SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
|☒||QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934|
For the quarterly period ended September 30, 2022
|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: 001-35966
bluebird bio, Inc.
(Exact Name of Registrant as Specified in Its Charter)
|(State or Other Jurisdiction of|
Incorporation or Organization)
|455 Grand Union Boulevard|
|(Address of Principal Executive Offices)||(Zip Code)|
(Registrant’s Telephone Number, Including Area Code)
(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, $0.01 par value per share||BLUE||The NASDAQ Stock Market LLC|
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 ☒
As of November 3, 2022, there were 82,909,980 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:
•the initiation, timing, progress and results of our preclinical and clinical studies, and our research and development programs;
•our ability to advance product candidates into, and successfully complete, clinical studies;
•our ability to obtain adequate financing to fund our operations and to execute on our strategy;
•our ability to implement and realize expected cost savings from our comprehensive restructuring plans;
•our ability to establish and scale commercial viral vector and drug product manufacturing capabilities, and to ensure adequate supply of our viral vectors and drug products;
•the timing or likelihood of regulatory filings and marketing approvals for our product candidates;
•the timing or success of commercialization of our approved products;
•our ability to obtain adequate pricing and reimbursement of any approved products;
•the implementation of our business model, strategic plans for our business, product candidates and technology;
•estimates of our expenses, future revenues, capital requirements and our needs for additional financing;
•developments relating to our competitors and our industry;
•the impact of the COVID-19 pandemic;
•the effects, costs, and benefits of the separation of our portfolio of products and programs into two independent, publicly-traded companies; and
•other risks and uncertainties, including those listed under Part II, Item 1A. Risk Factors.
Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other 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 these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A. Risk Factors and elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.
Summary of the Material and Other Risks Associated with Our Business
Below is a summary of the material risks to our business, operations and the investment in our common stock. This summary does not address all of the risks that we face. Risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q in its entirety before making investment decisions regarding our common stock.
•The FDA has placed our clinical studies of lovo-cel on partial clinical hold, and we have no assurance as to what the FDA may require, or the timing, if ever, of when the partial clinical hold may be lifted, or when we may resume enrolling pediatric patients in our clinical studies of lovo-cel.
•We cannot predict when or if we will obtain marketing approval to commercialize our product candidates, and the marketing approval of any future products may ultimately be for more narrow indications than we expect.
•We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.
•There is substantial doubt regarding our ability to continue as a going concern. We will need to raise additional financing in upcoming periods, which may not be available on acceptable terms, or at all. Failure to obtain necessary capital when needed may force us to delay, limit or terminate our commercial readiness efforts, activities to support a potential commercial launch following any approval of our product candidates, or other operations.
•Insertional oncogenesis is a risk of gene therapies using viral vectors that can integrate into the genome, and several patients with CALD treated with SKYSONA in our clinical studies have been diagnosed with myelodysplastic syndrome likely mediated by Lenti-D lentiviral vector ("LVV") insertion. These events may require us to halt or delay further clinical development of our product candidates or to suspend or cease commercialization, and the commercial potential of our products and product candidates may be materially and negatively impacted.
•We have limited experience as a commercial company and the marketing and sale of our current and future products may be unsuccessful or less successful than anticipated.
•The commercial success of our current and future products will depend upon the degree of market acceptance by physicians, patients, third-party payers and others in the medical community. If we fail to obtain sufficient pricing or reimbursement approval for any products, our revenues may be adversely affected and our business may suffer.
•If the market opportunities for our products or any future products are smaller than we believe they are, and if we are not able to successfully identify patients and achieve significant market share, our revenues may be adversely affected and our business may suffer.
•We rely on a complex supply chain for our product candidates. The manufacture and delivery of our LVV and drug products present significant challenges for us, and we may not be able to produce our vector and drug products at the quality, quantities, locations or timing needed to support our clinical programs or potential commercialization. In addition, we may encounter challenges with engaging or coordinating with qualified treatment centers needed to support potential commercialization.
•We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are more advanced or effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our product and any future products.
•Our future success depends on our ability to retain key employees, consultants and advisors and to attract, retain and motivate qualified personnel.
bluebird bio, Inc.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
bluebird bio, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except par value amounts)
|Cash and cash equivalents||$||66,478 ||$||161,160 |
|Marketable securities||73,155 ||138,343 |
|Prepaid expenses||8,270 ||25,628 |
|Receivables and other current assets||12,535 ||11,389 |
|Total current assets||160,438 ||336,520 |
|Marketable securities||1,407 ||97,114 |
|Property, plant and equipment, net||11,535 ||9,706 |
|Goodwill||5,646 ||5,646 |
|Operating lease right-of-use assets||288,684 ||91,532 |
|Restricted cash and other non-current assets||52,388 ||53,277 |
|Total assets||$||520,098 ||$||593,795 |
|Liabilities and Stockholders’ Equity|
|Accounts payable||$||18,622 ||$||25,883 |
|Accrued expenses and other current liabilities||64,314 ||103,958 |
|Operating lease liability, current portion||43,791 ||23,152 |
|Total current liabilities||126,727 ||152,993 |
|Operating lease liability, net of current portion||234,422 ||66,432 |
|Other non-current liabilities||92 ||93 |
|Total liabilities||361,241 ||219,518 |
Commitments and contingencies (Note 9)
Preferred stock, $0.01 par value, 5,000 shares authorized; 0 shares issued and outstanding at September 30, 2022 and December 31, 2021
|— ||— |
Common stock, $0.01 par value, 125,000 shares authorized; 82,880 and 71,115 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively
|829 ||711 |
|Additional paid-in capital||4,181,393 ||4,096,402 |
|Accumulated other comprehensive loss||(4,630)||(2,911)|
|Total stockholders’ equity||158,857 ||374,277 |
|Total liabilities and stockholders’ equity||$||520,098 ||$||593,795 |
See accompanying notes to unaudited condensed consolidated financial statements.
bluebird bio, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share data)
|For the three months ended September 30,||For the nine months ended |
|Product revenue||$||— ||$||768 ||$||2,739 ||$||1,492 |
|Other revenue||71 ||251 ||795 ||564 |
|71 ||1,019 ||3,534 ||2,056 |
Research and development
|53,149 ||73,679 ||194,864 ||240,561 |
|Selling, general and administrative||33,402 ||42,229 ||106,201 ||156,763 |
|Cost of product revenue||— ||19,385 ||10,056 ||35,176 |
|Restructuring expenses||(1,699)||20,175 ||4,940 ||24,800 |
Total operating expenses
|84,852 ||155,468 ||316,061 ||457,300 |
Loss from operations
Interest income, net
|383 ||160 ||663 ||733 |
|Other (expense) income, net||7,885 ||1,342 ||13,061 ||24,369 |
Loss before income taxes
|Income tax (expense) benefit||(7)||113 ||(7)||(169)|
|Net loss from continuing operations||(76,520)||(152,834)||(298,810)||(430,311)|
|Net loss from discontinued operations||— ||(63,982)||— ||(234,015)|
|Net loss per share from continuing operations - basic and diluted||$||(0.94)||$||(2.23)||$||(3.91)||$||(6.36)|
|Net loss per share from discontinued operations - basic and diluted||$||— ||$||(0.93)||$||— ||$||(3.46)|
|Net loss per share - basic and diluted||$||(0.94)||$||(3.16)||$||(3.91)||$||(9.81)|
Weighted-average number of common shares used in computing net loss per share - basic and diluted:
|81,543 ||68,621 ||76,361 ||67,701 |
|Other comprehensive (loss) income:|
Other comprehensive (loss) income, net of tax benefit (expense) of $0.0 million for the three and nine months ended September 30, 2022 and 2021
|Total other comprehensive (loss) income||(214)||(129)||(1,719)||(401)|
See accompanying notes to unaudited condensed consolidated financial statements.
bluebird bio, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
|Balances at December 31, 2021||71,115 ||$||711 ||$||4,096,402 ||$||(2,911)||$||(3,719,925)||$||374,277 |
|Vesting of restricted stock units||310 ||3 ||(3)||— ||— ||— |
|Exercise of stock options||1 ||— ||1 ||— ||— ||1 |
|Purchase of common stock under ESPP||— ||— ||— ||— ||— ||— |
|Stock-based compensation||— ||— ||12,681 ||— ||— ||12,681 |
|Issuance of unrestricted stock awards to settle accrued employee compensation ||12 ||— ||— ||— ||— ||— |
|Other comprehensive loss||— ||— ||— ||(1,548)||— ||(1,548)|
|Net loss||— ||$||— ||$||— ||$||— ||$||(122,152)||$||(122,152)|
|Balances at March 31, 2022||71,438 ||$||714 ||$||4,109,081 ||$||(4,459)||$||(3,842,077)||$||263,259 |
|Vesting of restricted stock units||60 ||$||1 ||$||(1)||$||— |
|Exercise of stock options||1 ||$||— ||$||1 ||$||1 |
|Issuance of common stock||2,052 ||$||20 ||$||8,023 ||$||8,043 |
|Stock-based compensation||— ||$||— ||$||8,908 ||$||8,908 |
|Other comprehensive income||$||43 ||$||43 |
|Balances at June 30, 2022||73,551 ||$||735 ||$||4,126,012 ||$||(4,416)||$||(3,942,215)||$||180,116 |
|Vesting of restricted stock units||572 ||$||6 ||$||(6)||$||— ||$||— ||$||— |
|Exercise of stock options||— ||$||— ||$||— ||$||— ||$||— ||$||— |
|Purchase of common stock under ESPP||67 ||$||1 ||$||238 ||$||— ||$||— ||$||239 |
|Issuance of common stock||8,690 ||$||87 ||$||45,937 ||$||— ||$||— ||$||46,024 |
|Issuance of warrants||— ||$||— ||$||— ||$||— ||$||— ||$||— |
|Issuance of unrestricted stock awards to settle |
accrued employee compensation
|— ||$||— ||$||— ||$||— ||$||— ||$||— |
|Stock-based compensation||— ||$||— ||$||9,212 ||$||— ||$||— ||$||9,212 |
|Other comprehensive loss||— ||$||— ||$||— ||$||(214)||$||— ||$||(214)|
|Net loss||— ||$||— ||$||— ||$||— ||$||(76,520)||$||(76,520)|
|Balances at September 30, 2022||82,880 ||$||829 ||$||4,181,393 ||$||(4,630)||$||(4,018,735)||$||158,857 |
|Balances at December 31, 2020||66,432 ||$||665 ||$||4,260,443 ||$||(5,505)||$||(2,900,547)||$||1,355,056 |
|Vesting of restricted stock units||294 ||3 ||(3)||— ||— ||— |
|Exercise of stock options||207 ||2 ||1,217 ||— ||— ||1,219 |
|Purchase of common stock under ESPP||67 ||1 ||1,706 ||— ||— ||1,707 |
|Stock-based compensation||— ||— ||36,090 ||— ||— ||36,090 |
|Issuance of unrestricted common stock awards to settle accrued employee compensation||422 ||4 ||12,009 ||— ||— ||12,013 |
|Other comprehensive income||— ||— ||— ||56 ||— ||56 |
|Net loss||— ||— ||— ||— ||(205,808)||(205,808)|
|Balances at March 31, 2021||$||67,422 ||$||675 ||$||4,311,462 ||$||(5,449)||$||(3,106,355)||$||1,200,333 |
|Vesting of restricted stock units||127 ||1 ||(1)||— ||— ||— |
|Exercise of stock options||2 ||— ||36 ||— ||— ||36 |
|Stock-based compensation||— ||— ||26,222 ||— ||— ||26,222 |
|Other comprehensive loss||— ||— ||— ||(328)||— ||(328)|
|Net loss||— ||— ||— ||— ||(241,702)||(241,702)|
|Balances at June 30, 2021||$||67,551 ||$||676 ||$||4,337,719 ||$||(5,777)||$||(3,348,057)||$||984,561 |
|Vesting of restricted stock units||80 ||1 ||(1)||— ||— ||— |
|Exercise of stock options||10 ||— ||233 ||— ||— ||233 |
|Issuance of common stock for private equity placement||2,273 ||22 ||37,477 ||— ||— ||37,499 |
|Issuance of unrestricted stock awards to settle accrued employee compensation||130 ||1 ||2,474 ||— ||— ||2,475 |
|Issuance of pre-funded warrants||— ||`||— ||37,477 ||— ||— ||37,477 |
|Purchase of common stock under ESPP||53 ||1 ||874 ||— ||— ||875 |
|Stock-based compensation||— ||— ||24,352 ||— ||— ||24,352 |
|Other comprehensive loss||— ||— ||— ||(129)||— ||(129)|
|Net loss||— ||— ||— ||— ||(216,816)||(216,816)|
|Balances at September 30, 2021||$||70,097 ||$||701 ||$||4,440,605 ||$||(5,906)||$||(3,564,873)||$||870,527 |
bluebird bio, Inc.
Condensed Consolidated Statements of Cash Flows
|For the nine months ended |
|Cash flows from operating activities:|
|Adjustments to reconcile net loss to net cash used in operating activities:|
|Change in fair value of contingent consideration||— ||464 |
|Depreciation and amortization||3,745 ||17,335 |
|Stock-based compensation expense||30,509 ||101,829 |
|Loss (gain) on equity securities||3,135 ||(28,765)|
|Excess inventory reserve||7,519 ||29,712 |
|Other non-cash items||2,890 ||13,358 |
|Changes in operating assets and liabilities:|
|Prepaid expenses and other assets||(6,197)||(15,720)|
|Operating lease right-of-use assets||29,650 ||22,630 |
|Accounts payable||(7,552)||2,004 |
|Accrued expenses and other liabilities||(39,046)||54,774 |
|Operating lease liabilities||(22,523)||(24,499)|
|Deferred revenue||— ||210 |
|Collaboration research advancement||— ||(4,920)|
|Net cash used in operating activities||(296,680)||(495,914)|
|Cash flows from investing activities:|
|Purchase of property, plant and equipment||(8,100)||(12,944)|
|Purchases of marketable securities||— ||(421,416)|
|Proceeds from maturities of marketable securities||125,095 ||802,367 |
|Proceeds from sales of marketable securities||30,216 ||31,318 |
|Proceeds from sale of Durham, North Carolina facility||— ||110,300 |
|Purchase of intangible assets||— ||(8,000)|
|Net cash provided by investing activities||147,211 ||501,625 |
|Cash flows from financing activities:|
|Proceeds from exercise of stock options and ESPP contributions||3 ||5,078 |
|Proceeds from issuance of common stock and warrants||— ||74,982 |
|Proceeds from the secondary public offering, net of issuance costs||54,365 ||— |
|Net cash provided by financing activities||54,368 ||80,060 |
|(Decrease) increase in cash, cash equivalents and restricted cash||(95,101)||85,771 |
|Cash, cash equivalents and restricted cash at beginning of period||206,693 ||373,728 |
|Cash, cash equivalents and restricted cash at end of period||111,592 ||459,499 |
|Reconciliation of cash, cash equivalents and restricted cash:|
|Cash and cash equivalents||66,478 ||402,461 |
|Restricted cash included in receivables and other current assets||1,565 ||2,530 |
|Restricted cash included in restricted cash and other non-current assets||43,549 ||54,508 |
|Total cash, cash equivalents and restricted cash||111,592 ||459,499 |
|Supplemental cash flow disclosures from investing and financing activities:|
|Purchases of property, plant and equipment included in accounts payable and accrued expenses||176 ||732 |
|Offering expenses accrued or in AP||298 ||— |
|Right-of-use assets obtained in exchange for operating lease liabilities||229,636 ||22,049 |
|Reduction of right of use asset and associated lease liability||(2,833)||(9,004)|
|Issuance of unrestricted stock awards to settle accrued employee compensation||— ||14,488 |
See accompanying notes to unaudited condensed consolidated financial statements.
bluebird bio, Inc.
Notes to Condensed Consolidated Financial Statements
1. Description of the business
bluebird bio, Inc. (the “Company” or “bluebird”) was incorporated in Delaware on April 16, 1992, and is headquartered in Cambridge, Massachusetts. The Company is a biotechnology company committed to researching, developing and commercializing potentially transformative gene therapies for severe genetic diseases. Since its inception, the Company has devoted substantially all of its resources to its research and development efforts relating to its product candidates, including activities to manufacture product candidates, conduct clinical studies of its product candidates, perform preclinical research to identify new product candidates and provide selling, general and administrative support for these operations, including commercial-readiness activities, and to its commercialization efforts relating to its approved products.
The Company’s programs in severe genetic diseases include ZYNTEGLO® (betibeglogene autotemcel, or "beti-cel", formerly "LentiGlobin for β-thalassemia gene therapy"), which was approved by the U.S. Food and Drug Administration ("FDA") in August 2022 for the treatment of adult and pediatric patients with β-thalassemia who require regular red blood cell (RBC) transfusions; SKYSONA® (elivaldogene autotemcel, or "eli-cel", formerly "Lenti-D gene therapy") which was granted Accelerated Approval by the FDA in September 2022 to slow the progression of neurologic dysfunction in boys 4-17 years of age with early, active cerebral adrenoleukodystrophy ("CALD"); and lovotibeglogene autotemcel ("lovo-cel", formerly "LentiGlobin for SCD") being developed as a treatment for sickle cell disease ("SCD").
In August 2021, the Company announced its intent to focus its severe genetic disease business on the U.S. market and further invest in research and development for its core programs in β-thalassemia, SCD, and CALD. As part of the strategy to focus on the U.S. market, it began executing an orderly wind down of its European operations, which resulted in a reduction of selling, general and administrative costs and had an impact on the Company's excess inventory analysis, which is based on sales forecasts and projected inventory consumption levels.
In November 2021, the Company completed the separation of its severe genetic disease and oncology programs into two separate, independent publicly traded companies, bluebird bio, Inc. and 2seventy bio, Inc. (“2seventy bio”), a Delaware corporation and wholly-owned subsidiary of the Company prior to the separation. bluebird retained its severe genetic disease programs, including programs for β-thalassemia, SCD, and CALD, with a focus on the U.S. market.
In April 2022, the Board of Directors approved a comprehensive restructuring plan intended to reduce operating expenses and enhance the Company’s focus on achieving FDA approval for its programs in the U.S. The Company intends to maintain targeted research efforts focused on in-vivo lentiviral vector ("LVV") gene therapy and to deprioritize direct investments in reduced toxicity conditioning and cryopreserved apheresis. As part of the restructuring, bluebird reduced its workforce by approximately 30% across the second and third quarters of 2022. Refer to Note 14, Reduction in workforce, for more information on this restructuring.
On June 22, 2022, the Company entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Goldman Sachs & Co. LLC (“Goldman”) to sell shares of the Company’s common stock up to $75.0 million, from time to time, through an “at the market” equity offering program under which Goldman will act as manager. The Equity Distribution Agreement also provides for the sale of shares to Goldman directly as principal, in which case the Company and Goldman will enter into a separate terms agreement. The Company will pay Goldman a commission equal to up to 3.0% of the gross proceeds of any Common Stock sold through Goldman under the Equity Distribution Agreement. As of September 30, 2022, the Company sold 10.7 million shares of common stock at-the-market under the Equity Distribution Agreement, resulting in gross proceeds to the Company of approximately $56.2 million ($54.1 million net of offering costs). Refer to Note 10, Equity, in the Notes to Condensed Consolidated Financial Statements appearing elsewhere in this Quarterly Report on Form 10-Q for more information.
As of September 30, 2022, the Company had cash, cash equivalents and marketable securities of approximately $141.0 million. The Company has incurred losses since inception and to date has financed its operations primarily through the sale of equity securities and, to a lesser extent, through collaboration agreements and grants from charitable foundations. As of September 30, 2022, the Company had an accumulated deficit of $4.02 billion. During the nine months ended September 30, 2022, the Company incurred a loss of $298.8 million and used $296.7 million of cash in operations. The Company expects to continue to generate operating losses and negative operating cash flows for the next few years and will need additional funding to support its planned operating activities through profitability. The transition to profitability is dependent upon the successful
development, approval, and commercialization of lovo-cel, the successful commercialization of ZYNTEGLO and SKYSONA and the achievement of a level of revenues adequate to support its cost structure.
In accordance with Accounting Standards Codification 205-40, Going Concern ("ASC 205-40"), the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that these condensed consolidated financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that these condensed consolidated financial statements are issued. In performing its analysis, management excluded certain elements of its operating plan that cannot be considered probable. Under ASC 205-40, the future receipt of potential funding from future equity or debt issuances, the release of restricted cash related to the Company’s 50 Binney Street lease, and the potential sale of priority review vouchers cannot be considered probable at this time because these plans are not entirely within the Company’s control nor have been approved by the Board of Directors as of the date of these condensed consolidated financial statements. The restructuring plan described above was approved by the Board of Directors in April 2022 and therefore was incorporated into the Company's assessment of its ability to continue as a going concern within one year after the date that these condensed consolidated financial statements are issued.
The Company's expectation to generate operating losses and negative operating cash flows in the future and the need for additional funding to support its planned operations raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year after the date that these condensed consolidated financial statements are issued. Management's plans to alleviate the conditions that raise substantial doubt include implementing reduced 2022 spending, including projected savings through the move of the Company's headquarters to Assembly Row in Somerville, Massachusetts, the completion of its orderly wind down of European operations, the completion of its April 2022 restructuring plans, the potential sale of priority review vouchers issued with the U.S. regulatory approvals of ZYNTEGLO and SKYSONA, and the pursuit of additional cash resources through public or private equity or debt financings. Management has concluded the likelihood that its plan to successfully obtain sufficient funding from one or more of these sources, or adequately reduce expenditures, while reasonably possible, is less than probable. In accordance with ASC 205-40, the Company has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least 12 months from the date of issuance of these condensed consolidated financial statements.
The accompanying 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 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 the uncertainties described above.
2. Basis of presentation, principles of consolidation and significant accounting policies
Basis of presentation
The accompanying condensed consolidated financial statements are unaudited and have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States GAAP as included in the ASC and Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”). Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. These 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 interim periods ended September 30, 2022 and 2021.
The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2021, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on March 4, 2022 (the "2021 Annual Report on Form 10-K").
Certain items in the prior year’s condensed consolidated financial statements have been reclassified to conform to the current presentation. The Company has presented its oncology business together with its manufacturing facility in Durham, North Carolina as discontinued operations in its consolidated financial statements for the three and nine months ended September 30, 2021 (see Note 3, Discontinued operations). The historical financial statements and footnotes have been recast accordingly.
Amounts reported are computed based on thousands, except percentages, per share amounts or as otherwise noted. As a result, certain totals may not sum due to rounding.
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. 2seventy bio was a wholly-owned subsidiary until it became an independent publicly-traded company on November 4, 2021. All intercompany balances and transactions have been eliminated in consolidation. The Company views its operations and manages its business in one operating segment.
The Company determined that the separation of its oncology business in November 2021 and the sale of its manufacturing facility in Durham, North Carolina in September 2021 represented multiple components of a single disposal plan that met the criteria for classification as a discontinued operation in accordance with ASC Subtopic 205-20, Discontinued Operations (“ASC 205-20”). Accordingly, the accompanying condensed consolidated financial statements for the three and nine months ended September 30, 2021 have been updated to present the results of all discontinued operations reported as a separate component of loss in the consolidated statements of operations and comprehensive loss (see Note 3, Discontinued operations).
Significant accounting policies
The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and nine months ended September 30, 2022 are consistent with those discussed in Note 2 to the consolidated financial statements included in the Company’s 2021 Annual Report on Form 10-K.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could materially differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including: expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements.
Estimates and judgments are used in the following areas, among others: future undiscounted cash flows and subsequent fair value estimates used to assess potential and measure any impairment of long-lived assets, including goodwill and intangible assets, and the measurement of right-of-use assets and lease liabilities, stock-based compensation expense, accrued expenses, income taxes, the assets and liabilities and losses related to discontinued operations and the assessment of the Company's ability to fund its operations for at least the next twelve months from the date of issuance of these financial statements.
Recent accounting pronouncements
Not yet adopted
ASU No. 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures
In March 2022, the FASB issued ASU 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”), which eliminates the recognition and measurement guidance on troubled debt restructurings for creditors that have adopted ASC 326 and requires enhanced disclosure of loan modifications for borrowers experiencing financial difficulty. ASU 2022-02 amends the guidance on vintage disclosures to require disclosure of current-period gross write-offs by year of origination. The new standard will be effective beginning January 1, 2023. The
adoption of ASU 2022-02 is not expected to have a material impact on the Company's financial position or results of operations.
3. Discontinued operations
Sale of bluebird Research Triangle manufacturing facility
In November 2017, the Company acquired a manufacturing facility in Durham, North Carolina ("bRT") for the future manufacture of LVV for the Company’s therapies related to its oncology programs. In July 2021, the Company and Resilience US, Inc., an affiliate of National Resilience, Inc. ("Resilience"), signed an Asset Purchase Agreement (the “Agreement”). As part of the Agreement, and upon the closing of the transaction in September 2021, Resilience acquired the Company's LVV manufacturing facility located in Durham, North Carolina and retained staff currently employed at the site. As a result of the transaction, the Company disposed of $111.2 million of net assets, primarily consisting of the building and laboratory equipment associated with the Company's oncology programs. The Company recognized a loss on disposal of assets of $2.0 million during the year ended December 31, 2021. As the sale of the bRT manufacturing facility and the separation of 2seventy bio (as described below) were deemed to represent multiple components of a single disposal plan, the results of operations related to bRT have been included as a component of discontinued operations.
2seventy bio Separation
On November 4, 2021, the Company completed the previously announced separation of its oncology programs and portfolio, and the certain related assets and liabilities, into a separate, independent publicly traded company (the “Separation”). The Separation was effected by means of a distribution of all of the outstanding shares of common stock of 2seventy bio in which each bluebird stockholder received one share of common stock, par value $0.0001 per share, of 2seventy bio for every three shares of common stock, par value $0.01 per share, of bluebird held as of the close of business on October 19, 2021 (the “Distribution”).
In connection with the Separation, bluebird entered into a separation agreement (the “Separation Agreement”) with 2seventy bio, dated as of November 3, 2021, that, among other things, set forth bluebird’s agreements with 2seventy bio regarding the principal actions to be taken in connection with the Separation, including the Distribution. The effective time of the Distribution was 12:01 a.m. on November 4, 2021. The Separation Agreement identified assets transferred to, liabilities assumed by and contracts assigned to 2seventy bio as part of the Separation, and it provided for when and how these transfers, assumptions and assignments occurred. The purpose of the Separation Agreement was to provide 2seventy bio and bluebird with assets to operate their respective businesses and retain or assume liabilities related to those assets. Each of 2seventy bio and bluebird agreed to releases, with respect to pre-Separation claims, and cross indemnities, with respect to post-Separation claims, that were principally designed to place financial responsibility for the obligations and liabilities allocated to 2seventy bio under the Separation Agreement with 2seventy bio and financial responsibility for the obligations and liabilities allocated to bluebird under the Separation Agreement with bluebird. bluebird and 2seventy bio are also each subject to mutual 12-month employee non-solicit and non-hire restrictions, subject to certain customary exceptions.
bluebird and 2seventy bio also entered into a tax matters agreement, an employee matters agreement and an intellectual property agreement. Additionally, bluebird entered into two transition services agreements with 2seventy bio, whose President is a member of the Company’s Board of Directors. Pursuant to the transition service agreements, bluebird is obligated to provide and is entitled to receive certain transition services related to corporate functions, such as finance, human resources, internal audit, research and development, financial reporting, and information technology. Services provided by bluebird to 2seventy bio will continue for an initial term of up to two years, unless earlier terminated or extended according to the terms of the transition services agreement. Services received and performed are paid at a mutually agreed upon rate. Amounts received for services provided to 2seventy bio are recorded as other income and amounts paid for services provided by 2seventy bio are recorded as selling, general and administrative expense and research and development expense, as applicable. In addition, the Company entered into a sublease agreement with 2seventy bio for office, laboratory and storage space located at 60 Binney Street (the "60 Binney Street Sublease") while it constructs and outfits its new office and laboratory space.
During the three and nine months ended September 30, 2022, the Company incurred $1.5 million and $7.0 million, respectively of net expense for transactions with 2seventy bio within research and development and selling, general and administrative expense in the condensed consolidated statements of operations and comprehensive loss, including $0.9 million and $3.1 million, respectively of net expense related to the 60 Binney Street Sublease. As of September 30, 2022, the Company had $0.4 million of accounts receivable due from and $1.9 million of accounts payable due to 2seventy bio. As of December 31, 2021, the Company had an immaterial amount of accounts receivable and accounts payable due from and due to 2seventy bio.
In connection with the Separation, the Company determined its oncology business, together with the bRT manufacturing facility, qualified for discontinued operations accounting treatment in accordance with ASC 205-20. The following table summarizes revenue and expenses of the discontinued operations for the three and nine months ended September 30, 2021 (in thousands):
|Three months ended September 30, 2021||Nine months ended September 30, 2021|
|Service revenue||$||6,312 ||$||17,544 |
|Collaborative arrangement revenue||14,738 ||17,927 |
|Royalty and other revenue||609 ||5,417 |
|Total revenues||21,659 ||40,888 |
|Research and development||57,748 ||189,053 |
|Selling, general and administrative||26,048 ||72,945 |
|Share of collaboration loss||— ||10,071 |
|Cost of royalty and other revenue||320 ||2,111 |
|Change in fair value of contingent consideration||48 ||464 |
|Total operating expenses||84,164 ||274,644 |
|Loss from operations||(62,505)||(233,756)|
|Interest income, net||159 ||735 |
|Other income, net||(1,636)||(994)|
|Loss before income taxes||(63,982)||(234,015)|
|Income tax benefit (expense)||— ||— |
There were no revenue and expenses of the discontinued operations for the three and nine months ended September 30, 2022, as all operations were transferred to 2seventy bio upon the Separation. There were no assets and liabilities related to discontinued operations as of September 30, 2022 or December 31, 2021, as all balances were transferred to 2seventy bio upon the Separation.
The following table summarizes the significant non-cash items and capital expenditures of the discontinued operations that are included in the condensed consolidated statements of cash flows for the nine months ended September 30, 2021 (in thousands):
|Nine months ended September 30, 2021|
|Change in fair value of contingent consideration||$||464 |
|Depreciation and amortization||12,967 |
|Stock-based compensation expense||26,189 |
|Loss on fixed asset disposal||254 |
|Loss on sale of manufacturing facility||1,986 |
|Purchase of property, plant and equipment||$||(10,579)|
|Proceeds from sale of manufacturing facility||110,300 |
|Purchase of intangible assets||(8,000)|
|Supplemental cash flow disclosures:|
|Purchases of property, plant and equipment included in accounts payable and accrued expenses||$||321 |
4. Marketable securities
The following table summarizes the marketable securities held at September 30, 2022 and December 31, 2021 (in thousands):
cost / Cost
|September 30, 2022|
U.S. government agency securities and treasuries
|$||70,456 ||$||— ||$||(2,215)||$||68,241 |
|6,396 ||— ||(75)||6,321 |
|— ||— ||— ||— |
|— ||— ||— ||— |
|$||76,852 ||$||— ||$||(2,290)||$||74,562 |
|December 31, 2021|
|U.S. government agency securities and treasuries||$||128,902 ||$||— ||$||(509)||$||128,393 |
|49,366 ||— ||(59)||49,307 |
|54,065 ||— ||— ||54,065 |
|4,305 ||— ||(614)||3,691 |
|$||236,638 ||$||— ||$||(1,182)||$||235,456 |
No available-for-sale debt securities held as of September 30, 2022 or December 31, 2021 had remaining maturities greater than five years.
5. Fair value measurements
The following table sets forth the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021 (in thousands):
|September 30, 2022|
|Cash and cash equivalents||$||66,478 ||$||66,478 ||$||— ||$||— |
|U.S. government agency securities and treasuries||68,241 ||— ||68,241 ||— |
|Corporate bonds||6,321 ||— ||6,321 ||— |
|Commercial paper||— ||— ||— ||— |
|Equity securities||— ||— ||— ||— |
|Total||$||141,040 ||$||66,478 ||$||74,562 ||$||— |
|December 31, 2021|
|Cash and cash equivalents||$||161,160 ||$||161,146 ||$||14 ||$||— |
|U.S. government agency securities and treasuries||128,393 ||— ||128,393 ||— |
|Corporate bonds||49,308 ||— ||49,308 ||— |
|Commercial paper||54,065 ||— ||54,065 ||— |
|Equity securities||3,691 ||3,691 ||— ||— |
|Total||$||396,617 ||$||164,837 ||$||231,780 ||$||— |
Cash and cash equivalents
The Company considers all highly liquid securities with original final maturities of 90 days or less from the date of purchase to be cash equivalents. As of September 30, 2022 and December 31, 2021, cash and cash equivalents comprise funds in cash and money market accounts.
Marketable securities classified as Level 2 within the valuation hierarchy generally consist of U.S. government agency securities and treasuries, corporate bonds, and commercial paper. The Company estimates the fair values of these marketable securities by taking into consideration valuations obtained from third-party pricing sources. These pricing sources utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include market pricing based on real-time trade data for the same or similar securities, issuer credit spreads, benchmark yields, and other observable inputs. The Company validates the prices provided by its third-party pricing sources by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances.
The amortized cost of available-for-sale debt securities is adjusted for amortization of premiums and accretion of discounts to the earliest call date for premiums or to maturity for discounts. At September 30, 2022 and December 31, 2021, the balance in the Company’s accumulated other comprehensive loss was composed primarily of activity related to the Company’s available-for-sale debt securities. There were no material realized gains or losses recognized on the sale or maturity of available-for-sale debt securities during the three and nine months ended September 30, 2022 or 2021.
Accrued interest receivable on the Company's available-for-sale debt securities totaled $0.1 million and $0.3 million as of September 30, 2022 and December 31, 2021, respectively. No accrued interest receivable was written off during the three and nine months ended September 30, 2022 or 2021.
The following table summarizes available-for-sale debt securities in a continuous unrealized loss position for less than and greater than twelve months, and for which an allowance for credit losses has not been recorded at September 30, 2022 and December 31, 2021 (in thousands):
|Less than 12 months||12 months or greater||Total|
|Description||Fair value||Unrealized losses||Fair value||Unrealized losses||Fair value||Unrealized losses|
|September 30, 2022|
|U.S. government agency securities |
|$||31,448 ||$||(1,030)||$||36,793 ||$||(1,185)||$||68,241 ||$||(2,215)|
|Corporate bonds||3,337 ||(24)||2,984 ||(51)||6,321 ||(75)|
|Total||$||34,785 ||$||(1,054)||$||39,777 ||$||(1,236)||$||74,562 ||$||(2,290)|
|December 31, 2021|
|U.S. government agency securities |
|$||108,695 ||$||(505)||$||2,496 ||$||(4)||$||111,191 ||$||(509)|