Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

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

For the quarterly period ended March 31, 2020

OR

 

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

Commission File Number: 001-36370

 

 

 

LOGO

APPLIED GENETIC

TECHNOLOGIES CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   59-3553710

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

14193 NW 119th Terrace, Suite 10, Alachua, Florida 32615

(Address of Principal Executive Offices, Including Zip Code)

(386) 462-2204

(Registrant’s Telephone Number, Including Area Code)

 

 

 

Title of class

 

Trading

Symbol(s)

 

Name of exchange

on which registered

Common Stock, $0.001 par value   AGTC   Nasdaq Global Market

Securities registered pursuant to Section 12(g) of the Act: None

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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

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

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

The number of shares of the registrant’s common stock outstanding as of May 8, 2020 was 25,765,621.

 

 

 


Table of Contents

APPLIED GENETIC TECHNOLOGIES CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED March 31, 2020

TABLE OF CONTENTS

 

             Pages      
    PART I. FINANCIAL INFORMATION       

ITEM 1.

 

FINANCIAL STATEMENTS (Unaudited)

     3  
 

Condensed Balance Sheets as of March 31, 2020 and June 30, 2019

     3  
 

Condensed Statements of Operations for the three and nine months ended March 31, 2020 and 2019

     4  
 

Condensed Statements of Stockholders’ Equity for the three and nine months ended March 31, 2020 and 2019

     5  
 

Condensed Statements of Cash Flows for nine months ended March  31, 2020 and 2019

     6  
 

Notes to Condensed Financial Statements

     7  

ITEM 2.

  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS      20  

ITEM 3.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     29  

ITEM 4.

 

CONTROLS AND PROCEDURES

     29  
    PART II. OTHER INFORMATION       

ITEM 1.

 

LEGAL PROCEEDINGS

     29  

ITEM 1A.

 

RISK FACTORS

     29  

ITEM 6.

 

EXHIBITS

     30  
 

SIGNATURE

     31  

 

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Table of Contents

PART I. FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS

APPLIED GENETIC TECHNOLOGIES CORPORATION

CONDENSED BALANCE SHEETS

(Unaudited)

 

In thousands, except per share data

   March 31,
2020
    June 30,
2019
 
ASSETS             

Current assets:

    

Cash and cash equivalents

    $ 58,491      $ 26,703  

Investments

     26,026       55,292  

Grants receivable

     —         13  

Prepaid and other current assets

     2,942       2,276  
  

 

 

   

 

 

 

Total current assets

     87,459       84,284  
  

 

 

   

 

 

 

Property and equipment, net

     4,216       4,430  

Intangible assets, net

     1,176       1,013  

Investment in Bionic Sight

     8,115       1,945  

Right-of-use assets – operating leases

     3,503       —    

Right-of-use asset – finance lease

     91       —    

Other assets

     544       544  
  

 

 

   

 

 

 

Total assets

    $ 105,104      $ 92,216  
  

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY             

Current liabilities:

    

Accounts payable

    $ 3,013      $ 1,331  

Accrued and other liabilities

     9,434       8,024  

Lease liabilities – operating

     1,054       —    

Lease liability – finance

     47       —    
  

 

 

   

 

 

 

Total current liabilities

     13,548       9,355  
  

 

 

   

 

 

 

Lease liabilities – operating, net of current portion

     4,329       —    

Lease liability – finance, net of current portion

     51       —    

Other liabilities

     2,357       4,152  
  

 

 

   

 

 

 

Total liabilities

     20,285       13,507  
  

 

 

   

 

 

 

Stockholders’ equity:

    

Preferred stock, par value $0.001 per share, 5,000 shares authorized; no shares issued and outstanding

     —         —    

Common stock, par value $0.001 per share, 150,000 shares authorized; 25,784 and 18,226 shares issued; 25,764 and 18,207 shares outstanding at March 31, 2020 and June 30, 2019, respectively

     25       18  

Additional paid-in capital

     251,819       214,324  

Shares held in treasury of 20 and 19 at March 31, 2020 and June 30, 2019, respectively

     (88     (85

Accumulated deficit

     (166,937     (135,548
  

 

 

   

 

 

 

Total stockholders’ equity

     84,819       78,709  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

    $ 105,104      $ 92,216  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these Unaudited Condensed Financial Statements.

 

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APPLIED GENETIC TECHNOLOGIES CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

 

    Three Months
Ended March 31,
    Nine Months
Ended March 31,
 

In thousands, except per share amounts

  2020     2019     2020     2019  

Revenue:

       

Collaboration revenue

   $ —        $ 21,207      $ 2,297      $ 41,128  

Grant and other revenue

    —         111       156       158  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

    —         21,318       2,453       41,286  
 

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

       

Research and development

    8,308       7,203       25,325       24,851  

General and administrative and other

    3,134       3,110       9,490       9,345  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    11,442       10,313       34,815       34,196  
 

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

    (11,442     11,005       (32,362     7,090  

Other income:

       

Investment income, net

    281       512       1,063       1,504  

Other income

    4       —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

 

Total other income, net

    285       512       1,063       1,504  
 

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before provision for income taxes

    (11,157     11,517       (31,299     8,594  

Provision for income taxes

    21       19       63       57  
 

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before equity in net losses of an affiliate

    (11,178     11,498       (31,362     8,537  

Equity in net losses of an affiliate

    (11     (9     (27     (29
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (11,189    $ 11,489      $ (31,389    $ 8,508  
 

 

 

   

 

 

   

 

 

   

 

 

 

Weighted Average Shares Outstanding

       

Basic

    22,272       18,166       19,558       18,149  

Diluted

    22,272       18,324       19,558       18,322  

Net income (loss) per common share

       

Basic

   $ (0.50    $ 0.63      $ (1.60    $ 0.47  

Diluted

   $ (0.50    $ 0.63      $ (1.60    $ 0.46  

The accompanying notes are an integral part of these Unaudited Condensed Financial Statements.

 

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APPLIED GENETIC TECHNOLOGIES CORPORATION

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

    Common Stock     Treasury Stock     Additional
Paid-in
Capital
    Accumulated
Deficit
    Total  

In thousands

  Outstanding
Shares
    Amount     Outstanding
Shares
    Amount  

Balance, June 30, 2019

    18,207     $ 18       19     $ (85   $ 214,324     $ (135,548   $ 78,709  

Share-based compensation expense

    —         —         —         —         810       —         810  

Shares issued under employee plans

    11       —         1       (3     34       —         31  

Net loss

    —         —         —         —         —         (11,577     (11,577
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, September 30, 2019

    18,218       18       20       (88     215,168       (147,125     67,973  

Share-based compensation expense

    —         —         —         —         689       —         689  

Shares issued under employee plans

    1       —         —         —         —         —         —    

Net loss

    —         —         —         —         —         (8,623     (8,623
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2019

    18,219       18       20       (88     215,857       (155,748     60,039  

Issuance of common stock, net of issuance costs

    7,475       7       —         —         34,804       —         34,811  

Share-based compensation expense

    —         —         —         —         874       —         874  

Shares issued under employee plans

    70       —         —         —         284       —         284  

Net loss

    —         —         —         —         —         (11,189     (11,189
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, March 31, 2020

    25,764     $ 25       20     $ (88   $ 251,819     $ (166,937   $ 84,819  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Common Stock     Treasury Stock     Additional
Paid-in
Capital
    Accumulated
Deficit
    Total  

In thousands

  Outstanding
Shares
    Amount     Outstanding
Shares
    Amount  

Balance, June 30, 2018

    18,126     $ 18       11     $ (49   $ 210,139     $ (110,926   $ 99,182  

Cumulative impact of adopting Topic 606

    —         —         —         —         —         (22,616     (22,616

Share-based compensation expense

    —         —         —         —         1,181       —         1,181  

Shares issued under employee plans

    4       —         2       (8     —         —         (8

Net income

    —         —         —         —         —         1,200       1,200  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, September 30, 2018

    18,130       18       13       (57     211,320       (132,342     78,939  

Share-based compensation expense

    —         —         —         —         1,094       —         1,094  

Shares issued under employee plans

    34       —         2       (13     136       —         123  

Net loss

    —         —         —         —         —         (4,181     (4,181
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2018

    18,164       18       15       (70     212,550       (136,523     75,975  

Share-based compensation expense

    —         —         —         —         845       —         845  

Shares issued under employee plans

    4       —         2       (7     —         —         (7

Net income

    —         —         —         —         —         11,489       11,489  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, March 31, 2019

    18,168     $ 18       17     $ (77   $ 213,395     $ (125,034   $ 88,302  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these Unaudited Condensed Financial Statements.

 

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APPLIED GENETIC TECHNOLOGIES CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

 

         Nine Months Ended March 31,      

In thousands

   2020     2019  

Operating activities:

    

Net income (loss)

    $ (31,389    $ 8,508  

Adjustments to reconcile net income (loss) to net cash used in operating activities:

    

Share-based compensation expense

     2,373       3,120  

Depreciation and amortization

     919       957  

Recovery of bad debts

     —         (258

Investment discount accretion

     (306     (578

Reduction in the carrying amount of operating lease right-of-use assets

     222       —    

Collaboration revenue from Bionic Sight

     (2,197     —    

Equity in net losses of an affiliate

     27       29  

Changes in operating assets and liabilities:

    

Grants receivable

     13       73  

Prepaid and other assets

     (660     302  

Deferred revenues

     —         (28,393

Accounts payable

     1,603       505  

Operating lease liabilities

     (459     —    

Accrued and other liabilities

     2,000       (185
  

 

 

   

 

 

 

Net cash used in operating activities

     (27,854     (15,920
  

 

 

   

 

 

 

Investing activities:

    

Purchases of property and equipment

     (812     (81

Purchases of and capitalized costs related to intangible assets

     (349     (148

Investment in Bionic Sight

     (4,000     —    

Maturities of investments

     63,500       71,619  

Purchases of investments

     (33,928     (64,866
  

 

 

   

 

 

 

Net cash provided by investing activities

     24,411       6,524  
  

 

 

   

 

 

 

Financing activities:

    

Proceeds from the issuance of common stock, net of issuance costs

     34,949       —    

Proceeds from exercises of common stock options

     318       136  

Taxes paid related to equity awards

     (3     (28

Deferred offering costs

     —         (168

Principal payments on finance/capital lease

     (33     (39
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     35,231       (99
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     31,788       (9,495

Cash and cash equivalents, beginning of period

     26,703       31,065  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

    $ 58,491      $ 21,570  
  

 

 

   

 

 

 

Supplemental information:

    

Shares issued for no consideration

    $ 3      $ 28  

The accompanying notes are an integral part of these Unaudited Condensed Financial Statements.

 

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APPLIED GENETIC TECHNOLOGIES CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

 

1.

Organization and Operations

Applied Genetic Technologies Corporation (the “Company” or “AGTC”) was incorporated as a Florida corporation on January 19, 1999 and reincorporated as a Delaware corporation on October 24, 2003. The Company is a clinical-stage biotechnology company that uses a proprietary gene therapy platform to develop transformational genetic therapies for patients suffering from rare and debilitating diseases.

On February 11, 2020, the Company closed an underwritten public offering of 6.5 million shares of its common stock at $5.00 per share, generating gross proceeds of $32.5 million, before deducting underwriting discounts, commissions and other offering expenses payable by the Company. Additionally, the underwriters exercised their option to purchase an additional 975,000 shares of common stock to cover over-allotments, and such transaction closed on February 13, 2020 and generated additional gross proceeds of $4.9 million. Issuance costs totaling $138,000 were unpaid on March 31, 2020 and have been included in accounts payable on the Company’s Unaudited Condensed Balance Sheets as of such date.

In July 2015, the Company entered into a collaboration agreement (the “Collaboration Agreement”) with Biogen MA, Inc., a wholly owned subsidiary of Biogen Inc. (“Biogen”), pursuant to which the Company and Biogen collaborated to develop, seek regulatory approval for and commercialize gene therapy products to treat X-linked retinoschisis (“XLRS”), X-linked retinitis pigmentosa (“XLRP”), and discovery programs targeting three indications based on the Company’s adeno-associated virus vector technologies. The Collaboration Agreement became effective in August 2015. On December 7, 2018, the Company received notice from Biogen that it had elected to terminate the Collaboration Agreement, which became effective on March 8, 2019. The Collaboration Agreement and other transactions with Biogen are discussed further in Note 7 to the Company’s Unaudited Condensed Financial Statements.

The Company has devoted substantially all of its efforts to research and development, including clinical trials. The Company has not completed the development of any products. The Company has generated revenue from collaboration agreements, sponsored research payments and grants, but has not generated product revenue to date and is subject to a number of risks similar to those of other early stage companies in the biotechnology industry, including dependence on key individuals, the difficulties inherent in the development of commercially viable products, the need to obtain additional capital necessary to fund the development of its products, development by the Company or its competitors of technological innovations, risks of failure of clinical studies, protection of proprietary technology, compliance with government regulations and ability to transition to large-scale production of products. As of March 31, 2020, the Company had an accumulated deficit of $166.9 million. While the Company expects to continue to generate some revenue from partnering, the Company expects to incur losses for the foreseeable future. The Company has funded its operations to date primarily through public offerings of its common stock, private placements of its preferred stock, and collaborations. As of March 31, 2020, the Company had cash and cash equivalents and liquid investments of $84.5 million.

 

2.

Summary of Significant Accounting Policies

Basis of presentation

The accompanying Unaudited Condensed Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and, in the opinion of management, include all adjustments necessary for a fair presentation of the Company’s financial position, results of operations, stockholders’ equity and cash flows for the periods presented.

The adjustments referred to above are of a normal and recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to SEC rules and regulations for interim reporting.

The Condensed Balance Sheet as of June 30, 2019 was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The Company’s Unaudited Condensed Financial Statements should be read in conjunction with the audited financial statements included in the Company’s 2019 Annual Report on Form 10-K (the “June 30, 2019 Form 10-K”). Results of operations for the three and nine months ended March 31, 2020 are not necessarily indicative of the results to be expected for the full year or any other interim period.

Segment reporting

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. To date, we have viewed our operations and managed our business as one segment.

 

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Use of estimates

The preparation of financial statements in conformity with U.S. GAAP and SEC regulations, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and cash equivalents

Cash consists of funds held in bank accounts. Cash equivalents consist of short-term, highly liquid investments with original maturities of 90 days or less at the time of purchase and generally include money market accounts.

Investments

The Company’s investments consist of certificates of deposit and debt securities classified as held-to-maturity. Management determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. Debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in investment income. Interest on securities classified as held-to-maturity is included in investment income.

The Company uses the specific identification method to determine the cost basis of securities sold.

Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. The Company evaluates an investment for impairment by considering the length of time and extent to which market value has been less than cost or amortized cost, the financial condition and near-term prospects of the issuer as well as specific events or circumstances that may influence the operations of the issuer and the Company’s intent to sell the security or the likelihood that it will be required to sell the security before recovery of the entire amortized cost. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded to investment income (expense) and a new cost basis in the investment is established.

Fair value of financial instruments

The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 820, Fair Value Measurements and Disclosures, establishes a hierarchy of inputs used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of financial instruments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Revenue recognition

Effective July 1, 2018, the Company adopted the provisions of ASC Topic 606, Revenue from Contracts with Customers, (“Topic 606”), using the modified retrospective transition method. Under this method, the Company recorded the cumulative effect of initially applying the new standard to all contracts in process as of the date of adoption. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards.

 

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The adoption of the new revenue recognition guidance resulted in an increase of $22.6 million in deferred revenue and accumulated deficit as of July 1, 2018.

The Company may enter into collaboration agreements which are within the scope of Topic 606, under which the Company licenses rights to its technology and certain of the Company’s product candidates and performs research and development services for third parties. The terms of these arrangements typically may include payment of one or more of the following: non-refundable, up-front fees; reimbursement of research and development costs; development, regulatory and commercial milestone payments; and royalties on net sales of licensed products.

Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of Topic 606, the Company performs the following five steps: (i) identification of the contract; (ii) determination of whether the promised goods or services are performance obligations; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect consideration it is entitled to in exchange for the goods or services it transfers to the customer.

Performance obligations are promises to transfer distinct goods or services to the customer. Promised goods or services are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources and (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whether promised good or services are distinct, the Company considers factors such as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the intellectual property on their own or whether the required expertise is readily available.

The Company estimates the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include both fixed consideration and variable consideration. At the inception of an arrangement that includes variable consideration and at each reporting period, the Company evaluates the amount of potential payment and the likelihood that the payments will be received. The Company utilizes either the most likely amount method or expected amount method to estimate the amount to be received based on which method better predicts the amount expected to be received. If it is probable that a significant revenue reversal would not occur, the variable consideration is included in the transaction price. The Company will assess its revenue generating arrangements in order to determine whether a significant financing component exists and conclude that a significant financing component does not exist in any of its arrangements if: (a) the promised consideration approximates the cash selling price of the promised goods and services or any significant difference is due to factors other than financing; and (b) timing of payment approximates the transfer of goods and services and performance is over a relatively short period of time within the context of the entire term of the contract.

The Company’s contracts will often include development and regulatory milestone payments. At contract inception and at each reporting period, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the customer’s control, such as regulatory approvals, are not included in the transaction price. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenues and earnings in the period of adjustment.

For arrangements that may include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of the Company’s collaboration arrangements.

The Company allocates the transaction price based on the estimated standalone selling price of the underlying performance obligations or in the case of certain variable consideration to one or more performance obligations. The Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. The Company utilizes key assumptions to determine the stand-alone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs to complete the respective performance obligation. Certain variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the

 

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satisfaction of the performance obligation and the resulting amounts allocated to each performance obligation are consistent with the amounts the Company would expect to receive for each performance obligation.

For performance obligations consisting of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company will recognize revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license.

The Company receives payments from its customers based on billing terms established in each contract. Such billings generally have 30-day payment terms. Upfront payments and fees are recorded as deferred revenue upon receipt or when due until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the right to consideration is unconditional.

Collaboration revenue

To date, the Company’s collaboration revenue has been generated from its collaboration arrangement with Biogen and Bionic Sight as further described in Note 7, “Collaboration Agreements.

The Company analyzes its collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements (“ASC 808”) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and therefore within the scope of ASC 606. For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to ASC 606.

Income taxes

The Company uses the asset and liability method for accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

As required by U.S. GAAP, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Any interest and penalties related to uncertain tax positions will be reflected in income tax expense. The Company is subject to examination of its income tax returns in the federal and state income tax jurisdictions in which it operates for the tax years ended June 30, 2016 through 2019.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law. The CARES Act contains several significant provisions that affect corporations, including, among others, provisions addressing the use of net operating losses, interest deduction limitations and employer payroll tax payments. Management does not believe that the CARES Act will have a material impact on the Company; however, management will continue to monitor ongoing developments, new regulations and interpretive guidance regarding such legislation and evaluate any potential impact on the Company’s overall business and tax position.

For the three and nine months ended March 31, 2020, the Company’s tax expense included an increase in the uncertain tax position liability of $21,000 and $63,000, respectively, related to interest on the uncertain tax position, compared to $19,000 and $57,000, respectively, for the three and nine months ended March 31, 2019. The uncertain tax position liability as of March 31, 2020 and June 30, 2019 was $2,098,000 and $2,035,000, respectively.

 

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Research and development

Research and development costs include costs incurred in identifying, developing and testing product candidates and generally comprise compensation and related benefits and non-cash share-based compensation to research related employees; laboratory costs; animal and laboratory maintenance and supplies; rent; utilities; clinical and pre-clinical expenses; and payments for sponsored research, scientific and regulatory consulting fees and testing.

As part of the process of preparing its financial statements, the Company is required to estimate its accrued expenses. This process involves reviewing quotations and contracts, identifying services that have been performed on its behalf and estimating the level of service performed and the associated cost incurred for services for which the Company has not yet been invoiced or otherwise notified of the actual cost. The majority of the Company’s service providers invoice the Company monthly in arrears for services performed or when contractual milestones are met. The Company makes estimates of its accrued expenses as of each balance sheet date in its financial statements based on facts and circumstances known to it at that time. The significant estimates in the Company’s accrued research and development expenses are related to expenses incurred with respect to academic research centers, contract research organizations, and other vendors in connection with research and development activities for which it has not yet been invoiced.

There may be instances in which the Company’s service providers require advance payments at the inception of a contract or in which payments made to these vendors will exceed the level of services provided, resulting in a prepayment of the research and development expense. Such prepayments are charged to research and development expense as and when the service is provided or when a specific milestone outlined in the contract is reached.

Prepayments related to research and development activities were $1.8 million and $0.7 million at March 31, 2020 and June 30, 2019, respectively, and are included in prepaid and other current assets in the Company’s Unaudited Condensed Balance Sheets.

Share-based compensation

The Company accounts for share-based awards issued to employees in accordance with ASC Topic 718, Compensation—Stock Compensation and generally recognizes share-based compensation expense on a straight-line basis over the periods during which the employees are required to provide service in exchange for the award. In addition, the Company issues stock options and restricted shares of common stock to non-employees in exchange for consulting services. As noted in the Company’s fiscal year 2019 Annual Report on Form 10-K, the Company historically accounted for these in accordance with the provisions of ASC Subtopic 505-50, Equity-Based Payments to Non-employees (“ASC 505-50”). Under ASC 505-50, share-based awards to non-employees were subject to periodic fair value re-measurement over their vesting terms. As discussed below under “Adopted in the current period” section, in the first fiscal quarter of 2020 the Company adopted Accounting Standards Update (“ASU”) No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). As a result, the accounting for non-employee awards will be generally consistent with that of employee awards. The measurement date for non-employee awards is the date of grant without changes in the fair value of the award. Stock-based compensation costs for non-employees are recognized as expense over the vesting period on a straight-line basis.

For purposes of calculating stock-based compensation, the Company uses Monte Carlo simulation model to determine the fair value of restricted stock units and Black-Scholes model to determine the fair value of stock options. The Monte Carlo simulation model incorporates probability of satisfying a market condition and uses transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as, volatility. The Black-Scholes model is affected by the Company’s stock price at the grant date and incorporates a number of assumptions, including expected volatility, expected term, risk-free interest rate and expected dividends.

Net income or loss per share

Basic net income or loss per share is calculated by dividing net income or loss by the weighted average shares outstanding during the period, without consideration of common stock equivalents. Diluted net income or loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effects of common stock equivalents outstanding during the period, determined using the treasury-stock method. For purposes of the diluted net income or loss per share calculations, stock options, restricted stock awards and performance service awards are considered to be common stock equivalents if they are dilutive. The dilutive impact of common stock equivalents (i) for the three and nine months ended March 31, 2020 was approximately 0.4 million shares and 0.2 million shares, respectively, and (ii) for both the three and nine months ended March 31, 2019 was approximately 0.2 million shares. However, the dilutive impact of common stock equivalents was excluded from the calculations of diluted net loss per share for both the three and nine months ended March 31, 2020 because their effects were anti-dilutive. Therefore, for each of the three and nine months ended March 31, 2020, basic and diluted net loss per share were the same.

 

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Comprehensive income or loss

Comprehensive income or loss consists of net income or loss and changes in equity during a period from transactions and other equity and circumstances generated from non-owner sources. For all periods presented herein, the Company’s net income or loss is the same as its comprehensive income or loss.

New Accounting Pronouncements

Adopted during the nine months ended March 31, 2020

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which superseded FASB ASC Topic 840, Leases (“Topic 840”) and provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new accounting guidance requires the recognition of long-term lease assets and lease liabilities by lessees and sets forth new disclosure requirements for leases. The standard requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet. An entity can transition to ASU 2016-02 using a modified retrospective approach at either the beginning of the earliest comparative period in the financial statements or at the beginning of the period of adoption. A lessee is also required to record a right-of-use asset and a lease liability regardless of lease classification. The FASB subsequently issued several ASUs amending the new standard. The Company adopted the new standard effective July 1, 2019 using the modified retrospective approach at the beginning of the period of adoption. As a result, prior periods are presented in accordance with the previous guidance in Topic 840.

ASU 2016-02 provides a number of optional practical expedients during transition. The Company elected a package of practical expedients that permits it to: (i) not reassess whether any expired or existing contracts are or contain leases; (ii) not reassess the lease classification for any expired or existing leases; and (iii) not reassess initial direct costs for any existing leases. The Company will continue to differentiate between finance leases (previously referred to as capital leases) and operating leases using classification criteria in ASU 2016-02 that are substantially similar to the previous guidance in Topic 840. The adoption of ASU 2016-02 resulted in the recognition of right-of-use assets – operating leases and related lease liabilities of $3.7 million and $5.8 million, respectively, on the Company’s July 1, 2019 Unaudited Condensed Balance Sheet. There was no material impact from ASU 2016-02 on the Company’s Unaudited Condensed Statements of Operations for the three and nine months ended March 31, 2020. The Company made a policy election not to record a right-of-use asset or lease liability for leases with an expected duration of 12 months or less at inception; however, such leases are not material to the Company. For leases with terms greater than 12 months, the Company records a right-of-use asset and lease liability at the present value of the future lease payments. As the Company’s leases do not provide readily determinable implicit interest rates, the Company used incremental borrowing rates commensurate with the respective terms of the leases to discount future lease payments. The application of ASU 2016-02 required netting the unamortized balance of lease incentives and deferred lease obligations against the right-of-use asset on the date of adoption. The Company’s operating leases include rental escalation clauses that are factored into the determination of future lease payments when appropriate. The Company does not separate lease and nonlease components of its contracts when applying the provisions of ASU 2016-02. Refer to Note 3, Leases in these Notes to Unaudited Condensed Financial Statements for additional information about the Company’s leasing activities.

Share-Based Compensation

In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The new standard aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to employees, with certain exceptions. Under the guidance, the measurement of equity-classified nonemployee awards will be fixed at the grant date, which may lower their cost and reduce volatility in the income statement. The Company adopted ASU 2018-07 on July 1, 2019 using a cumulative effect adjustment as of the date of adoption. The adoption of this standard did not have an impact on the Company’s financial position or results of operations upon adoption.

To be adopted in future periods

Financial Instruments—Credit Losses

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new standard requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected and separately measure an allowance for credit losses that is deducted from the amortized cost basis of the financial assets. This standard will be effective for the Company on July 1, 2023. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements.

 

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Fair Value Measurement

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The new standard eliminates, adds and modifies certain disclosure requirements for fair value measurement as part of its disclosure framework project. The amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy will no longer be required to be disclosed, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. This standard will be effective for the Company on July 1, 2020. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements.

Collaborative Arrangements

In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606. The new standard clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. It precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. The guidance amends ASC 808 to refer to the unit-of-account guidance in ASC 606 and requires it to be used only when assessing whether a transaction is in the scope of ASC 606. This standard will be effective for the Company on July 1, 2020. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements.

Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new standard includes several provisions which simplify accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and increasing consistency and clarity for the users of financial statements. This standard will be effective for the Company on July 1, 2021. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements.

Equity Securities, Investment – Equity Method and Joint Ventures, and Derivatives and Hedging

In January 2020, the FASB issued ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The new standard clarifies certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815, which could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with Topic 825, Financial Instruments. These amendments improve current U.S. GAAP by reducing diversity in practice and increasing comparability of the accounting for these interactions. This standard will be effective for the Company on July 1, 2021. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements.

 

3.

Leases

The Company leases certain laboratory and office space under operating leases, which consist of the following:

Alachua, Florida

The Company’s corporate headquarters are located in Alachua, Florida. In January 2016, the Company moved into a new combined-use facility consisting of approximately 21,500 square feet of laboratory and office space. The initial lease term for this facility is 12 years with options to extend the term of the lease for three additional five-year periods.

Cambridge, Massachusetts

In August 2015, the Company entered into a two-year lease to occupy approximately 3,000 square feet of laboratory and office space in Cambridge, Massachusetts. On July 31, 2017, the Company entered into a new lease to increase laboratory and office space in Cambridge by approximately 5,000 square feet to a total of approximately 8,000 square feet and extend the term of the lease for an additional seven years, with an option to further extend the lease for one additional three-year term.

In addition, the Company leases certain office equipment under a finance lease.

 

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As part of the Company’s assessment of the lease term, the Company did not elect the hindsight practical expedient, which allows companies to use current knowledge and expectations when determining the likelihood to extend lease options. By not electing this practical expedient, the Company will not re-assess the lease term for any leases identified under ASC 840.

Summary of all lease costs recognized under ASU 2016-02

The table below contains a summary of the lease costs recognized under ASU 2016-02 and other information pertaining to the Company’s operating and finance leases.

 

In thousands

    Three Months Ended  
March 31, 2020
      Nine Months Ended  
March 31, 2020
 

Lease Cost:

   

Finance lease cost

   

Amortization of right-of-use asset

   $ 11      $ 34  

Interest on lease liability

    2       6  

Operating lease cost

    193       578  

Variable lease cost

    95       271  
 

 

 

   

 

 

 

Total lease cost

   $                     301      $                     889  
 

 

 

   

 

 

 

Cash paid for amounts included in the measurement of lease liabilities:

   

Operating cash flows used for finance lease

   $ 2      $ 6  

Operating cash flows used for operating leases

   $ 278      $ 829  

Financing cash flows used for finance lease

   $ 11      $ 33  

Other Information:

   

Weighted-average remaining lease term - operating leases (in years)

      6.4  

Weighted-average remaining lease term - financing lease (in years)

      2.1  

 

Weighted-average discount rate - operating leases

      8.5

Weighted-average discount rate - financing lease

      6.9

Amortization of the right-of-use asset - finance lease is included in general and administrative and other in the Company’s Unaudited Condensed Statements of Operations. Operating lease cost and variable lease cost are included as rent expense in general and administrative and other, and research and development in the Company’s Unaudited Condensed Statements of Operations.

As of March 31, 2020, future minimum commitments for the Company’s operating and financing leases for the years ending June 30 are summarized below.

 

In thousands

                  

Operating lease liabilities:

  

2020 (excluding the nine months ended March 31, 2020)

    $ 275  

2021

     1,108  

2022

     1,127  

2023

     1,146  

2024 and thereafter

     3,311  

Imputed interest

     (1,584
  

 

 

 

Operating lease liabilities per the Unaudited Condensed Balance Sheet

    $                 5,383  
  

 

 

 

Finance lease liability:

  

2020 (excluding the nine months ended March 31, 2020)

    $ 13  

2021

     53  

2022

     39  

Imputed interest

     (7
  

 

 

 

Finance lease liability per the Unaudited Condensed Balance Sheet

    $ 98  
  

 

 

 

Based on the Company’s selected method of adoption for ASU 2016-02, the prior U.S. GAAP disclosures under ASC Topic 840 are required to be presented in the Company’s Unaudited Condensed Financial Statements during the year

 

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ending June 30, 2020. As such, below are the Company’s future annual minimum lease payments for the years ending June 30 under non-cancelable operating leases as of June 30, 2019.

 

In thousands

      

2020

     $ 1,353  

2021

     1,376  

2022

     1,400  

2023

     1,425  

2024

     1,450  

Thereafter

     2,638  
  

 

 

 

Total

     $                     9,642  
  

 

 

 

 

4.

Share-based Compensation Plans

The Company uses stock options, performance service awards, restricted stock awards and restricted stock units to provide long-term incentives to its employees, non-employee directors and certain consultants. The Company has two equity compensation plans under which awards are currently authorized for issuance, the 2013 Employee Stock Purchase Plan and the 2013 Equity and Incentive Plan. No awards have been issued to date under the 2013 Employee Stock Purchase Plan and, as such, all of the 128,571 shares previously authorized under that plan remain available for issuance.

Information about the Company’s stock options that do not have performance conditions is provided below.

 

    Nine Months Ended March 31,  
    2020     2019  

(In thousands, except per share amounts)

   Shares       Weighted 
Average
Exercise
Price
     Shares        Weighted 
Average
Exercise
Price
 

Outstanding at June 30,

    3,585     $ 9.19       3,107     $     10.93  

Granted

    1,108       3.18       1,126       4.53  

Exercised

    (81     3.91       (29     4.52  

Forfeited

    (339     3.97       (302     7.21  

Expired

    (324         11.78       (200     13.17  
 

 

 

     

 

 

   

Outstanding at March 31,

    3,949     $ 7.84       3,702     $ 9.22  
 

 

 

     

 

 

   

Exercisable at March 31,

    2,347         2,170    
 

 

 

     

 

 

   

Weighted average fair value of options granted during the period

  $ 2.04       $ 2.91    
 

 

 

     

 

 

   

The fair value of each option granted is estimated on the date of grant using the Black-Scholes stock option pricing model. Below are the assumptions that were used when estimating fair value.

 

Assumption

  Nine months ended
March 31, 2020
    Nine months ended
March 31, 2019
 

Dividend yield

    0.00%       0.00%  

Expected term

    6.00 to 6.25 years       6.00 to 6.25 years  

Risk-free interest rate

    0.47% to 1.90%       2.27% to 3.11%  

Expected volatility

    71.20%       69.22%  

In addition to the stock option activity described above, the Company also granted 100,000 performance-based stock options to a senior officer during the nine months ended March 31, 2020 with an exercise price of $3.91. That award: (i) was issued under the 2013 Equity and Incentive Plan; (ii) has a term of ten years; and (iii) includes six separate tranches with performance criteria that will each vest 25% upon their achievement, with the remaining 75% of the tranche vesting on a monthly basis over a period of three years subsequent to achieving the underlying performance objective (assuming continued service by the awardee). Each tranche represents one-sixth of the total award. If any of the performance criteria are not satisfied, that tranche will be forfeited. As of March 31, 2020, one of the six performance criteria has been met. The Company used the Black-Scholes stock option pricing model to estimate the grant date fair value of each option to be $2.58; however, determining the appropriate periodic share-based compensation expense for this award requires management to estimate the likelihood of the achievement of the performance targets.

During the nine months ended March 31, 2020, 175,500 restricted stock units, which included a market-based vesting condition related to the trading price of our common stock, were granted to certain of the Company’s employees under

 

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the 2013 Equity and Incentive Plan with a weighted average grant date fair value of $2.56. As of March 31, 2020, none of the restricted stock units had vested; however, the market condition embedded in the award has been met and 15,000 awards have been forfeited. Therefore, assuming continuing service by the grantees, 50% of the remaining outstanding restricted stock units will vest on each of August 15, 2020 and August 15, 2021. The fair value of each restricted stock unit awarded was estimated on the grant date using a Monte Carlo simulation pricing model, which incorporated the probability of satisfying the related market-based vesting condition.

Share-based compensation expense for the three and nine months ended March 31, 2020 was $0.9 million and $2.4 million, respectively, compared to $0.8 million and $3.1 million, respectively, for the three and nine months ended March 31, 2019.

5. Investments

Cash in excess of immediate requirements is invested in accordance with the Company’s investment policy, which primarily seeks to maintain adequate liquidity and preserve capital. As of both March 31, 2020 and June 30, 2019, the Company’s investments consisted entirely of held-to-maturity debt securities that were due in one year or less from the respective balance sheet dates.

The Company’s debt securities that are classified as held-to-maturity are summarized below.

 

In thousands

  March 31, 2020     June 30, 2019  

U.S. Treasury Securities:

   

Amortized cost

    $ 26,026      $ 55,292  

Gross unrealized gains

    142       78  

Gross unrealized losses

    —         —    
 

 

 

   

 

 

 

Fair Value

    $                 26,168      $         55,370  
 

 

 

   

 

 

 

The Company continues to expect to collect the principal and interest due on its debt securities that have an amortized cost in excess of fair value. At the end of each reporting period, the Company evaluates securities for impairment, if and when, the fair value of an investment is less than its amortized cost. In the event the fair value of an investment is less than its amortized cost, the Company will evaluate the underlying credit quality and credit ratings of the issuers. The Company does not intend to sell its investments before recovery of their amortized cost bases which may be at maturity.

 

6.

Fair Value of Financial Instruments and Investments

Certain assets and liabilities are measured at fair value in the Company’s financial statements or have fair values disclosed in these Notes to Unaudited Condensed Financial Statements. Such assets and liabilities are classified into one of three levels of a hierarchy defined by U.S. GAAP. The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability. The methods and assumptions described below were used to estimate fair values and determine the fair value hierarchy classification of each class of financial instrument held by the Company.

Cash and Cash Equivalents. The carrying value of cash and cash equivalents approximates fair value as maturities are less than three months.

Debt securities—held-to-maturity. The Company’s investments in debt securities classified as held-to-maturity include U.S. Treasury Securities, which are valued using quoted market prices. Valuation adjustments are not applied. Accordingly, U.S. Treasury Securities are valued using Level 1 inputs under the fair value hierarchy.

 

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The fair value hierarchy table below provides information about each major category of the Company’s financial assets and liabilities measured at fair value on a recurring basis or disclosed at fair value in these Notes to Unaudited Condensed Financial Statements.

 

In thousands

  Level 1       Level 2         Level 3       Total Fair
     Value     
 

 

March 31, 2020

       

Cash and cash equivalents

   $ 58,491      $ —        $ —        $ 58,491  

Held-to-maturity investments:

       

U.S. Treasury Securities

    26,168       —         —         26,168  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 84,659      $       —        $       —        $   84,659  
 

 

 

   

 

 

   

 

 

   

 

 

 

June 30, 2019

       

Cash and cash equivalents

   $ 26,703      $ —        $ —        $ 26,703  

Held-to-maturity investments:

       

U.S. Treasury Securities

    55,370       —         —         55,370  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 82,073      $ —        $ —        $ 82,073  
 

 

 

   

 

 

   

 

 

   

 

 

 

 

7.

Collaboration Agreements

Biogen

On July 1, 2015, the Company entered into a Collaboration Agreement with Biogen, pursuant to which the Company and Biogen collaborated to develop, seek regulatory approval for and commercialize gene therapy products to treat XLRS, XLRP, and discovery programs targeting three indications based on the Company’s adeno-associated virus vector technologies. Effective March 8, 2019, Biogen terminated the Collaboration Agreement. Upon termination, the Company received back the exclusive license rights to develop, manufacture and commercialize the product candidates for all of our partnered programs including our XLRP program, XLRS program and our three discovery programs.

Accounting Analysis

The performance obligations and the allocated transaction price as of the date of initial application of Topic 606 were as follows:

 

In thousands

   Allocated
Transaction Price
 

XLRS License and Pre-Funded Activities

    $ 52,060  

XLRP License and Pre-Funded Activities

     43,570  

Pre-Funded Activities associated with the Discovery Programs

     16,700  
  

 

 

 
    $             112,330  
  

 

 

 

The Pre-Funded Activities associated with the Discovery Programs amount is comprised of four distinct performance obligations based on the separate development plans for discovery candidates at contract inception. The Company concluded that the delivered license was not distinct from the Pre-Funded Activities as Biogen cannot obtain the benefit of the license without the related services. Further, each of the license and related Pre-Funded Activities performance obligation is considered a distinct performance obligation as each development plan is pursued independent of every other development plan.

The Company concluded that Post-Funded Activities represent customer options that are not material rights as any services requested by Biogen and provided by the Company are reimbursed at a rate that reflects the estimated standalone selling price for the services. As such, the Company recognized revenue related to Post-Funded Activities as the services were provided.

The Company concluded that the option to receive (i) commercial licenses for the Discovery Programs that achieve clinical candidate designation, as defined in the Collaboration Agreement and (ii) manufacturing licenses for up to six genes pursuant to the Manufacturing Agreement represent customer options that were not material rights as the exercise price for such options reflects the estimated standalone selling price for such option. As such, the Company accounted for such option if and when the options were exercised.

As of the date of the initial application of Topic 606, the total transaction price for the Biogen Agreement was $112.3 million, which included a $5.0 million milestone payment for initiation of dosing of XLRS and a $2.5 million

 

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milestone payment for initiation of dosing of XLRP. The Company used the most-likely method to determine the amount of variable consideration in the Biogen Agreement. The Company believes that any estimated amount of variable consideration related to clinical and regulatory milestone payments should be fully constrained as the achievement of such milestones was highly susceptible to factors outside of the Company’s control. The Company determined that the commercial milestones and sales-based royalties would be recognized when the related sales occurred as they were deemed to relate predominately to the license granted and therefore were also excluded from the transaction price.

In the quarter ended September 30, 2018, the Company received a $10.0 million milestone payment related to XLRP which increased the transaction price. Based on an understanding between the parties in the quarter ended September 30, 2018, the Company also reallocated $1.1 million of Pre-Funded amounts to cover Post-Funded Activities which resulted in a decrease to the transaction price and deferred revenue of $1.1 million in the quarter ended September 30, 2018. Additionally, the Company reallocated $1.8 million of variable consideration between Pre-Funded Activities associated with Discovery Programs performance obligations based on changes to the underlying development plans of the product candidates. The total transaction price did not change in the quarter ended December 31, 2018.

The reallocation between Discovery Programs generated an insignificant cumulative catch up adjustment to revenue in the quarter ended September 30, 2018.

The transaction price was allocated to the performance obligations based on the relative estimated standalone selling price of each performance obligation or, in the case of certain variable consideration, to one or more performance obligations. The estimated standalone selling prices for performance obligations, that include a license and Pre-Funded Activities, were developed using the estimated selling price of the license and an estimate of the overall effort to perform the Pre-Funded Activities. The estimated selling price of the licenses were determined using a discounted cash flow valuation utilizing forecasted revenues and costs for the Company’s product candidate licenses.

The Company recognized revenue related to the performance obligations which included a license and Pre-Funded Activities over the estimated period of the research and development services using a proportional performance model. The Company measured proportional performance based on the costs incurred relative to the total costs expected to be incurred to satisfy the performance obligation. Management believes that recognizing revenue on a proportional performance basis based on costs incurred faithfully depicts the transfer of goods and services to the customer because the customer consumed the Company’s services as such services were performed. The Company accounted for the termination of the Collaboration Agreement upon the effective date of the termination and updated its total costs incurred to satisfy the performance obligations as of June 30, 2019; including any impact of the termination.

As a result of the termination of the Collaboration Agreement with Biogen effective March 8, 2019, the Company recognized the remaining deferred revenue balance as of the termination date.

The Company’s revenue related to the Biogen Agreement for the three and nine months ended March 31, 2019 was comprised of the following:

 

In thousands

    Three Months Ended  
March 31, 2019
      Nine Months Ended  
March 31, 2019
 

Collaboration revenue:

   

Licenses and related services

   $ 18,019       $ 27,000   

Development services

    775        2,736   

Milestone revenue

    2,413        11,392   
 

 

 

   

 

 

 

Total collaboration revenue

   $                 21,207       $                 41,128   
 

 

 

   

 

 

 

License and related services revenue comprise of revenue related to the Company’s completion of performance obligations that contained the delivery of licenses and Pre-Funded Activities. Development services revenue relate to the delivery of Post Funded Activities. Milestone revenue relate to the portion of milestone payments received that were recognized as revenue based on the proportional performance of the underlying performance obligation.

For a more detailed description of the Company’s collaboration agreement with Biogen refer to Note 7, Collaboration Agreements, of AGTC’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019.

Bionic Sight

On February 2, 2017, the Company entered into a strategic research and development collaboration agreement with Bionic Sight, LLC (“Bionic Sight”) to develop therapies for patients with visual deficits and blindness due to retinal disease. Through the AGTC-Bionic Sight collaboration, the companies seek to develop a new optogenetic therapy that leverages AGTC’s deep experience in gene therapy and ophthalmology and Bionic Sight’s innovative neuro-prosthetic

 

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device and algorithm for retinal coding. The collaboration agreement grants to AGTC, subject to achievement by Bionic Sight of certain development milestones, an option to exclusively negotiate for a limited period of time to acquire (i) a majority equity interest in Bionic Sight, (ii) the Bionic Sight assets to which the collaboration agreement relates, or (iii) an exclusive license with respect to the product to which the collaboration agreement relates.

Under the agreement, AGTC made an initial $2.0 million payment to Bionic Sight for an equity interest in that company. This initial investment represented an equity interest of approximately 5% in Bionic Sight. In addition to the initial investment, AGTC contributed ongoing research and development support costs through additional payments and other in-kind contributions (the “AGTC Ongoing R&D Support”). The AGTC Ongoing R&D Support payments and in-kind contributions were made over time and continued until December 2019, the month Bionic Sight received both IND clearance from the FDA and receipt of written approval from an internal review board to conduct clinical trials from at least one clinical site for that product candidate (the “IND Trigger”). Prior to the achievement of the IND Trigger, the Company had incurred approximately $2.2 million of research and development support costs and in-kind contributions, which were reported as research and development expense in the Company’s financial statements.

Upon achievement of the IND Trigger, AGTC was (i) entitled to receive additional equity in Bionic Sight, based on the valuation in place at the beginning of the agreement, for the AGTC Ongoing R&D Support payments and in-kind contributions, and (ii) was obligated to purchase additional equity in Bionic Sight for $4.0 million and receive its equity interests based on certain pre-determined valuation criteria. The Company made the $4.0 million payment to Bionic Sight in January 2020. Thereafter, AGTC is not obligated to purchase additional equity in Bionic Sight or make any additional in-kind contributions under the agreement.

The Company received the additional shares in Bionic Sight related to its $4.0 million investment and the conversion of the $2.2 million of in-kind contributions into equity in March 2020 upon the execution of a subscription agreement between the parties. The Company’s equity interest in Bionic Sight increased to approximately 15.5% upon the issuance of the additional shares.

The Company concluded that the AGTC Ongoing R&D Support was within the scope of Topic 606 because the services rendered represent a distinct service delivered to a counterparty that meets the definition of a customer. The Company further concluded that those services represented one combined performance obligation. Because the consideration that the Company was entitled to was contingent upon achievement of the IND Trigger, that consideration was determined to be variable and the amount was fully constrained until achievement of the IND Trigger. As a result of achieving the IND Trigger in December 2019, the Company recognized $2.2 million of collaboration revenue during the nine months ended March 31, 2020. With regard to the obligation to purchase additional equity in Bionic Sight for $4.0 million, the Company concluded at contract inception that such option represented a forward contract to be accounted for within the scope of ASC 321, Investments—Equity Securities. The Company assessed the fair value of this forward contract at the inception of the Bionic Sight agreement and determined the value to be de minimis. As the forward contract did not have a readily determinable fair value, the Company elected to use a measurement alternative for all subsequent measurements of the financial instrument. Under such measurement alternative, the forward contract was remeasured at fair value when observable transactions involving the underlying equity securities or impairment of those securities occurred. As noted above, the Company made a supplemental investment of $4.0 million in Bionic Sight and the underlying equity interests were delivered in March 2020, resulting in the settlement of the forward contract at that time. From the inception of the Bionic Sight arrangement and through the settlement date in March 2020, no observable transactions or impairment involving the underlying equity securities had occurred.

The Company recorded its initial $2.0 million investment in Bionic Sight using the equity method of accounting for investments, which is recorded as its own line item in the Company’s Unaudited Condensed Balance Sheets. Upon the issuance of the additional shares in March 2020, the Company concluded that equity method accounting was still appropriate for the Company’s investment in Bionic Sight. Given that the conversion price used to calculate the number of additional shares that the Company was to receive was based on contractually fixed valuation amounts, the Company assessed whether there was a difference between the cost of the investment and the underlying equity in the net assets of Bionic Sight. The Company concluded that any such difference was not material to the Company’s financial statements and, therefore, recorded its additional investment in Bionic Sight at $6.2 million in its Unaudited Condensed Balance Sheet as of March 31, 2020.    For the three and nine months ended March 31, 2020, the Company recorded equity in net losses of an affiliate of $11,000 and $27,000, respectively, in its Unaudited Statements of Operations to reflect its equity interest in the net losses of Bionic Sight.

Otonomy, Inc.

In October 2019, the Company entered into a strategic collaboration agreement with Otonomy, Inc. to co-develop and co-commercialize an AAV-based gene therapy to restore hearing in patients with sensorineural hearing loss caused by a mutation in the gap junction protein beta 2 gene (GJB2) – the most common cause of congenital hearing loss. Mutations

 

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in GJB2 account for approximately 30% of all genetic hearing loss cases. Patients with this mutation can have severe-to-profound deafness in both ears that is identified in screening tests routinely performed in newborns. Under the collaboration agreement, the parties will equally share the program costs and proceeds beginning in January 2020 and can include additional genetic hearing loss targets in the future.

The Company has concluded that the Otonomy collaboration agreement is within the scope of ASC 808, which defines collaborative arrangements and addresses the presentation of the transactions between the two parties in the income statement and related disclosures. However, ASC 808 does not provide guidance on the recognition of consideration exchanged or accounting for the obligations that may arise between the parties. The Company has concluded that ASC 730, Research and Development, should be applied by analogy to payments made between the parties during the development activities. As such, payments made to or received from Otonomy for development activities in a given quarter will be recorded as research and development expenses. For both the three and nine months ended March 31, 2020, settlement activity between the parties under the Otonomy agreement had an immaterial effect on the Company’s research and development expenses.

 

8.

Subsequent Events

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. National, state and local governments in affected regions have implemented, and may continue to implement, safety precautions, including quarantines, border closures, increased border controls, travel restrictions, shelter in place orders and shutdowns, business closures, cancellations of public gatherings and other measures. Organizations and individuals are taking additional steps to avoid or reduce infection, including limiting travel and staying home from work.

The worldwide spread of the COVID-19 outbreak is expected to result in a global slowdown of economic activity that is likely to decrease demand for a broad variety of goods and services, while also disrupting sales channels and marketing activities for an unknown period of time until the disease is contained. The extent to which the COVID-19 outbreak may impact the Company’s financial condition or results of operations is uncertain and, as of the date of these financial statements, management is not aware of any specific event or circumstance that would require the Company to update its estimates, judgments or revise the carrying value of its assets or liabilities. However, future events are subject to change and management’s best estimates and judgments may require future adjustments. Therefore, actual results could differ materially from current estimates. Management is closely monitoring the evolving impact of the pandemic on all aspects of the Company’s business and periodically evaluates its estimates and they are adjusted prospectively based on such periodic evaluation.

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides an overview of our financial condition as of March 31, 2020, and results of operations for the three and nine months ended March 31, 2020 and 2019. This discussion should be read in conjunction with the accompanying Unaudited Condensed Financial Statements and accompanying notes, as well as our Annual Report on Form 10-K for the year ended June 30, 2019, as amended (the “June 2019 Form 10-K”). In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, assumptions and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below under the heading “Risk Factors” in Part II, Item 1A, and elsewhere in this report, as well as those set forth in Part I, Item 1A, “Risk Factors” of the June 2019 Form 10-K. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies and operations, financing plans, potential growth opportunities, potential market opportunities and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s plans, estimates, assumptions and beliefs only as of the date of this report. Except as required by law, we assume no obligation to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

As used herein, except as otherwise indicated by context, references to “we,” “us,” “our,” or the “Company” refer to Applied Genetic Technologies Corporation.

 

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Overview

We are a clinical-stage biotechnology company that uses a proprietary gene therapy platform to develop transformational genetic therapies for patients suffering from rare and debilitating diseases. Our initial focus is in the field of ophthalmology, where we have active clinical programs in X-linked retinitis pigmentosa (“XLRP”) and achromatopsia (“ACHM”) and preclinical programs in optogenetics, Stargardt disease, and age-related macular degeneration (“AMD”). In addition to ophthalmology, we have initiated one preclinical program in otology and three preclinical programs targeting central nervous system disorders (“CNS”), including adrenoleukodystrophy (“ALD”), frontotemporal dementia (“FTD”) and amyotrophic lateral sclerosis (“ALS”). Our optogenetics program is being developed in collaboration with Bionic Sight and our otology program is being developed in collaboration with Otonomy. With a number of important clinical milestones on the horizon, we believe we are well positioned to advance multiple programs towards pivotal studies. In addition to our product pipeline, we have also developed broad technological capabilities through our collaborations with Synpromics Limited (“Synpromics”) and the University of Florida, which provide us with expertise in vector design and manufacturing as well as synthetic promoter development and optimization.

Since our inception in 1999, we have devoted substantially all of our resources to development efforts relating to our proof-of-concept programs in ophthalmology and alpha-1 antitrypsin deficiency, or AAT deficiency, an inherited orphan lung disease, including activities to manufacture product in compliance with good manufacturing practices, preparing to conduct and conducting clinical trials of our product candidates, providing general and administrative support for these operations and protecting our intellectual property. We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations to date primarily through public offering of our common stock, private placement of preferred stock, and collaborations. We have also been the recipient, either independently or with our collaborators, of grant funding administered through federal, state, and local governments and agencies, including the United States Food and Drug Administration, or FDA, and by patient advocacy groups such as The Foundation Fighting Blindness, or FFB, and the Alpha-1 Foundation.

We have incurred losses from operations in each year since inception, except for fiscal year 2017, in which we reported net income of $0.4 million due in part to the amortization associated with our collaboration agreement with Biogen. For the nine months ended March 31, 2020 and 2019, we reported a net loss of $31.4 million and net income of $8.5 million, respectively. Substantially all our net losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We expect to continue to incur significant operating expenses for at least the next several years and anticipate that such expenses will increase substantially in connection with our ongoing activities, as we:

 

   

continue to conduct preclinical studies and clinical trials for our XLRP and ACHM product candidates and preclinical studies for our other ophthalmology, otology and CNS product candidates;

 

   

continue our research and development efforts, including exploration through early preclinical studies of potential applications of our gene therapy platform in:

 

   

orphan ophthalmology indications;

 

   

non-orphan ophthalmology indications including wet AMD and other inherited retinal diseases; and

 

   

other inherited diseases, such as otology and CNS indications.

 

   

manufacture clinical trial materials and develop larger-scale manufacturing capabilities;

 

   

seek regulatory approval for our product candidates;

 

   

further develop our gene therapy platform;

 

   

add personnel to support our collaboration, product development and commercialization efforts; and

 

   

continue to operate as a public company.

As of March 31, 2020, we had cash and cash equivalents and investments totaling $84.5 million. We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years and which we believe is subject to significant uncertainty. We believe that our existing cash and cash equivalents and investments as of March 31, 2020, will be sufficient to allow us to generate data from our ongoing clinical programs, initiate a pivotal trial on XLRP and to fund currently planned research and discovery programs into the second half of 2021. In order to complete the XLRP pivotal trial, obtain regulatory approval for our lead product candidates and build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our lead product candidates, if approved, we will require substantial additional funding. Also, our current operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, government or other third-party funding, marketing and distribution arrangements and other

 

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collaborations, strategic alliances and licensing arrangements or a combination of these approaches. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our product candidates.

Recent Developments

In September of 2019, we released positive interim six-month data from our ongoing Phase 1/2 clinical program in XLRP for an initial set of patients dosed peripherally. The data showed that for nine patients dosed peripherally in dose groups 1-3 that their visual sensitivity as measured by perimetry was stable over the six months of follow-up especially for the high dose group patients. We also released three-month data on eight patients dosed centrally showing improved retinal sensitivity.

In January of 2020 we released a second set of positive interim six-month data from our ongoing Phase 1/2 clinical program in XLRP. The data showed that of the nine patients dosed centrally – two patients in the 2nd dose group and seven patients in the 4th dose group – improved retinal sensitivity (as measured by microperimetry) was observed in 50% (4/8) of evaluable patients through six months, and importantly, these data are consistent with the previous data reported at three months. In addition to retinal sensitivity we have observed stable and, in some cases, improving trends in visual acuity.

In both data releases, the Company reported that the study drug was safe and well-tolerated. As of March 31, 2020, we have dosed 28 patients and have not observed dose limiting toxicity. We will continue to monitor patients for safety and efficacy and will release additional data on two new higher dose groups – as well as 12-month data on the first four dose groups – in the second half of 2020.

We plan to hold an end of Phase 2 meeting with the FDA in the second quarter of 2020 at which time we hope to reach final agreement with the FDA on pivotal trial design. If successful, this would position us to potentially initiate that XLRP pivotal trial in the second half of 2020.

On January 23, 2020, we announced encouraging interim six-month data from the dose-escalation cohorts of our ongoing Phase 1/2 clinical programs in patients with achromatopsia due to mutation in the CNGB3 or CNGA3 genes. The studies’ primary endpoint is safety, with various secondary efficacy endpoints, including light discomfort. The study agent was found to have a favorable safety profile, with no serious study drug-related adverse events. On the secondary efficacy endpoints, we saw preliminary signs of biologic activity based on light discomfort testing at Month 3. Light discomfort is a clinically relevant symptom for these patients. On the additional secondary efficacy endpoints, we did not see consistent improvements, but we will continue to monitor these patients over time at higher doses and in younger patient groups. As of March 31, 2020, we have dosed 15 adult patients and three pediatric patients in the ACHMA3 trial; adult enrollment is now complete and six more pediatric patients will be enrolled. As of March 31, 2020, we have dosed 22 adult patients and three pediatric patients in the ACHMB3 trial; adult enrollment is now complete and six more pediatric patients will be enrolled. The Data and Safety Monitoring Committee has reviewed all safety data to date and cleared the Company to complete the pediatric enrollment in both trials.

On February 11, 2020, the Company closed an underwritten public offering of 6.5 million shares of its common stock at $5.00 per share, generating gross proceeds of $32.5 million, before deducting underwriting discounts, commissions and other offering expenses payable by the Company. Additionally, the underwriters exercised their option to purchase an additional 975,000 shares of common stock to cover over-allotments, and such transaction closed on February 13, 2020 and generated additional gross proceeds of $4.9 million.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Quarterly Report on Form 10-Q is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of those financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses and share-based compensation. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from our estimates under different assumptions or conditions. Moreover, we may need to change the assumptions underlying our estimates due to risks and uncertainties related to the COVID-19 pandemic or otherwise and those changes could have a material adverse effect on our statements of operations, liquidity and financial condition.

 

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During the nine months ended March 31, 2020, there were no significant changes to our critical accounting policies and estimates, other than the change described in the next paragraph. For a description of our accounting policies that, in our opinion, involve the most significant application of judgment or involve complex estimation and which could, if different judgments or estimates were made, materially affect our reported results of operations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in the June 2019 Form 10-K.

The Company adopted ASU 2016-02 on July 1, 2019. See Note 2 to the Unaudited Condensed Financial Statements included in this Quarterly Report on Form 10-Q for a description of our lease accounting policies and the effects of adopting ASU 2016-02.

New Accounting Pronouncements

Refer to Note 2 to the Unaudited Condensed Financial Statements included in this Quarterly Report on Form 10-Q for further information about recently issued accounting standards.

Financial Operations Review

Revenue

We primarily generate revenue through collaboration agreements, sponsored research arrangements with nonprofit organizations for the development and commercialization of product candidates and from federal research and development grant programs. In December 2019, Bionic Sight notified the Company that it had achieved the IND Trigger under its collaboration agreement with the Company. As a result of the IND Trigger achievement and in connection with the In-Kind Contribution payments previously made by the Company, $2.2 million of revenue was recognized during the nine months ended March 31, 2020, which is included in collaboration revenue in the Company’s Unaudited Condensed Statements of Operations. Thereafter, no additional collaboration revenue related to the collaboration agreement with Bionic Sight will be recognized. In the future, we may generate revenue from a combination of: product sales, license fees, milestone payments, development services, research and development grants, and from collaboration and royalty payments for the sales of products developed under licenses of our intellectual property.

We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of license fees, research and development programs, manufacturing efforts and reimbursements, collaboration milestone payments, and the sale of our products, to the extent any are successfully commercialized. We do not expect to generate revenue from product sales for the foreseeable future, if at all. If we or our collaborators fail to complete the development of our product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, our results of operations and financial position would be materially adversely affected.

Research and development expenses

Research and development expenses consist primarily of costs incurred for the development of our product candidates, which include:

 

   

employee-related expenses, including salaries, benefits, travel and share-based compensation expense;

 

   

expenses incurred under agreements with academic research centers, contract research organizations, or CROs, and investigative sites that conduct our clinical trials;

 

   

license and sublicense fees and collaboration expenses;

 

   

the cost of acquiring, developing, and manufacturing clinical trial materials; and

 

   

facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance, and other supplies.

Research and development costs are expensed as incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites.

We cannot determine with certainty the duration and completion costs of the current or future clinical trials of our product candidates or if, when, or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for

 

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any of our product candidates. The duration, costs, and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:

 

   

the scope, rate of progress, and expense of our ongoing as well as any additional clinical trials and other research and development activities;

 

   

the timing and level of activity as determined by us or jointly with our partners;

 

   

the level of funding received from our partners;

 

   

whether or not we elect to cost share with our collaborators;

 

   

the countries in which trials are conducted;

 

   

future clinical trial results;

 

   

uncertainties in clinical trial enrollment rates or drop-out or discontinuation rates of patients;

 

   

potential additional safety monitoring or other studies requested by regulatory agencies or elected as best practice by us;

 

   

increased cost and delay associated with manufacturing or testing issues, including ongoing quality assurance, qualifying new vendors and developing in-house capabilities;

 

   

significant and changing government regulation; and

 

   

the timing and receipt of any regulatory approvals.

A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA, or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate or if we experience significant delays in enrollment in or execution of any of our clinical trials, which could be adversely impacted by the COVID-19 pandemic, we could be required to expend significant additional financial resources and time on the completion of clinical development.

From inception through March 31, 2020, we have incurred approximately $227.7 million in research and development expenses. We expect our research and development expenses to increase for the foreseeable future as we continue the development of our product candidates and explore potential applications of our gene therapy platform in other indications.

General and administrative expenses

General and administrative expenses consist primarily of salaries and related costs for personnel, including share-based compensation and travel expenses for our employees in executive, operational, legal, business development, finance and human resource functions. Other general and administrative expenses include costs to support employee training and development, board of directors’ costs, depreciation, insurance expenses, facility-related costs not otherwise included in research and development expense, professional fees for legal services, including patent-related expenses, and accounting, investor relations, corporate communications and information technology services. We anticipate that our general and administrative expenses will continue to increase in the future as we hire additional employees to support our continued research and development efforts, collaboration arrangements, and the potential commercialization of our product candidates. Additionally, if and when we believe a regulatory approval of the first product candidate appears likely, we anticipate an increase in payroll and related expenses as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of our product candidates.

Other income (expense), net

Other income and expense primarily consists of interest earned on cash and cash equivalents and our held-to-maturity investments.

Provision for income taxes

Income tax expense for the three and nine months ended March 31, 2020 was $21,000 and $63,000, respectively, compared to $19,000 and $57,000 for the three and nine months ended March 31, 2019, respectively. The income tax expense for the three and nine months ended March 31, 2020 was primarily driven by interest expense related to the Company’s uncertain tax position.

 

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Results of Operations

Comparison of the three months ended March 31, 2020 to the three months ended March 31, 2019

Revenue

The following table summarizes our revenue for the three months ended March 31, 2020 and 2019 (in thousands):

 

    Three Months
Ended March 31,
    Increase
(Decrease)
    %Increase
(Decrease)
 
    2020     2019  

Collaboration revenue

       

Licenses and related services

   $         —        $ 18,019      $ (18,019)       nm%  

Development services

    —         775       (775)       nm%  

Milestone revenue

    —         2,413       (2,413)       nm%  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total collaboration revenue

    —         21,207       (21,207)       nm%  

Grant revenue

    —         111       (111)       nm%  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

   $ —        $     21,318      $     (21,318)                       nm%  
 

 

 

   

 

 

   

 

 

   

 

 

 

Collaboration revenue for the three months ended March 31, 2019 related to the Collaboration Agreement with Biogen, which was terminated effective March 8, 2019. As a result, the Company recognized in collaboration revenue the remaining deferred revenue balance as of the termination date. Thereafter, no additional collaboration revenue was recognized.

Research and development expense

The following table summarizes our research and development expenses by product candidate or program for the three months ended March 31, 2020 and 2019 (in thousands):

 

    Three Months
Ended March 31,
    Increase
(Decrease)
    % Increase
(Decrease)
 
    2020     2019  

External research and development expenses

       

ACHM

   $ 1,622      $ 1,312      $ 310       24%  

XLRS

    224       104       120                    >100%  

XLRP

    1,075       736       339       46%  

Research and discovery programs

    438       505       (67)       (13)%  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total external research and development expenses

    3,359       2,657       702       26%  
 

 

 

   

 

 

   

 

 

   

 

 

 

Internal research and development expenses

       

Employee-related costs

    3,007       2,724       283       10%  

Share-based compensation

    508       418       90       22%  

Other

    1,434       1,404       30       2%  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total internal research and development expenses

    4,949       4,546       403       9%  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total research and development expense

   $     8,308      $     7,203      $         1,105       15%  
 

 

 

   

 

 

   

 

 

   

 

 

 

External research and development costs consist of collaboration, licensing, manufacturing, testing, and other miscellaneous expenses that are directly attributable to our most advanced product candidates and discovery programs. We do not allocate personnel-related costs, including stock-based compensation, costs associated with broad technology platform improvements or other indirect costs, to specific programs, as they are deployed across multiple projects under development and, as such, are separately classified as internal research and development expenses in the table above.

Research and development expenses for the three months ended March 31, 2020 were $8.3 million, compared to $7.2 million for the three months ended March 31, 2019, an increase of $1.1 million, or 15%. The increase was primarily due to increased ACHM external spending primarily associated with patient enrollment and new site activations, increased XLRP external spending primarily associated with patient enrollment and initiation of potential pivot trial

 

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activities, and increased internal spending primarily due to the hiring of additional employees to support clinical trial execution and research and development activities.

General and administrative expense

The following table summarizes our general and administrative expenses for the three months ended March 31, 2020 and 2019 (in thousands):

 

     Three Months
    Ended March 31,    
     Increase
  (Decrease)  
     % Increase
    (Decrease)    
 
         2020              2019      

Employee-related costs

    $ 1,405       $ 1,312       $             93                      7%  

Share-based compensation

     367        427        (60)        (14)%  

Legal and professional fees

     97        201        (104)        (52)%  

Other

     1,265        1,170        95          8%  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total general and administrative expense

    $       3,134       $       3,110       $ 24          1%  
  

 

 

    

 

 

    

 

 

    

 

 

 

General and administrative expense was $3.1 million for both the three months ended March 31, 2020 and 2019. The increase in employee-related costs during the three months ended March 31, 2020 compared to 2019 was primarily associated with new employee hires. The decrease in share-based compensation expense was primarily due to lower fair values of awards that were granted more recently. The decrease in legal and professional fees and the increase in other general administrative expenses during the three months ended March 31, 2020 compared 2019 was primarily due to the timing of expenses and normal business operations.

Comparison of the nine months ended March 31, 2020 to the nine months ended March 31, 2019

Revenue

The following table summarizes our revenue for the nine months ended March 31, 2020 and 2019 (in thousands):

 

     Nine Months
Ended March 31,
     Increase
    (Decrease)    
     % Increase
    (Decrease)    
 
           2020                  2019        

Collaboration revenue

           

Licenses and related services

   $ —        $       27,000      $ (27,000)        nm%  

Development services

     —          2,736        (2,736)        nm%  

Non-cash consideration

     2,197        —                  2,197                    nm%  

Milestone revenue

     100        11,392        (11,292)        (99)%  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total collaboration revenue

     2,297        41,128        (38,831)        (94)%  

Grant revenue

     156        158        (2)        —%  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

   $       2,453      $ 41,286      $ (38,833)        (94)%  
  

 

 

    

 

 

    

 

 

    

 

 

 

Collaboration revenue for the nine months ended March 31, 2019 related to the Collaboration Agreement with Biogen, which was terminated effective March 8, 2019. As a result, the Company recognized in collaboration revenue the remaining deferred revenue balance as of the termination date. Thereafter, no additional collaboration revenue was recognized. Milestone revenue during the nine months ended March 31, 2019 was primarily attributable to (i) $8.3 million of revenue related to the receipt of a $10.0 million milestone payment from Biogen during the first quarter of fiscal year 2019 and (ii) $2.4 million of revenue resulting from the termination of the Collaboration Agreement with Biogen.

In December 2019, Bionic Sight attained the IND Trigger under its collaboration agreement with the Company and, as a result, the Company recognized $2.2 million of non-cash consideration collaboration revenue in connection with in-kind contributions made since inception of the collaboration agreement with Bionic Sight.

 

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Research and development expense

The following table summarizes our research and development expenses by product candidate or program for the nine months ended March 31, 2020 and 2019 (in thousands):

 

     Nine Months
Ended March 31,
     Increase
    (Decrease)    
     % Increase
    (Decrease)    
 
     2020      2019  

External research and development expenses

           

ACHM

    $ 5,028       $ 3,309      $ 1,719        52%  

XLRS

     664        968        (304)        (31)%  

XLRP

     2,646        3,831        (1,185)        (31)%  

Research and discovery programs

     1,552        2,540        (988)        (39)%  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total external research and development expenses

     9,890        10,648        (758)        (7)%  
  

 

 

    

 

 

    

 

 

    

 

 

 

Internal research and development expenses

           

Employee-related costs

     9,301        7,937        1,364                  17%  

Share-based compensation

     1,183        1,443        (260)        (18)%  

Other

     4,951        4,823        128        3%  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total internal research and development expenses

           15,435                14,203                1,232        9%  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total research and development expense

    $ 25,325       $ 24,851       $ 474        2%  
  

 

 

    

 

 

    

 

 

    

 

 

 

Research and development expenses for the nine months ended March 31, 2020 were $25.3 million, compared to $24.9 million for the nine months ended March 31, 2019, an increase of $0.5 million, or 2%. This increase was primarily attributable to:

 

   

$1.7 million of increased external spending related to ACHM primarily due to increase in patient enrollment and new site activations; and

 

   

$1.4 million of increased employee-related costs primarily associated with the hiring of new employees to support clinical trial execution and research and development activities.

These increases were partially offset by:

 

   

$1.2 million of decreased external spending related to XLRP primarily due to decreased sublicense expenses associated with receiving a $10.0 million XLRP milestone payment from Biogen in September 2018;

 

   

$1.0 million of decreased external research and discovery spending primarily due to decreased otology and pre-clinical ophthalmology activities;

 

   

$0.3 million of decreased internal share-based compensation expenses primarily due to lower fair value of awards granted during the nine months ended March 31, 2020 compared to the same period in the prior year; and

 

   

$0.3 million of decreased external XLRS expenses primarily due to reaching full enrollment on Phase 1/2 clinical trial and the decision to stop further development of our XLRS product candidate.

General and administrative expense

The following table summarizes our general and administrative expenses for the nine months ended March 31, 2020 and 2019 (in thousands):

 

     Nine Months
    Ended March 31,    
     Increase
    (Decrease)    
     % Increase
    (Decrease)    
 
         2020              2019      

Employee-related costs

   $ 4,142      $ 3,635      $ 507          14%  

Share-based compensation

     1,191        1,677        (486)        (29)%  

Legal and professional fees

             330                442        (112)        (25)%  

Other

     3,827        3,591        236          7%  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total general and administrative expense

   $ 9,490      $ 9,345      $         145                      2%  
  

 

 

    

 

 

    

 

 

    

 

 

 

General and administrative expense for the nine months ended March 31, 2020 and 2019 was $9.5 million and $9.3 million. The increase was primarily driven by $0.5 million in higher employee-related costs and increased other general

 

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and administrative expenses of $0.2 million associated with normal business operations, partially offset by decreased share-based compensation related to lower fair value of awards granted for the nine months ended March 31, 2020 compared to the nine months ended March 31, 2019, and decreased legal and professional fees.

Liquidity and capital resources

We have incurred cumulative losses and negative cash flows from operations since our inception in 1999, and as of March 31, 2020, we had an accumulated deficit of $166.9 million. It will be several years, if ever, before we have a product candidate ready for commercialization. We expect that our research and development and general and administrative expenses will continue to increase and as a result, we anticipate that we will require additional capital to fund our operations, which we may raise through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements.

The Company is closely monitoring ongoing developments in connection with the COVID-19 pandemic, which may negatively impact its projected cash position and access to capital. The Company will continue to assess its cash position and, if circumstances warrant, make appropriate adjustments to its operating plan.

As of March 31, 2020, we had cash, cash equivalents, and investments totaling $84.5 million. We believe that our existing cash, cash equivalents, and investments at March 31, 2020 will be sufficient to allow us to generate data from our ongoing clinical programs, initiate a pivotal trial on XLRP and to fund currently planned research and discovery programs into the second half of 2021.

Cash in excess of immediate requirements is invested in accordance with our investment policy which primarily seeks to maintain adequate liquidity and preserve capital by generally limiting investments to certificates of deposit and investment-grade debt securities that mature within 12 months. As of March 31, 2020, our cash and cash equivalents were held in bank accounts and money market funds, while our investments consisted of U.S. Treasury securities, none of which mature more than 12 months after the balance sheet date, consistent with our investment policy that seeks to maintain adequate liquidity and preserve capital.

Cash flows

The following table sets forth the primary sources and uses of cash for each of the periods set forth below:

 

     Nine Months
Ended March 31,
     Increase
(Decrease)
     % Increase
(Decrease)
 
           2020                  2019        

Net cash provided by (used in):

           

Operating activities

   $ (27,854)      $ (15,920)      $ (11,934)        (75)%  

Investing activities

     24,411              6,524        17,887        >100%  

Financing activities

           35,231        (99)        35,330        >100%  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase (decrease) in cash and cash equivalents

   $ 31,788      $ (9,495)      $       41,283              >100%  
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating activities. For the nine months ended March 31, 2020, net cash used in operating activities was primarily the result of research and development and general and administrative expenses incurred in conducting normal business operations, and the impact of changes in our working capital accounts. For the nine months ended March 31, 2019, net cash used in operating activities was primarily the result of research and development and general and administrative expenses incurred in conducting normal business operations, partially offset by, cash received from the collaboration with Biogen, and the impact of changes in our working capital accounts.

Investing activities. Net cash provided by investing activities for the nine months ended March 31, 2020 consisted primarily of cash proceeds of $63.5 million from the maturity of investments, net of investment purchases of $33.9 million, partially offset by an additional equity investment in Bionic Sight of $4.0 million, the purchase of property and equipment of $0.8 million and intellectual property costs of $0.3 million. Net cash used in investing activities for the nine months ended March 31, 2019 consisted primarily of cash proceeds of $71.6 million from the maturity of investments, net of investment repurchases of $64.9 million.

Financing activities. Net cash provided by financing activities during the nine months ended March 31, 2020 primarily consisted of proceeds from the issuance of common stock, net of issuance costs, of $34.9 million and proceeds from the exercise of common stock options, partially offset by principal payments on a finance lease and taxes paid related to equity awards. Net cash used in financing activities during the nine months ended March 31, 2019 primarily consisted of payments for deferred offering costs, partially offset by proceeds from the exercise of common stock options.

 

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Operating capital requirements

To date, we have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We do not expect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize one of our current or future product candidates. We anticipate that we will continue to generate losses for the foreseeable future as we continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any approved products. We are subject to all of the risks incident in the development of new gene therapy products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.

We believe that our existing cash and cash equivalents and investments as of March 31, 2020 will be sufficient to allow us to generate data from our ongoing clinical programs, initiate a pivotal trial on XLRP and to fund currently planned research and discovery programs into the second half of 2021. In order to finish the XLRP pivotal trial, complete the process of obtaining regulatory approval for our lead product candidates and to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our lead product candidates, if approved, we will require substantial additional funding.

 

    ITEM 3.

  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

 

    ITEM 4.

  CONTROLS AND PROCEDURES

 

a)

Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15e and 15d-15e under the Securities Exchange Act of 1934, as amended as of the end of the period covered by this quarterly report). Based on this evaluation the Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures are effective and designed to ensure that the information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, summarized and reported within the requisite time periods.

 

b)

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15f and 15d-15f under the Exchange Act) identified in connection with the evaluation of our internal control performed during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

 

    ITEM 1.

  LEGAL PROCEEDINGS

We are not a party to any pending legal proceedings. However, because of the nature of our business, we may be subject at any particular time to lawsuits or other claims arising in the ordinary course of our business, and we expect that this will continue to be the case in the future.

 

    ITEM 1A.

  RISK FACTORS

In addition to the other information set forth in this report, please review and consider the information regarding certain factors that could materially affect our business, financial condition or future results set forth under Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019 filed with the Securities and Exchange Commission on September 26, 2019, as amended. Except as noted below, there have been no material changes to these risk factors during the quarter ended March 31, 2020.

The recent outbreak of COVID-19 could materially and adversely affect our ability to conduct clinical trials and engage with our third-party vendors and thereby have a material adverse effect on our financial results.

We currently plan to hold an end of Phase 2 meeting with the FDA in the second quarter of 2020 at which time we hope to reach final agreement with the FDA on pivotal trial design for our XLRP product candidate. If successful, this would position us to potentially initiate that XLRP pivotal trial in the second half of 2020. The FDA has indicated that the staff of the Center for Biologics Evaluation and Research continue to operate according to historical timelines despite the allocation of substantial resources to address the COVID-19 pandemic. The FDA has noted, however, that its current levels of performance may be impacted by the workload created by COVID-19 activities. It is possible that COVID-19 activities could be prioritized in the future, which could delay our planned end of Phase 2 meeting and/or our ability to

 

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reach a final agreement with the FDA on the XLRP pivotal trial design. Any decision by the FDA to delay meeting with us in light of COVID-19 could have a material adverse effect on our scheduled clinical trials, which could increase our operating expenses and have a material adverse effect on our financial results.

In addition, we could experience delays in critical follow-up visits required under clinical trial protocols, which could increase the cost of those trials and also impact their expected timelines. Our ability to fully interpret the trial outcomes and the ability of certain lab-based employees’ ability to perform their jobs due to stay-at-home orders or other restrictions related to COVID-19 could also result in delays and increase our operating expenses. We are exploring alternative methods of data acquisition, such as collecting data via mobile vision centers and using telehealth options, in an effort to maintain existing timelines for our programs. These or other methods to respond to the impact of COVID-19 may, however, increase our operating costs.

Furthermore, third-party vendors, such as raw material suppliers and contracted manufacturing, testing or research organizations, could also be impacted by COVID-19, which could result in unavoidable delays and/or increases in our operating costs.

The extent to which COVID-19 may impact our clinical trials and our dealings with vendors will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the severity of COVID-19, and the effectiveness of actions to contain and treat those who have contracted COVID-19.

Our ability to raise capital may be materially adversely impacted by the COVID-19 pandemic.

We have funded our operations and capital spending, in part, through proceeds from the sale of our capital stock and collaboration agreements. We expect that our research and development and general and administrative expenses will continue to increase and, as a result, we anticipate that we will require additional capital to fund our operations, which we may raise through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. Any sustained disruption in the capital markets from the COVID-19 pandemic could negatively impact our ability to raise capital from the offering of equity or debt securities. In addition, the safety measures that have been implemented, and may continue to be implemented, by national, state and local governments, including quarantines, border closures, travel restrictions, shelter-in-place orders and shutdowns, are disrupting normal business operations both in and outside of affected areas and have had significant negative impacts on businesses and financial markets worldwide that could negatively impact our ability to secure funding through collaborations, strategic alliances and licensing arrangements.

 

ITEM 6.

EXHIBITS

 

Exhibit
    Number    
 

Description

3.1   Fifth Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 1, 2014)
3.2   Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 1, 2014)
10.1*#   Restricted Stock Agreement related to restricted stock award to Matthew Feinsod under the Company’s 2013 Equity and Incentive Plan dated March 25, 2020
31.1*   Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer of Applied Genetic Technologies Corporation
31.2*   Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer of Applied Genetic Technologies Corporation
32.1**   Section 1350 Certification of Principal Executive Officer and Principal Financial Officer of Applied Genetic Technologies Corporation
101*   Interactive Data Files pursuant to Rule 405 of Regulation S-T (XBRL)

 

*

Filed herewith.

**

Furnished herewith.

#

Management contract or compensatory plan or arrangement.

 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

APPLIED GENETIC TECHNOLOGIES CORPORATION

(Registrant)

By:

 

/s/ William A. Sullivan

  William A. Sullivan, Chief Financial Officer
  Date: May 13, 2020

 

31

EX-10.1

EXHIBIT 10.1

APPLIED GENETIC TECHNOLOGIES CORPORATION

EMPLOYEES RESTRICTED STOCK AGREEMENT

1. Restricted Stock Award. Applied Genetic Technologies Corporation (the “Company”) has granted to Matthew Feinsod (the “Grantee”), a restricted stock award (the “Award”), pursuant to the Company’s 2013 Equity and Incentive Plan (the “Plan”), of 10,000 shares (the “Shares”) of common stock, $0.001 par value (“Common Stock”), of the Company, subject to the terms and conditions of this Agreement and the Plan. Except where the context otherwise requires, the term “Company” shall include the parent and all present and future subsidiaries of the Company as defined in Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as amended or replaced from time to time (the “Code”). Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in the Plan.

2. Forfeitable Shares and Vested Shares. All Shares shall be deemed to be “Forfeitable Shares” until the Company’s right of forfeiture, described in Section 4, below, has expired (and the Grantee’s right to retain such shares has accrued) in accordance with the vesting schedule set forth in Section 3. Forfeitable Shares shall be subject to forfeiture as described in Section 4, below. “Vested Shares” are Shares held by the Grantee as to which the Company’s right of forfeiture has expired (and the Grantee’s right to retain has accrued) based on the stock vesting schedule. All certificates representing Forfeitable Shares shall remain in the possession of the Company until such shares become Vested Shares in accordance with the terms of this Agreement.

3. Vested Shares; Vesting Schedule. The Company’s right of Forfeiture shall expire and the Shares shall become Vested Shares in accordance with the following schedule:

(a) All of the total number of Shares (100%) shall become Vested Shares on the six-month anniversary of the grant date of March 13, 2020, such that all of the Shares shall be Vested Shares on September 13, 2020 (the “Vesting Date”).

4. Forfeiture of Shares.

4.1 Forfeiture. If for any reason the Grantee ceases to be employed by the Company (including, without limitation, by reason of the Grantee’s voluntary resignation or the Company’s dismissal of the Grantee for any reason, with or without cause) then all Shares which as of the date of such termination of employment constitute Forfeitable Shares shall be forfeited to the Company without payment of any consideration by the Company. There shall be no further accruals under the vesting schedule, and no further Forfeitable Shares shall become Vested Shares, from and after the date of any such termination of employment.

4.2 Death or Disability. The Committee shall have sole authority and discretion to determine whether in the event of the death or Disability of the Grantee, the vesting of the Shares under the Vesting Schedule would be accelerated so that all Shares become Vested Shares, effective as of the date of death or Disability.


4.3 Forfeiture of Forfeitable Shares. The Grantee’s rights in all Forfeitable Shares shall terminate automatically on the date of the Grantee’s termination of employment, and the Company may thereupon cancel the certificate or certificates representing such Forfeitable Shares on its books. In the event that the certificates then being retained by the Company under this Agreement also represent other shares of Common Stock not being forfeited to the Company, the Company shall issue to the Grantee replacement certificates for such other shares.

4.4 Nontransferability of Shares. No Shares may be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) or otherwise disposed of prior to their becoming Vested Shares. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any Forfeitable Shares, or upon the levy of any attachment or similar process upon Forfeitable Shares, the Company shall have a right of Forfeiture with respect to such Forfeitable Shares. Notwithstanding the foregoing, the Grantee may transfer any Shares either during his or her lifetime or on death by will or intestacy to one or more members of his or her immediate family or to a trust the beneficiaries of which are exclusively the undersigned and/or a member or members of his or her immediate family; provided, however, that prior to any such transfer each transferee shall execute an agreement, satisfactory to the Company, pursuant to which each transferee shall agree to receive and hold such Shares subject to the provisions hereof (including, without limitation, the Company’s right of forfeiture with respect to any Shares so transferred that constitute Forfeitable Shares), and there shall be no further transfer except in accordance with the provisions hereof. For the purposes of this paragraph, “immediate family” shall mean spouse, lineal descendent, father, mother, brother or sister of the transferor.

5. No Special Employment Rights. Nothing contained in the Plan or this Agreement shall confer upon the Grantee any right with respect to the continuation of his or her employment by the Company or interfere in any way with the right of the Company at any time to terminate such employment or to increase or decrease the Grantee’s compensation.

6. Rights as a Shareholder. The Grantee shall have the rights of a shareholder with respect to all of the Forfeitable Shares and the Vested Shares held by the Grantee (including, without limitation, any rights to vote and to receive dividends or non-cash distributions with respect to such shares) unless and until the Company exercises its right of Forfeiture as to any or all of the Forfeitable Shares in accordance with Section 4.

7. Availability of Tax Election: Withholding.

(a) Grantee acknowledges that the Company has advised the Grantee of the possibility of making an election under Section 83(b) of the Code with respect to the Award of the Shares and has recommended that the Grantee consult a qualified tax advisor regarding the desirability of making such an election in light of the Grantee’s individual circumstances.

(b) Grantee shall, no later than the date as of which the value of any Shares first becomes includable in the gross income of the Grantee for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of any Federal, state, local and/or payroll taxes of any kind required by law to be withheld with respect to such income. The Company and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the participant.

 

- 2 -


(c) Grantee may elect to have such tax withholding obligation satisfied, in whole or in part, by (i) authorizing the Company to withhold from the Vested Shares a number of shares with an aggregate Fair Market Value (as defined in the Plan, and determined of the date the withholding is effected) not greater than that which would satisfy the minimum statutory withholding amount due with respect to such Award, or (ii) delivering to the Company a number of Shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the statutory minimum withholding amount due. In the event that the amount of any such tax that is due with respect to such Award exceeds the statutory minimum amount, the Grantee shall be responsible for, and make provision for the timely payment of, any such excess amount.

8. Miscellaneous.

8.1 By accepting this Award, Grantee agrees that, if so requested by the Company or by the underwriters managing any underwritten offering of the Company’s securities, the recipient will not, without the prior written consent of the Company or such underwriters, as the case may be, sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any shares subject to any such Award during the Lock-up Period, as defined below. The “Lock-Up Period” shall mean a period of time not exceeding 180 days or, if greater, such number of days as shall have been agreed to by each director and executive officer of the Company in a substantially similar lock-up agreement by which each such director and executive officer is bound. If requested by the Company or such underwriters, the Grantee will enter into an agreement with such underwriters consistent with the foregoing.

8.2 Any certificate representing Shares shall be subject to a legend in substantially the following form:

“THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AND ARE TRANSFERABLE ONLY IN ACCORDANCE WITH THAT CERTAIN RESTRICTED STOCK AGREEMENT DATED [•], 2020. ANY ATTEMPTED TRANSFER OF THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE IN VIOLATION OF SUCH AGREEMENT SHALL BE NULL AND VOID AND WITHOUT EFFECT. A COPY OF THE AGREEMENT MAY BE OBTAINED FREE OF CHARGE FROM THE SECRETARY OF THE COMPANY.”

8.3 Grantee hereby agrees to execute and deliver to the Secretary of the Company a stock power (endorsed in blank) hereto covering this Award and authorizes the Secretary to deliver to the Company for cancellation any and all Shares that are forfeited or withheld under the provisions of this Agreement.

8.4 Except as provided herein, this Agreement may not be amended or otherwise modified unless evidenced in writing and signed by the Company and the Grantee.

8.5 All notices under this Agreement shall be mailed or delivered by hand to the parties at their respective addresses set forth beneath their names below or at such other address as may be designated in writing by either of the parties to one another.

8.6 This Agreement shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts, without regard to its principles of conflicts of laws.

 

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8.7 This Agreement is and shall be subject in every respect to the provisions of the Plan, as amended from time to time, which is incorporated herein by reference and made a part hereof.

8.8 This Agreement is executed in two (2) counterpart originals, one (1) to be retained by the Grantee and one (1) to be retained by the Company.

Date of Grant:

March 13, 2020

 

APPLIED GENETIC TECHNOLOGIES CORPORATION
By:  

/s/ Susan Washer, March 25, 2020

Title:   President and Chief Executive Officer

 

- 4 -


GRANTEE’S ACCEPTANCE

The undersigned hereby accepts the grant of the Restricted Stock Award described in this Agreement and agrees to the terms and conditions thereof. The undersigned hereby acknowledges receipt of a copy of the Company’s 2013 Equity and Incentive Plan.

 

GRANTEE

 

/s/ Matthew Feinsod, March 25, 2020

Name: Matthew Feinsod
Address:

 

 

Social Security Number:

 


STOCK POWER

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to the Company a total of 10,000 shares of the Common Stock of the Company represented by stock certificate number ___ to be delivered herewith, and does hereby irrevocably constitute and appoint ______________________ as attorney to transfer said shares on the books of the Company with full power of substitution in the premises.

Dated: ___________________

 

 

Name: Matthew Feinsod

 

- 2 -

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Susan B. Washer, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Applied Genetic Technologies Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 13, 2020

   By:   

/s/ Susan B. Washer

      Susan B. Washer
      President and Chief Executive Officer
      (Principal Executive Officer)

 

EX-31.2

Exhibit 31.2

CERTIFICATION

I, William A. Sullivan, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Applied Genetic Technologies Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 13, 2020

   By:   

/s/ William A. Sullivan

      William A. Sullivan
      Chief Financial Officer
      (Principal Financial Officer)

 

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Applied Genetic Technologies Corporation (the “Company”) for the period ended March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, that to her or his knowledge:

 

  (1)

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  (2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: May 13, 2020

   By:   

/s/ Susan B. Washer

      Susan B. Washer
      President and Chief Executive Officer
      (Principal Executive Officer)

Date: May 13, 2020

   By:   

/s/ William A. Sullivan

      William A. Sullivan
      Chief Financial Officer
      (Principal Financial Officer)

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Applied Genetic Technologies Corporation and will be retained by Applied Genetic Technologies Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

v3.20.1
Summary of Significant Accounting Policies (Policies)
9 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Basis of Presentation
Basis of presentation
The accompanying Unaudited Condensed Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and, in the opinion of management, include all adjustments necessary for a fair presentation of the Company’s financial position, results of operations, stockholders’ equity and cash flows for the periods presented.
The adjustments referred to above are of a normal and recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to SEC rules and regulations for interim reporting.
The Condensed Balance Sheet as of June 30, 2019 was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. The Company’s Unaudited Condensed Financial Statements should be read in conjunction with the audited financial statements included in the Company’s 2019 Annual Report on
Form 10-K
(the “June 30, 2019
Form 10-K”).
Results of operations for the three and nine months ended March 31, 2020 are not necessarily indicative of the results to be expected for the full year or any other interim period.
Segment Reporting
Segment reporting
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. To date, we have viewed our operations and managed our business as one segment.
Use of estimates
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP and SEC regulations, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents
Cash consists of funds held in bank accounts. Cash equivalents consist of short-term, highly liquid investments with original maturities of 90 days or less at the time of purchase and generally include money market accounts.
Investments
Investments
The Company’s investments consist of certificates of deposit and debt securities classified as
held-to-maturity.
Management determines the appropriate classification of debt securities at the time of purchase and reevaluates such designation as of each balance sheet date. Debt securities are classified as
held-to-maturity
when the Company has the positive intent and ability to hold the securities to
maturity. Held-to-maturity
securities are stated at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in investment income. Interest on securities classified as
held-to-maturity
is included in investment income.
The Company uses the specific identification method to determine the cost basis of securities sold.
Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. The Company evaluates an investment for impairment by considering the length of time and extent to which market value has been less than cost or amortized cost, the financial condition and near-term prospects of the issuer as well as specific events or circumstances that may influence the operations of the issuer and the Company’s intent to sell the security or the likelihood that it will be required to sell the security before recovery of the entire amortized cost. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded to investment income (expense) and a new cost basis in the investment is established.
Fair value of financial instruments
Fair value of financial instruments
The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 820,
Fair Value Measurements and Disclosures
, establishes a hierarchy of inputs used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of financial instruments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:
Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Revenue recognition
Revenue recognition
Effective July 1, 2018, the Company adopted the provisions of ASC Topic 606,
Revenue from Contracts with Customers,
(“Topic 606”), using the modified retrospective transition method. Under this method, the Company recorded the cumulative effect of initially applying the new standard to all contracts in process as of the date of adoption. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards.
 
The adoption of the new revenue recognition guidance resulted in an increase of $22.6 million in deferred revenue and accumulated deficit as of July 1, 2018.
The Company may enter into collaboration agreements which are within the scope of Topic 606, under which the Company licenses rights to its technology and certain of the Company’s product candidates and performs research and development services for third parties. The terms of these arrangements typically may include payment of one or more of the following:
non-refundable,
up-front
fees; reimbursement of research and development costs; development, regulatory and commercial milestone payments; and royalties on net sales of licensed products.
Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of Topic 606, the Company performs the following five steps: (i) identification of the contract; (ii) determination of whether the promised goods or services are performance obligations; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect consideration it is entitled to in exchange for the goods or services it transfers to the customer.
Performance obligations are promises to transfer distinct goods or services to the customer. Promised goods or services are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources and (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whether promised good or services are distinct, the Company considers factors such as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the intellectual property on their own or whether the required expertise is readily available.
The Company estimates the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include both fixed consideration and variable consideration. At the inception of an arrangement that includes variable consideration and at each reporting period, the Company evaluates the amount of potential payment and the likelihood that the payments will be received. The Company utilizes either the most likely amount method or expected amount method to estimate the amount to be received based on which method better predicts the amount expected to be received. If it is probable that a significant revenue reversal would not occur, the variable consideration is included in the transaction price. The Company will assess its revenue generating arrangements in order to determine whether a significant financing component exists and conclude that a significant financing component does not exist in any of its arrangements if: (a) the promised consideration approximates the cash selling price of the promised goods and services or any significant difference is due to factors other than financing; and (b) timing of payment approximates the transfer of goods and services and performance is over a relatively short period of time within the context of the entire term of the contract.
The Company’s contracts will often include development and regulatory milestone payments. At contract inception and at each reporting period, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the customer’s control, such as regulatory approvals, are not included in the transaction price. At the end of each subsequent reporting period, the Company
re-evaluates
the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative
catch-up
basis, which would affect collaboration revenues and earnings in the period of adjustment.
For arrangements that may include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of the Company’s collaboration arrangements.
The Company allocates the transaction price based on the estimated standalone selling price of the underlying performance obligations or in the case of certain variable consideration to one or more performance obligations. The Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. The Company utilizes key assumptions to determine the stand-alone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs to complete the respective performance obligation. Certain variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated to each performance obligation are consistent with the amounts the Company would expect to receive for each performance obligation.
 
For performance obligations consisting of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from
non-refundable,
up-front
fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company will recognize revenue from
non-refundable,
up-front
fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license.
The Company receives payments from its customers based on billing terms established in each contract. Such billings generally have
30-day
payment terms. Upfront payments and fees are recorded as deferred revenue upon receipt or when due until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the right to consideration is unconditional.
Collaboration revenue
To date, the Company’s collaboration revenue has been generated from its collaboration arrangement with Biogen and Bionic Sight as further described in Note 7, “
Collaboration Agreements.
The Company analyzes its collaboration arrangements to assess whether they are within the scope of ASC 808,
Collaborative Arrangements
(“ASC 808”) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and therefore within the scope of ASC 606. For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to ASC 606.
Income taxes
Income taxes
The Company uses the asset and liability method for accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
As required by U.S. GAAP, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the
more-likely-than-not
threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Any interest and penalties related to uncertain tax positions will be reflected in income tax expense. The Company is subject to examination of its income tax returns in the federal and state income tax jurisdictions in which it operates for the tax years ended June 30, 2016 through 2019.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law. The CARES Act contains several significant provisions that affect corporations, including, among others, provisions addressing the use of net operating losses, interest deduction limitations and employer payroll tax payments. Management does not believe that the CARES Act will have a material impact on the Company; however, management will continue to monitor ongoing developments, new regulations and interpretive guidance regarding such legislation and evaluate any potential impact on the Company’s overall business and tax position.
For the three and nine months ended March 31, 2020, the Company’s tax expense included an increase in the uncertain tax position liability of $21,000 and $63,000, respectively, related to interest on the uncertain tax position, compared to $19,000 and $57,000, respectively, for the three and nine months ended March 31, 2019. The uncertain tax position liability as of March 31, 2020 and June 30, 2019 was $2,098,000 and $2,035,000, respectively.
Research and development
Research and development
Research and development costs include costs incurred in identifying, developing and testing product candidates and generally comprise compensation and related benefits and
non-cash
share-based compensation to research related employees; laboratory costs; animal and laboratory maintenance and supplies; rent; utilities; clinical and
pre-clinical
expenses; and payments for sponsored research, scientific and regulatory consulting fees and testing.
 
As part of the process of preparing its financial statements, the Company is required to estimate its accrued expenses. This process involves reviewing quotations and contracts, identifying services that have been performed on its behalf and estimating the level of service performed and the associated cost incurred for services for which the Company has not yet been invoiced or otherwise notified of the actual cost. The majority of the Company’s service providers invoice the Company monthly in arrears for services performed or when contractual milestones are met. The Company makes estimates of its accrued expenses as of each balance sheet date in its financial statements based on facts and circumstances known to it at that time. The significant estimates in the Company’s accrued research and development expenses are related to expenses incurred with respect to academic research centers, contract research organizations, and other vendors in connection with research and development activities for which it has not yet been invoiced.
There may be instances in which the Company’s service providers require advance payments at the inception of a contract or in which payments made to these vendors will exceed the level of services provided, resulting in a prepayment of the research and development expense. Such prepayments are charged to research and development expense as and when the service is provided or when a specific milestone outlined in the contract is reached.
Prepayments related to research and development activities were $1.8 million and $0.7 million at March 31, 2020 and June 30, 2019, respectively, and are included in prepaid and other current assets in the Company’s Unaudited Condensed Balance Sheets.
Share-based compensation
Share-based compensation
The Company accounts for share-based awards issued to employees in accordance with ASC Topic 718,
 Compensation—Stock Compensation
and generally recognizes share-based compensation expense on a straight-line basis over the periods during which the employees are required to provide service in exchange for the award. In addition, the Company issues stock options and restricted shares of common stock to
non-employees
in exchange for consulting services. As noted in the Company’s fiscal year 2019 Annual Report on Form
10-K,
the Company historically accounted for these in accordance with the provisions of ASC Subtopic
505-50,
Equity-Based Payments to
Non-employees
(“ASC
505-50”).
Under ASC
505-50,
share-based awards to
non-employees
were subject to periodic fair value
re-measurement
over their vesting terms. As discussed below under “Adopted in the current period” section, in the first fiscal quarter of 2020 the Company adopted Accounting Standards Update (“ASU”)
No. 2018-07,
Compensation
 -
Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting
 (“ASU
2018-07”). As
a result, the accounting for
non-employee
awards will be generally consistent with that of employee awards. The measurement date for
non-employee
awards is the date of grant without changes in the fair value of the award. Stock-based compensation costs for
non-employees
are recognized as expense over the vesting period on a straight-line basis.
For purposes of calculating stock-based compensation, the Company uses Monte Carlo simulation model to determine the fair value of restricted stock units and Black-Scholes model to determine the fair value of stock options. The Monte Carlo simulation model incorporates probability of satisfying a market condition and uses transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as, volatility. The Black-Scholes model is affected by the Company’s stock price at the grant date and incorporates a number of assumptions, including expected volatility, expected term, risk-free interest rate and expected dividends.
Net income or loss per share
Net income or loss per share
Basic net income or loss per share is calculated by dividing net income or loss by the weighted average shares outstanding during the period, without consideration of common stock equivalents. Diluted net income or loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effects of common stock equivalents outstanding during the period, determined using the treasury-stock method. For purposes of the diluted net income or loss per share calculations, stock options, restricted stock awards and performance service awards are considered to be common stock equivalents if they are dilutive. The dilutive impact of common stock equivalents (i) for the three and nine months ended March 31, 2020 was approximately 0.4 million shares and 0.2 million shares, respectively, and (ii) for both the three and nine months ended March 31, 2019 was approximately 0.2 million shares. However, the dilutive impact of common stock equivalents was excluded from the calculations of diluted net loss per share for both the three and nine months ended March 31, 2020 because their effects were anti-dilutive. Therefore, for each of the three and nine months ended March 31, 2020, basic and diluted net loss per share were the same.
Comprehensive loss
Comprehensive income or loss
Comprehensive income or loss consists of net income or loss and changes in equity during a period from transactions and other equity and circumstances generated from
non-owner
sources. For all periods presented herein, the Company’s net income or loss is the same as its comprehensive income or loss.
New Accounting Pronouncements
New Accounting Pronouncements
Adopted during the nine months ended March 31, 2020
Leases
In February 2016, the FASB issued ASU
No. 2016-02,
Leases
(“ASU
2016-02”),
which superseded FASB ASC Topic 840,
 Leases
 (“Topic 840”) and provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new accounting guidance requires the recognition of long-term lease assets and lease liabilities by lessees and sets forth new disclosure requirements for leases. The standard requires lessees to recognize
right-of-use
assets and lease liabilities on the balance sheet. An entity can transition to ASU
2016-02
using a modified retrospective approach at either the beginning of the earliest comparative period in the financial statements or at the beginning of the period of adoption. A lessee is also required to record a
right-of-use
asset and a lease liability regardless of lease classification. The FASB subsequently issued several ASUs amending the new standard. The Company adopted the new standard effective July 1, 2019 using the modified retrospective approach at the beginning of the period of adoption. As a result, prior periods are presented in accordance with the previous guidance in Topic 840.
ASU
2016-02
provides a number of optional practical expedients during transition. The Company elected a package of practical expedients that permits it to: (i) not reassess whether any expired or existing contracts are or contain leases; (ii) not reassess the lease classification for any expired or existing leases; and (iii) not reassess initial direct costs for any existing leases. The Company will continue to differentiate between finance leases (previously referred to as capital leases) and operating leases using classification criteria in ASU
2016-02
that are substantially similar to the previous guidance in Topic 840. The adoption of ASU
2016-02
resulted in the recognition of
right-of-use
assets – operating leases and related lease liabilities of $3.7 million and $5.8 million, respectively, on the Company’s July 1, 2019 Unaudited Condensed Balance Sheet.
There was no material impact from ASU
2016-02
on the Company’s Unaudited Condensed Statements of Operations for the three and nine months ended March 31, 2020. The Company made a policy election not to record a
right-of-use
asset or lease liability for leases with an expected duration of 12 months or less at inception; however, such leases are not material to the Company. For leases with terms greater than 12 months, the Company records a
right-of-use
asset and lease liability at the present value of the future lease payments. As the Company’s leases do not provide readily determinable implicit interest rates, the Company used incremental borrowing rates commensurate with the respective terms of the leases to discount future lease payments. The application of ASU
2016-02
required netting the unamortized balance of lease incentives and deferred lease obligations against the
right-of-use
asset on the date of adoption. The Company’s operating leases include rental escalation clauses that are factored into the determination of future lease payments when appropriate. The Company does not separate lease and nonlease components of its contracts when applying the provisions of ASU
2016-02.
Refer to Note 3, Leases in these Notes to Unaudited Condensed Financial Statements for additional information about the Company’s leasing activities.
Share-Based Compensation
In June 2018, the FASB issued ASU
No. 2018-07,
Compensation—Stock Compensation (Topic
 718): Improvements to Nonemployee Share-Based Payment Accounting
. The new standard aligns the measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to employees, with certain exceptions. Under the guidance, the measurement of equity-classified nonemployee awards will be fixed at the grant date, which may lower their cost and reduce volatility in the income statement. The Company adopted ASU
2018-07
on July 1, 2019 using a cumulative effect adjustment as of the date of adoption. The adoption of this standard did not have an impact on the Company’s financial position or results of operations upon adoption.
To be adopted in future periods
Financial Instruments—Credit Losses
In June 2016, the FASB issued ASU
No. 2016-13,
Financial Instruments – Credit Losses (Topic
 326): Measurement of Credit Losses on Financial Instruments
. The new standard requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected and separately measure an allowance for credit losses that is deducted from the amortized cost basis of the financial assets. This standard will be effective for the Company on July 1, 2023. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements.
Fair Value Measurement
In August 2018, the FASB issued ASU
No. 2018-13,
Fair Value Measurement (Topic
 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement
. The new standard eliminates, adds and modifies certain disclosure requirements for fair value measurement as part of its disclosure framework project. The amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy will no longer be required to be disclosed, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. This standard will be effective for the Company on July 1, 2020. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements.
Collaborative Arrangements
In November 2018, the FASB issued ASU
No. 2018-18,
Collaborative Arrangements (Topic
 808): Clarifying the Interaction between Topic 808 and Topic 606
. The new standard clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. It precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. The guidance amends ASC 808 to refer to the
unit-of-account
guidance in ASC 606 and requires it to be used only when assessing whether a transaction is in the scope of ASC 606. This standard will be effective for the Company on July 1, 2020. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements.
Income Taxes
In December 2019, the FASB issued ASU
No. 2019-12,
Income Taxes (Topic
 740): Simplifying the Accounting for Income Taxes
. The new standard includes several provisions which simplify accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and increasing consistency and clarity for the users of financial statements. This standard will be effective for the Company on July 1, 2021. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements.
Equity Securities, Investment – Equity Method and Joint Ventures, and Derivatives and Hedging
In January 2020, the FASB issued ASU
No. 2020-01,
Investments-Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815
. The new standard clarifies certain interactions between the guidance to account for certain equity securities under Topic 321, the guidance to account for investments under the equity method of accounting in Topic 323, and the guidance in Topic 815, which could change how an entity accounts for an equity security under the measurement alternative or a forward contract or purchased option to purchase securities that, upon settlement of the forward contract or exercise of the purchased option, would be accounted for under the equity method of accounting or the fair value option in accordance with Topic 825, Financial Instruments. These amendments improve current U.S. GAAP by reducing diversity in practice and increasing comparability of the accounting for these interactions. This standard will be effective for the Company on July 1, 2021. Early adoption is permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial statements.
v3.20.1
Investments
9 Months Ended
Mar. 31, 2020
Schedule of Investments [Abstract]  
Investments
5
.
Investments
Cash in excess of immediate requirements is invested in accordance with the Company’s investment policy, which primarily seeks to maintain adequate liquidity and preserve capital. As of both March 31, 2020 and June 30, 2019, the Company’s investments consisted entirely of
held-to-maturity
debt securities that were due in one year or less from the respective balance sheet dates.
The Company’s debt securities that are classified as
held-to-maturity
are summarized below.
 
In thousands
 
March 31, 2020
  
June 30, 2019
 
U.S. Treasury Securities:
    
Amortized cost
  
 
 
$
26,026   
 
$
55,292 
Gross unrealized gains
   142    78 
Gross unrealized losses
   —      —   
  
 
 
   
 
 
 
Fair Value
  
  
$
                
26,168   
 
$
        
55,370 
  
 
 
   
 
 
 
The Company continues to expect to collect the principal and interest due on its debt securities that have an amortized cost in excess of fair value. At the end of each reporting period, the Company evaluates securities for impairment, if and when, the fair value of an investment is less than its amortized cost. In the event the fair value of an investment is less than its amortized cost, the Company will evaluate the underlying credit quality and credit ratings of the issuers. The Company does not intend to sell its investments before recovery of their amortized cost bases which may be at maturity.
v3.20.1
Fair Value of Financial Instruments and Investments (Tables)
9 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Schedule of Major Category of Company's Financial Assets and Liabilities Measured at Fair Value on Recurring Basis
The fair value hierarchy table below provides information about each major category of the Company’s financial assets and liabilities measured at fair value on a recurring basis or disclosed at fair value in these Notes to Unaudited Condensed Financial Statements.
 
In thousands
  
Level 1
   
  Level 2  
 
 
  Level 3  
 
 
Total Fair
     Value     
 
March 31, 2020
        
Cash and cash equivalents
  
 
$
58,491   $—    $—    $58,491 
Held-to-maturity
investments:
        
U.S. Treasury Securities
   26,168    —      —      26,168 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total assets
  
 
$
84,659   $
      
—  
  $
      
—  
  $
 
 
84,659 
  
 
 
   
 
 
   
 
 
   
 
 
 
June 30, 2019
        
Cash and cash equivalents
  
 
$
26,703   $—    $—    $26,703 
Held-to-maturity
investments:
        
U.S. Treasury Securities
   55,370    —      —      55,370 
  
 
 
   
 
 
   
 
 
   
 
 
 
Total assets
  
 
$
82,073   $—    $—    $82,073 
  
 
 
   
 
 
   
 
 
   
 
 
 
v3.20.1
Collaboration Agreements - Additional Information (Detail)
1 Months Ended 3 Months Ended 9 Months Ended
Mar. 08, 2019
TargetIndication
Jul. 01, 2018
USD ($)
Feb. 02, 2017
USD ($)
Site
Jul. 01, 2015
TargetIndication
Jan. 31, 2020
USD ($)
Oct. 31, 2019
Jul. 31, 2015
TargetIndication
Mar. 31, 2020
USD ($)
Mar. 31, 2019
USD ($)
Sep. 30, 2018
USD ($)
Mar. 31, 2020
USD ($)
Mar. 31, 2019
USD ($)
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]                        
Collaboration revenue                 $ 21,318,000   $ 2,453,000 $ 41,286,000
Payments to acquire equity interest                     4,000,000  
Equity in net losses of affiliate               $ 11,000 9,000   27,000 29,000
Number of clinical site required to conduct clinical trials | Site     1                  
Discovery Programs [Member]                        
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]                        
Increase (Decrease) in transaction price                   $ 1,800,000    
Mutations in GJB2 [Member] | Otonomy Inc [Member]                        
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]                        
Percentage on mutations in GJB2 account           30.00%            
Collaboration [Member]                        
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]                        
Collaboration revenue                 21,207,000   2,297,000 41,128,000
Accounting Standards Update 2014-09 [Member] | XLRP [Member]                        
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]                        
Increase (Decrease) in transaction price                   10,000,000    
Bionic Sight LLC [Member]                        
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]                        
Additional Equity method investments               6,200,000     6,200,000  
Collaboration Agreement [Member] | BIOGEN [Member]                        
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]                        
Number of target indications | TargetIndication 3     3     3          
Milestone Revenue   $ 112,300,000                    
Collaboration revenue                 $ 21,207,000     $ 41,128,000
Increase (Decrease) in transaction price                   (1,100,000)    
Decrease in deferred revenue                   $ (1,100,000)    
Collaboration Agreement [Member] | BIOGEN [Member] | XLRS [Member]                        
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]                        
Milestone Revenue   5,000,000                    
Collaboration Agreement [Member] | BIOGEN [Member] | XLRP [Member]                        
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]                        
Milestone Revenue   $ 2,500,000                    
Strategic Research And Development Collaboration Agreement [Member] | Bionic Sight LLC [Member]                        
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]                        
Payments to acquire equity interest     $ 2,000,000   $ 4,000,000     $ 4,000,000     $ 4,000,000  
Percentage of investment in equity interest     5.00%         15.50%     15.50%  
Contributions of in-kind contributions               $ 2,200,000     $ 2,200,000  
Equity in net losses of affiliate               $ 11,000     27,000  
Additional investment     $ 2,000,000                  
Ongoing research and development support costs                     $ 2,200,000  
Strategic Research And Development Collaboration Agreement [Member] | Bionic Sight LLC [Member] | If IND Trigger Attained [Member]                        
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]                        
Obligated to purchase additional equity at pre-determined valuation     $ 4,000,000                  
v3.20.1
Share-based Compensation Plans - Additional Information (Detail)
$ / shares in Units, $ in Millions
3 Months Ended 9 Months Ended
Mar. 31, 2020
USD ($)
$ / shares
shares
Mar. 31, 2019
USD ($)
$ / shares
Mar. 31, 2020
USD ($)
Plan
$ / shares
shares
Mar. 31, 2019
USD ($)
$ / shares
shares
Jun. 30, 2019
$ / shares
Jun. 30, 2018
$ / shares
Share-Based Compensation Arrangement By Share Based Payment Award [Line Items]            
Number of equity compensation plans | Plan     2      
Stock options granted     1,108,000 1,126,000    
Exercise price | $ / shares $ 7.84 $ 9.22 $ 7.84 $ 9.22 $ 9.19 $ 10.93
Grant date fair value | $ / shares     $ 2.04 $ 2.91    
2013 Employee Stock Purchase Plan [Member]            
Share-Based Compensation Arrangement By Share Based Payment Award [Line Items]            
Share based awards issued     0      
Number of shares authorized 128,571   128,571      
Stock Options [Member]            
Share-Based Compensation Arrangement By Share Based Payment Award [Line Items]            
Share-based compensation expense | $ $ 0.9 $ 0.8 $ 2.4 $ 3.1    
Restricted Shares Awards [Member]            
Share-Based Compensation Arrangement By Share Based Payment Award [Line Items]            
Restricted stock awards to employees, Granted     175,500      
Award vesting rights, percentage     50.00%      
Grant date fair value | $ / shares     $ 2.56      
Restricted stock awards to employees, forfeited     15,000      
Six Performance Criteria Based Stock Options [Member] | Senior Executive [Member] | 2013 Equity and Incentive Plan [Member]            
Share-Based Compensation Arrangement By Share Based Payment Award [Line Items]            
Stock options granted     100,000      
Exercise price | $ / shares $ 3.91   $ 3.91      
Expiration period     10 years      
Award vesting period     3 years      
Six Performance Criteria Based Stock Options [Member] | Senior Executive [Member] | 2013 Equity and Incentive Plan [Member] | Vesting Period One [Member]            
Share-Based Compensation Arrangement By Share Based Payment Award [Line Items]            
Award vesting rights, percentage     25.00%      
Six Performance Criteria Based Stock Options [Member] | Senior Executive [Member] | 2013 Equity and Incentive Plan [Member] | Vesting Period Two [Member]            
Share-Based Compensation Arrangement By Share Based Payment Award [Line Items]            
Award vesting rights, percentage     75.00%      
First Performance Criteria Based Stock Options [Member] | Senior Executive [Member] | 2013 Equity and Incentive Plan [Member]            
Share-Based Compensation Arrangement By Share Based Payment Award [Line Items]            
Grant date fair value | $ / shares     $ 2.58      
v3.20.1
Leases - Additional Information (Detail) - ft²
Jul. 31, 2017
Jan. 31, 2016
Aug. 31, 2015
Alachua, Florida [Member]      
Leases Description [Line Items]      
Office and laboratory space for lease   21,500  
Term of operating lease agreement   12 years  
Renewal term of operating lease agreement   5 years  
Cambridge, Massachusetts [Member]      
Leases Description [Line Items]      
Office and laboratory space for lease 8,000    
Office and laboratory space for leased area     3,000
Additional square footage upon lease renewal 5,000    
Term of operating lease agreement 7 years   2 years
Renewal term of operating lease agreement 3 years    
v3.20.1
Condensed Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
9 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Operating activities:    
Net income (loss) $ (31,389) $ 8,508
Adjustments to reconcile net income (loss) to net cash used in operating activities:    
Share-based compensation expense 2,373 3,120
Depreciation and amortization 919 957
Recovery of bad debts   (258)
Investment discount accretion (306) (578)
Reduction in the carrying amount of operating lease right-of-use assets 222  
Collaboration revenue from Bionic Sight (2,197)  
Equity in net losses of an affiliate 27 29
Changes in operating assets and liabilities:    
Grants receivable 13 73
Prepaid and other assets (660) 302
Deferred revenues   (28,393)
Accounts payable 1,603 505
Operating lease liabilities (459)  
Accrued and other liabilities 2,000 (185)
Net cash used in operating activities (27,854) (15,920)
Investing activities:    
Purchases of property and equipment (812) (81)
Purchases of and capitalized costs related to intangible assets (349) (148)
Investment in Bionic Sight (4,000)  
Maturities of investments 63,500 71,619
Purchases of investments (33,928) (64,866)
Net cash provided by investing activities 24,411 6,524
Financing activities:    
Proceeds from the issuance of common stock, net of issuance costs 34,949  
Proceeds from exercises of common stock options 318 136
Taxes paid related to equity awards (3) (28)
Deferred offering costs   (168)
Principal payments on finance/capital lease (33) (39)
Net cash provided by (used in) financing activities 35,231 (99)
Net increase (decrease) in cash and cash equivalents 31,788 (9,495)
Cash and cash equivalents, beginning of period 26,703 31,065
Cash and cash equivalents, end of period 58,491 21,570
Supplemental information:    
Shares issued for no consideration $ 3 $ 28
v3.20.1
Condensed Balance Sheets (Unaudited) - USD ($)
$ in Thousands
Mar. 31, 2020
Jun. 30, 2019
Current assets:    
Cash and cash equivalents $ 58,491 $ 26,703
Investments 26,026 55,292
Grants receivable   13
Prepaid and other current assets 2,942 2,276
Total current assets 87,459 84,284
Property and equipment, net 4,216 4,430
Intangible assets, net 1,176 1,013
Investment in Bionic Sight 8,115 1,945
Right of use assets – operating leases 3,503  
Right of use asset – finance lease 91  
Other assets 544 544
Total assets 105,104 92,216
Current liabilities:    
Accounts payable 3,013 1,331
Accrued and other liabilities 9,434 8,024
Lease liabilities – operating 1,054  
Lease liability – finance 47  
Total current liabilities 13,548 9,355
Lease liabilities – operating, net of current portion 4,329  
Lease liability – finance, net of current portion 51  
Other liabilities 2,357 4,152
Total liabilities 20,285 13,507
Stockholders' equity:    
Preferred stock, par value $0.001 per share, 5,000 shares authorized; no shares issued and outstanding
Common stock, par value $0.001 per share, 150,000 shares authorized; 25,784 and 18,226 shares issued; 25,764 and 18,207 shares outstanding at March 31, 2020 and June 30, 2019, respectively 25 18
Additional paid-in capital 251,819 214,324
Shares held in treasury of 20 and 19 at March 31, 2020 and June 30, 2019, respectively (88) (85)
Accumulated deficit (166,937) (135,548)
Total stockholders' equity 84,819 78,709
Total liabilities and stockholders' equity $ 105,104 $ 92,216
v3.20.1
Leases - Summary of Future Annual Minimum Lease Payments Under Non-Cancelable Operating Leases (Detail)
$ in Thousands
Jun. 30, 2019
USD ($)
Commitments and Contingencies [Line Items]  
2020 $ 1,353
2021 1,376
2022 1,400
2023 1,425
2024 1,450
Thereafter 2,638
Total minimum future lease payments $ 9,642
v3.20.1
Summary of Significant Accounting Policies - Additional Information (Detail)
shares in Millions
3 Months Ended 9 Months Ended
Mar. 31, 2020
USD ($)
shares
Mar. 31, 2019
USD ($)
shares
Mar. 31, 2020
USD ($)
Segment
shares
Mar. 31, 2019
USD ($)
shares
Jul. 01, 2019
USD ($)
Jun. 30, 2019
USD ($)
Jul. 01, 2018
USD ($)
Summary of Significant Accounting Policies [Line Items]              
Number of operating segments | Segment     1        
Increase in uncertain tax position liability $ 21,000 $ 19,000 $ 63,000 $ 57,000      
Uncertain tax position liability 2,098,000   2,098,000     $ 2,035,000  
Right of use asset 3,503,000   3,503,000        
Lease liability $ 5,383,000   $ 5,383,000        
Dilutive impact of common stock equivalents | shares 0.4 0.2 0.2 0.2      
Prepaid and Other Current Assets [Member]