 

122,405

 

Total financial liabilities

 

 

 

$

122,405

 

 

$

-

 

 

$

-

 

 

$

122,405

 

The Company measures the fair value of money market funds based on quoted prices in active markets for identical assets or liabilities. The Level 2 marketable securities include U.S. government and agency securities and corporate debt securities and are valued based on either recent trades of securities in inactive markets or quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data.

The following table summarizes available-for-sale debt securities in a continuous unrealized loss position for less than and greater than twelve months for the periods presented:

 

 

 

Less than 12 months

 

 

12 months or greater

 

 

Total

 

 

 

Fair value

 

 

Unrealized losses

 

 

Fair value

 

 

Unrealized losses

 

 

Fair value

 

 

Unrealized losses

 

 

 

(in thousands)

 

March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency securities

 

$

111,511

 

 

$

(9

)

 

$

5,984

 

 

$

(14

)

 

$

117,495

 

 

$

(23

)

Corporate debt securities

 

 

7,858

 

 

 

(2

)

 

 

-

 

 

 

-

 

 

 

7,858

 

 

 

(2

)

Total

 

$

119,369

 

 

$

(11

)

 

$

5,984

 

 

$

(14

)

 

$

125,353

 

 

$

(25

)

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency securities

 

$

9,186

 

 

$

(3

)

 

$

10,386

 

 

$

(75

)

 

$

19,572

 

 

$

(78

)

Corporate debt securities

 

 

1,396

 

 

 

(1

)

 

 

-

 

 

 

-

 

 

 

1,396

 

 

 

(1

)

Total

 

$

10,582

 

 

$

(4

)

 

$

10,386

 

 

$

(75

)

 

$

20,968

 

 

$

(79

)

The Company determined that there was no material change in the credit risk of the above investments during the three months ended March 31, 2024. As such, an allowance for credit losses has not been recognized. As of March 31, 2024, the Company does not intend to sell such securities, and it is not more-likely-than-not that the Company will be required to sell the securities prior to the recovery of the amortized cost basis.

As of March 31, 2024, all marketable securities had an effective maturity date of two years or less. Investments in securities with maturities of less than one year, or those for which management intends to use to fund current operations, are included in current assets and classified as available-for-sale. As of March 31, 2024, the balance in accumulated other comprehensive loss included net unrealized gains related to the Company’s available-for-sale debt securities.

14


 

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities:

 

 

 

Contingent
Consideration

 

 

Cobalt
Success Payment
Liability

 

 

Harvard
Success Payment
Liability

 

 

 

(in thousands)

 

Balance as of December 31, 2023

 

$

109,606

 

 

$

11,160

 

 

$

1,639

 

Changes in fair value – expense

 

 

5,384

 

 

 

27,920

 

 

 

4,703

 

Balance as of March 31, 2024

 

$

114,990

 

 

$

39,080

 

 

$

6,342

 

Contingent consideration

The Company utilizes significant estimates and assumptions it believes would be made by a market participant in determining the estimated fair value of the Cobalt Contingent Consideration at each balance sheet date. The fair value of the Cobalt Contingent Consideration was determined by calculating the probability-weighted estimated value of the pre-specified development milestone payments based on the assessment of the likelihood and estimated timing that the milestones would be achieved and the applicable discount rates. The discount rate captures the credit risk associated with the payment of the contingent consideration when earned and due. The Company assesses these estimates on an ongoing basis as additional data impacting the assumptions are obtained.

The fair value of the Cobalt Contingent Consideration was calculated using the following unobservable inputs:

 

 

 

March 31, 2024

 

December 31, 2023

Unobservable Input

 

Range

 

Weighted-Average

 

Range

 

Weighted-Average

Discount rates

 

10.9% – 11.3%

 

11.0%

 

11.7% – 12.4%

 

11.9%

Probability of milestone achievement

 

5.0% – 55.0%

 

25.7%

 

5.0% – 55.0%

 

25.7%

The weighted-average unobservable inputs were calculated based on the relative value of the pre-specified development milestones. The estimated fair value of the Cobalt Contingent Consideration may change significantly as development progresses and additional data are obtained, impacting the assumptions regarding probabilities of successful achievement of the milestones used to estimate the fair value of the liability and the timing in which they are expected to be achieved. In evaluating the fair value assumptions, judgment is required to interpret the market data used to develop the estimates. The estimates of fair value may not be indicative of the amounts that could be realized in a current market exchange. Accordingly, the use of different market assumptions, inputs and/or different valuation techniques could result in materially different fair value estimates.

Success payments

The Company utilizes significant estimates and assumptions in determining the estimated fair value of the success payment liabilities and the associated expense or gain at each balance sheet date. The estimated fair value of the Cobalt Success Payment and Harvard Success Payment liabilities was determined using a Monte Carlo simulation methodology, which models the estimated fair value of the liability based on several key assumptions, including the expected volatility, remaining term, risk-free interest rate, estimated number and timing of valuation measurement dates on the basis of which payment may be triggered, and, for the Cobalt Success Payment, the Company’s market capitalization, and, for the Harvard Success Payments, the per share fair value of the Company’s common stock.

The fair values of the Cobalt Success Payments and Harvard Success Payments were calculated using the following unobservable inputs:

 

 

 

March 31, 2024

 

December 31, 2023

Unobservable Input

 

Cobalt

 

Harvard

 

Cobalt

 

Harvard

Expected stock price volatility

 

72.5%

 

72.5%

 

72.5%

 

72.5%

Expected term (years)

 

14.9

 

7.0

 

15.1

 

7.2

 

15


 

7. Property and equipment, net

Property and equipment, net consists of the following: