Intellia Therapeutics Inc

Notes to Condensed Consolidated Financial Statements (unaudited)

1. Overview and Basis of Presentation

Intellia Therapeutics, Inc. (“Intellia” or the “Company”) is a leading clinical-stage gene editing company, focused on developing potentially curative therapeutics using CRISPR/Cas9-based technologies. CRISPR/Cas9, an acronym for Clustered, Regularly Interspaced Short Palindromic Repeats (“CRISPR”)/CRISPR associated 9 (“Cas9”), is a technology for genome editing, the process of altering selected sequences of genomic deoxyribonucleic acid (“DNA”). To fully realize the transformative potential of CRISPR/Cas9-based technologies, Intellia is building a full-spectrum gene editing company, by leveraging its modular platform, to advancein vivo andex vivo therapies for diseases with high unmet need by pursuing two primary approaches. Forin vivo applications to address genetic diseases, the Company deploys CRISPR/Cas9 as the therapy. The Company’sin vivo programs use CRISPR to enable precise editing of disease-causing genes directly inside the human body. In addition, the Company is advancingex vivo applications to address immuno-oncology and autoimmune diseases, where it uses CRISPR/Cas9 as the tool to create the engineered cell therapy. For itsex vivo programs, CRISPR/Cas9 is used to engineer human cells outside the body. The Company’s deep scientific, technical and clinical development experience, along with its robust intellectual property (“IP”) portfolio, have enabled it to unlock broad therapeutic applications of CRISPR/Cas9 and related technologies to create new classes of genetic medicine.

The condensed consolidated financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K (“Annual Report”) for the year ended December 31, 2023.

The unaudited condensed consolidated financial statements include the accounts of Intellia Therapeutics, Inc. and its wholly- owned subsidiary, Intellia Securities Corp. All intercompany balances and transactions have been eliminated in consolidation. Comprehensive loss is comprised of net loss, unrealized gain/loss on marketable securities and other comprehensive gain/loss from equity method investment.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates in these condensed consolidated financial statements have been made in connection with the calculation of revenues, research and development expenses, valuation of equity and fair value method investments, contingent consideration and stock-based compensation expense. The Company bases its estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances at the time such estimates are made. Actual results could differ from those estimates. The Company periodically reviews its estimates in light of changes in circumstances, facts and experience.

The effects of material revisions in estimates, if any, would be reflected in the condensed consolidated financial statements prospectively from the date of the change in estimate.

In the opinion of management, the information furnished reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the results for the reported interim periods. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.

Liquidity

Since its inception through June 30, 2024, the Company has raised an aggregate of $2,666.7 million to fund its operations through its initial public offering (“IPO”) and concurrent private placements, follow-on public offerings, at-the-market offerings and the sale of convertible preferred stock, as well as through its collaboration agreements. The Company expects that its cash, cash equivalents and marketable securities as of June 30, 2024 will enable the Company to fund its ongoing operating expenses and capital expenditure requirements for at least the twelve-month period following the issuance of these condensed consolidated financial statements.

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies” to the consolidated financial statements included in the Annual Report for the year ended December 31, 2023. There have been no material changes to these policies during the six months ended June 30, 2024.

Recent Issued Accounting Pronouncements Not Yet Effective

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures. The ASU requires disclosure of incremental segment information on an annual and interim basis and also requires companies with a single reportable segment to provide all disclosures required by this ASU and all existing segment disclosures in Accounting Standard Codification (“ASC”) 280, Segment Reporting. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU updates income tax disclosure requirements primarily by requiring specific categories and greater disaggregation within the rate reconciliation and disaggregation of income taxes paid by jurisdiction. This ASU is effective for annual periods beginning after December 15, 2024 and is applicable to the Company’s fiscal year beginning January 1, 2025, with early application permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

3. Marketable Securities

The following table summarizes the Company’s available-for-sale marketable securities:

The amortized cost of available-for-sale securities is adjusted for amortization of premiums and accretion of discounts to maturity. There wereno material realized gains or losses in thesix months ended June 30, 2024 or for the year ended December 31, 2023. The Company generally does not intend to sell any investments prior to recovery of their amortized cost basis for any investment in an unrealized loss position. As such, the Company has classified these losses as temporary in nature.

The Company’s available-for-sale securities that are classified as short-term marketable securities in the condensed consolidated balance sheet mature within one year or less as of the balance sheet date. Available-for-sale securities that are classified as noncurrent in the condensed consolidated balance sheet are those that mature afterone year but within five years from the balance sheet date and that the Company does not intend to dispose of within the next twelve months. At June 30, 2024 and December 31, 2023, the Company didnot hold any marketable securities that matured beyond five years of the balance sheet date.

4. Fair Value Measurements

The Company classifies fair value-based measurements using a three-level hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1, quoted market prices (unadjusted) in active markets for identical assets or liabilities; Level 2, observable inputs other than quoted market prices included in Level 1, such as quoted market prices for markets that are not active or other inputs that are observable or can be corroborated by observable market data; and Level 3, unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The Company’s financial assets recognized at fair value on a recurring basis consisted of the following:

Certain of the Company’s financial assets, including cash equivalents, restricted cash equivalents and marketable securities, have been initially valued at the transaction price, and subsequently revalued at the end of each reporting period, utilizing third party pricing services or other observable market data. The pricing services utilize industry standard valuation models and observable market inputs to determine value.

Other financial instruments, including accounts receivable, accounts payable and accrued expense, are carried at cost, which approximates fair value due to the short duration and term to maturity.

The Company has determined that the estimated fair value of its investment in Kyverna Therapeutics, Inc. (“Kyverna”), a publicly traded company, is reported as Level 1 as it is valued at a quoted market price in an active market. The investment in Kyverna is classified within “investments and other assets” in the condensed consolidated balance sheets. Refer to Note 8 for further details.

Other Investments

The Company’s other investments include investments in AvenCell Therapeutics, Inc. (“AvenCell”) and SparingVision Sas (“SparingVision”). These investments are accounted for under ASC 321, Investments in Equity Securities (“ASC 321”) using the measurement alternative at cost minus impairment with adjustments for changes in observable prices. The Company previously accountedfor the AvenCell investment under the equity method; refer to Note 8 for further details. The Company monitors any events or changes in circumstances that may have a significant effect on the fair value of investments, either due to impairment or based on observable price changes, and records adjustments as needed. These investments are classified as Level 3 assets and are not included in the fair value table above as they are not valued at fair value on a recurring basis.

5. Accrued Expenses

Accrued expenses consisted of the following:

6. Commitments and Contingencies

Litigation

From time to time, the Company may be involved in legal and administrative proceedings and claims of various types. In some actions, the claimants seek damages, as well as other relief, which, if granted, would require significant expenditures. The Company records a liability in its consolidated financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate. If a matter is both probable to result in a liability to the Company and the amount of the loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in its consolidated financial statements.

BlueAllele Corp. v. Intellia Therapeutics, Inc.

On July 8, 2024, BlueAllele Corp. (“BlueAllele”) filed a complaint alleging infringement by the Company of various patents in the U.S. District Court for the District of Delaware. Specifically, BlueAllele alleges that the Company’s experimentation, basic research, identification, optimization, manufacturing and/or use of bi-directional insertion template technology infringes the asserted patents and seeks unspecified compensatory damages and an injunction against the alleged infringing activities. Intellia intends to defend itself in this matter. At this stage, the Company is unable to determine the likelihood of an unfavorable outcome or estimate the amount or range of potential loss, if any.

Except as noted above, there have been no material changes to any outstanding litigation, nor is the Company a party to any material new litigation, since December 31, 2023.

License Agreements

The Company is party to license agreements, which may include contingent payments. These payments will become payable if and when certain development, regulatory and commercial milestones are achieved. As of June 30, 2024, the satisfaction and timing of the contingent payments is uncertain and not reasonably estimable.

7. Collaborations and Other Arrangements

To accelerate the development and commercialization of CRISPR/Cas9-based products in multiple therapeutic areas, the Company has formed, and intends to seek other opportunities to form, strategic alliances with collaborators who can augment its leadership in CRISPR/Cas9 therapeutic development. As of June 30, 2024, the Company’s accounts receivable were related to its collaborations with Regeneron Pharmaceuticals, Inc. (“Regeneron”), SparingVision and AvenCell, and the Company’s contract liabilities were related to its collaborations with Regeneron and SparingVision. As of December 31, 2023, the Company’s accounts receivable were related to its collaborations with Regeneron, SparingVision, AvenCell and Kyverna and the Company’s contract liabilities were related to its collaborations with Regeneron and SparingVision.

The following table presents changes in the Company’s accounts receivable and contract liabilities (in thousands):

During thesix months ended June 30, 2024 and 2023, the Company recognized the following revenues as a result of changes in the contract liability balance (in thousands):

The Company has not incurred significant expenses to obtain collaboration agreements and costs to fulfill those contracts do not generate or enhance resources of the Company. As such, no costs to obtain or fulfill a contract have been capitalized in any period.

Regeneron Pharmaceuticals, Inc.

In April 2016, the Company entered into a license and collaboration agreement with Regeneron (as amended from time to time, the “2016 Regeneron Agreement”). In October 2023, Regeneron exercised its one-time option to extend the technology collaboration termfor an additionaltwo years, until April 2026, in exchange for a nonrefundable payment of $30.0 million, which was received by the Company in April 2024. In September 2023, Regeneron and Intellia further expanded the research collaboration (the “2023 Regeneron Amendment”) to develop additionalin vivo CRISPR-based gene editing therapies focused on neurological and muscular diseases.

In 2018, the Company entered into a co-development and co-promotion (“Co/Co”) agreement with Regeneron for transthyretin (“ATTR”) amyloidosis (the “ATTR Co/Co”). In May 2020, the Company entered into co-development and co-funding agreements for the treatment of hemophilia A and hemophilia B (the “Hemophilia Co/Co”) agreements. In March 2024, the Company notified Regeneron that it is opting out of its hemophilia B Co/Co agreement. The Company will continue to have obligations under the hemophilia B Co/Co agreement until September 2024. In addition, after termination of the hemophilia B Co/Co agreement the Company will continue to support Regeneron with the development of gene editing products directed to hemophilia B, as applicable, under the 2016 Regeneron Agreement. That agreement will control the parties’ obligations to develop and commercialize gene editing products directed to hemophilia B. The Company may be eligible to receive up to $320.0 million in milestone payments and royalties in the high-single digits to low teens, which royalties are potentially subject to various reductions, offsets and upstream payment obligations.

Since December 31, 2023, there have been no material changes to the key terms of the 2016 Regeneron Agreement, ATTR Co/Co, Hemophilia Co/Co, or 2023 Regeneron Amendment (the “Regeneron Agreements”), other than as described above.

The Company recognized collaboration revenue related to the Regeneron Agreements of$6.4 million and $13.8 million during the three and six months ended June 30, 2024, respectively, and $7.3 million and $14.1 million during the three and six months ended June 30, 2023, respectively, in the condensed consolidated statements of operations and comprehensive loss. This includes approximately $5.1 million and $9.7 million during the three and six months ended June 30, 2024, respectively, and $4.5 million and $8.7 million during the three and six months ended June 30, 2023, respectively, primarily representing payments due from Regeneron pursuant to the ATTR Co/Co. These revenues are offset in part by contra-revenue related to the Hemophilia Co/Co agreements amounting to approximately $4.4 million and $7.6 million during the three and six months ended June 30, 2024, respectively, and $2.8 million and $5.8 million during the three and six months ended June 30, 2023, respectively.

As of June 30, 2024, there was $36.8 million of the aggregate transaction price remaining to be recognized through April 2026, the remaining period of the 2016 Regeneron Agreement. As of June 30, 2024 and December 31, 2023, the Company had accounts receivable of $11.5 million and $35.7 million, respectively, and deferred revenue of $36.8 million and $47.1 million, respectively, related to the Regeneron Agreements.

SparingVision SAS

In October 2021, the Company and SparingVision, a genomic medicine company developing vision saving treatments for ocular diseases, entered into a license and collaboration agreement (the “SparingVision LCA”) to develop novel genomic medicines utilizing CRISPR/Cas9 technology for the treatment of ocular diseases.

Since December 31, 2023, there have been no material changes to the key terms of the SparingVision LCA agreement.

The Company recognized collaboration revenue related to the SparingVision LCA of approximately $0.5 million and $1.1 million, respectively, for thethree and six months ended June 30, 2024 and $0.5 million and $0.9 million, respectively, for the three and six months ended June 30, 2023, in the condensed consolidated statements of operations and comprehensive loss. As of June 30, 2024 and December 31, 2023, the Company had $0.6 million and $0.5 million in accounts receivable, respectively, related to the SparingVision LCA. As of June 30, 2024 and December 31, 2023, the Company had deferred revenue of $13.4 million and $13.9 million, respectively, related to the SparingVision LCA, which is expected to be recognized over a six to nine year period from the signing of the agreement.

ReCode Therapeutics, Inc. (“ReCode”)

On February 14, 2024, the Company entered into a license, collaboration and option agreement with ReCode (the “ReCode LCA”), a clinical-stage genetic medicines company, to develop novel genomic medicines for the treatment of cystic fibrosis (“CF”). The ReCode LCA leverages the Company’s proprietary CRISPR-based gene editing platform, including its DNA writing technology, and ReCode’s proprietary Selective Organ Targeting (“SORT”) lipid nanoparticle delivery platform to precisely correct one or more CF disease-causing gene mutations. As part of the agreement, the companies will focus initial research efforts on therapeutic approaches that address CF for patients who have limited or no treatment options available, with the opportunity to expand the scope of the collaboration in later phases. The Company will be responsible for the design of the editing strategy and research-grade components for the investigational therapies. ReCode will lead the subsequent preclinical and clinical development and worldwide commercialization for certain programs arising from the collaboration. The Company also has an option to lead commercialization in the U.S. for certain programs (the “Co/Co option”).

The ReCode LCA did not include an exchange of upfront consideration between the parties. The Company will be eligible to receive pre-specified development and commercial milestone payments, up to $262.0 million per product, as well as single digit royalties on potential sales. Certain milestone and royalty payments may be removed or reduced for a product if the Company exercises the Co/Co option. The Company did not recognize any revenue from the ReCode LCA during the three or six months ended June 30, 2024.

Other Agreements

The Company has existing license and collaboration agreements with AvenCell, Kyverna, and ONK Therapeutics, Ltd (“ONK”). Since December 31, 2023, there have been no material changes to the key terms of the AvenCell, Kyverna and ONK license and collaboration agreements. During the six months ended June 30, 2024, the Company recognized $21.0 million of previously eliminated intra-entity profit related to the AvenCell license and collaboration agreement (the “AvenCell LCA”) in the condensed consolidated statements of operations and comprehensive loss. See Note 8 for further details. The Company didnot recognize material revenue from the Kyverna and ONK agreements during the three or six month periods ending June 30, 2024. During the three months ended June 30, 2023, the Company recognized $5.8 million in revenue related to AvenCell and didnot recognize revenue related to Kyverna or ONK during that period. During the six months ended June 30, 2023, the Company recognized $10.7 million, $0.4 million and $0.1 million in revenue related to AvenCell, Kyverna and ONK, respectively.

8. Investments and Other Assets

Investments and other assets consisted of the following:

Kyverna Therapeutics, Inc.

In February 2024, Kyverna completed an initial public offering of its common stock (the “Kyverna IPO”). Prior to the Kyverna IPO, the Company accounted for its investment in Kyverna using the measurement alternative as Kyverna was a private company with no readily observable transaction price, and the investment was valued at $10.0 million as of December 31, 2023. As of June 30, 2024, the Company’s investment in Kyverna is valued at $8.8 million. The Company recognized an unrealized loss of $20.4 million and $1.2 million, recorded within “change in fair value of investments, net”in the condensed consolidated statement of operations and comprehensive loss during the three and six months ended June 30, 2024, respectively, associated with changes in the fair value of Kyverna’s common stock.

AvenCell Therapeutics, Inc.

As of June 30, 2024 and December 31, 2023, the Company holds a 33.33% equity interest in AvenCell. As of December 31, 2023, the Company accounted for its investment using the equity method of accounting, as the Company had significant influence, but not control, over AvenCell, and the investment was valued at $11.8 million. During the first quarter of 2024, in conjunction with the completion of a debt financing, AvenCell increased the size of their board, with a single investor having control over AvenCell’s operational and financial decisions. As a result, the Company no longer has the ability to exercise significant influence over AvenCell, and therefore the Company’s investment in AvenCell is accounted for in accordance with ASC 321 as of June 30, 2024, and AvenCell is no longer considered to be a related party.

The transition from equity method accounting to ASC 321 required the Company to reclassify $2.1 million from accumulated other comprehensive loss amounts previously recognized as a result of the investment in AvenCell to the carrying value of the investment in AvenCell and recognize $21.0 million of previously eliminated intra-entity profit as “collaboration revenue” in the condensed consolidated statement of operations and comprehensive loss during the first quarter of 2024. The Company also considered whether there was an indication that the investment was impaired, and recorded an impairment of $25.3 million within “change in fair value of investments, net” in the condensed consolidated statement of operations and comprehensive loss during that period. This impairment was caused by AvenCell’s financial condition, indicators of fair value based on the completion of the debt financing, and an executed term sheet for further financing, which indicated that the fair value of the investment was less than its carrying value. The Company used a market approach to value the investment, which is a Level 3 measurement in the fair value hierarchy.

Other than the $21.0 million of previously eliminated intra-entity profit noted above that was recognized during the six months ended June 30, 2024, no revenue was recognized during that period related to the AvenCell LCA. During the three and six months ended June 30, 2023, the Company recognized $5.8 million and $10.7 million in revenue, respectively, related to the AvenCell LCA. The Company had $0.2 million in accounts receivable and $1.0 million in accrued expenses related to the AvenCell agreements as of both June 30, 2024 and December 31, 2023.

As of June 30, 2024, the carrying value of the Company’s investment in AvenCell was $9.6 million.

SparingVision SAS

As of June 30, 2024, the fair value of the Company’s investment in SparingVision was $14.6 million. There have been no material changes in the valuation of the SparingVision investment as of June 30, 2024.

9. Leases

The Company leases approximately 230,000 square feet of real estate, including laboratory and office space in Cambridge, Massachusetts and the surrounding areas. The Company’s leases have remaining terms ranging from one to approximately nine years. Certain leases include options to renew, exercised at the Company’s sole discretion, with varying renewal terms that can extend the lease term for an additional three to five years. All of the Company’s leases qualify as operating leases.

Separately, the Company entered into an agreement in February 2022, later amended in June 2023, to lease approximately 140,000 square feet of office, general laboratory and planned good manufacturing practice (“GMP”) manufacturing space at 840 Winter Street in Waltham, Massachusetts (the “840 Winter Lease”). The Company anticipates a phased move-in process during the second half of 2024. As of June 30, 2024, the Company had not taken control of the premises and therefore there are no right of use assets or liabilities recorded related to the 840 Winter Lease under ASC 842, Leases (Topic 842) (“ASC 842”).

10. Stock-Based Compensation

Stock-based compensation expense is classified in the condensed consolidated statements of operations and comprehensive loss as follows:

Stock Option and Incentive Plans

In April 2016, the Company adopted the Amended and Restated 2015 Stock Option and Incentive Plan (the “2015 Plan”). The 2015 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and other stock-based awards. Recipients of incentive stock options and non-qualified stock options are eligible to purchase shares of the Company’s common stock at an exercise price equal to the fair value of such stock on the grant date. As of June 30, 2024, there were 4,614,029 shares available for future issuance under the 2015 Plan. The number of shares reserved for issuance under the 2015 Plan willbe cumulatively increased on each January 1 st byfour percent of the number of shares of stock issued and outstanding on the immediately preceding December 31 st or such lesser number of shares of stock as determined by the board of directors.

In June 2024, the Company adopted the 2024 Inducement Plan (the “Inducement Plan”). The Inducement Plan provides for the grant of non-qualified stock options, stock appreciation rights, RSAs, RSUs, unrestricted stock awards and dividend equivalent rights to individuals who are not employed by the Company. Recipients of non-qualified stock options are eligible to purchase shares of the Company’s common stock at an exercise price equal to the fair value of such stock on the grant date. In accordance with the Inducement Plan,850,000 shares of common stock have been reserved for future issuance. No grants had been made under the Inducement Plan as of June 30, 2024.

Restricted Stock Units

The following table summarizes the Company’s RSU activity for thesix months ended June 30, 2024:

Restricted Stock Units - Service Awards

The Company awards RSUs with a service condition to all employees upon hire and as part of their annual grant. RSUs with a service condition granted under the 2015 Plan in 2024 and 2023 generally vest as to one-third on the first anniversary of the original vesting date, with the balance vesting annually over the remaining two years.

In March 2024, the Company granted 2,157,921 RSUs with a service condition to employees as part of their annual grant, which have the potential to vest over a period ofthree years. The weighted average grant date fair value of these RSUs was $32.66 and the vesting start date for these RSUs was January 1, 2024.

In March 2023, the Company granted 2,195,135 RSUs with a service condition to employees as part of their annual grant, which have the potential to vest over a period ofthree years. The weighted average grant date fair value of these RSUs was $40.75 and the vesting start date for these RSUs was January 1, 2023.

Unvested restricted stock units as of June 30, 2024 in the table above includes 4,478,007 RSUs that are service-based.

Restricted Stock Units - Market Awards

In March 2024, 2023 and 2022, market-based RSUs were granted to senior executives as part of their annual grant. These RSUs have the potential to vest after a period ofthree years, with a vesting start date of January 1, 2024, 2023 and 2022, respectively, and the number of shares to be delivered will depend on the Company’s Total Shareholder Return (“TSR”), a market condition, over that period relative to a defined group of biotechnology companies. The number of market-based RSUs granted in March 2024, 2023 and 2022 was 235,858,181,743 and 55,144, respectively. The grant date fair value for the market-based RSUs, calculated using a Monte Carlo valuation model, was $51.12, $68.55 and $126.49, respectively. The following assumptions were used to determine the grant date fair value for the three years, respectively: risk free interest rate:4.28%,4.60% and 1.44%; expected volatility:77.2%,84.34% and 82.53%. The expected term for all grants was approximately 3.0 years; the expected dividend yield was 0.0%.

Unvested restricted stock units as of June 30, 2024 in the table above includes 438,329 RSUs that are market-based.

Restricted Stock Units - Performance-Based Awards with TSR Multiplier

Also in March 2024,444,117 performance-based RSUs (“PSUs”) with a relative TSR modifier were granted to senior executives as part of their annual grant. These PSUs, to the extent earned, shall vest on January 1, 2027, and the number of shares to be delivered will be determined based upon the achievement of certain performance goals, which can range from 0% to 200%. Following the determination of the achievement of performance criteria, the amount of shares awarded will be subject to adjustment based on the application of a TSR modifier, which can range from 75% to 125%. The grant date fair value for these PSUs, calculated using a Monte Carlo valuation model, was $36.16. The following assumptions were used to determine the grant date fair value: risk free interest rate:4.28%; expected volatility:77.2%; expected term approximately 3.0 years; expected dividend yield:0.0%. The Company recognizes compensation expense ratably over the required service period based on its estimate of the number of shares that will vest based upon the probability of achieving the performance goals.

Unvested restricted stock units as of June 30, 2024 in the table above includes 410,743 PSUs with a TSR multiplier.

Restricted Stock Units - Performance-Based Awards

In March 2022, the Company granted 66,296 performance-based RSUs to certain non-executive employees that would vest upon obtaining certain scientific milestones. There weretwo separate tranches, each attached to a different set of milestones. The milestone related to the first tranche, made up of 21,878 RSUs, was achieved in the first quarter of 2023 and these RSUs vested. The remaining performance milestones were considered not probable of achievement as of June 30, 2024 and, therefore, no related stock-based compensation was recorded during the period then ending.

Unvested restricted stock units as of June 30, 2024 in the table above includes 44,418 performance-based RSUs.

The weighted-average grant date fair value of all RSUs granted during the three and six months ended June 30, 2024 was $25.16 and $34.20, respectively. The total fair value of RSUs vested (measured on the date of vesting) for thethree and six months ended June 30, 2024 was $4.6 million and $35.5 million, respectively. The weighted-average grant date fair value of RSUs granted during the three and six months ended June 30, 2023 was $38.70 and $42.45, respectively. The total fair value of RSUs vested (measured on the date of vesting) for the three and six months ended June 30, 2023 was $6.2 million and $18.3 million, respectively.

As of June 30, 2024, there was $156.1 million of unrecognized stock-based compensation expense related to all RSUs that are expected to vest. These costs are expected to be recognized over a weighted average remaining vesting period of 1.8 years.

Stock Options

The weighted average grant date fair value of options, estimated as of the grant date using the Black-Scholes option pricing model, was$17.50 and $22.01 per option for those options granted during thethree and six months ended June 30, 2024, respectively, and$29.80 and $28.92 per option for those options granted during the three and six months ended June 30, 2023, respectively. Weighted average assumptions used to apply this pricing model were as follows:

Risk-free Interest Rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant with maturities approximately equal to the option’s expected term.

Expected Term. The expected term represents the period that stock option awards are expected to be outstanding. For option grants that are considered to be “plain vanilla,” the Company determines the expected term using the simplified method. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options. The Company uses the simplified method because it does not have sufficient historical option exercise data to provide a reasonable basis upon which to estimate the expected term.

Expected Volatility. Expected volatility is estimated based on actual movements in the Company’s stock price over the most recent historical periods, over the expected term of their stock option grants.

Expected Dividend Yield. The Company has not paid cash dividends and has no intention to pay cash dividends in the future.

Stock options generally vest as to one-third on the first anniversary of the original vesting date, with the balance vesting monthly over the remaining two years, unless they contain specific vesting provisions. The maximum term of stock options granted under the 2015 Plan is ten years.

The following is a summary of stock option activity for thesix months ended June 30, 2024:

The total intrinsic value (the amount by which the fair market value exceeded the exercise price) of stock options exercised during the three and six months ended June 30, 2024 was $0.8 million and $2.0 million, respectively. The total intrinsic value of stock options exercised during the three and six months ended June 30, 2023 was $0.8 million and $1.9 million, respectively.

As of June 30, 2024, there was $43.5 million of unrecognized compensation cost related to stock options that have not yet vested which are expected to be recognized over a weighted average remaining vesting period of 1.22 years.

Employee Stock Purchase Plan

In May 2016, the Company adopted the 2016 Employee Stock Purchase Plan (the “2016 Plan”). The 2016 Plan allows eligible employees to purchase shares of the Company’s common stock on the last day of each predetermined six-month offering period at 85% of the lower of the fair market value per share at the beginning or end of the applicable offering period. The 2016 Plan provides for six-month offering periods beginning in January and July of each year.

As of June 30, 2024, there were 989,736 shares available for future issuance under the 2016 Plan. The number of shares reserved for issuance under the 2016 Plan will be cumulatively increased on each January 1 st by the lesser of a) one percent of the number of shares of common stock issued and outstanding on the immediately preceding December 31 st, b)500,000 shares of common stock, or c) such lesser number of shares of common stock as determined by the board of directors.

During the six months ended June 30, 2024 and 2023 the Company issued 87,751 and 69,631 shares of common stock under the 2016 Plan, respectively. The weighted-average purchase prices of shares issued under the 2016 Plan were $19.02 and $29.45 per sharefor the six-month periods ended June 30, 2024 and 2023, respectively.

The fair value of shares under the 2016 Plan was estimated at the beginning of the offering period using a Black-Scholes option-pricing model with the following assumptions:

11. Loss Per Share

The Company calculates basic loss per share by dividing net loss for each respective period by the weighted average number of common shares outstanding for each respective period. The Company computes diluted loss per share after giving consideration to the dilutive effect of stock options and unvested restricted stock units that are outstanding during the period, except where such securities would be anti-dilutive.

Basic and diluted loss per share was calculated as follows:

The following common stock equivalents were excluded from the calculation of diluted loss per share because their inclusion would have been anti-dilutive:

12. Stockholders’ Equity

At-the-Market Offering Programs

2022 Sale Agreement

In March 2022, the Company entered into an Open Market Sale Agreement (the “2022 Sale Agreement”) with Jefferies LLC (“Jefferies”), under which Jefferies was able to offer and sell, from time to time in “at-the-market” offerings, shares of the Company’s common stock having aggregate gross proceeds of up to $400.0 million. In February 2024, the Company entered into an amendment to the 2022 Sale Agreement (the “2022 Sale Agreement, as amended”) toincrease the size of the at-the-market offering program from $400.0 million to $750.0 million. The Company agreed to pay cash commissions of up to 3.0% of the gross proceeds of sales of common stock under the 2022 Sale Agreement, as amended. Through June 30, 2024, the Company issued 11,320,924 shares of its common stock under the 2022 Sale Agreement, as amended.

During the six months ended June 30, 2024, the Company issued 3,802,761 shares of its common stock, in a series of sales, at an average price of $25.58 per share, in accordance with the 2022 Sale Agreement, as amended, for aggregate net proceeds of $94.4 million, after payment of cash commissions and approximately $0.2 million related to legal, accounting and other fees in connection with the sales.

As of June 30, 2024, $331.7 million in shares of common stock remain eligible for sale under the 2022 Sale Agreement, as amended.