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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2021.

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

For the transition period from ______ to ______

Commission file number: 001-37625

Voyager Therapeutics, Inc.

(Exact name of Registrant as specified in its charter)

Delaware

46-3003182

(State or other jurisdiction of
incorporation or organization)

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

75 Sidney Street,
Cambridge, Massachusetts

02139

(Address of principal executive offices)

(Zip Code)

(857) 259-5340

(Registrant’s telephone number, including area code)

Not Applicable

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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 par value

VYGR

Nasdaq Global Select Market

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

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

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

The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of August 4, 2021 was 37,935,649.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “target,” “potential,” “contemplate,” “anticipate,” “goals,” “will,” “would,” “could,” “should,” “continue,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about:

our plans to develop and commercialize our product candidates based on adeno-associated virus, or AAV, gene therapy;
our ability to identify and optimize product candidates and novel AAV gene therapy capsids;
our strategic collaboration with and funding from our collaboration partner Neurocrine Biosciences, Inc., or Neurocrine;
our ongoing and planned clinical trials and related timelines, and our preclinical development efforts and studies;
formulation changes to our product candidates that may require us to conduct additional clinical studies to bridge our modified product candidates to earlier versions;
our ability to determine the appropriate path forward for the development of VY-AADC (NBIb-1817) as a treatment for Parkinson’s disease;
the timing of and our ability to submit applications and obtain and maintain regulatory approvals for our product candidates, including the ability to file IND applications for our programs;
our estimates regarding expenses, future revenues, capital requirements, and needs for additional financing;
our ability to continue to develop our proprietary gene therapy platform technologies, including our TRACERTM AAV capsid screening platform and our vectorized antibody platform;
our ability to develop a manufacturing capability compliant with current good manufacturing practices for our product candidates;
our ability to access, develop, and obtain regulatory clearance for devices to deliver our AAV gene therapies to critical targets of neurological disease;
our intellectual property position and our ability to obtain, maintain and enforce intellectual property protection for our proprietary assets;
our estimates regarding the size of the potential markets for our product candidates and our ability to serve those markets;
the rate and degree of market acceptance of our product candidates for any indication once approved;
our plans and ability to raise additional capital, including through equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements;

3

our competitive position and the success of competing products that are or become available for the indications that we are pursuing;
the impact of government laws and regulations including in the United States, the European Union, and other important geographies such as Japan;
our ability to enter into future collaborations, strategic alliances, or licensing arrangements;
our ability to reduce costs and reprioritize our product candidate pipeline successfully in connection with our strategic initiatives; and
the potential impact of the COVID-19 pandemic on our clinical trials and other business operations.

These forward-looking statements are only predictions and we may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. You should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in “Part II, Item 1A — Risk Factors,” and in “Part I, Item 1A — Risk Factors” included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 25, 2021 that could cause actual future results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.

RISK FACTOR SUMMARY

Investment in our securities involves risk and uncertainties that you should be aware of when evaluating our business. The following is a summary of what we believe to be the principal risks facing our business, as more fully described under “Part II, Item 1A—Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations.

We have a history of incurring significant losses and anticipate that we will incur losses for the foreseeable future and may never achieve or maintain consistent profitability. We may not be able to generate sufficient revenue from the commercialization of our product candidates and may never be consistently profitable.
We will need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate certain of our product development efforts or other operations.
To date, all of our revenue has been derived from our prior collaborations with Sanofi Genzyme Corporation, AbbVie Biotechnology Ltd and AbbVie Ireland Unlimited Company and our ongoing collaboration with Neurocrine Biosciences, Inc. If any ongoing or future collaboration agreements were to be terminated, our business financial condition, results of operations and prospects could be harmed.
Our AAV gene therapy product candidates are based on a novel technology, which makes it difficult and potentially infeasible to predict the duration and cost of development of, and of subsequently obtaining regulatory approval for, our product candidates.

4

Regulatory requirements governing gene and cell therapy products have changed frequently and may continue to change in the future. Such requirements may lengthen the regulatory review process, require us to modify current studies or perform additional studies or increase our development costs, which in turn may force us to delay, limit, or terminate certain of our programs.
We are early in our development efforts. Our product candidates are in the discovery and preclinical development stages. We may encounter substantial delays or difficulties in commencement, enrollment or completion of our preclinical studies or clinical trials, or may fail to demonstrate safety and efficacy to the satisfaction of applicable regulatory authorities, which could prevent us from commercializing our current and future product candidates on a timely basis, if at all.
Our product candidates or the process for administering our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit their commercial potential or result in significant negative consequences following any potential marketing approval.
We face significant competition in an environment of rapid technological change and the possibility that our competitors may achieve regulatory approval before us or develop therapies that are more advanced or effective than ours, which may harm our business and financial condition, and our ability to successfully market or commercialize our product candidates.
Gene therapies and their companion diagnostics are novel, complex and difficult to manufacture. We could experience manufacturing problems that result in delays in the development or commercialization of our product candidates or otherwise harm our business.
Our gene therapy approach utilizes vectors derived from viruses, which may be perceived as unsafe or may result in unforeseen adverse events. Negative public opinion and increased regulatory scrutiny of gene therapy may damage public perception of the safety of our product candidates and adversely affect our ability to conduct our business or obtain regulatory approvals for our product candidates.
If we are unable to obtain and maintain patent protection for our products and technology, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to successfully commercialize our products and technology may be adversely affected.
Our inability to recruit, or the loss of services of certain executives, key employees, consultants or advisors, may impede the progress of our research, development and commercialization objectives and could harm our business, financial condition, results of operations and prospects.
We have recently reduced the size of our organization, and we may encounter difficulties in managing our business as a result of this reduction, or the attrition that may occur following this reduction, which could disrupt our operations. In addition, we may not achieve anticipated benefits and savings from the reduction.
A widespread outbreak of an illness or other health issue could significantly disrupt our operations. The current COVID-19 pandemic and the response to it have had, and we expect they will continue to have, an adverse effect on our business, operations, and future results.

5

VOYAGER THERAPEUTICS, INC.

FORM 10-Q

TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION

ITEM 1.

   

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

7

CONDENSED CONSOLIDATED BALANCE SHEETS

7

CONDENSED CONSOLIDATED Statements of Operations and Comprehensive INCOME (Loss)

8

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

9

CONDENSED CONSOLIDATED Statements of Cash Flows

10

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11

ITEM 2.

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

24

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

42

ITEM 4.

CONTROLS AND PROCEDURES

43

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

43

ITEM 1A.

RISK FACTORS

43

ITEM 6.

EXHIBITS

108

SIGNATURES

109

6

PART I. FINANCIAL INFORMATION

Voyager Therapeutics, Inc.

Condensed Consolidated Balance Sheets

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

(unaudited)

June 30, 

December 31, 

 

    

2021

    

2020

 

Assets

    

    

Current assets:

Cash and cash equivalents

$

117,844

$

104,440

Marketable securities

 

25,137

 

76,698

Related party collaboration receivable

1,758

8,012

Prepaid expenses and other current assets

 

3,910

 

8,619

Total current assets

 

148,649

 

197,769

Property and equipment, net

 

23,689

 

25,435

Deposits and other non-current assets

 

2,247

 

2,316

Operating lease, right-of-use asset

34,142

36,064

Total assets

$

208,727

$

261,584

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

790

$

634

Accrued expenses

 

10,959

 

14,205

Other current liabilities

4,870

4,198

Deferred revenue, current

 

8,069

 

7,729

Total current liabilities

 

24,688

26,766

Deferred revenue, non-current

 

31,656

 

36,088

Other non-current liabilities

 

41,847

 

44,410

Total liabilities

 

98,191

107,264

Commitments and contingencies (see notes 6 and 8)

Stockholders’ equity:

Preferred stock $0.001 par value: 5,000,000 shares authorized at June 30, 2021 and December 31, 2020; no shares issued and outstanding at June 30, 2021 and December 31, 2020

Common stock, $0.001 par value: 120,000,000 shares authorized at June 30, 2021 and December 31, 2020; 37,772,219 and 37,368,027 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

 

38

 

37

Additional paid-in capital

 

438,300

 

430,324

Accumulated other comprehensive loss

 

(126)

 

(134)

Accumulated deficit

 

(327,676)

 

(275,907)

Total stockholders’ equity

 

110,536

 

154,320

Total liabilities and stockholders’ equity

$

208,727

$

261,584

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

Voyager Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

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

(unaudited)

Three Months Ended

Six Months Ended

June 30, 

 

June 30, 

 

    

2021

    

2020

 

2021

    

2020

 

Collaboration revenue

$

1,357

    

$

28,681

$

7,858

    

$

46,748

Operating expenses:

Research and development

 

19,505

 

29,423

 

41,851

 

61,718

General and administrative

 

10,437

 

8,239

 

20,181

 

18,444

Total operating expenses

 

29,942

37,662

 

62,032

80,162

Operating loss

(28,585)

(8,981)

(54,174)

(33,414)

Other (expense) income:

Interest income

 

48

 

346

 

132

 

1,324

Other (expense) income

 

(1,583)

 

(46)

 

2,273

 

(854)

Total other (expense) income, net

 

(1,535)

 

300

 

2,405

 

470

Net loss

$

(30,120)

$

(8,681)

$

(51,769)

$

(32,944)

Other comprehensive (loss) income

Net unrealized (loss) gain on available-for-sale securities

 

(3)

 

(276)

 

8

 

249

Total other comprehensive (loss) income

 

(3)

 

(276)

 

8

 

249

Comprehensive loss

$

(30,123)

$

(8,957)

$

(51,761)

$

(32,695)

Net loss per share, basic and diluted

$

(0.80)

$

(0.23)

$

(1.38)

$

(0.89)

Weighted-average common shares outstanding, basic and diluted

37,581,381

37,029,524

37,543,387

36,996,390

The accompanying notes are an integral part of these condensed consolidated financial statements.

8

Voyager Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(amounts in thousands, except share data)

(unaudited)

Accumulated

 

Additional

Other

 

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders’

 

    

Shares

    

Amount

    

Capital

    

Income (Loss)

    

Deficit

    

Equity (Deficit)

 

Balance at December 31, 2019

36,865,116

$

37

$

412,227

$

(104)

$

(312,648)

$

99,512

Exercises of vested stock options

3,035

34

34

Vesting of restricted stock units

108,600

Stock-based compensation expense

3,949

3,949

Unrealized gain on available-for-sale securities, net of tax

525

525

Net loss

(24,263)

(24,263)

Balance at March 31, 2020

36,976,751

$

37

$

416,210

$

421

$

(336,911)

$

79,757

Exercises of vested stock options

160,478

1,651

1,651

Vesting of restricted stock units

21,403

Issuance of common stock under ESPP

44,995

638

638

Stock-based compensation expense

3,795

3,795

Unrealized loss on available-for-sale securities, net of tax

(276)

(276)

Net loss

(8,681)

(8,681)

Balance at June 30, 2020

37,203,627

$

37

$

422,294

$

145

$

(345,592)

$

76,884

Balance at December 31, 2020

37,368,027

$

37

$

430,324

$

(134)

$

(275,907)

$

154,320

Exercises of vested stock options

3,811

1

27

28

Vesting of restricted stock units

184,217

Stock-based compensation expense

3,498

3,498

Unrealized gain on available-for-sale securities, net of tax

11

11

Net loss

(21,649)

(21,649)

Balance at March 31, 2021

37,556,055

$

38

$

433,849

$

(123)

$

(297,556)

$

136,208

Vesting of restricted stock units

114,412

Issuance of common stock under ESPP

101,752

580

580

Stock-based compensation expense

3,871

3,871

Unrealized loss on available-for-sale securities, net of tax

(3)

(3)

Net loss

(30,120)

(30,120)

Balance at June 30, 2021

37,772,219

$

38

$

438,300

$

(126)

$

(327,676)

$

110,536

The accompanying notes are an integral part of these condensed consolidated financial statements.

9

Voyager Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited)

Six Months Ended

June 30, 

 

    

2021

    

2020

 

Cash flow from operating activities

    

    

Net loss

$

(51,769)

$

(32,944)

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

Stock-based compensation expense

 

7,592

 

7,900

Depreciation

 

2,459

 

1,768

Amortization of premiums and discounts on marketable securities

213

(122)

Other non-cash items

 

(2,460)

 

854

Changes in operating assets and liabilities:

Related party collaboration receivable

6,254

5,810

Prepaid expenses and other current assets

 

893

 

995

Operating lease, right-of-use asset

 

1,922

 

1,484

Other non-current assets

69

139

Accounts payable

 

156

 

(2,025)

Accrued expenses

 

(3,357)

 

(4,568)

Operating lease liabilities

 

(1,891)

 

(1,564)

Deferred revenue

 

(4,092)

 

(27,726)

Net cash used in operating activities

 

(44,011)

 

(49,999)

Cash flow from investing activities

Purchases of property and equipment

 

(602)

 

(3,389)

Loss from sale of equipment

31

Purchases of marketable securities

 

 

(14,987)

Proceeds from sales and maturities of marketable securities

57,632

125,500

Net cash provided by investing activities

 

57,030

 

107,155

Cash flow from financing activities

Proceeds from the exercise of stock options

 

28

 

1,685

Proceeds from the purchase of common stock under ESPP

357

482

Net cash provided by financing activities

 

385

 

2,167

Net increase in cash, cash equivalents, and restricted cash

 

13,404

 

59,323

Cash, cash equivalents, and restricted cash beginning of period

 

106,219

 

86,777

Cash, cash equivalents, and restricted cash end of period

$

119,623

$

146,100

Supplemental disclosure of cash and non-cash activities

Capital expenditures incurred but not yet paid

$

111

$

1,603

The accompanying notes are an integral part of these condensed consolidated financial statements.

10

VOYAGER THERAPEUTICS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of business

Voyager Therapeutics, Inc. (the “Company”) is a gene therapy company focused on developing life-changing treatments and next-generation platform technologies. The Company is focused on diseases where the Company believes a single dose adeno-associated virus (“AAV”) gene therapy approach that either increases or decreases the production of a specific protein can either halt or slow disease progression or reduce the symptom severity, therefore providing clinically meaningful impact to patients. The Company’s gene therapy platforms enable it to engineer, optimize, manufacture and deliver its AAV-based gene therapies that the Company believes have the potential to safely provide durable efficacy following a single administration. The Company’s team of experts in the fields of AAV gene therapy and neuroscience first identifies and selects diseases with target tissues that have tropism for AAV gene therapy. The Company then engineers and optimizes AAV vectors for delivery of the virus payload to the targeted tissue or cells. The Company believes its single dose gene therapies have the potential to be delivered directly, with targeted infusions or systemically, in conjunction with its novel capsids.

The Company is identifying novel AAV capsids, outer viral protein shells that enclose genetic material of a virus payload. The Company’s team has developed a proprietary system called TRACERTM (Tropism Redirection of AAV by Cell Type-Specific Expression of RNA) to facilitate the selection of AAV capsids with blood brain barrier (“BBB”) crossing and cell-specific transduction properties for particular therapeutic applications. The TRACER system is a broadly-applicable, functional RNA-based AAV capsid screening platform that allows for rapid in vivo evolution of AAV capsids with cell-specific transduction properties in wild-type animals. The Company is also applying the TRACER system towards further capsid variant libraries and selection for tropism and transduction in additional cell and tissue types, such as cardiac and skeletal muscle.

The Company’s quality and manufacturing processes employ an established system capable of enabling production of high quality AAV vectors at clinical scale. In addition to the Company’s capsid screening platform, the Company has developed a vectorized antibody platform which it believes will overcome many of the challenges of passive immunization.

The Company’s business strategy focuses on discovering, developing, manufacturing and commercializing its gene therapy programs. As part of this strategy, the Company has developed core competencies specific to AAV gene therapy development and manufacturing. This business strategy also includes business development activities that may include in-licensing activities or partnering certain programs in certain geographies with collaborators, as the Company has demonstrated through its ongoing collaboration with Neurocrine Biosciences, Inc. (“Neurocrine”) under a collaboration agreement that became effective in January 2019 (the “Neurocrine Collaboration Agreement”). The Company is devoting substantially all of its efforts to product research and development, market development, and raising capital. The Company is subject to risks common to companies in the biotechnology and gene therapy industries, including but not limited to, the need to obtain sufficient capital to continue to fund its operations, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for its product candidates, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary information and technology, protection against data breaches and other cybersecurity threats, compliance with government regulations, development by competitors of technological innovations, and ability to transition from pilot-scale manufacturing to large-scale production of products.

The Company has a history of incurring annual net operating losses. As of June 30, 2021, the Company had an accumulated deficit of $327.7 million. The Company has not generated any product revenue and has financed its operations primarily through public offerings and private placements of its equity securities and funding from its prior collaborations with Sanofi Genzyme Corporation (“Sanofi Genzyme”) and AbbVie Biotechnology Ltd and AbbVie Ireland Unlimited Company (collectively, “AbbVie”) and its ongoing collaboration with Neurocrine.

11

Through June 30, 2021, the Company has raised approximately $640.0 million of proceeds from sales of convertible preferred stock and common stock, including its initial public offering and follow-on public offering, and proceeds from collaboration agreements. As of June 30, 2021, the Company had cash, cash equivalents, and marketable debt securities of $143.0 million. Based upon its current operating plan, the Company expects that its existing cash, cash equivalents, and marketable debt securities will be sufficient to meet the Company’s planned operating expenses and capital expenditure requirements into early 2023.

There can be no assurance that the Company will be able to obtain additional debt or equity financing or generate product revenue or revenue from collaboration partners on terms acceptable to the Company, on a timely basis or at all. The failure of the Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Company’s business, results of operations, and financial condition.

2. Summary of significant accounting policies and basis of presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as filed with the Securities and Exchange Commission (“SEC”) on February 25, 2021. These interim condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for a fair presentation of the Company’s financial position and results of operations for the periods presented. Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Principles of Consolidation

The unaudited interim consolidated financial statements include the accounts of the Company and its wholly owned subsidiary as disclosed in Note 2, under the headings “Summary of Significant Accounting Policies” and “Basis of Presentation”, within the “Notes to Consolidated Financial Statements” accompanying the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates its estimates, which include, but are not limited to, estimates related to revenue recognition, accrued expenses, stock-based compensation expense, and income taxes. The Company bases its estimates on historical experience and other market specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions. Certain reclassifications have been made to prior periods to conform to current period presentation.

Summary of Significant Accounting Policies

There have been no changes in the Company's significant accounting policies as described in Note 2, “Summary of Significant Accounting Policies,” within the “Notes to Consolidated Financial Statements” accompanying the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

12

3. Fair value measurements

Assets and liabilities measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020 are as follows:

Quoted Prices

Significant

 

in Active

Other

Significant

 

Markets for

Observable

Unobservable

 

Identical Assets

Inputs

Inputs

Assets

    

Total

    

(Level 1)

    

(Level 2)

    

(Level 3)

 

June 30, 2021

(in thousands)

 

Money market funds included in cash and cash equivalents

    

$

114,196

    

$

114,196

    

$

    

$

Marketable securities - U.S. Treasury notes

 

25,137

 

25,137

 

 

Total

$

139,333

$

139,333

$

$

December 31, 2020

Money market funds included in cash and cash equivalents

    

$

103,992

    

$

103,992

    

$

    

$

Marketable securities:

U.S. Treasury notes

 

70,342

 

70,342

 

 

Equity securities

6,356

6,356

Total marketable securities

76,698

76,698

Warrants to purchase equity securities

3,816

3,816

Total

$

184,506

$

180,690

$

3,816

$

The Company measures the fair value of money market funds, U.S. Treasury notes and equity securities based on quoted prices in active markets for identical securities. The Level 2 equity securities included warrants used to purchase equity securities that were valued using the Black-Scholes model. The Black-Scholes option pricing model requires inputs based on certain subjective assumptions, including (a) the expected stock price volatility, (b) the calculation of expected term of the awards, (c) the risk-free interest rate, and (d) expected dividends. All warrants were exercised, and the shares of common stock received following exercise were subsequently sold, by the Company during the three months ending June 30, 2021.

13

4. Cash, cash equivalents, restricted cash, and available-for-sale marketable securities

Cash, cash equivalents, and marketable securities included the following at June 30, 2021 and December 31, 2020:

Amortized

Unrealized

Unrealized

Fair

    

Cost

    

Gains

    

Losses

    

Value

(in thousands)

As of June 30, 2021

    

    

    

    

    

    

    

    

Money market funds included in cash and cash equivalents

$

114,196

$

$

$

114,196

Marketable securities - U.S. Treasury notes

 

25,135

 

2

 

 

25,137

Total money market funds and marketable securities

$

139,331

$

2

$

$

139,333

As of December 31, 2020

    

    

    

    

    

    

    

    

Money market funds included in cash and cash equivalents

$

103,992

$

$

$

103,992

Marketable securities:

U.S. Treasury notes

 

70,348

6

 

70,342

Equity securities

1,220

5,136

6,356

Total marketable securities

$

71,568

$

5,136

$

6

$

76,698

Total money market funds and marketable securities

$

175,560

$

5,136

$

6

$

180,690

All of the Company’s marketable debt securities as of June 30, 2021 and December 31, 2020, have a contractual maturity of one year or less.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows:

As of June 30, 

As of December 31, 

2021

    

2020

(in thousands)

Cash and cash equivalents

$

117,844

$

104,440

Restricted cash included in deposits and other non-current assets

1,779

1,779

Total cash, cash equivalents, and restricted cash

$

119,623

$

106,219

5. Accrued expenses

Accrued expenses as of June 30, 2021 and December 31, 2020 consist of the following:

As of June 30, 

As of December 31, 

    

2021

    

2020

 

(in thousands)

Research and development costs

$

5,394

$

6,624

Employee compensation costs

 

4,034

 

5,857

Professional services

 

1,103

 

1,228

Accrued goods and services

428

496

Total

$

10,959

$

14,205

14

6. Lease obligation

Operating Leases

As of June 30, 2021, the Company has leases for office and lab space at 75 and 64 Sidney Street in Cambridge, Massachusetts through November 30, 2026.

In March 2020, the Company entered into an agreement to lease additional laboratory and office space at 75 Hayden Avenue in Lexington, Massachusetts through January 31, 2031. The Company gained control of and occupied the space in November 2020.

The Company has received leasehold improvement incentives from the landlord totaling $5.3 million for the 75 Sidney Street and 64 Sidney Street leases. The Company also received $5.6 million of leasehold improvement incentives from the landlord for the 75 Hayden Avenue lease. The leasehold improvements have been capitalized as fixed assets and the Company recorded the incentives as a component of its right-of-use assets and is amortizing them as a reduction of lease expense over the life of the lease.

The Company’s lease agreements require the Company to maintain a cash deposit or irrevocable letter of credit in the aggregate amount of $1.8 million payable to its landlords as security for the performance of its obligations under the leases. These amounts are recorded as restricted cash and included in deposits and other non-current assets in the accompanying condensed consolidated balance sheets.

The following table summarizes the Company’s significant contractual obligations under operating leases as of payment due date by period as of June 30, 2021:

    

Total Minimum

 

    

Lease Payments

 

(in thousands)

2021 (remainder of year)

$

4,075

2022

 

8,469

2023

 

8,723

2024

8,985

2025

9,644

Thereafter

19,945

Total future minimum lease payments

$

59,842

Less: imputed interest

(14,126)

Total lease liability

$

45,716

Reported as:

Other current liabilities

$

4,870

Other non-current liabilities

40,846

Total lease liability

$

45,716

During the three and six months ended June 30, 2021, the Company incurred lease expense of $1.9 million and $3.7 million, respectively, for operating leases. During the three and six months ended June 30, 2020, the Company incurred lease expense of $1.7 million and $3.4 million, respectively, for operating leases. As of June 30, 2021, the weighted average remaining lease term was 6.4 years and the weighted average incremental borrowing rate used to determine the operating lease liability was 8.0%.

15

7. Other liabilities

As of June 30, 2021 and December 31, 2020, other current and non-current liabilities consisted of the following:

As of June 30, 

As of December 31, 

2021

    

2020

(in thousands)

Other current liabilities

Lease liability

$

4,870

$

4,198

Total other current liabilities

$

4,870

$

4,198

Other non-current liabilities

Lease liability

$

40,846

$

43,409

Other

1,001

1,001

Total other non-current liabilities

$

41,847

$

44,410

8. Commitments and contingencies

Significant Agreements

Neurocrine Collaboration Agreement

Summary of Agreement

In January 2019, the Company signed the Neurocrine Collaboration Agreement for the research, development and commercialization of certain of its AAV gene therapy products. The Neurocrine Collaboration Agreement became effective in March 2019. Under the Neurocrine Collaboration Agreement, the Company agreed to collaborate on the conduct of four collaboration programs (the “Neurocrine Programs”) which include: (i) the VY-AADC (NBIb-1817) for Parkinson’s disease (the “VY-AADC Program”), (ii) the VY-FXN01 for Friedreich’s ataxia (the “FA Program”) (collectively with the VY-AADC Program, the “Legacy Programs”), and (iii) two programs to be determined by the Company and Neurocrine at a later date (the “Discovery Programs”).

In June 2019, in conjunction with the termination of the collaboration agreement with Sanofi Genzyme (the “Sanofi Genzyme Collaboration Agreement”), the Company gained ex-U.S. rights to the FA Program. The Company’s ex-U.S. rights to the FA Program were subsequently transferred to Neurocrine under the terms of the Neurocrine Collaboration Agreement. To facilitate the transfer of the ex-U.S. rights to the FA Program to Neurocrine, the Company and Neurocrine executed an amendment to the Neurocrine Collaboration Agreement (the “June 2019 Modification”), and Neurocrine paid $5.0 million to the Company. There were no other changes in pricing or scope of the obligations required to be performed under the Neurocrine Collaboration Agreement.

In February 2021, Neurocrine notified the Company that it had elected to terminate the Neurocrine Collaboration Agreement solely with regards to the VY-AADC Program, effective August 2, 2021 (the “Neurocrine VY-AADC Program Termination Effective Date”). The Neurocrine Collaboration Agreement remains in full force and effect for each other program thereunder. As a result of the termination, subsequent to the Neurocrine VY-AADC Program Termination Effective Date, Neurocrine will no longer be obligated to reimburse the Company for research and development activities related to the VY-AADC Program.

Under the terms of the Neurocrine Collaboration Agreement, the Company originally agreed to collaborate with Neurocrine on, and to grant, exclusive, royalty-bearing, non-transferable, sublicensable licenses to certain of its intellectual property rights, for all human and veterinary diagnostic, prophylactic, and therapeutic uses, for the research, development, and commercialization of gene therapy products (the “Collaboration Products”) on a worldwide basis under (i) the VY-AADC Program; (ii) the FA Program; and (iii) each Discovery Program. As a result of the termination of the Neurocrine Collaboration Agreement with regards to the VY-AADC Program, in accordance with the terms of the Neurocrine Collaboration Agreement, the licenses granted by the Company to Neurocrine regarding the VY-AADC

16

Program have expired, and the Company has regained worldwide intellectual property rights regarding the VY-AADC Program, in each case as of the VY-AADC Termination Effective Date.

Pursuant to development plans agreed by the parties, which are overseen by a joint steering committee (“JSC”), the Company has operational responsibility, subject to certain exceptions, for the conduct of each Neurocrine Program prior to the occurrence of a specified event for such Neurocrine Program (a “Transition Event”), as described below, and is required to use commercially reasonable efforts to develop the corresponding Collaboration Products. Neurocrine has agreed to be responsible for all costs incurred by the Company in conducting these activities for each Neurocrine Program, in accordance with an agreed budget for each Neurocrine Program. If the Company breaches its development responsibilities or in certain circumstances upon a change in control, Neurocrine has the right but not the obligation to assume the activities under such Neurocrine Program.

Upon the occurrence of a Transition Event for each Neurocrine Program, Neurocrine has agreed to assume responsibility for development, manufacturing and commercialization activities for such Neurocrine Program from the Company and to pay milestones and royalties on future net sales as described further below. As a result of Neurocrine’s termination of the Neurocrine Collaboration Agreement with respect to the VY-AADC Program, the Transition Event with respect to the VY-AADC Program is no longer applicable. The Transition Events for the remaining programs are (i) with respect to the FA Program, the Company’s receipt of topline data for the initial Phase 1 clinical trial for an FA Program product candidate; and (ii) with respect to each Discovery Program, the preparation by the Company and the approval by Neurocrine of an investigational new drug (“IND”) application to be filed with the U.S. Food and Drug Administration (the “FDA”) by Neurocrine for the first development candidate in such Discovery Program. For the FA Program, the Company was granted the option (the “FA Co-Co Option”) to co-develop and co-commercialize the FA Program upon the occurrence of a specified event (a “FA Co-Co Trigger Event”). The Company agreed, upon its exercise of the FA Co-Co Option, to enter into a cost- and profit-sharing arrangement with Neurocrine (the “FA Co-Co Agreement”), and (i) jointly develop and commercialize the Collaboration Products for the FA Program (“FA Collaboration Products”), (ii) share in its costs, profits and losses, and (iii) forfeit certain milestones and royalties on net sales in the United States during the effective period of the FA Co-Co Agreement. The FA Co-Co Trigger Event is the receipt of topline data for the initial Phase 1 clinical trial for an FA Program product candidate.

Under the Neurocrine Collaboration Agreement, subject to exceptions specified therein, the Company and Neurocrine agreed that profits and losses under the Company’s FA Co-Co Option would be allocated  60% to Neurocrine and 40% to the Company for any FA Collaboration Product. The parties agreed that FA Co-Co Agreement would provide the Company the right to terminate for any reason upon prior written notice to Neurocrine and Neurocrine the right to terminate in certain circumstances upon change of control.

The Company’s research and development activities under the Neurocrine Collaboration Agreement are to be conducted pursuant to plans agreed to by the parties, on a program-by-program basis, and overseen by the JSC, as detailed in the Neurocrine Collaboration Agreement.

The parties have agreed on a list of up to eight target genes (the “Targets”) from which Neurocrine had the right to nominate Targets for the two Discovery Programs. The Targets nominated for the Discovery Programs were approved by a consensus of the JSC or the executive officers.

The Neurocrine Collaboration Agreement provides for an upfront non-refundable payment of $115.0 million, as well as for aggregate development and regulatory milestone payments from Neurocrine to the Company for Collaboration Products under (i) the VY-AADC Program of up to $170.0 million; (ii) the FA Program of up to $195.0 million, and (iii) each of the two Discovery Programs of up to $130.0 million per Discovery Program. The Company may be entitled to receive aggregate commercial milestone payments for each Collaboration Product of up to $275.0 million, subject to an aggregate cap on commercial milestone payments across all Neurocrine Programs of $1.1 billion. As a result of Neurocrine’s termination of the Neurocrine Collaboration Agreement with respect to the VY-AADC Program, the Company is no longer entitled to receive the development, regulatory and commercial milestone payments related to the VY-AADC Program upon the achievement of specified milestones. Furthermore, in connection with the Neurocrine Collaboration Agreement, Neurocrine purchased 4,179,728 shares of the Company’s common stock at a price of $11.9625 per share, for an aggregate purchase price of $50.0 million.

17

Neurocrine also agreed to pay the Company royalties, based on future net sales of the Collaboration Products. Such royalty percentages, for net sales in and outside the United States, as applicable, range (i) for the VY-AADC Program, from the mid-teens to low thirties and the low-teens to low twenties, respectively; (ii) for the FA Program, from the low-teens to high-teens and high-single digits to mid-teens, respectively; and (iii) for each Discovery Program, from the high-single digits to mid-teens and mid-single digits to low-teens, respectively. On a country-by-country and program-by-program basis, royalty payments would commence on the first commercial sale of a Collaboration Product and terminate on the later of (a) the expiration of the last patent covering the Collaboration Product or its method of use in such country, (b) ten years from the first commercial sale of the Collaboration Product in such country and (c) the expiration of regulatory exclusivity in such country (the “Royalty Term”). Royalty payments may be reduced by up to 50% in specified circumstances, including expiration of patents rights related to a Collaboration Product, approval of biosimilar products in a given country or required payment of licensing fees to third parties related to the development and commercialization of any Collaboration Product. As a result of Neurocrine’s termination of the Neurocrine Collaboration Agreement with respect to the VY-AADC Program, the Company is no longer entitled to receive royalties related to the VY-AADC Program. Additionally, the licenses granted to Neurocrine shall automatically convert to fully paid-up, non-royalty bearing, perpetual, irrevocable, exclusive licenses on a country-by-country and product-by-product basis upon the expiration of the Royalty Term applicable to such Collaboration Product in such country.

Under the terms of the Neurocrine Collaboration Agreement and subject to specified exceptions therein, each party owns the entire right, title and interest in and to all intellectual property rights made solely by its employees or agents in the course of the collaboration. The parties jointly own all rights, title and interest in and to all intellectual property rights made or invented jointly by employees or agents of both parties.

During the term of the Neurocrine Collaboration Agreement, neither party nor any of its respective affiliates is permitted to directly or indirectly exploit any AAV-based gene therapy products directed to a Target to which a Collaboration Product is directed, subject to specified exceptions including the parties’ conduct of basic research activities.

Unless earlier terminated, the Neurocrine Collaboration Agreement expires on the later of (i) the expiration of the last to expire royalty term with respect to a Collaboration Product in all countries in the relevant territory or (ii) the expiration or termination of any FA Co-Co Agreement. Neurocrine may terminate the Neurocrine Collaboration Agreement in its entirety or on a program-by-program or country-by-country basis by providing at least (x) 180-day advance notice if such notice is provided prior to the first commercial sale of the Collaboration Product to which the termination applies or (y) one-year advance notice if such notice is provided after the first commercial sale of the Collaboration Product to which the termination applies. The Company may terminate the Neurocrine Collaboration Agreement, subject to specified conditions, if Neurocrine challenges the validity or enforceability of certain of the Company’s intellectual property rights. Subject to a cure period, either party may terminate the Neurocrine Collaboration Agreement in the event of a material breach by the other party in whole or in part, subject to specified conditions.

Upon termination in certain cases, Neurocrine has agreed to grant to the Company licenses to certain Neurocrine intellectual property, subject to a negotiation between the parties to establish royalty rates for use of such intellectual property. In the event of a breach by the Company with respect to a Neurocrine Program, if such termination were to occur after a Transition Event, then (i) with respect to the FA Program, if an FA Co-Co Agreement is in effect, Neurocrine can terminate the FA Co-Co Agreement for such program and the Company would no longer have co-development and co-commercialization rights with respect to the FA Collaboration Products and (ii) subject to any license agreements, Neurocrine would no longer have any obligations with respect to any Collaboration Products resulting from such program.

Termination of VY-AADC Program

As described above, as of the Neurocrine VY-AADC Program Termination Effective Date, the license granted by the Company to Neurocrine thereunder regarding the VY-AADC Program expired, the Company regained worldwide intellectual property rights regarding the VY-AADC Program, and the restrictions on the Company to develop, manufacture or commercialize a gene therapy product directed to the Target of the VY-AADC Program terminated, in each case in accordance with the terms of the Neurocrine Collaboration Agreement. As of the Neurocrine VY-AADC Program Termination Effective Date, Neurocrine no longer is obligated to reimburse the Company for research and

18

development activities related to the VY-AADC Program, and the Company is no longer entitled to receive future milestone or royalty payments related to the VY-AADC Program. The Company intends to support Neurocrine, the study sponsor and IND holder, on ongoing matters related to the completion of imaging and clinical assessments requested by the Data Safety and Monitoring Board (the “DSMB”), and the provision of other information requested by the FDA for the RESTORE-1 Phase 2 clinical trial.

The Company continues to believe that the VY-AADC program may hold promise for Parkinson’s disease patients as evidenced by the positive multi-year safety and efficacy data from the two Phase 1b clinical trials presented in September 2020 at the MDS Virtual Congress. As a result of portfolio reevaluation efforts and a strategic shift to invest in novel capsid development efforts, however, the Company has determined that it will not advance the VY-AADC Program on its own. The Company is exploring potential options for continuing the future development and commercialization of the VY-AADC Program as a partnered program.

Accounting Analysis

At inception, the Neurocrine Collaboration Agreement included the following performance obligations: (i) research and development services for each Legacy Program combined with a development and commercialization license for each such program and (ii) research and development services for each Discovery Program combined with a development and commercialization license for each program. The research services and license on a program by program basis are not distinct as Neurocrine cannot benefit from such license on its own or from other resources commonly available in the industry, without the corresponding research services due to the unique and specialized expertise of the Company that is not readily available in the marketplace.

The Company identified $92.4 million of fixed transaction price consisting of the $115.0 million upfront fee and $5.0 million payment from the June 2019 Modification, offset by a discount of $27.6 million related to the $50.0 million equity investment of 4,179,728 shares when measured at fair value on the date of issuance. The Company is also entitled to reimbursement of costs incurred by the Company prior to the Transition Events associated with each Neurocrine Program. These amounts are determinable based on program plans and budgets, and the Company has a contractual right to the payment of costs incurred under the agreed upon program plans. The Company utilized the most likely amount approach and estimated the expected cost reimbursement to be $431.1 million at inception. The Company concluded that these amounts do not require a constraint and are included in the transaction price at inception. The Company considers this estimate at each reporting date and updates the estimate based on information available. During the three months ended June 30, 2021, the Company further revised the estimate of the expected reimbursement to $284.7 million based on expectations as of such date. Additional consideration to be paid to the Company upon reaching certain milestones are excluded from the transaction price at inception due to the uncertainty of achieving the development and regulatory milestones.

The Company allocated the fixed transaction price to the separate performance obligations based on the relative 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 research services, were developed using the estimated selling price of the license, using comparable and market data, and an estimate of the overall effort to perform the research services along with a reasonable profit for research services.

The Company has concluded that the variable consideration related to the cost reimbursement of each program will be allocated to each respective program as the cost reimbursement relates specifically to the respective program services being performed under the Neurocrine Collaboration Agreement. The reimbursement of research services is considered to be at a market rate and the allocation of the fixed consideration to all of the performance obligations depicts the estimated amounts in which it would expect to receive for these obligations, absent the variable consideration

19

related to the research reimbursement. The total variable consideration allocated to each program related to the expected cost reimbursement was as follows as of June 30, 2021:

Performance Obligation

Amount

(in thousands)

Variable Consideration

VY-AADC Program

$

53,397

FA Program

88,533

Discovery Program 1

72,782

Discovery Program 2

70,040

Total

$

284,752

Based on the relative standalone selling price allocation, the allocation of the transaction price, exclusive of the variable consideration allocated to the individual performance obligations, to the separate performance obligations was as follows:

Performance Obligation

Amount

(in thousands)

Fixed Consideration

VY-AADC Program

$

49,045

FA Program

20,647

Discovery Program 1

14,443

Discovery Program 2

8,247

Total

$

92,382

The Company recognizes the transaction price associated with each performance obligation on a proportional performance basis over the period of service using input-based measurements such as costs incurred to date, to estimate proportion performed, and remeasures its progress towards completion at the end of each reporting period.

The Company determined the partial termination of the Neurocrine Collaboration Agreement with respect to the VY-AADC Program represented a modification of the arrangement under ASC 606 and that the remaining fixed transaction price at the Neurocrine VY-AADC Program Termination Effective Date of $42.2 million should be re-allocated to the FA Program and Discovery Program 1 and 2 based on their standalone selling prices. Accordingly, the Company recorded a cumulative adjustment to revenue of approximately $0.9 million on the partially satisfied remaining performance obligations, as the remaining services to be performed under each of the performance obligations are not distinct from the services prior to the modification. The Company determined that reasonable changes to the Company’s estimates of standalone selling prices for the FA Program, Discovery Program 1 and Discovery Program 2 performance obligations did not have a material impact on the re-allocation or the amount of revenue recorded pursuant to the cumulative catch-up adjustment.

During the three and six months ended June 30, 2021, the Company recognized $1.4 million and $7.9 million, respectively, of revenue associated with its collaboration with Neurocrine related to research and development services performed during the period and the corresponding cost reimbursement receivable. During the three and six months ended June 30, 2020, the Company recognized $24.5 million and $38.9 million of revenue, respectively, associated with its collaboration with Neurocrine related to research and development services performed during the period and the corresponding cost reimbursement receivable.

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The following table presents changes in the balances of the Company’s related party collaboration receivables and contract liabilities during the six months ended June 30, 2021:

Balance at

    

Balance at

December 31, 2020

Additions

Deductions

June 30, 2021

(in thousands)

Related party collaboration receivables

$

8,012

$

4,959

$

(11,212)

$

1,758

Contract liabilities:

Deferred revenue

$

43,689

$

$

(3,964)

$

39,725

The change in the receivables balance for the six months ended June 30, 2021 is primarily driven by amounts owed to the Company for research and development services provided, offset by amounts collected from Neurocrine during the period.

As of June 30, 2021, there was $39.7 million of deferred revenue related to the Neurocrine Collaboration Agreement, which is classified as either current or non-current in the accompanying condensed consolidated balance sheet based on the period the services are expected to be delivered. Additionally, as of June 30, 2021, there was $1.8 million of related party collaboration receivables related to reimbursable costs expected to be received from Neurocrine for research and development services performed.

Costs incurred relating to the Company’s collaboration programs under the Neurocrine Collaboration Agreement consist of internal and external research and development costs, which primarily include: salaries and benefits, lab supplies, preclinical research studies, clinical studies, consulting services, and commercial development. These costs are included in research and development expenses in the Company’s condensed consolidated statements of operations during the three and six months ended June 30, 2021.

The Company incurred approximately $0.8 million of costs to obtain the Neurocrine Collaboration Agreement which were payable only upon the close of the deal and therefore considered incremental costs of obtaining a contract with a customer and capitalized. The costs are recorded in prepaid expenses and other non-current assets and are being amortized over the period in which the research services will be provided.

Other Agreements

The Company has entered into various agreements with contract research organizations and institutions to license intellectual property. In consideration for the rights licensed under such agreements, the Company generally made upfront payments, which were recorded as research and development expense as the acquired technologies were considered in-process research and development. The license agreements obligate the Company to make additional payments that are contingent upon specific clinical trial and regulatory approval milestones being achieved as well as royalties on future product sales. The agreements to license intellectual property include potential milestone payments that are dependent upon the development of products licensed under the agreements and contingent upon the achievement of clinical trial or regulatory approval milestones. The Company reached a milestone related to first patient dosing on the RESTORE-1 Phase 2 clinical trial which resulted in a $0.1 million milestone payment to one of its licensors in 2019. The Company can generally terminate the license agreements upon 30 to 90 days’ prior written notice.

Additionally, certain license agreements require the Company to reimburse the licensor for certain past and ongoing patent related expenses.

During the year ended December 31, 2016, the Company entered into a research and development funding arrangement with a non-profit organization that provides up to $4.0 million in funding to the Company upon the achievement of clinical and development milestones. The agreement provides that the Company repay amounts received under certain circumstances including termination of the agreement, and to pay an amount up to 2.6 times the funding received upon successful development and commercialization of any products developed. During the year ended December 31, 2017, the Company earned a milestone payment of $1.0 million. The Company has evaluated the arrangement and has concluded that it represents a research and development financing arrangement as it is probable that

21

the Company will repay amounts received under the arrangement. As a result, the $1.0 million earned to date is recorded as a non-current liability in the condensed consolidated balance sheet.

Litigation

Except as described below, the Company was not a party to any material legal matters or claims as of June 30, 2021 or December 31, 2020. The Company did not have contingency reserves established for any litigation liabilities as of June 30, 2021 or December 31, 2020.

On January 22, 2021, a putative class action lawsuit was filed in the U.S. District Court for the Eastern District of New York against the Company and certain of its current and former officers and directors, captioned Karp v. Voyager Therapeutics, Inc. et al., No. 1:21-cv-00381. The complaint generally alleged that the defendants violated Sections 10(b) and/or 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by making material misstatements or omissions concerning the Huntington’s Program and the Company’s investigational new drug application for VY-HTT01. On April 19, 2021, the court appointed the lead plaintiff for the action, and on April 30, 2021, the action was transferred to the U.S. District Court for the District of Massachusetts (where it was assigned case number 1:21-cv-10727). On July 2, 2021, the lead plaintiff voluntarily dismissed the action without prejudice against all defendants and as to all claims. This matter is no longer pending.

9. Stock-based compensation

Stock-Based Compensation Expense

Total compensation cost recognized for all stock-based compensation awards in the condensed consolidated statements of operations and comprehensive income (loss) is as follows:

Three Months Ended

Six Months Ended

June 30, 

 

June 30, 

 

    

2021

    

2020

 

2021

    

2020

 

(in thousands)

 

Research and development

$

1,336

$

1,764

$

2,706

$

3,449

General and administrative

 

2,655

 

2,095

 

4,886

 

4,451

Total stock-based compensation expense

$

3,991

$

3,859

$

7,592

$

7,900

Stock-based compensation expense by type of award included within the condensed consolidated statements of operations and comprehensive income (loss) was as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2021

    

2020

2021

    

2020

(in thousands)

Stock options

$

2,480

$

2,930

$

5,002

$

6,138

Restricted stock awards and units

1,392

864

2,366

1,605

Employee stock purchase plan awards

 

120

 

65

223

157

Total stock-based compensation expense

$

3,991

$

3,859

7,592

7,900

22

Restricted Stock Units

A summary of the status of and changes in unvested restricted stock unit activity under the Company’s equity award plans for the six months ended June 30, 2021 was as follows:

    

    

Weighted

Average

Grant Date

Fair Value

    

Units

    

Per Unit

Unvested restricted stock units as of December 31, 2020

 

638,471

$

12.74

Granted

 

1,255,401

$

6.21

Vested

 

(298,629)

$

12.57

Forfeited

 

(424,541)

$

9.78

Unvested restricted stock units as of June 30, 2021

 

1,170,702

$

7.71

Stock-based compensation of restricted stock units is based on the fair value of the Company’s common stock on the date of grant and is recognized over the vesting period. Restricted stock units granted by the Company typically vest in equal amounts, annually over three years. In the six months ended June 30, 2021, the Company granted 525,401 restricted stock units vesting in equal amounts, annually over three years, and 730,000 restricted stock units vesting in equal amounts, annually over two years. All of the restricted stock units granted in the six months ended June 30, 2020 vest in equal amounts, annually over three years. The stock-based compensation expense related to restricted stock units and awards was $1.4 million and $2.4 million for the three and six months ended June 30, 2021, respectively. The stock-based compensation expense related to restricted stock units and awards was $0.9 million and $1.6 million for the three and six months ended June 30, 2020, respectively.

As of June 30, 2021, the Company had unrecognized stock-based compensation expense related to its unvested restricted stock units of $7.3 million, which is expected to be recognized over the remaining average vesting period of 1.9 years.

Stock Options

The following is a summary of stock option activity for the six months ended June 30, 2021:

    

    

Weighted

    

Remaining

    

Aggregate

Average

Contractual

Intrinsic

Exercise

Life

Value

    

Shares

    

Price

    

(in years)

    

(in thousands)

Outstanding at December 31, 2020

 

5,485,078

$

14.77

Granted

 

1,386,679

$

6.62

Exercised

 

(3,811)

$

7.27

Cancelled or forfeited

 

(948,571)

$

12.96

Outstanding at June 30, 2021

 

5,919,375

$

13.16

 

6.5

$

Exercisable at June 30, 2021

 

3,718,767

$

14.90

 

5.1

$

As of June 30, 2021, the Company had unrecognized stock-based compensation expense related to its unvested stock options of $13.4 million which is expected to be recognized over the remaining weighted-average vesting period of 2.6 years.

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10. Net loss per share

The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because to include them would be anti-dilutive:

As of June 30, 

2021

    

2020

Unvested restricted common stock awards

156,863

 

176,471

Unvested restricted common stock units

1,170,702

709,730

Outstanding stock options

5,919,375

 

5,893,175

Total

7,246,940

 

6,779,376

Basic net loss per share for the six months ended June 30, 2021 and 2020 is the same as diluted net loss per share as shown on the Company’s condensed consolidated statement of operations.

11. Related-party transactions

During the three and six months ended June 30, 2021 and 2020, the Company received board and scientific advisory services from one of its prior executives, Dinah Sah, Ph.D., the Company’s former Chief Scientific Officer. The total amount of fees paid to Dr. Sah for services provided during the three and six months ended June 30, 2021, was $60,000 and $90,000, respectively. The total amount of fees paid to Dr. Sah for services provided during the three and six months ended June 30, 2020 was $0.1 million and $0.2 million, respectively.

Under the Neurocrine Collaboration Agreement, the Company and Neurocrine have agreed to conduct research, development and commercialization activities for certain of the Company’s AAV gene therapy products (Note 8). Amounts due from Neurocrine are reflected as related party collaboration receivables. As of June 30, 2021, the Company had approximately $1.7 million in related party collaboration receivables associated with Neurocrine.

12. Subsequent Events

On August 6, 2021, the board of directors of the Company approved a strategic restructuring plan to eliminate a portion of its workforce as part of an initiative to reduce expenses and enhance operations. The strategic restructuring plan was approved in connection with its portfolio reevaluation efforts and its strategic shift to invest additional resources in the Company’s novel capsid development efforts.

The Company currently expects to substantially complete the restructuring and to record the restructuring charges in the third quarter of 2021. The Company anticipates incurring total restructuring costs of approximately $2.0 million, which primarily consists of severance related costs. The Company is continuing to review the potential impact of the restructuring and is unable to estimate any additional restructuring costs or charges at this time.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission, or the SEC, on February 25, 2021.

Our actual results and timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if our results of operations, financial condition and liquidity, and

24

the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods.

The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q, including those risks identified under “Part II, Item 1A-Risk Factors.”

These forward-looking statements are made under the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are neither promises nor guarantees. We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

Overview

We are a gene therapy company focused on developing life-changing treatments and next-generation platform technologies. We focus on diseases where we believe a single dose adeno-associated virus, or AAV, gene therapy approach that either increases or decreases the production of a specific protein can either halt or slow disease progression or reduce symptom severity, therefore providing clinically meaningful impact to patients. Our gene therapy platforms enable us to engineer, optimize, manufacture and deliver AAV-based gene therapies that we believe have the potential to safely provide durable efficacy. Our team of experts in the fields of AAV gene therapy and neuroscience first identifies and selects diseases that are well-suited for treatment using AAV gene therapy. We then engineer and optimize AAV vectors for delivery of the virus payload to the targeted tissue or cells. We believe our single dose gene therapies have the potential to be delivered directly, with targeted infusions or systemically, in conjunction with our novel capsids.

We are identifying novel AAV capsids, the outer viral protein shells that enclose genetic material of a virus payload. Our team has developed a proprietary system called TRACERTM (Tropism Redirection of AAV by Cell Type-Specific Expression of RNA) to facilitate the selection of AAV capsids with blood brain barrier, or BBB, crossing and cell-specific transduction properties for particular therapeutic applications. The TRACER system is a broadly-applicable, functional RNA-based AAV capsid screening platform that allows for rapid in vivo evolution of AAV capsids with cell-specific transduction properties in wild-type animals. We are also applying the TRACER system towards further capsid variant libraries and selection for tropism and transduction in additional cell and tissue types, such as cardiac and skeletal muscle.

Our quality and manufacturing processes employ an established system capable of enabling production of high quality AAV vectors at clinical scale. In addition to our capsid screening platform, we have developed a vectorized antibody platform which we believe will overcome many of the challenges of passive immunization.

Our business strategy focuses on discovering, developing, manufacturing and commercializing our gene therapy programs. As part of this strategy, we have developed core competencies specific to AAV gene therapy development and manufacturing. This business strategy also includes business development activities that may include in-licensing activities or partnering certain programs in specific geographies with collaborators, as we have demonstrated through our ongoing collaboration with Neurocrine Biosciences, Inc., which we refer to as Neurocrine. Since our inception, our operations have focused on organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio, determining which neurological diseases to pursue, advancing our product candidates including delivery and manufacturing, and conducting preclinical studies and early-phase clinical trials. We do not have any product candidates approved for sale and have not generated any revenue from product sales.

We have funded our operations primarily through private placements of redeemable convertible preferred stock, public offerings of our common stock, and our strategic collaborations, including our prior collaboration with Sanofi Genzyme Corporation, or the Sanofi Genzyme Collaboration, which commenced in February 2015 and was terminated

25

in June 2019, our prior collaboration with AbbVie Biotechnology Ltd. focusing on tau-related disease, or the AbbVie Tau Collaboration, which commenced in February 2018 and was terminated in August 2020, our prior collaboration with AbbVie Ireland Unlimited Company focusing on pathological species of alpha-synuclein, or the AbbVie Alpha-Synuclein Collaboration, which commenced in February 2019 and was terminated in August 2020, and our ongoing collaboration with Neurocrine, which commenced in March 2019. We refer to our collaboration agreement with Neurocrine as the Neurocrine Collaboration Agreement and the collaboration with Neurocrine as the Neurocrine Collaboration.

In August 2021, we initiated a strategic initiative and reevaluated our existing product candidate portfolio. As a result of this reevaluation, we intend to invest additional resources in our novel capsid screening technology to expand discovery of novel capsids with broad tissue tropism in CNS, cardiac and skeletal tissues. We also plan to advance innovative gene therapy programs that leverage these novel capsids as well as our vectorized antibody technology.

As a result of these efforts, we have determined that we will not advance our VY-AADC program for the treatment of Parkinson’s disease on our own. Additionally, to leverage our novel capsid development efforts, we have decided to discontinue our current first-generation Huntington’s disease program and to initiate a second-generation program leveraging a novel, proprietary AAV capsid that may enable intravenous administration and achieve broad distribution to affected tissue. We have also initiated gene therapy programs using our novel capsids in treatment programs for monogenic amyotrophic lateral sclerosis, or ALS; spinal muscular atrophy, or SMA; and various diseases linked to GBA1 mutations, including Parkinson’s disease, Lewy body dementia and Gaucher’s disease. Additionally, we continue to advance our vectorized antibody platform capability with programs for tauopathies and indications in neuro-oncology. We continue to partner with Neurocrine on programs for diseases including Friedreich’s ataxia. All of our current product candidates are in the early stages of development. We continue to evaluate additional diseases that could be treated using AAV gene therapy and are also actively exploring additional potential treatment methods that can utilize our proprietary novel capsids.

Our pipeline of early-stage gene therapy programs is summarized in the table below:

A PICTURE CONTAINING GRAPHICAL USER INTERFACE  DESCRIPTION AUTOMATICALLY GENERATED

As part of the Neurocrine Collaboration, we and Neurocrine have been developing VY-AADC (NBIb-1817) for the treatment of Parkinson’s disease, or the VY-AADC Program. The FDA has granted VY-AADC (NBIb-1817) its regenerative medicine advanced therapy, known as RMAT, designation, which provides for an enhanced level of

26

interactions between the company sponsor and the FDA throughout a development program, and has granted VY-AADC (NBIb-1817) fast-track designation.

VY-AADC (NBIb-1817) is currently being evaluated in the RESTORE-1 Phase 2 clinical trial. In December 2020, the FDA notified Neurocrine that the FDA had placed a clinical hold on the RESTORE-1 Phase 2 trial. In February 2021, Neurocrine notified us of its termination of the Neurocrine Collaboration with regards to the VY-AADC Program, effective August 2, 2021.

We continue to believe that the VY-AADC program may hold promise for Parkinson’s disease patients as evidenced by the positive multi-year safety and efficacy data from the two Phase 1b clinical trials presented in September 2020 at the MDS Virtual Congress. As a result of the portfolio reevaluation efforts and a strategic shift to invest in novel capsid development efforts, however, we have determined that we will not advance the VY-AADC program on our own and are currently evaluating potential options for partnering the future development and commercialization of the VY-AADC program.

VY-AADC (NBIb-1817) Phase 1 Clinical Development

We evaluated the delivery of VY-AADC (NBIb-1817) in a transfrontal (i.e., top of the head) surgical delivery route in a Phase 1b clinical trial, which we refer to as PD-1101, and we are exploring the delivery of VY-AADC (NBIb-1817) using a posterior trajectory (i.e., back of the head) surgical delivery route in a Phase 1 clinical trial, which we refer to as PD-1102. PD-1101 was an open-label, dose-ranging, Phase 1b clinical trial for VY-AADC (NBIb-1817) to evaluate safety and efficacy. We enrolled 15 patients with advanced Parkinson’s disease and assessed increased volume or concentration of VY-AADC (NBIb-1817) in three separate cohorts consisting of five patients in each cohort. PD-1102 is a separate, open-label Phase 1 clinical trial for VY-AADC (NBIb-1817) to evaluate the posterior trajectory that enrolled eight patients with advanced Parkinson’s disease. We have completed enrollment in both PD-1101 and PD-1102, have completed three-year follow-up for PD-1101, and continue to follow patients in PD-1102. Data to date from both trials demonstrate that VY-AADC (NBIb-1817) has been generally well-tolerated and that administration with VY-AADC (NBIb-1817) improved patients’ motor function and quality of life as measured by standard scores and measures used in Parkinson’s disease trials.

VY-AADC (NBIb-1817) RESTORE-1 Program

In connection with our continued clinical development of VY-AADC (NBIb-1817), we sought to shift from production using a mammalian cell system consisting of triple-transfection of HEK293 cells, which was used in our two Phase 1 clinical trials, to production using insect-derived cells and our baculovirus/Sf9 manufacturing process. We designed our baculovirus/Sf9 manufacturing process to produce AAV vectors at clinical and commercial scale, with the potential for increased yields and more efficient scalability compared with mammalian-based systems.

In December 2017, we submitted an IND to the FDA to evaluate VY-AADC (NBIb-1817) in the RESTORE-1 Phase 2 clinical trial, a randomized, double-blind, sham-surgery controlled trial evaluating the safety and efficacy of VY-AADC (NBIb-1817) for the treatment of moderate to advanced Parkinson’s disease in patients with motor fluctuations. As part of the IND application for VY-AADC (NBIb-1817), the chemistry, manufacturing, and controls section included data demonstrating comparability between VY-AADC (NBIb-1817) produced using our baculovirus/Sf9 manufacturing process and VY-AADC (NBIb-1817) produced using the mammalian cell system. In each case, the VY-AADC was produced under cGMP. The data demonstrated that this production platform change resulted in comparable vector quality and activity. As a result, we decided to use VY-AADC (NBIb-1817) manufactured in our baculovirus/Sf9 system in the RESTORE-1 Phase 2 clinical trial.

In December 2018, we announced randomization of the first patient in the RESTORE-1 Phase 2 clinical trial. We received written feedback from the FDA, including FDA guidance received during the Type B meeting, that in a disease such as Parkinson’s, two adequate and well-controlled clinical trials are suggested. Based upon feedback received from the FDA, we and Neurocrine amended the RESTORE-1 clinical trial protocol to support a potential future registration filing for VY-AADC (NBIb-1817) for the treatment of Parkinson’s disease in the United States. The protocol amendments included increasing the planned enrollment to approximately 85 patients from the previously planned 42

27

patients, and adjusting future enrollment in the trial to randomize patients 2:1 to VY-AADC (NBIb-1817) or sham-surgery, respectively, as compared to the previous 1:1 randomization. The eligibility criteria remained substantially the same: the trial is potentially available to patients who have been diagnosed with Parkinson’s disease for at least four years, are not responding adequately to oral medications, and have at least three or more hours of OFF time during the day as meas