LogicBio Therapeutics, Inc. - Quarter Report: 2021 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2021

OR

For the transition period from                  to                 

Commission File Number: 001-38707

LogicBio Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

(617) 245-0399

(Registrant’s telephone number, including area code)

n/a

(Former name, former address and formal fiscal year, if changed since last report)

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

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.

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 November 8, 2021, the registrant had 32,956,794 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents

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NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of this Quarterly Report on Form 10-Q. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “approach,” “believe,” “continue,” “could,” “designed,” “estimate,” “expect,”  “goal,” “intend,” “may,” “plan,” “potential,” “project,” “strategy,” “will,” “would,” “should,” “seek,” “likely,” “become,” “develop,” “engage,” “execute,” “expand,” “goal,” “leverage,” “future,” “vision” or similar expressions, or the negative or plural of these words or expressions. These forward-looking statements may include statements concerning the following:

Any or all of these forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. These forward-looking statements involve risks and uncertainties, including those that are discussed below under the heading “Risk Factors Summary”, and the risk factors identified further in Part II, Item 1A. "Risk Factors" included in this Quarterly Report on Form 10-Q and elsewhere in this Quarterly Report on Form 10-Q, that could cause our actual results, financial condition, performance or achievements to be materially different from those indicated in these forward-looking statements. In particular, the impact of the ongoing COVID-19 pandemic on our ability to progress with our research, development, manufacturing and regulatory efforts, including our plans to advance and complete our Phase 1/2 SUNRISE clinical trial for LB-001 in MMA, and the value of and market for our common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the United States and in other countries, and the effectiveness of actions taken globally to contain and treat the disease. In addition we are subject to the following risks: existing preclinical data may not be predictive of the results of ongoing or later clinical trials; clinical trials may not be successful or may be discontinued or delayed for any reason; manufacturing and process development risks, including delays relating to continuously improving our manufacturing processes; risks associated with management and key personnel changes and transitional periods; the actual funding required to develop and commercialize product candidates, including for safety, tolerability, enrollment, manufacturing or economic reasons; the timing and content of decisions made by regulatory authorities; the actual time it takes to initiate and complete preclinical and clinical studies; the competitive landscape; changes in our economic and financial conditions; and our ability to obtain, maintain and enforce patent and other intellectual property protection for LB-001 and any other product candidates. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason. Unless otherwise stated, our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

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In this Quarterly Report on Form 10-Q, unless the context otherwise requires, the terms “LogicBio,” “LogicBio Therapeutics, Inc.,” the “Company,” “we,” “us,” “our” and similar references in this Quarterly Report on Form 10-Q refer to LogicBio Therapeutics, Inc. and its subsidiaries.

LOGICBIO™, GENERIDE™, SAAVY™ and any associated logos are trademarks of LogicBio and/or its affiliates. All other trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. The use or display of other parties’ trademarks, trade dress or products in this Quarterly Report on Form 10-Q does not imply that we have a relationship with, or endorsement or sponsorship of, the trademark or trade dress owners. Any website addresses given in this Quarterly Report on Form 10-Q are for information only and are not intended to be an active link or to incorporate any website information into this document.

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RISK FACTORS SUMMARY

The following is a summary of the principal risks that could adversely affect our business, financial condition and results of operations:

Risks Related to Our Financial Position and Need for Additional Capital

Risks Related to Discovery, Development, Clinical Testing, Manufacturing and Regulatory Approval

Risks Related to Our Dependence on Third Parties

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Risks Related to Our Intellectual Property

Risks Related to Healthcare Laws and Other Legal Compliance Matters

Risks Related to Employee Matters and Managing Growth

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

LogicBio Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

See notes to unaudited condensed consolidated financial statements.

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LogicBio Therapeutics, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)

See notes to unaudited condensed consolidated financial statements.

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LogicBio Therapeutics, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

See notes to unaudited condensed consolidated financial statements.

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LogicBio Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share and per share data)

See notes to unaudited condensed consolidated financial statements.

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LogicBio Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

See notes to unaudited condensed consolidated financial statements.

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LogicBio Therapeutics, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(Dollars in thousands, except share and per share data)

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

Business Overview

LogicBio Therapeutics, Inc. (“LogicBio” or the “Company”) was incorporated in 2014 as a Delaware corporation. Its principal offices are in Lexington, Massachusetts. LogicBio is a clinical-stage genetic medicine company pioneering gene editing and gene delivery platforms to address rare and serious diseases from infancy through adulthood. The Company's gene editing platform, GeneRide™, is a new approach to precise gene insertion harnessing a cell's natural deoxyribonucleic acid (“DNA”) repair process potentially leading to durable therapeutic protein expression levels. The Company's gene delivery platform, sAAVy™, is an adeno-associated virus (“AAV”) capsid engineering platform designed to optimize gene delivery for treatments in a broad range of indications and tissues.

Based on the Company’s GeneRide technology, LogicBio is developing its lead product candidate, LB-001, to treat methylmalonic acidemia (“MMA”) in pediatric patients. The SUNRISE trial is a multi-center, open label, Phase 1/2 clinical trial designed to assess the safety, tolerability and preliminary efficacy of LB-001 in pediatric patients with MMA characterized by methylmalonyl CoA mutase gene (“MMUT”) mutations. The Company expects seven centers in the United States and one center in Saudi Arabia to participate in the SUNRISE trial.

In April 2021, the Company entered into an Exclusive Research Collaboration, License and Option Agreement with CANbridge Care Pharma Hong Kong Limited (“CANbridge”), pursuant to which LogicBio granted CANbridge (a) an exclusive worldwide license to certain of the Company’s intellectual property rights, including those relating to AAV sL65 (“sL65”), the first capsid produced from the sAAVy platform, to develop, manufacture and commercialize gene therapy candidates for the treatment of Fabry and Pompe diseases, (b) an option to obtain an exclusive worldwide license to certain of the Company’s intellectual property rights, including those relating to sL65, to develop and commercialize gene therapy candidates for the treatment of two additional indications, and (c) an exclusive option to obtain an exclusive license to develop and commercialize LB-001 for the treatment of MMA in China, Taiwan, Hong Kong and Macau. Also in April 2021, the Company announced a research collaboration with Daiichi Sankyo Company, Limited (“Daiichi”) for the development of treatments for two indications based on GeneRide. In addition, the Company entered into a research collaboration with Takeda Pharmaceutical Company Limited (“Takeda”) in January 2020 to develop LB-301, an investigational therapy leveraging GeneRide, for the treatment of Crigler-Najjar syndrome (“CN”), a rare pediatric disease. As of September 30, 2021, the work under the research plan has been completed.  

Since its inception, the Company has devoted the majority of its efforts to research and development, including its preclinical and clinical development activities and its manufacturing and process development activities, raising capital, and providing general and administrative support for these operations. The Company is subject to a number of risks similar to those of other companies conducting high-risk, early-stage research and development of product candidates. Principal among these risks are a dependency on key individuals and intellectual property, competition from other products and companies, and the technical risks associated with the successful research, development and clinical manufacturing of its product candidates. The Company’s success is dependent upon its ability to continue to raise additional capital in order to fund ongoing research and development, meet its obligations and, ultimately, obtain regulatory approval of its product candidates, successfully commercialize its products, if approved, generate revenue and attain profitable operations.

COVID-19 Impact

The Company is closely monitoring the COVID-19 pandemic in order to promote the safety of its personnel and to continue advancing its research and development activities. The Company is following federal, state and local requirements and guidelines with respect to the COVID-19 pandemic, and has allowed its employees to return to working on-premises in accordance with those requirements and guidelines.

The COVID-19 pandemic did not have a material impact on the Company’s results of operations, cash flow and financial position as of and for the nine months ended September 30, 2021. However, the Company is aware that certain of its third-party vendors are being affected by import/export and other restrictions due to COVID-19, which are currently having an impact on certain of the Company’s research, development and manufacturing activities. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial position will depend on future developments that are uncertain and cannot be accurately predicted.

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Liquidity and Capital Resources

The Company has had recurring losses since inception and incurred a loss of $30,966 during the nine months ended September 30, 2021. Net cash used in operations for the nine months ended September 30, 2021 was $13,834. The Company expects to continue to generate operating losses and use cash in operations for the foreseeable future. As of September 30, 2021, the Company had cash and cash equivalents of $59,581 which management believes will be sufficient to fund its operating expenses and capital expenditure requirements into the fourth quarter of 2022. On a quarterly basis, the Company is required to conduct an accounting analysis under ASC 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, or ASC 205-40. The result of the Company’s ASC 205-40 analysis is that there is substantial doubt about the Company’s ability to continue as a going concern through the next twelve months from the date of issuance of this Quarterly Report on Form 10-Q.

The Company will require substantial additional capital to fund its research and development, including its preclinical and clinical development activities and its manufacturing and process development activities, and ongoing operating expenses. Management’s plans to mitigate the conditions that raise substantial doubt include raising additional capital through equity or debt financings, payments from its collaborators, strategic transactions, or a combination of those approaches. These plans may also include the possible deferral of certain operating expenses unless and until additional capital is received. There can be no assurance that the Company will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to the Company, or that the Company will be successful in deferring certain operating expenses. 

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by the Company in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 15, 2021.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments which are necessary for a fair statement of the Company’s financial position as of September 30, 2021, consolidated results of operations for the three and nine months ended September 30, 2021 and 2020 and cash flows for the nine months ended September 30, 2021 and 2020. Such adjustments are of a normal and recurring nature. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2021.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 15, 2021. Since the date of those financial statements, there have been no material changes to its significant accounting policies.

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Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. The Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial statements upon adoption.

In March 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848). This ASU provides optional expedients and exceptions for applying U.S. GAAP to transactions affected by reference rate (e.g., LIBOR) reform if certain criteria are met, for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The ASU is effective as of March 12, 2020 through December 31, 2022. The Company will evaluate transactions or contract modifications, including any related to its July 2019 loan and security agreement which uses LIBOR as a reference rate, occurring as a result of reference rate reform and determine whether to apply the optional guidance on an ongoing basis. The ASU is currently not expected to have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

3. FAIR VALUE MEASUREMENTS

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:

When developing fair value estimates, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. When available, the Company uses quoted market prices to measure fair value. The valuation technique used to measure fair value for the Company’s Level 1 and Level 2 assets is a market approach, using prices and other relevant information generated by market transactions involving identical or comparable assets. If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including yield curves, volatilities, credit ratings and currency rates. In certain cases where market rate assumptions are not available, the Company is required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument.

The Company did not have any transfers of assets between levels of the fair value measurement hierarchy during the nine months ended September 30, 2021.

4. INVESTMENTS

As of September 30, 2021 and December 31, 2020, the Company did not hold any short-term or long-term investments.

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5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities at September 30, 2021 and December 31, 2020 consisted of the following:

Accrued compensation and benefits consists primarily of accrued bonuses. Accrued professional services consists primarily of consulting services, legal services and services provided by contract research organizations (“CRO”) and contract manufacturing organizations (“CMO”). Accrued lab supplies consists primarily of reagents and lab consumables. Accrued IP licensing fees consist of fees payable to certain of the Company’s existing licensors.

6. DEBT

On July 2, 2019 (the “Closing Date”), the Company entered into a loan and security agreement (the “Loan Agreement”), for term loans with Oxford Finance LLC (“Oxford”) and Horizon Technology Finance Corporation (“Horizon,” and, together with Oxford, the “Lenders”). The Loan Agreement allows the Company to borrow up to $20,000 issuable in two equal tranches (the “Term Loans”). On the Closing Date, the first tranche of $10,000 was drawn down by the Company (the “Term A Loan”). In September 2020 and March 2021, the Company entered into amendments to the Loan Agreement, each of which extended the availability of the $10,000 second tranche subject to certain conditions. In the second quarter of 2021, the Company met the conditions to initiate drawdown of the second tranche but did not exercise its right to do so, and the option to draw down the second tranche of the Term Loans expired.

The outstanding balance of the Term Loans will accrue interest at the greater of (i) the rate of the one-month U.S. LIBOR rate plus 6.25% and (ii) 8.75%. The Loan Agreement provides for an interest only period until July 1, 2021, followed by thirty-six equal monthly payments of principal and interest continuing through June 1, 2024 (the “Maturity Date”). The Company has the option to prepay the outstanding balance prior to the Maturity Date, subject to a prepayment fee of 1.0% to 3.0% depending upon when the prepayment occurs. Upon repayment of the Term Loans, the Company is required to make a final payment to the Lenders equal to 4.5% of the original principal amount of the Term Loans funded which will be accrued by charges to interest expense over the term of the loans using the effective interest method.

In conjunction with the Loan Agreement, the Company issued 15,686 of common stock warrants (“Warrants”) to the Lenders at a per share exercise price of $12.75, a maximum contractual term of 10 years and exercisable immediately. The fair value of the Warrants was accounted for as a debt discount and calculated to be approximately $136 using the Black-Scholes method. The Company determined the Warrants met the criteria for equity classification, and, as such, the fair value of the Warrants is recorded as additional paid-in capital on the condensed consolidated balance sheets. Finally, the Company incurred issuance costs of approximately $150. Both the debt discount and issuance costs will be accreted to long-term debt on the condensed consolidated balance sheets by charges to interest expense over the term of the Term A Loan using the effective interest method.

The Loan Agreement contains customary representations, warranties and covenants and also includes customary events of default. Events of default include, among other things, the Company’s failure to pay amounts due, a breach of certain covenants, a material adverse change event, misrepresentations and judgments. Upon the occurrence of an event of default, a default interest rate of an additional 5.00% per annum may be applied to the outstanding loan balances, and the Lenders may declare all outstanding obligations immediately due and payable. Borrowings under the Loan Agreement are collateralized by substantially all the Company’s assets, other than its intellectual property, which include maintaining certain cash balances in controlled accounts.

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Interest expense was $270 and $824 for the three and nine months ended September 30, 2021, respectively. Interest expense was $276 and $821 for the three and nine months ended September 30, 2020, respectively. The effective interest rate on the Loan Agreement, including the amortization of the debt discount and issuance costs, and accretion of the final payment, was 11.34% at September 30, 2021. The components of the long-term debt balance are as follows:

As of September 30, 2021, the estimated future principal payments due were as follows:

7. STOCK-BASED COMPENSATION

Equity Incentive Plans

In December 2014, the Company adopted the LogicBio Therapeutics, Inc. 2014 Equity Incentive Plan, as amended (the “2014 Plan”), for the issuance of stock options and other stock-based awards. In October 2018, the Company’s 2018 Equity Incentive Plan (the “2018 Plan”) became effective and as a result, no further awards will be made under the 2014 Plan. The 2018 Plan was established to provide equity-based ownership opportunities for employees and directors, as well as outside consultants and advisors. Any awards granted under the 2014 Plan prior to the adoption of the 2018 Plan remained outstanding in accordance with their respective terms.

Under the 2018 Plan, there is an annual increase on January 1 of each year from 2019 until 2028, by the lesser of (i) 4% of the number of shares of common stock outstanding on December 31 of the prior year and (ii) an amount determined by the Company’s Board of Directors (“Board”). On January 1, 2021, the Company increased the number of shares available for future grant under the 2018 Plan by 1,272,547 shares. At September 30, 2021, there were 759,002 shares available for future grant under the 2018 Plan.

The 2018 Plan is administered by the Compensation Committee of the Board, except with respect to such matters that are not delegated to the Compensation Committee by the Board (collectively, the “Administrator”). The exercise prices, vesting and certain other restrictions are determined at the discretion of the Administrator, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the common stock on the date of grant. The term of stock options awarded under the 2018 Plan may not exceed 10 years from the grant date. Stock options, shares of restricted stock and restricted stock units (“RSU”) granted to employees, officers, members of the Board, advisors, and consultants of the Company typically vest over one to four years.  

Stock Options

During the nine months ended September 30, 2021 and 2020, the Company granted options with time-based vesting to purchase 2,097,256 and 870,203 shares of common stock, respectively, with a weighted-average grant date fair value per share of $4.13 and $4.80, respectively. The Company recorded stock-based compensation expense for options granted of $2,812 and $1,999 during the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021, there were 4,508,640 outstanding options, of which 2,693,368 were unvested, and $9,738 of unrecognized stock-based compensation expense to be recognized over a weighted-average period of 2.9 years.

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Restricted Common Stock

The Company has granted shares of restricted common stock with time-based and performance-based vesting conditions from time to time. The Company did not grant any restricted common stock during the nine months ended September 30, 2021 or 2020. The Company recorded stock-based compensation expense for restricted common stock granted of $132 and $108 during the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021, there were 11,153 shares of unvested restricted common stock outstanding, all of which have been expensed as of September 30, 2021.

Restricted Stock Units

The Company has granted RSUs with time-based vesting conditions from time to time. Each RSU represents the right to receive one share of the Company’s common stock upon vesting. The fair value is calculated based upon the Company’s closing stock price on the date of grant, and the stock-based compensation expense is recognized over the vesting period. The Company granted 5,939 and 125,737 RSUs during the nine months ended September 30, 2021 and 2020, respectively. The Company recorded stock-based compensation for RSUs granted of $174 and $321 during the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021, there were 5,939 unvested RSUs outstanding and $14 of unrecognized stock-based compensation expense related to unvested RSUs to be recognized over a weighted-average period of 0.3 years.

Stock-Based Compensation Expense

Total stock-based compensation expense recorded as research and development and general and administrative expenses, respectively, for employees, directors and non-employees for the nine months ended September 30, 2021 and 2020 is as follows:

8. STOCKHOLDERS’ EQUITY

Open Market Sale Agreement

On November 15, 2019, the Company entered into an Open Market Sale Agreement (the “Open Market Sale Agreement”) with Jefferies LLC, as agent (“Jefferies”), and filed a related prospectus supplement, pursuant to which the Company may issue and sell shares of its common stock at the then current market prices having an aggregate offering price of up to $50,000 (the “Open Market Shares”) from time to time through Jefferies (the “Open Market Offering”).

Under the Open Market Sale Agreement, Jefferies may sell the Open Market Shares by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Exchange Act of 1934, as amended. The Company may sell the Open Market Shares in amounts and at times to be determined by the Company from time to time subject to the terms and conditions of the Open Market Sale Agreement, but it has no obligation to sell any of the Open Market Shares in the Open Market Offering.

The Company or Jefferies may suspend or terminate the offering of Open Market Shares upon notice to the other party and subject to other conditions. The Company has agreed to pay Jefferies commissions for its services in acting as agent in the sale of the Open Market Shares in the amount of up to 3.0% of gross proceeds from the sale of the Open Market Shares pursuant to the Open Market Sale Agreement. The Company has also agreed to provide Jefferies with customary indemnification and contribution rights.

During the nine months ended September 30, 2021, the Company issued 922,077 Open Market Shares at a weighted-average price of $5.70 per share, resulting in net proceeds to the Company of $5,098. During the nine months ended September 30, 2020, the Company issued 436,477 shares of its common stock at a weighted-average price of $7.56 per share, resulting in net proceeds to the Company of $3,227. At September 30, 2021, the Company had $41,253 in aggregate gross offering amount available under the Open Market Sale Agreement.

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9. REVENUE

Service Revenue

Takeda Agreement

In January 2020, the Company entered into a Research Collaboration and Option Agreement with Takeda (“Takeda Agreement”), which is accounted for within the scope of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). For further details on the terms and accounting treatment consideration for the Takeda Agreement, please refer to Note 10, “Revenue,” to the Company’s consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

During the three and nine months ended September 30, 2021, the Company recognized $43 and $556, respectively, in service revenue under the Takeda Agreement. During the three and nine months ended September 30, 2020, the Company recognized $926 and $2,912, respectively, in service revenue under the Takeda Agreement. As of September 30, 2021, there was $119 in accounts receivable on the consolidated balance sheet related to the Takeda Agreement.

Daiichi Sankyo Agreement

In April 2021, the Company entered into a Research Collaboration and Exclusive Option Agreement (the “Daiichi Agreement”) with Daiichi for the development of gene therapy candidates for two indications based on the GeneRide platform (each, a “Daiichi Candidate”). Under the terms of the Daiichi Agreement, Daiichi will fund all research and development activities related to the development of the Daiichi Candidates under a mutually agreed research plan (the “Daiichi Research Plan”). The Daiichi Agreement also provides Daiichi with an exclusive, non-binding option for each Daiichi Candidate to negotiate in good faith for a certain period of time to enter into a license agreement with respect to each such Daiichi Candidate (the “Daiichi License Options”).

The Company assessed the Daiichi Agreement in accordance with ASC 606 and concluded that it represents a contract with a customer and is within the scope of ASC 606. The Company concluded that its conduct of research services under the Daiichi Research Plan, which includes a research data package, participation in various joint oversight committees, a research license and a materials transfer, represents a single combined performance obligation. The Company determined the transaction price totaled $2,000, which included an upfront payment of $1,000 and an additional $1,000 prepayment of the first-year research and development fees. The entire transaction price will be allocated to the single combined performance obligation, which is transferred over the expected term of the conduct of the research services. Terms related to exclusive licenses negotiated after the exercise of the Daiichi License Options will be part of a separate contract and reflect applicable standalone selling prices. As such, the Company concluded the Daiichi License Options are not considered to be a material right.

The upfront payment of $2,000 was recorded as deferred revenue and is being recognized as revenue over time in conjunction with the Company’s conduct of research services as the research services are the primary component of the combined performance obligation. Revenue associated with the upfront payment and ongoing research services will be recognized using an input-based measurement of actual costs incurred as a percentage of the estimated total costs expected to be incurred over the expected term of conduct of the research services. The Company believes this input-based method to recognize revenue best reflects the transfer of value to Daiichi. During the three and nine months ended September 30, 2021, the Company recognized $392 and $572, respectively, as service revenue under the Daiichi Agreement. As of September 30, 2021, there was $1,428 in deferred revenue related to the Daiichi Agreement, of which $1,130 was classified as current deferred revenue.  

Collaboration Revenue

CANbridge Agreement

In April 2021, the Company entered into an Exclusive Research Collaboration, License and Option Agreement (the “CANbridge Agreement”) with CANbridge.

Under the terms of the CANbridge Agreement, the Company granted CANbridge (a) an exclusive worldwide license to certain of the Company’s intellectual property rights, including those relating to sL65, the first capsid produced from the sAAVy platform, to develop, manufacture and commercialize gene therapy candidates for the treatment of Fabry and Pompe diseases (the “Fabry and Pompe License”), (b) an option to obtain an exclusive worldwide license to certain of the Company’s intellectual property rights, including those relating to sL65, to develop and commercialize gene therapy candidates for the treatment of two additional indications (the “Candidate Option”) and (c) an exclusive option to obtain an exclusive license to develop and commercialize LB-001 for the treatment of MMA (the “LB-001 Option”) in China, Taiwan, Hong Kong and Macau (“Greater China”). Pursuant to the CANbridge Agreement, LogicBio and CANbridge will collaborate to develop the gene therapy candidates referenced in (a) above for the treatment of Fabry and Pompe diseases plus, upon CANbridge’s exercise of the applicable option, two additional indications under a

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mutually agreed research plan. CANbridge agreed to provide funding for LogicBio’s activities under the research plan in accordance with a mutually agreed research budget.

Under the CANbridge Agreement, the Company received an upfront, non-refundable and non-creditable payment of $10,000 from CANbridge. In addition, CANbridge is obligated to reimburse the Company for research and development costs incurred by the Company for activities related to the development of the gene therapy candidates for two indications, Pompe disease and Fabry disease, under a mutually agreed upon research plan (the “CANbridge Research Plan”).

The Company is eligible to receive up to $542,000 in aggregate from CANbridge contingent on the achievement of specified clinical, regulatory and sales milestones relating to the named gene therapy candidates for Fabry disease and Pompe diseases, the additional indications for which CANbridge exercises the Candidate Option, and the payment of any option exercise fees. The Company is also eligible to receive up to $49,000 in aggregate clinical, regulatory and sales milestones for LB-001, subject to the exercise of the LB-001 Option, and the payment of the LB-001 Option fee. CANbridge is obligated to pay to the Company royalties based on an escalating tiered, mid- to high-single digit percentage of the annual worldwide net sales for each non-LB-001 indication pursued. In addition, CANbridge will pay to the Company royalties based on an escalating tiered, high-single digit to mid-double digit percentage of the annual Greater China net sales for LB-001 for the treatment of MMA, subject to the exercise of the LB-001 Option.

The Company applied ASC Topic 808, Collaborative Arrangements (“ASC 808”) and determined that the CANbridge Agreement is within the scope of ASC 808. Furthermore, the Company determined that certain aspects of the CANbridge Agreement represented a vendor-customer relationship as CANbridge represents a customer for certain activities. As such, the Company applied the relevant guidance from ASC 606 to evaluate the appropriate accounting for the vendor-customer aspects of the CANbridge Agreement. In accordance with ASC 606, the Company identified its performance obligation as a grant of a license to CANbridge for certain of its intellectual property rights, including those relating to sL65, and its conduct of research services under the CANbridge Research Plan, which includes participation in various joint oversight committees and a technology transfer. The Company determined that its grant of a license to CANbridge to certain of its intellectual property subject to certain conditions was not distinct as it does not have stand-alone value to CANbridge apart from the services to be performed by the Company pursuant to the CANbridge Agreement. A third party would not be able to provide research and development services due to the specific nature of the intellectual property and knowledge required to perform the services, and CANbridge could not benefit from the license without the corresponding services. The Company also concluded that the LB-001 Option and Candidate Options were not provided to CANbridge at a significant discount. The terms of the options, including the upfront exercise fee and applicable milestone payments, reflected applicable standalone selling prices at the time of the CANbridge Agreement. As such, the Company concluded that none of the options was considered to be material rights and, as such, were not performance obligations.  

Accordingly, the Company determined that its grant of a license to CANbridge and its conduct of research and development services under the research plan should be accounted for as one combined performance obligation, and that the combined performance obligation is transferred over the expected term of the conduct of the research and development services. 

In accordance with ASC 606, the Company determined that the initial transaction price under the CANbridge agreement was $10,878, consisting of the upfront, non-refundable and non-creditable payment of $10,000 and an upfront payment of estimated quarterly research costs $878. The upfront payment of $10,878 was initially recorded as deferred revenue and, along with payments related to the Company’s conduct of research services under the research plan, will be recognized as revenue using an input-based measurement of actual costs incurred as a percentage of the estimated total costs expected to be incurred over the expected term of conduct of the research services. The Company believes this input-based method to recognize revenue best reflects the transfer of value to CANbridge. The Company recorded the initial $878 prepayment of the quarterly research and development fees as deferred revenue, and such fees will be recognized as revenue as the research services are delivered.

The Company also assessed the effects of variable elements including the likelihood of receiving (i) various clinical, regulatory and commercial milestone payments, and (ii) royalties on net sales of any product candidate. Based on its assessment, the Company concluded that, based on the likelihood of these uncertain events occurring, there was not a significant variable element included in the transaction price. Accordingly, the Company has not assigned a transaction price to these variable elements given the substantial uncertainty related to their achievement and has not assigned a transaction price to any CANbridge milestone or royalties.

The Company recognized revenue of $1,685 and $2,255 under the CANbridge Agreement for the three and nine months ended September 30, 2021, respectively. As of September 30, 2021, aggregate deferred revenue related to the CANbridge Agreement was $9,305 of which $3,707 was classified as current. Both the current and non-current deferred revenue amounts will be recognized during the expected term of the conduct of research and development services. As a direct result of the Company’s entry into the CANbridge Agreement, the Company incurred $775 in sublicense fees to certain of its existing licensors which was expensed to research and development expense during the quarter ended June 30, 2021.

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10. INCOME TAXES

For the nine months ended September 30, 2021 and the year ended December 31, 2020, the Company maintained a full valuation allowance on federal and state deferred tax assets since management does not forecast the Company to be in a taxable position in the near future.

11. LOSS PER SHARE

Basic loss per share is computed by dividing net loss by the weighted-average shares of common stock outstanding, without consideration to common stock equivalents:

The Company’s potentially dilutive shares, which include any outstanding stock options, warrants and unvested restricted stock (which includes unvested restricted stock units and unvested restricted common stock), are considered to be common stock equivalents and are only included in the calculation of diluted net loss when their effect is dilutive.

The Company excluded the following potential common stock equivalents from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutive effect for the three and nine months ended September 30, 2021 and 2020.

12. LEASES

The Company has historically entered into lease arrangements for its facilities and certain equipment. As of September 30, 2021, the Company had one operating lease with required future minimum payments related to its headquarters in Lexington, MA.

In November 2019, the Company entered into a lease agreement for office, laboratory and vivarium space located at 65 Hayden Avenue, Lexington, Massachusetts (“65 Hayden Ave Lease”) to replace the Company’s prior headquarters in Cambridge, Massachusetts. Under the terms of the 65 Hayden Ave Lease, the Company leases approximately 23,901 square feet of space and is obligated to pay an initial annual base rent of approximately $1,494, which is subject to scheduled annual increases, plus certain operating expenses and taxes. The Company took possession of the space on April 1, 2020 (“Lease Commencement Date”) and the lease will continue through July 1, 2025 (“Lease Termination Date”). The Company has an option to extend the lease for a single additional term of 5 years. Upon execution of the 65 Hayden Ave Lease, the Company executed a $622 cash-collateralized letter of credit. Lease payments are due in monthly installments through the Lease Termination Date.

At the Lease Commencement Date, the Company performed a lease assessment under the guidance prescribed in ASC Topic 842, Leases (“ASC 842”), and concluded that the 65 Hayden Ave Lease was an operating lease. As such, the Company recorded an operating lease right-of-use asset and corresponding operating lease liability on the consolidated balance sheets of $6,428 which reflected the net present value of future payments under the lease. The discount rate used to calculate the net present value of future payments was the Company’s incremental borrowing rate at the Lease Commencement Date, which was 7.6%.

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The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases for the three and nine months ended September 30, 2021 and 2020:

The following table contains a summary of the lease liabilities recognized on the Company’s condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020:

The variable lease costs for the three and nine months ended September 30, 2021 and 2020 include common area maintenance and other operating charges. As the Company’s leases do not provide an implicit interest rate, the Company utilized its incremental borrowing interest rate based on what it would normally pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments at the commencement date in determining the present value of lease payments.

Future minimum lease payments under the Company’s operating lease as of September 30, 2021 and December 31, 2020, were as follows:

13. RELATED PARTIES

The Company is party to a consulting service agreement with Mark Kay, who is a co-founder and a member of the Board. Under the terms of this agreement, the Company has agreed to pay an annual fee of $68 for research and development consulting services. For each of the three and nine-month periods ended September 30, 2021 and 2020, the Company recorded research and development expense of $17 and $51, respectively, related to consulting services received from Mark Kay. In addition, as a result of his participation on the Scientific Advisory Board in June 2021, Mark Kay earned $5 and received a non-qualified stock option to

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purchase 5,000 shares of the Company’s common stock with a fair value of $13, which will be expensed over a two-year vesting period. Expenses related to Mark Kay’s participation on the Scientific Advisory Board are recorded in research and development expense.

14. COMMITMENTS AND CONTINGENCIES

Litigation and Related Matters

From time to time, the Company may become subject to legal proceedings and claims which arise in the ordinary course of its business. Consistent with ASC 450, Contingencies, the Company’s policy is to record a liability if a loss in a significant legal dispute is considered probable and an amount can be reasonably estimated. The Company provides disclosure when a loss in excess of any reserve is reasonably possible, and if estimable, the Company discloses the potential loss or range of possible loss. Significant judgment is required to assess the likelihood of various potential outcomes and the quantification of loss in those scenarios. The Company’s estimates change as litigation progresses and new information comes to light. Changes in Company estimates could have a material impact on the Company’s results and financial position. As of September 30, 2021, the Company did not have any significant legal disputes that require a loss liability to be recorded. The Company continually monitors the need for a loss liability for litigation and related matters. 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the U.S. Securities and Exchange Commission, or SEC, on March 15, 2021, or the 2020 10-K. This discussion and analysis contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those set forth under “Risk Factors” in Part I, Item 1A. of the 2020 10-K, as may be amended or updated in subsequent filings with the SEC, our actual results may differ materially from those anticipated in these forward-looking statements.

Overview

We are a clinical-stage genetic medicine company pioneering gene editing and gene delivery platforms to address rare and serious diseases from infancy through adulthood. Our genome editing platform, GeneRide™, is a new approach to precise gene insertion harnessing a cell's natural deoxyribonucleic acid, or DNA, repair process potentially leading to durable therapeutic protein expression levels. Our gene delivery platform, sAAVy™, is an adeno-associated virus, or AAV, capsid engineering platform designed to optimize gene delivery for treatments in a broad range of indications and tissues.

Our lead product candidate, LB-001, is a single-administration, genome editing therapy developed using our GeneRide technology, currently in Phase 1/2 development for the treatment of methylmalonic acidemia, or MMA, in pediatric patients. MMA is a rare and life-threatening genetic disorder affecting approximately 1 in 50,000 newborns in the United States that often results in developmental delays and other long-term complications and a high rate of hospitalizations. In April 2021, we granted CANbridge Care Pharma Hong Kong Limited, or CANbridge, an exclusive option to obtain an exclusive license to develop and commercialize LB-001 for the treatment of MMA in China, Taiwan, Hong Kong and Macau.

Also based on our GeneRide technology, we completed the first phase of preclinical development of our product candidate, LB-301, for the treatment of Crigler-Najjar syndrome, a rare monogenic pediatric disease affecting approximately 1 in 1,000,000 newborns globally, in collaboration with Takeda Pharmaceutical Company Limited, or Takeda. In addition, we are developing treatments based on our GeneRide technology for two indications in collaboration with Daiichi Sankyo Company, or Daiichi. In addition, we demonstrated proof of concept of our GeneRide platform in hemophilia B and alpha-1-antitrypsin deficiency, or A1ATD, animal disease models, and more recently, in hereditary tyrosinemia type 1, or HT1, and Wilson disease.

Based on our sAAVy technology, we are developing gene therapy candidates utilizing, among other things, AAV sL65, the first capsid produced from sAAVy, for the treatment of Fabry and Pompe diseases in collaboration with CANbridge. We also granted CANbridge an option to obtain an exclusive worldwide license to certain of our intellectual property rights, including those relating to sL65, to develop and commercialize gene therapy candidates for the treatment of two additional indications.

We expect to select future product candidates from diseases addressed by targeting the liver initially, and later by targeting other tissues such as the central nervous system, or CNS, muscle, or other tissues. We plan to select one new development candidate from our preclinical portfolio by the end of 2021 and commence Investigational New Drug Application-enabling studies utilizing our modular approach and leveraging learnings from our lead programs.

LB-001 for the Treatment of Methylmalonic Acidemia (MMA) in Pediatric Patients

We are evaluating the safety, tolerability and preliminary efficacy of LB-001 in our Phase 1/2 SUNRISE clinical trial in pediatric patients with MMA. The SUNRISE trial is designed to enroll up to eight patients with ages ranging from six months to twelve years and evaluate a single administration of LB-001 at two dose levels (5 x 10¹³ vg/kg and 1 x 10¹⁴ vg/kg). On June 2, 2021, we announced that the first patient was dosed in the SUNRISE trial. In accordance with the FDA-cleared protocol, we initially enrolled patients in the three- to twelve-year-old age group at the lower dose.

On October 18, 2021, we announced early results from the SUNRISE trial. The early results showed measurable levels of albumin-2A, a technology-related biomarker indicating site-specific gene insertion and protein expression. Detection of albumin-2A is an indication that we have achieved the first ever in vivo genome editing in children. On October 18, 2021, we also announced that, following an evaluation of the safety data from the first two patients enrolled in the SUNRISE trial, the independent Data Safety Monitoring Board, or the DSMB, overseeing the SUNRISE trial recommended continuation of the trial without modification. Albumin-2A detection together with the DSMB continuation recommendation enabled us to begin enrolling two patients in the higher dose cohort (with ages ranging three to twelve years old), and two patients in the lower age (six months to two years old) cohort at the

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lower dose. In late October 2021, the third patient dosed in the SUNRISE trial, who received 5 x 10¹³ vg/kg of LB-001 and was in the six-month to two-year-old age group, experienced a serious adverse event, or SAE, deemed possibly related to study drug. The SAE was noted during a scheduled visit that took place two weeks after dosing. This SAE is being ultimately categorized as a case of thrombotic microangiopathy, or TMA, which has been previously reported in association with other adeno-associated virus genetic therapies, and classically presents as a syndrome of hemolytic anemia, thrombocytopenia, and acute kidney injury. While the SAE experienced by this patient was characterized by hemolytic anemia and acute kidney injury, thrombocytopenia was not present. The patient was hospitalized, monitored and responded well to intravenous fluids and parenteral nutrition. The patient is currently asymptomatic. Key laboratory parameters that were abnormal at the time of the visit have either returned to normal or improved, and following a hospitalization of less than a week, the patient is continuing outpatient assessments in accordance with the protocol. We reported the SAE to the DSMB along with a proposed response plan, which was endorsed by the DSMB. The plan includes proposed protocol amendments to increase patient monitoring. In accordance with our regulatory obligations, we also reported the SAE to the FDA. We plan to continue to enroll the study in accordance with the protocol and additional safety measures we have communicated to the sites.

In accordance with the protocol, following the dosing of two patients in the lower age cohort and two patients from the older age cohort with the higher dose, the SUNRISE trial could progress to dosing additional patients in the younger age group at the higher dose (cohort 2, younger age group, n=2), subject to a review of safety data and/or albumin-2A detection, as applicable. The SUNRISE trial includes a six-week staggering interval between the dosing of each patient with the exception that age de-escalation and dose escalation can occur simultaneously. Patients participate in a pre-dosing observational period and are administered a prophylactic steroid regimen.

The primary endpoint of the SUNRISE trial is to assess the safety and tolerability of LB-001 at 52 weeks after a single infusion. Additional endpoints include changes in disease-related biomarkers, including serum methylmalonic acid, clinical outcomes such as growth and healthcare utilization, and the pharmacodynamic marker albumin-2A. We expect seven centers in the United States and one center in Saudi Arabia to participate in the SUNRISE trial. Based on current projections for enrollment, we expect to announce interim data by the end of 2021.

In addition to the Phase 1/2 SUNRISE trial, we have also completed a retrospective natural history study designed to evaluate disease progression in pediatric patients with MMA. These data helped to provide us with a better understanding of the natural progression of the disease, the impact of a liver transplant on the outcomes of MMA patients and potential endpoints such as the relevance of methylmalonic acid levels on clinical outcomes, with the goal of informing our future clinical development in MMA and our discussions with regulatory agencies as we look toward advancing our MMA program. We presented preliminary findings from our retrospective natural history study at the American College of Medical Genetics in April 2021.

In July 2019, the U.S. Food and Drug Administration, or FDA, granted rare pediatric disease designation for LB-001 for the treatment of MMA, and in April 2019, the FDA granted orphan drug designation for LB-001 for the treatment of MMA. In November 2020, the FDA granted fast track designation for LB-001 for the treatment of MMA, and in June 2021, the European Commission granted orphan drug designation to LB-001 for the treatment of MMA.

Our GeneRide Platform

Our genome editing platform, GeneRide, is a new approach to precise gene insertion harnessing a cell's natural DNA repair process potentially leading to durable therapeutic protein expression levels. GeneRide is designed to support the development of a new generation of genetic medicines designed to insert a corrective gene in the human genome with the goal of avoiding certain risks associated with other methods of gene therapy and gene editing. The therapies developed based on our GeneRide platform are designed to use an engineered viral vector to deliver a corrective gene, known as a transgene, to the nuclei of a patient’s cells utilizing a one-time infusion.

We believe that GeneRide has the potential to enable us to target diseases that cannot be treated by current genetic medicines, including early onset genetic childhood diseases where early intervention is critical in order to prevent progressive irreversible tissue damage that leads to long-term complications.

In addition, preclinical studies have shown that some specific product candidates targeting the liver based on the GeneRide platform have exhibited “selective advantage,” where modified cells take over the non-modified cells as the liver continues to regenerate, which allowed expression of therapeutic levels of the missing protein.

At the European Society of Gene & Cell Therapy, or ESGCT, conference in October 2021, we presented preclinical data that validates previous research in MMA and highlights selective advantage in two additional indications characterized by intrinsic liver damage,

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HT1, and Wilson disease. In the HT1 mice models with acute liver damage, the data showed that GeneRide-corrected hepatocytes repopulated the entire liver within weeks post-administration, replacing the diseased hepatocytes with corrected hepatocytes. These mice models demonstrated restored normal body growth, liver function, and undetectable succinyl acetone levels, one of the toxic metabolites that accumulates in patients with HT1. In a Wilson disease mouse model, GeneRide-corrected hepatocytes partially repopulated the liver within months, and the treated mice showed improvements in liver function, hepatomegaly, and urinary copper excretion.

Our sAAVy Platform

We are also developing sAAVy, a next generation AAV capsid platform, for use in gene editing and gene therapy. At the American Society of Gene & Cell Therapy, or ASGCT, 2020 Annual Meeting in May 2020, we presented data showing that the capsids delivered highly efficient functional transduction of human hepatocytes in a humanized mouse model. Based on these data, we believe the top-tier capsid candidates from this effort demonstrated the potential to achieve significant improvements over benchmark AAVs that are currently in clinical development. We are developing these highly potent vectors for use in our internal development candidates and collaborations. We announced data generated from translational animal models using these capsids at the ASGCT 2021 Annual Meeting in May 2021. In addition, in January 2021, we announced the extension of our collaboration with Children’s Medical Research Institute, or CMRI, to continue to develop next-generation capsids for gene therapy and gene editing applications in the liver as well as two additional tissues.

Operating Overview

Since our inception in 2014, we have devoted the majority of our efforts to research and development, including our preclinical and clinical development activities and our manufacturing and process development activities, raising capital, and providing general and administrative support for these operations. We do not have any products approved for sale and our only revenue recognized to date has been revenue related to upfront payments and research cost reimbursement under our strategic agreements with CANbridge, Daiichi and Takeda. Through September 30, 2021, we have raised approximately $126.0 million through underwritten public offerings and at-the-market sales of our common stock and $33.1 million in net proceeds from the sale of preferred stock prior to our initial public offering. In July 2019, we entered into a Loan and Security Agreement for term loans with Oxford Finance LLC and Horizon Technology Finance Corporation, or the Loan Agreement, under which term loans in an aggregate principal amount of $20.0 million were made available to us in two tranches, subject to certain terms and conditions. As of September 30, 2021, we had drawn down the $10.0 million first tranche. In the second quarter of 2021, we met the conditions to initiate drawdown of the $10.0 million second tranche but did not exercise our right to do so and the option to draw down the second tranche of the Term Loans expired. We have incurred significant operating losses since our inception. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and commercialization of our product candidate and any future product candidates. Our net loss was $31.0 million for the nine months ended September 30, 2021. As of September 30, 2021, we had an accumulated deficit of $131.0 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future in connection with our ongoing activities. While we intend to continue to evaluate ways to enhance our liquidity and capital position, our efforts will largely depend on future developments that are highly uncertain and cannot be predicted with confidence at this time.

Impact of COVID-19

We are closely monitoring the COVID-19 pandemic in order to promote the safety of our personnel and to continue advancing our research and development activities. We are following federal, state and local requirements and guidelines with respect to the COVID-19 pandemic, and have allowed our employees to return to working on-premises in accordance with those requirements and guidelines.

The COVID-19 pandemic did not have a material impact on our results of operations, cash flow and financial position as of and for the nine months ended September 30, 2021. However, we are aware that certain of our third-party vendors are being affected by import/export and other restrictions due to the COVID-19 pandemic, which are currently having an impact on certain of our research, development and manufacturing activities. Further, the pandemic could also potentially affect the business of the FDA, the EMA or other governmental authorities, which could result in delays in meetings, reviews, inspections and approvals relating to LB-001. Any decision by the FDA, EMA or other governmental authorities to delay meeting with us or scheduling inspections in light of COVID-19 could have a material adverse effect on our clinical trials, which could increase our operating expenses and have a material adverse effect on our financial results, including the timing and amount of future regulatory milestones we could receive from our partners.

We cannot predict the impact of the progression of the COVID-19 pandemic on future results due to a variety of factors, including the health of our and their employees, our ability to maintain operations, the ability of our third-party vendors, suppliers and collaborators

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to continue operations, any further government and/or public actions taken in response to the pandemic and ultimately the length of the pandemic.

We plan to continue to closely monitor the COVID-19 pandemic in order to ensure the safety of our personnel and to continue advancing our research and development activities.

Components of Results of Operations

Revenue

Our only revenue recognized to date has been revenue related to upfront payments and research cost reimbursement under our agreements with CANbridge, Daiichi and Takeda. We have not generated any revenue from product sales and do not expect to generate any revenue from product sales for the foreseeable future.

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our product candidates, and include:

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We expense research and development costs as incurred. Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses.

Research and development activities are central to our business model. We expect that our research and development expenses will increase in the future as we continue to conduct the clinical program for our product candidate, LB-001, and as we increase our research and development headcount to continue to discover and develop additional product candidates. If any of our product candidates enter into later stages of clinical development, we expect that they will generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate and business development and administrative functions. General and administrative expenses also include professional fees for legal, patent, accounting, auditing, tax and consulting services, travel expenses, and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expect that our general and administrative expenses will increase in the future as we increase our general and administrative headcount to support our continued research and development and potential commercialization of our product candidates.

Other Income (Expense), Net

Interest income consists primarily of interest on our cash and cash equivalents and investments. Interest expense consists of interest expense related to the aggregate $10.0 million principal amount of the Term A Loan borrowing under the loan agreement in July 2019. A portion of the interest expense on the Term A Loan is non-cash expense relating to the accretion of the debt discount, amortization of issuance costs and accretion of the final payment fee. During each of the three and nine months ended September 30, 2021 and 2020, we recorded $0.3 million and $0.8 million, respectively, in interest expense, of which $0.2 million and $0.7 million, respectively, related to cash interest paid and the remainder to the accretion of the debt discount and amortization of issuance costs.

Results of Operations

Comparison of the Three Months Ended September 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended September 30, 2021 and 2020:

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Revenue

Our revenue for the three months ended September 30, 2021 consisted of $2.1 million, relating to our agreements with CANbridge, Daiichi and Takeda. Our revenue for the three months ended September 30, 2020 consisted of $0.9 million in revenue under the Takeda agreement. The increase in revenue during the three months ended September 30, 2021 compared to the corresponding period in 2020 was related to revenue recognized under the April 2021 CANbridge and Daiichi agreements, which was partially offset by a decrease in revenue under the Takeda Agreement due to winding down activities. We expect our collaboration and service revenue to increase in the fourth quarter of 2021, as compared to the third quarter of 2021, as we continue to conduct activities under the CANbridge and Daiichi agreements.  

Research and Development Expenses

The following table summarizes our research and development expenses for the three months ended September 30, 2021 and 2020:

Research and development expenses for the three months ended September 30, 2021 were $7.8 million, compared to $5.5 million for the three months ended September 30, 2020. The increase of approximately $2.3 million was primarily due to increases of $1.2 million in personnel-related costs related to an increase in headcount associated with the progress of both our partnered and internal programs and a corresponding increase of $0.4 million in lab supplies. In addition, LB-001 external development and manufacturing costs increased $0.5 million mainly driven by an increase in activities supporting the LB-001 development program. We expect that our research and development expenses will increase during the fourth quarter as we continue to advance our pipeline both internally and with collaborators as well as continue to advance our LB-001 clinical program.

General and Administrative Expenses

General and administrative expenses were $4.3 million for the three months ended September 30, 2021, compared to $3.2 million for the three months ended September 30, 2020. The increase of approximately $1.1 million was primarily driven by an increase of $0.4 million in personnel expenses as we increased our headcount to support our continued research and development activities as well as build our corporate and administrative functions, as well as an increase of $0.4 million in fees relating to professional services due to an increase in general corporate activities. We expect that our general and administrative expenses will remain relatively consistent during the fourth quarter of 2021 as compared to the third quarter of 2021.

Other Expense, Net

Other expense, net was $0.3 million for each of the three-month periods ended September 30, 2021 and 2020. Other expense, net remained consistent due to similar interest rates on our capital balances and principal amount due on the term loan balance during the periods.

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Comparison of the Nine Months Ended September 30, 2021 and 2020

The following table summarizes our results of operations for the nine months ended September 30, 2021 and 2020: