gnca-20210630

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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: 001-36289

GENOCEA BIOSCIENCES, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware						51-0596811
(State or Other Jurisdiction of Incorporation or Organization)						(I.RS. Employer Identification No.)

100 Acorn Park Drive, Cambridge, MA 02140

(Address of principal executive offices, including zip code)

(617) 876-8191

(Registrant’s telephone number, including area code)

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

Title of each class

Trading symbol

Name of each exchange on which registered

Common Stock, $0.001 par value

GNCA

Nasdaq

Capital 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 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 a 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 outstanding of the registrant’s common stock as of July 26, 2021 was 57,015,637.

TABLE OF CONTENTS


			Page
PART I.	FINANCIAL INFORMATION
	Item 1.	Financial Statements (unaudited)
		Condensed Consolidated Balance Sheets	3
		Condensed Consolidated Statements of Operations and Comprehensive Loss	4
		Condensed Consolidated Statements of Stockholders' Equity	5
		Condensed Consolidated Statements of Cash Flows	6
		Notes to the Condensed Consolidated Financial Statements	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
	Item 4.	Controls and Procedures	26

PART II.	OTHER INFORMATION
	Item 1.	Legal Proceedings	27
	Item 1A.	Risk Factors	27
	Item 6.	Exhibits	29

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Genocea Biosciences, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share data)


	June 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	60,399	$	79,769

Prepaid expenses and other current assets	2,514		2,458
Total current assets	62,913		82,227
Property and equipment, net	5,214		5,123
Right-of-use assets	8,371		9,308
Restricted cash	631		631
Other non-current assets	254		1,204
Total assets	$	77,383	$	98,493

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,362	$	534
Accrued expenses and other current liabilities	6,328		7,344
Deferred revenue	1,641		1,641
Lease liabilities	2,218		1,614
Current portion of long-term debt	3,283		13,862
Total current liabilities	14,832		24,995
Non-current liabilities:
Warrant liabilities	44,747		56,118
Lease liabilities, net of current portion	7,255		8,398
Long-term debt, net of current portion	6,494		—
Total liabilities	73,328		89,511
Commitments and contingencies (Note 6)
Stockholders’ equity:
Preferred stock, $0.001 par value; (25,000,000 shares authorized at June 30, 2021 and December 31, 2020; — shares issued and outstanding at June 30, 2021 and December 31, 2020)	—		—
Common stock, $0.001 par value; (225,000,000 shares authorized at June 30, 2021 and 170,000,000 shares authorized at December 31, 2020, 57,014,243 shares issued and outstanding at June 30, 2021 and 53,018,813 shares issued and outstanding at December 31, 2020)	57		53
Additional paid-in capital	394,960		383,597
Accumulated deficit	(390,962)		(374,668)
Total stockholders’ equity	4,055		8,982
Total liabilities and stockholders’ equity	$	77,383	$	98,493

See accompanying notes to the condensed consolidated financial statements.

Genocea Biosciences, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

(in thousands, except per share data)


	Three Months Ended June 30				Six Months Ended June 30
	2021		2020		2021		2020
License revenue	$	—	$	906	$	—	$	906

Operating expenses:
Research and development	10,513		8,587		19,264		18,574
General and administrative	4,033		3,480		7,704		6,868
Total operating expenses	14,546		12,067		26,968		25,442
Loss from operations	(14,546)		(11,161)		(26,968)		(24,536)
Other income (expense):
Change in fair value of warrants	10,517		222		11,371		1,003
Interest expense, net	(282)		(365)		(561)		(624)
Other expense	—		(17)		(136)		(17)
Total other income (expense)	10,235		(160)		10,674		362
Net loss	$	(4,311)	$	(11,321)	$	(16,294)	$	(24,174)

Comprehensive loss	$	(4,311)	$	(11,321)	$	(16,294)	$	(24,174)

Net loss per share:
Basic	$	(0.06)	$	(0.39)	$	(0.24)	$	(0.84)
Diluted	$	(0.20)	$	(0.39)	$	(0.37)	$	(0.84)
Weighted average number of shares used in computing net loss per share:
Basic	67,970		29,142		67,074		28,642
Diluted	70,202		29,142		72,467		28,642

See accompanying notes to the condensed consolidated financial statements.

Genocea Biosciences, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(unaudited)

(in thousands)


				Preferred		Additional				Total
	Common Stock			Stock		Paid-In		Accumulated		Stockholders’
	Shares	Amount		Amount		Capital		Deficit		Equity
Balance at December 31, 2020	53,019	$	53	$	—	$	383,597	$	(374,668)	$	8,982
Issuance of common stock, net	1,301	1		—		3,978		—		3,979
Stock-based compensation expense	—	—		—		580		—		580
Issuance of warrants	—	—		—		120		—		120
Issuance of common stock under employee benefit plans	49	—		—		84		—		84
Net loss	—	—		—		—		(11,983)		(11,983)
Balance at March 31, 2021	54,369	54		—		388,359		(386,651)		1,762
Issuance of common stock, net	2,500	3		—		5,512		—		5,515
Stock-based compensation expense	—	—		—		1,014		—		1,014
Issuance of common stock under employee benefit plans	145	—		—		75		—		75
Net loss	—	—		—		—		(4,311)		(4,311)
Balance at June 30, 2021	57,014	$	57	$	—	$	394,960	$	(390,962)	$	4,055


				Preferred		Additional				Total
	Common Stock			Stock		Paid-In		Accumulated		Stockholders’
	Shares	Amount		Amount		Capital		Deficit		Equity
Balance at December 31, 2019	27,453	$	27	$	701	$	355,268	$	(330,954)	$	25,042
Issuance of common stock, net	187	1		—		439		—		440
Stock-based compensation expense	—	—		—		384		—		384
Issuance of common stock under employee benefit plans	4	—		—		—		—		—
Net loss	—	—		—		—		(12,853)		(12,853)
Balance at March 31, 2020	27,644	28		701		356,091		(343,807)		13,013
Issuance of common stock, net	2,287	2		—		5,797		—		5,799
Stock-based compensation	—	—		—		486		—		486
Issuance of common stock under employee benefit plans	33	—		—		60		—		60
Net loss	—	—		—		—		(11,321)		(11,321)
Balance at June 30, 2020	29,964	$	30	$	701	$	362,434	$	(355,128)	$	8,037

See accompanying notes to the condensed consolidated financial statements.

Genocea Biosciences, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)


	Six Months Ended June 30
	2021		2020
Operating activities
Net loss	$	(16,294)	$	(24,174)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of warrant liability	(11,371)		(1,003)
Stock-based compensation	1,594		870
Depreciation and amortization	752		556
Non-cash interest expense	245		220
Other	101		100
Changes in operating assets and liabilities	2,068		(281)
Net cash used in operating activities	(22,905)		(23,712)
Investing activities
Purchases of property and equipment	(1,823)		(550)
Proceeds from sale of equipment	65		22
Net cash used in investing activities	(1,758)		(528)
Financing activities
Repayment of long-term debt	(13,960)		—
Proceeds from long-term debt	10,000		—
Proceeds from issuance of common stock, net	9,494		6,239
Payment of deferred financing costs	(289)		—
Proceeds from issuance of common stock under employee benefit plans	159		60
Debt prepayment costs	(88)		—
Payments on finance lease	(23)		(78)
Net cash provided by financing activities	5,293		6,221
Net decrease in cash, cash equivalents and restricted cash	(19,370)		(18,019)
Cash, cash equivalents and restricted cash at beginning of period	80,400		40,758
Cash, cash equivalents and restricted cash at end of period	$	61,030	$	22,739
Non-cash financing activities and supplemental cash flow information
Property and equipment included in accounts payable and accrued expenses	$	314	$	—
Right-of-use asset obtained in exchange for lease liabilities	$	—	$	5,931
Cash paid in connection with operating lease liabilities	$	1,436	$	1,097
Cash paid for interest	$	272	$	523

See accompanying notes to the condensed consolidated financial statements.

Genocea Biosciences, Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

1. Organization and operations

Genocea Biosciences, Inc. ("Genocea" or the "Company”) is a biopharmaceutical company that was incorporated in Delaware on August 16, 2006 and has a principal place of business in Cambridge, Massachusetts. The Company is dedicated to discovering and developing novel cancer immunotherapies using its proprietary ATLASTM platform. The ATLAS platform can profile each patient's CD4+ and CD8+ T cell immune responses to every potential target or “antigen” identified by next-generation sequencing of that patient's tumor. ATLAS zeroes in on both antigens that activate anti-tumor T cell responses and inhibitory antigens, or InhibigensTM, that drive pro-tumor immune responses. Genocea believes this approach ensures that cancer immunotherapies, such as cellular therapies and vaccines, focus T cell responses on the tumor antigens most vulnerable to T cell targeting. Consequently, the Company believes that ATLAS may enable more immunogenic and efficacious cancer immunotherapies. Genocea operates as one segment, which is discovering, researching, developing and commercializing novel cancer immunotherapies.

GEN-011 is an investigational adoptive T cell therapy comprising neoantigen-targeted peripheral T cells ("NPTs"). NPTs are peripheral blood-derived T cells targeted to ATLAS-identified neoantigens. By employing ATLAS to optimize neoantigen selection and by using T cells derived from peripheral blood, Genocea believes GEN-011 will enable potential patient efficacy, accessibility and cost advantages over other autologous T cell therapies. The Company is conducting a first-in-human clinical trial for GEN-011 (the “TiTANTM trial”), and in the second quarter of 2021, Genocea dosed its first patient in the trial. GEN-009 is an investigational neoantigen vaccine delivering adjuvanted synthetic long peptides from ATLAS-identified neoantigens. Genocea reported long-term immunogenicity and clinical response data from its GEN-009 neoantigen Phase 1 clinical trial in June 2021, and the Company continues to monitor patients to further evaluate these efficacy signals.

Genocea is devoting substantially all of its efforts to product research and development, initial market development, and raising capital. The Company has not generated any product revenue related to its primary business purpose to date and is subject to a number of risks and uncertainties common to companies in the biotech and pharmaceutical industry, including, but not limited to, the risks associated with the uncertainty of success of its preclinical and clinical trials; the challenges associated with gaining regulatory approval of product candidates; the risks associated with commercializing pharmaceutical products, if approved for marketing and sale; the potential for development by third parties of new technological innovations that may compete with Genocea's products; the dependence on key personnel; the challenges of protecting proprietary technology; the need to comply with government regulations; the high cost of drug development; competition from other companies; the uncertainty of being able to secure additional capital when needed to fund operations; and the challenges and uncertainty associated with the outbreak of the novel coronavirus ("COVID-19") that could adversely impact the Company's operations, supply chain, preclinical development work, clinical trials and ability to raise capital.

The Company regularly evaluates whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the financial statements are issued. As of June 30, 2021, Genocea had an accumulated deficit of $391.0 million and anticipates that it will continue to incur significant operating losses for the foreseeable future as it continues to develop its product candidates.

The Company expects that its cash and cash equivalents as of June 30, 2021 of $60.4 million should be sufficient to fund operations into the third quarter of 2022. These funds may not be sufficient to fund operations for at least the next twelve months from the date of issuance of these consolidated financial statements which raises substantial doubt about the Company’s ability to continue as a going concern. The future viability of the Company beyond one year from the date of issuance of these consolidated financial statements is dependent on its ability to raise additional capital to finance its operations. If the Company is unable to raise additional funds when needed, it may be required to implement cost reduction strategies, including ceasing development of GEN-011 or other research programs and activities, including the Inhibigens and COVID-19 programs. Genocea expects to finance its cash needs through a combination of equity offerings, strategic transactions, or other sources of funding, including utilization of the Lincoln Park Capital (“LPC”) purchase agreement and the at-the-market (“ATM”) equity offering program with Cowen and Company, LLC ("Cowen"). Although management plans to pursue additional funding, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, or at all.

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

2. Summary of significant accounting policies

Genocea's significant accounting policies have not changed materially from those disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “2020 10-K”).

Basis of presentation

The condensed consolidated financial statements include the accounts of the Company and a wholly owned subsidiary. Intercompany accounts and transactions have been eliminated. In the opinion of the Company’s management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, and necessary for fair financial statement presentation. The preparation of these condensed consolidated financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. These condensed consolidated financial statements and accompanying notes should be read in conjunction with the Company’s annual consolidated financial statements and accompanying notes included in the 2020 10-K.

Recently adopted accounting standards

In 2019, the Financial Accounting Standards Board ("FASB") issued a new standard on Simplifying the Accounting for Income Taxes. The new standard simplifies the accounting for income taxes and became effective beginning after December 15, 2020. The Company adopted this standard on January 1, 2021. The adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements and related disclosures.

Recent accounting pronouncements

In May 2021, the FASB issued a new standard that clarifies an issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. The new standard is effective on a prospective basis for fiscal years beginning after December 15, 2021, and early adoption is permitted. The Company is currently evaluating the timing of adoption.

3. Revenue

In May 2020, Genocea entered into a material transfer agreement (the “MTA”) with Shionogi & Co., Ltd. (“Shionogi”) pursuant to which the Company agreed to transfer certain herpes simplex type 2 ("HSV-2") antigens from its GEN-003 program to Shionogi to evaluate the potential development of a novel HSV-2 vaccine. In connection with the agreement, Genocea provided Shionogi with an option to negotiate an exclusive development and commercialization license for the HSV-2 antigens prior to the expiration of the MTA (the "Exclusive Negotiation Period"). Under the terms of the MTA, Shionogi paid the Company a total of $3.0 million in non-refundable, creditable (with respect to the up-front fee pursuant to a development and commercialization agreement) fees.

Genocea evaluated the promised goods and services within the MTA and determined those which represented separate performance obligations. As a result, the Company concluded there were two separate performance obligations at the inception of the MTA: (i) a combined performance obligation consisting of a limited use research license and the delivery of the initial antigen materials and (ii) the right to negotiate a license prior to expiration of the MTA. The Company determined that the exclusive limited use research license and the delivery of the initial antigen materials should be combined as they are not capable of being distinct. A third party would not be able to provide the initial antigen materials as it contains Genocea’s proprietary intellectual property, and Shionogi could not benefit from the research license without the initial antigen materials. The Company determined that the option to negotiate the development and commercialization agreement prior to the expiration of the MTA is a material right. The $3.0 million fee associated with the MTA is creditable against the upfront fee for the development and commercialization agreement and represents a discount that would otherwise not be available to the customer without entering into the MTA.

Genocea estimated the standalone selling price of the initial antigen materials based on the expected cost plus a margin approach. The Company developed its standalone selling price for the material right by applying a probability-weighted likelihood that Shionogi will exercise its option to license the HSV-2 assets.

The initial amount allocated to the limited use research license and the delivery of the initial antigen materials, or $0.9 million, was recognized upon delivery of the materials to Shionogi in the three months ended June 30, 2020. As of June 30, 2021, $1.6 million allocated to the material right is considered a contract liability and is recorded as deferred revenue on the Company's condensed consolidated balance sheet.

In July 2021, Shionogi informed Genocea that their studies under the MTA were successful and demonstrated that GEN-003 antigen vaccination was protective in animal models of genital herpes. However, due to a change in Shionogi’s corporate focus, Shionogi will allow its Exclusive Negotiation Period to lapse and has elected to cease further negotiations as this time. As such, revenue associated with the material right will be recognized in Q3 2021 due to the termination of the MTA.

4. Fair value of financial instruments

Genocea has certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.

•Level 1—Fair values are determined by utilizing quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access;

•Level 2—Fair values are determined by utilizing quoted prices for similar assets and liabilities in active markets or other market observable inputs such as interest rates, yield curves and foreign currency spot rates; and

•Level 3—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The Company's financial assets and liabilities measured at fair value consist of cash equivalents and warrant liabilities, respectively.

The fair value of Genocea’s cash equivalents is determined using quoted prices in active markets. The Company's cash equivalents consist of money market funds that are classified as Level 1.

The fair value of Genocea’s warrant liabilities is determined using a Monte Carlo simulation. See Note 9. Warrants for the assumptions and methodologies used in calculating the estimated fair value. The Company’s warrant liabilities are classified as Level 3.

The following table sets forth the Company's assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020 (in thousands):


			Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	Total		(Level 1)		(Level 2)		(Level 3)
June 30, 2021
Assets
Cash equivalents	$	57,198	$	57,198	$	—	$	—
Total assets	$

SEC Form 10-Q filed by Genocea Biosciences, Inc.