Item 2.05 Costs Associated with Exit or Disposal Activities.
On November 27, 2023, the Board of Directors (the “Board”) of Generation Bio Co. (the “Company”) approved a reduction of the Company’s workforce by approximately 40% (the “RIF”). The Company expects to complete the RIF by the end of the second quarter of 2024. The RIF was implemented following a review of strategic priorities and a determination by the Company’s management and Board to implement a strategic reorganization to invest in the Company’s highly selective cell-targeted lipid nanoparticle (ctLNP) delivery platform to develop wholly-owned programs for extrahepatic cell types and to develop its immune-quiet DNA (iqDNA) platform for its lead program in hemophilia A and other programs.
The RIF, together with reductions in operational expenditures including Good Manufacturing Practice readiness and manufacturing expenses, is expected to yield savings of approximately $120 million over the next three years. The Company expects its cash runway will be extended into the second half of 2027.
In connection with the RIF, affected employees will be eligible to receive severance benefits, including cash severance, temporary healthcare coverage to the extent they are eligible for and elect such coverage, and transition support services, subject to each such employee entering into an effective separation agreement, which will include a general release of claims against the Company. The Company is also offering a retention bonus to certain of the affected employees if such employees remain in continuous employment with the Company through their respective separation dates and execute a general release of claims against the Company.
As a result of the RIF, the Company estimates that it will incur severance-, termination- and retention-related costs of approximately $7 million to $8 million, which the Company expects to recognize in the fourth quarter of 2023 and the first quarter of 2024. The estimates of costs and expenses that the Company expects to incur in connection with the RIF are subject to a number of assumptions and actual results may differ materially. The Company may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the RIF.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
As part of the RIF described above in Item 2.05, the Company will terminate the employment of Douglas Kerr, M.D., Ph.D., M.B.A., the Company’s Chief Medical Officer, and Tracy Zimmermann, Ph.D., the Company’s Chief Development Officer, effective as of January 28, 2024 (the “Separation Date”).
The Company anticipates that it will enter into a separation and release agreement with each of Dr. Kerr and Dr. Zimmermann at the time of their separation (collectively, the “Separation Agreements”), pursuant to which Dr. Kerr and Dr. Zimmermann will be entitled to receive severance benefits, including cash severance in an amount equal to nine months of their base salary in effect on the Separation Date, in the total gross amount of $0.4 million and $0.3 million, respectively, less applicable taxes and withholdings, payable in equal installments over a nine-month period, temporary healthcare coverage for up to nine months to the extent they are eligible for and elect such coverage, and transition support services. In addition, the Company expects that under the terms of the Separation Agreements, 25% of Dr. Kerr and Dr. Zimmermann’s outstanding unvested equity awards will become fully vested on the Separation Date. The Separation Agreements will also contain a general release of claims by each of Dr. Kerr and Dr. Zimmermann.
The foregoing description of the Separation Agreements are qualified in their entirety by reference to the full text of the Separation Agreements, copies of which the Company intends to file as exhibits to its Quarterly Report on Form 10-Q for the quarter ended March 31, 2024.
Item 7.01 Regulation FD.
On November 29, 2023, the Company issued a press release announcing the strategic reorganization and RIF. A copy of this press release is furnished as Exhibit 99.1 and is incorporated herein by reference.
The information in this Item 7.01 on Form 8-K (including Exhibit 99.1 attached hereto) is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing by the Company, under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filling.