Precision BioSciences Inc.

11/03/2025 | Press release | Distributed by Public on 11/03/2025 06:01

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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 Financial Statements and the related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many important factors, including those set forth in Part II. Item 1A. "Risk Factors" of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in, or implied by, these forward-looking statements. As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to "we," "us," "our," the "Company" and "Precision" refer to Precision BioSciences, Inc.
Overview
We are a clinical stage gene editing company dedicated to improving life by developing in vivotherapies for genetic and infectious diseases with the application of our wholly-owned proprietary ARCUS genome editing platform. The foundation of ARCUS is a natural homing endonuclease which allows us to replicate precise gene editing as it evolved in nature for sophisticated gene edits, including gene insertion, excision, and elimination. ARCUS is also unique in its relatively small size which potentially allows delivery to a wider range of cells and tissues using viral and non-viral gene delivery methods.
We are leveraging our proprietary ARCUS genome editing platform to advance in vivogene editing programs that go beyond gene knockouts in the liver and carry out more sophisticated edits such as gene insertions, gene excision, and gene elimination, unlocking a broader potential for ARCUS in vivogene editing in human therapeutics.
PBGENE-HBV is our wholly owned in vivo gene editing program under investigation in a global first-in-human clinical trial, which is designed to be a potentially curative treatment for chronic Hepatitis B infection. PBGENE-HBV is the first and only potentially curative gene editing program to enter the clinic that is specifically designed to eliminate cccDNA and inactivate integrated HBV DNA, the root cause chronic Hepatitis B. The ELIMINATE-B trial is investigating PBGENE-HBV at multiple ascending dose levels with three dose administrations per dose level in patients with chronic Hepatitis B. The ELIMINATE-B trial is recruiting patients in the U.S., Moldova, Hong Kong, New Zealand and the U.K.
In August 2025, we announced Phase 1 safety and efficacy data for Cohort 1 (0.2 mg/kg) and initial safety data from Cohort 2 (0.4 mg/kg) in the ELIMINATE-B study and subsequently presented the data in September 2025 at the 6th International Coalition to Eliminate HBV Cure Symposium. Following multiple administrations across two dose levels in Cohort 1 and Cohort 2, PBGENE-HBV has continued to be well-tolerated and active. We commenced dosing patients in Cohort 3 in the third quarter of 2025 with additional data readouts planned in early 2026.
We have been selected to deliver a late-breaking oral presentation at the upcoming Liver Meeting 2025 during the 75th American Association for the Study of Liver Diseases on November 10, 2025. The oral presentation will feature new data from the first two cohorts of the ongoing Phase 1 ELIMINATE-B Trial.
Duchenne muscular dystrophy, or DMD, is a genetic disease caused by mutations in the dystrophin gene that prevent production of the dystrophin protein and affects approximately 15,000 patients in the United States alone. There are currently no approved therapies with curative intent that can drive durable and significant functional improvements over time. PBGENE-DMD is designed to improve function for more than 60% of patients afflicted with DMD by employing two complementary ARCUS nucleases delivered in a single AAV to excise exons 45-55 of the dystrophin gene. The aim of this approach is to restore a near-full length functional dystrophin protein within the body that more closely resembles normal dystrophin as opposed to synthetic, truncated dystrophin approaches with minimal functional benefit.
The U.S. Food and Drug Adminstration ("FDA") granted PBGENE-DMD Rare Pediatric Disease designation in June 2025 for the treatment of DMD followed by Orphan Drug Designation in July 2025, highlighting the significant unmet need for new therapeutic options for those living with DMD.
On October 10, 2025, we presented a late-breaking poster presentation at the 30th Annual International Congress of the World Muscle Society meeting, highlighting durable improvements in muscle function over time through increased dystrophin expression and dystrophin-positive cells for PBGENE-DMD. The data from a DMD mouse model demonstrated that dystrophin protein was detected in all muscles evaluated following the administration of PBGENE-DMD at doses up to 1x1014vg/kg, with increased expression observed at 9 months versus prior timepoints in the quadriceps, gastrocnemius,
heart, and diaphragm, resulting in substantial and sustained functional muscle improvement. An increase in dystrophin-positive muscle cells were observed in all muscles. The maximum force output was significantly improved over untreated DMD mice at 3-, 6- and 9-months post-treatment, highlighting expected durability of PBGENE-DMD outcomes.
We have completed final toxicology studies and are manufacturing clinical supplies with an anticipated U.S. investigational new drug ("IND") filing by the end of 2025. Pending IND clearance, Phase 1 initiation in DMD patients is anticipated in the first half of 2026 with initial clinical data expected in the second half of 2026.
PBGENE-3243 is a potential treatment for m.3243 associated mitochondrial disease that is designed to specifically target and eliminate mutant m.3243G mitochondrial DNA ("mtDNA"), thereby eliminating the root cause of the disease. We have paused development of PBGENE-3243 to prioritize our two lead programs, PBGENE-HBV and PBGENE-DMD.
In partnership with iECURE, Inc. ("iECURE"), an ARCUS-mediated targeted gene insertion approach is being pursued as a potential treatment option for neonatal onset ornithine transcarbamylase ("OTC") deficiency. iECURE presented at several recent medical conferences with updated ECUR-506 clinical data including the 6th International Symposium on Urea Cycle Disorders and the 15th International Congress of Inborn Errors of Metabolism, both held in early September 2025 in Kyoto, Japan. In October 2025, medical conferences included the European Society of Gene & Cell Therapy Annual Congress held in Sevilla, Spain, and the American Society of Human Genetics Annual Meeting in Boston, Massachusetts.
These data presentations build upon previously reported clinical results demonstrating complete clinical response in the first participant at the lowest dose level (1.3x1013GC/kg) of ECUR-506, as defined by the study protocol. The OTC-HOPE study is ongoing in the U.K., the U.S., Australia, and Spain with data from the trial expected in the first half of 2026.
Imugene Limited, our clinical stage partner developing azer-cel for oncology indications, announced in September 2025, additional efficacy data from its Phase 1b clinical trial evaluating azer-cel and IL-2 in patients with relapsed/refractory diffuse large B-cell lymphoma. The updated data showcased an overall response rate of 81% in patients treated with azer-cel and IL-2 with seven complete responses and six partial responses in patients treated with azer-cel including several patients remaining in durable remission beyond one year.
On October 28, 2025, Imugene announced the first efficacy results from the CAR T-naïve cohort of its ongoing Phase 1b trial of azer-cel. Of six evaluable CAR T-naïve patients, five (83%) achieved an overall response including three (50%) complete responses. The result of the sixth patient's follow-up scan is pending. A total of ten patients have been treated in this CAR T-naïve cohort thus far, with additional results to come upon patient follow-up. These initial results encompass several rare lymphoma subtypes, notably Waldenström Macroglobulinemia (WM), Marginal Zone Lymphoma (MZL), and Primary Central Nervous System Lymphoma (PCNSL).
Imugene is actively enrolling patients in the Phase 1b azer-cel trial at ten U.S. sites and five sites in Australia. Imugene has scheduled a Type C meeting with the FDA to discuss potential pivotal study design options for azer-cel. On October 31, 2025, the Company received an $8.0 million milestone payment from Imugene, including $3.0 million in cash and $5.0 million in Imugene stock.
Components of our Results of Operations
Revenue
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales in the foreseeable future. We record revenue from collaboration and license agreements, including amounts related to upfront payments, milestone payments, fees for licenses of our intellectual property, and research and development funding.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our product candidates. These include the following:
•salaries, benefits and other related costs, including share-based compensation expense, for personnel engaged in research and development functions;
•expenses incurred under agreements with third parties, including third parties that conduct preclinical research and development activities on our behalf;
•costs of manufacturing drug products for use in our preclinical studies, including the costs of contract manufacturing organizations ("CMOs");
•costs of outside consultants;
•costs of laboratory supplies and acquiring, developing and manufacturing preclinical study materials;
•license payments made for intellectual property used in research and development activities; and
•facility-related expenses, which include direct depreciation costs and expenses for rent and maintenance of facilities and other operating costs if specifically identifiable to research activities.
We expense research and development costs as incurred. We track external research and development costs by product candidate beginning when it is publicly named as a development program. Internal and external costs that are not identifiable to specific development candidates are included in the platform development expenses category.
Research and development activities are central to our business model. While we expect our costs to decrease in the short-term for 2026 and 2027 as a result of our cost reduction initiatives, we expect that our research and development expenses will increase over the long term and will comprise a larger percentage of our total expenses as we progress development of our product candidates.
We cannot determine with certainty the duration and costs of future clinical trials for our product candidates we may develop or if, when or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we obtain marketing approval. We may never succeed in obtaining marketing approval for any product candidate. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:
•the scope, rate of progress, expense and results of future clinical trials of our product candidates and other research and development activities that we may conduct;
•the ability to collaborate and partner with third parties to fund any or all of our programs;
•uncertainties in clinical trial design and patient enrollment rates;
•the actual probability of success for our product candidates, including their safety and efficacy, early clinical data, competition, manufacturing capability and commercial viability;
•significant and changing government regulation and regulatory guidance;
•the timing and receipt of any marketing approvals; and
•the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.
A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to slower than expected patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, consulting fees, recruitment-related costs and other employee-related costs, including share-based compensation, for personnel in our executive, finance, business development, operations and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters; information technology costs; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and expenses for rent and maintenance of facilities and other operating costs that are not specifically attributable to research activities.
Change in Equity Method Investment
Changes in fair value on our equity method investment represents changes in the investment value as a result of dilution from our proportionate share of our equity method investee, Elo Life Systems, Inc. ("Elo"), resulting from its Series A-2 financing offset by our proportionate share of net loss of Elo. Changes in the investment value also occur as a result of our proportionate share of Elo's profit and loss activity in a reporting period.
Changes in Other Fair Value Adjustments
The change in other fair value adjustments represents the assessed changes in fair value of assets and liabilities carried at fair value.
As part of the consideration received in connection to the development and license agreement with iECURE, we entered into an equity issuance agreement with iECURE (the "iECURE Equity Agreement"), pursuant which iECURE issued us common stock in iECURE.
We adjust the carrying value of the iECURE investment under the iECURE Equity Agreement to its fair value each reporting period with any changes in fair value recorded to other (expense) income.
Change in Fair Value of Warrant Liability
The change in fair value of warrant liability represents the mark-to-market fair value adjustments to the outstanding warrants issued in connection with an underwriting agreement in March 2024 relating to a public offering of (i) 2,500,000 shares of our common stock, par value $0.000005 per share, and (ii) warrants to purchase up to an aggregate of 2,500,000 shares of our common stock (the "March 2024 Public Offering").
Interest Expense
Interest expense consists of interest payments incurred and discount amortization on debt outstanding.
Interest Income
Interest income consists of interest income earned on our cash and cash equivalents and note receivable from Elo.
Gain on Disposal of Assets
Gain on disposal of assets represents the difference between the sale price and remaining net book value of sold assets at the time of their sale.
Results of Operations
Comparison of the Three Months Ended September 30, 2025 and September 30, 2024
The following table summarizes our results of operations for the three months ended September 30, 2025 and September 30, 2024, together with the changes in those items:
For the Three Months Ended September 30,
(in thousands) 2025 2024 Change
Revenue $ 13 $ 576 $ (563)
Operating expenses
Research and development 13,352 13,084 268
General and administrative 7,328 8,767 (1,439)
Total operating expenses 20,680 21,851 (1,171)
Operating loss (20,667) (21,275) 608
Other (expense) income:
Loss from equity method investment (591) (875) 284
(Loss) gain on changes in other fair value adjustments (3) 571 (574)
(Loss) gain on change in fair value of warrant liability (1,179) 3,647 (4,826)
Interest expense (362) (256) (106)
Interest income 1,027 1,763 (736)
Gain on disposal of assets 3 - 3
Total other (expense) income (1,105) 4,850 (5,955)
Loss from operations (21,772) (16,425) (5,347)
Net loss $ (21,772) $ (16,425) $ (5,347)
Revenue
Revenue for the three months ended September 30, 2025 was less than $0.1 million, compared to $0.6 million for the three months ended September 30, 2024. The decrease in revenue during the three months ended September 30, 2025 was the result of less billable effort under our collaboration and license agreement (the "Novartis Agreement") with Novartis Pharma AG ("Novartis") as we neared the completion of our preclinical work plan during the three months ended September 30, 2025 compared to the three months ended September 30, 2024.
Research and Development Expenses
Three months ended September 30,
(in thousands) 2025 2024 Change
Direct research and development expenses by product candidate:
PBGENE-HBV external development costs $ 1,596 $ 2,484 $ (888)
PBGENE-DMD external development costs 3,738 298 3,440
PBGENE-3243 external development costs 731 2,619 (1,888)
Platform development and early-stage research expenses:
Employee-related costs (including share-based compensation) 5,457 5,167 290
Laboratory supplies and services 329 539 (210)
CMOs and outsourced research and development 57 138 (81)
Facility-related costs, laboratory equipment, and maintenance 684 747 (63)
Depreciation and amortization 309 589 (280)
Licensing fees and other research and development costs 451 503 (52)
Total research and development expenses $ 13,352 $ 13,084 $ 268
Research and development expenses for the three months ended September 30, 2025 were $13.4 million, compared to $13.1 million for the three months ended September 30, 2024. The increase of $0.3 million was primarily due to a $3.4 million increase in our direct expenses in PBGENE-DMD which was partially offset by a $2.8 million decrease in our direct expenses in the PBGENE-HBV and PBGENE-3243 programs. Additionally offsetting the increase was a $0.4 million reduction in platform development and early-stage research expenses.
The increase in expense of $3.4 million for PBGENE-DMD was a result of the program's acceleration in 2025. The direct expense decrease of $0.9 million for PBGENE-HBV was due to lower manufacturing and toxicology expenses as the program transitioned to the clinic at the end of 2024. PBGENE-3243 also had an expense decrease of $1.9 million as we have paused development. Platform development and early-stage research expenses decreased over the comparison period as a result of a $0.3 million decrease in depreciation and amortization and a $0.2 million decrease in laboratory supplies and services expenses.
General and Administrative Expenses
General and administrative expenses were $7.3 million for the three months ended September 30, 2025, compared to $8.8 million for the three months ended September 30, 2024. The decrease of approximately $1.4 million was primarily due to a $1.1 million decrease in employee-related costs and a $0.2 million decrease in consulting and professional services expenses.
Loss from Equity Method Investment
Loss from equity method investment was $0.6 million during the three months ended September 30, 2025 compared to $0.9 million during the three months ended September 30, 2024, which represented our proportionate share of Elo's net loss in each period.
(Loss) Gain on Changes in Other Fair Value Adjustments
Loss on changes in other fair value adjustments was less than $0.1 million for the three months ended September 30, 2025, which is attributable to the change in fair value on the final payment fee associated with the term loan. Gain on changes in other fair value adjustments was $0.6 million for the three months ended September 30, 2024, which was primarily attributable to the increase in fair value of the Imugene Convertible Note for that period.
(Loss) Gain on Change in Fair Value of Warrant Liability
Loss from change in fair value of the warrant liability was $1.2 million for the three months ended September 30, 2025 compared to a gain of $3.6 million for the three months ended September 30, 2024, which represents the mark-to-market fair value adjustment to the outstanding warrants issued in connection with the March 2024 Public Offering.
Interest Expense
Interest expense was $0.4 million for the three months ended September 30, 2025 compared to $0.3 million for the three months ended September 30, 2024. During the three months ended September 30, 2024, the final payment fee from our previous line of credit debt instrument was waived, which was offset against interest expense during the period.
Interest Income
Interest income was $1.0 million during the three months ended September 30, 2025 compared to $1.8 million during the three months ended September 30, 2024. The decrease of approximately $0.7 million in interest income was the result of lower interest rates and a lower cash balance during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.
Gain on Disposal of Assets
Gain on disposal of assets was less than $0.1 million during the three months ended September 30, 2025. There was no gain or loss on disposal of assets during the three months ended September 30, 2024.
Comparison of the Nine Months Ended September 30, 2025 and September 30, 2024
The following table summarizes our results of operations for the nine months ended September 30, 2025 and September 30, 2024, together with the changes in those items:
For the Nine Months Ended September 30,
(in thousands) 2025 2024 Change
Revenue $ 60 $ 68,058 $ (67,998)
Operating expenses
Research and development 39,708 43,652 (3,944)
General and administrative 25,008 25,722 (714)
Total operating expenses 64,716 69,374 (4,658)
Operating loss (64,656) (1,316) (63,340)
Other (expense) income:
Gain (loss) from equity method investment 86 (112) 198
(Loss) gain on changes in other fair value adjustments (2,418) 917 (3,335)
(Loss) gain on change in fair value of warrant liability (1,230) 21,798 (23,028)
Interest expense (1,074) (1,390) 316
Interest income 3,466 5,269 (1,803)
Loss on disposal of assets (31) (254) 223
Total other (expense) income (1,201) 26,228 (27,429)
(Loss) income from operations (65,857) 24,912 (90,769)
Net (loss) income $ (65,857) $ 24,912 $ (90,769)
Revenue
Revenue for the nine months ended September 30, 2025 was less than $0.1 million, compared to $68.1 million for the nine months ended September 30, 2024. The decrease of $68.0 million in revenue during the nine months ended September 30, 2025 was primarily the result of $52.7 million of revenue recognized in the prior period related to the conclusion of the Prevail Therapeutics Agreement, which represented all remaining deferred revenue under that agreement. Additionally contributing to the decrease in revenue were $9.5 million of revenue recognized under the TG License Agreement and Caribou Biosciences, Inc. license agreement during the nine months ended September 30, 2024, and a $5.9 million decrease in revenue recognized under the Novartis Agreement as we neared the completion of our preclinical work plan.
Research and Development Expenses
Nine months ended September 30,
(in thousands) 2025 2024 Change
Direct research and development expenses by product candidate:
PBGENE-HBV external development costs $ 4,575 $ 13,194 $ (8,619)
PBGENE-DMD external development costs 10,339 629 9,710
PBGENE-3243 external development costs 2,871 4,795 (1,924)
Platform development and early-stage research expenses:
Employee-related costs (including share-based compensation) 15,523 15,915 (392)
Laboratory supplies and services 1,340 1,953 (613)
CMOs and outsourced research and development 390 478 (88)
Facility-related costs, laboratory equipment, and maintenance 2,219 2,375 (156)
Depreciation and amortization 979 2,322 (1,343)
Licensing fees and other research and development costs 1,472 1,991 (519)
Total research and development expenses $ 39,708 $ 43,652 $ (3,944)
Research and development expenses for the nine months ended September 30, 2025 were $39.7 million, compared to $43.7 million for the nine months ended September 30, 2024. The decrease of approximately $3.9 million was primarily due to a $10.5 million decrease in our direct expenses within the PBGENE-HBV and PBGENE-3243 programs along with a $3.1 million decrease in platform development and early-stage research expenses. These expense decreases were partially offset by a $9.7 million increase in our direct expenses in PBGENE-DMD.
The direct expense decrease of $8.6 million for PBGENE-HBV was due to lower manufacturing and toxicology expenses as the program transitioned to the clinic at the end of 2024. PBGENE-3243 also had an expense decrease of $1.9 million as we have paused development. These decreases were offset by the $9.7 million increase in PBGENE-DMD development due to the program's acceleration in 2025. Platform development and early-stage research expenses also decreased by $3.1 million in expense over the comparison period. The primary factors for the decrease were a $1.3 million decrease in depreciation and amortization, a $0.6 million decrease in laboratory supplies and services expenses, and a $0.5 million decrease in licensing fees and other research and development costs.
General and Administrative Expenses
General and administrative expenses were $25.0 million for the nine months ended September 30, 2025, compared to $25.7 million for the nine months ended September 30, 2024. The decrease of $0.7 million was primarily due to decreases in other operating expenses.
Gain (Loss) from Equity Method Investment
Gain from equity method investment was $0.1 million during the nine months ended September 30, 2025 which was primarily driven by a $2.3 million gain on dilution from our proportionate share of Elo's proceeds from an additional tranche of the Series A-2 financing in such period, partially offset by our proportionate share of Elo's net loss of $2.2 million during the period. Loss from equity method investment was $0.1 million during the nine months ended September 30, 2024 which was primarily driven by a $2.7 million gain on dilution from our proportionate share of Elo's proceeds from the Series A-2 financing in such period, offset by our proportionate share of Elo's net loss of $2.8 million during the period.
(Loss) Gain on Changes in Other Fair Value Adjustments
Loss on changes in other fair value adjustments was $2.4 million for the nine months ended September 30, 2025 due to the change in fair value of the iECURE investment in the current period. Gain on changes in other fair value adjustments was $0.9 million for the nine months ended September 30, 2024, which was primarily attributable to an increase during such period in the fair value of the Imugene Convertible Note.
(Loss) Gain on Change in Fair Value of Warrant Liability
Loss from change in fair value of the warrant liability was $1.2 million for the nine months ended September 30, 2025 compared to a gain of $21.8 million for the nine months ended September 30, 2024, which represents the mark-to-market fair value adjustment to the outstanding warrants issued in connection with the March 2024 Public Offering.
Interest Expense
Interest expense was $1.1 million for the nine months ended September 30, 2025 compared to $1.4 million for the nine months ended September 30, 2024. The decrease of $0.3 million of interest expense was primarily driven by lower interest rates during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024.
Interest income was $3.5 million during the nine months ended September 30, 2025 compared to $5.3 million during the nine months ended September 30, 2024. The $1.8 million decrease in interest income was the result of lower interest rates and a lower cash balance during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024.
Loss on Disposal of Assets
Loss on disposal of assets was less than $0.1 million during the nine months ended September 30, 2025 and $0.3 million during the nine months ended September 30, 2024.
Liquidity and Capital Resources
Since our formation in 2006, we have devoted substantially all of our resources to developing ARCUS, conducting research and development activities, recruiting skilled personnel, developing manufacturing processes, establishing our intellectual property portfolio and providing general and administrative support for these operations.
We have historically incurred significant operating losses and have not generated any revenue from the sale of products. Our ability to generate any product revenue or product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our product candidates or the product candidates of our collaborators or other licensees for which we may receive milestone payments or royalties. As of September 30, 2025, we had an accumulated deficit of $548.3 million and a cash, cash equivalents and restricted cash balance of $71.2 million.
We expect to incur significant expenses and operating losses for the foreseeable future as we advance the development of our product candidates. We expect that our research and development and general and administrative costs will increase over the long term, including in connection with conducting preclinical studies and potential clinical trials for our product candidates, contracting with CROs and CMOs, expanding our intellectual property portfolio and providing general and administrative support for our operations. If we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing and distribution. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements or other sources.
Our sources of funding to finance our cash needs include proceeds from third parties through a combination of financings including our initial public offering ("IPO"), preferred stock and convertible note financings, underwritten offerings of our common stock and warrants, at-the-market ("ATM") offerings of our common stock as part of our shelf registration statement, upfront and milestone payments from partners, borrowings under bank facilities and funding from other strategic alliances and grants.
Pursuant to our July 31, 2024 amended and restated loan and security agreement with Banc of California (the "2024 Loan and Security Agreement") pursuant to which Banc of California provided us with a term loan with a principal amount of $22.5 million (the "2024 Term Loan"), we are not entitled to borrow any additional amounts under the 2024 Term Loan and are required to maintain an aggregate balance in a cash security account with Banc of California (the "Cash Security Account") at least equal to the outstanding principal amount of the 2024 Term Loan then outstanding.
Because of the numerous risks and uncertainties associated with the development of therapeutic products, we are unable to predict the timing or amount of our future expenses or when or if we will be able to achieve or maintain profitability. Even
if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be required to raise additional capital, potentially on terms that are unfavorable to us, or we may be unable to continue our operations at planned levels and be forced to reduce or terminate operations.
Cash Flows
Our cash, cash equivalents, and restricted cash totaled $71.2 million and $121.3 million as of September 30, 2025 and September 30, 2024, respectively.
The following table summarizes our sources and uses of cash for the periods presented:
For the Nine Months Ended September 30,
(in thousands) 2025 2024 Change
Cash flows used in operating activities:
Net (loss) income $ (65,857) $ 24,912 $ (90,769)
Non-cash adjustments 13,295 (9,774) 23,069
Changes in operating assets and liabilities (2,031) (54,900) 52,869
Net cash used in operating activities (54,593) (39,762) (14,831)
Net cash used in investing activities (309) (118) (191)
Net cash provided by financing activities 17,646 44,530 (26,884)
(Decrease) increase in cash, cash equivalents, and restricted cash $ (37,256) $ 4,650 $ (41,906)
Cash Used in Operating Activities
Our primary use of cash is to fund operating expenses, which consist primarily of research and development and general and administrative costs.
Cash used in operating activities during the nine months ended September 30, 2025 was $54.6 million compared to $39.8 million during the nine months ended September 30, 2024. The $14.8 million increase in cash used in operating activities was primarily driven by an $90.8 million decrease in net income offset by increases of $23.1 million in non-cash adjustments and $52.9 million in changes in operating assets and liabilities.
The increase in non-cash adjustments year over year was primarily driven by the net change in fair value of warrants during the nine months ended September 30, 2024 due to the decrease in the warrant liability which resulted in a negative balance within non-cash adjustments for the period. For the nine months ended September 30, 2025, the net change in fair value of warrants was positive within non-cash adjustments given the incremental increase in the warrant liability for the current period. Also contributing to the increase in non-cash adjustments year over year was the change in fair value of the iECURE investment in the current period.
The change in cash used in operating assets and liabilities is primarily driven by the net changes of deferred revenue as a result of the conclusion of the Prevail collaboration and a decrease in revenue recognized under the Novartis collaboration for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. Additionally driving the change in cash used in operating assets and liabilities is the net change of the contract asset as a result of the TG Therapeutics deferred share payment in January 2025 as well as the net changes in prepaid expenses and accounts payable across the comparison period.
Cash Used in Investing Activities
Cash used in investing activities primarily relates to cash expenditures to acquire leasehold additions, equipment, software and intangible assets. Net cash used in investing activities during the nine months ended September 30, 2025 was $0.3 million, compared to $0.1 million used in investing activities in the nine months ended September 30, 2024. The increase in cash used in investing activities was primarily the result of a $0.2 million increase in intangible asset purchases during the nine months ended September 30, 2025.
Cash Provided by Financing Activities
Net cash provided by financing activities during the nine months ended September 30, 2025 was $17.6 million, compared to $44.5 million during the nine months ended September 30, 2024. The $26.9 million decrease in cash provided by financing activities during the nine months ended September 30, 2025 was primarily due to the Company receiving $37.0 million in net proceeds from an underwritten offering of common stock and warrants in the nine months ended September 30, 2024, whereas the Company did not receive any net proceeds from underwritten offerings during the nine months ended September 30, 2025. The decrease was partially offset by a $10.0 million increase in net proceeds from the issuance of common stock through the ATM facility between the comparison periods.
Debt Obligations
On July 31, 2024, we replaced our revolving line of credit with Banc of California with the 2024 Term Loan with an aggregate principal amount of $22.5 million. The stated interest rate under the 2024 Term Loan is equal to the greater of 1.50% below the Prime Rate or 4.5%. As of September 30, 2025, the outstanding principal balance on the 2024 Term Loan was $22.5 million, the stated interest rate was 5.75% and the effective interest rate was 6.17%.
Under the terms of the 2024 Loan and Security Agreement, we granted Banc of California a security interest in a cash security account at Banc of California (the "Cash Security Account"), and Banc of California agreed to terminate all other security interests it had in our assets. We are required to maintain an aggregate unencumbered balance in the Cash Security Account at least equal to the outstanding principal amount of the 2024 Term Loan then outstanding.
Funding Requirements
We will continue to have funding requirements in connection with the continuation of our research and development efforts, potential IND and/or CTA submissions, potential clinical trials, and expected growth in our in vivoportfolios.
We believe that, as of the date of this Quarterly Report on Form 10-Q, existing cash and cash equivalents, expected operational receipts, including potential near-term consideration to be received from licensees, operational efficiencies gained from divestment of our historical CAR T operations, and availability of our ATM facility will be sufficient to fund our operating expenses and capital expenditure requirements into the second half of 2027. We expect our cash runway to be sufficient to enable potential commencement of a Phase 2 study for PBGENE-HBV and a potential pivotal study for PBGENE-DMD pending supportive Phase 1 data readouts. We have based these estimates on assumptions that may prove to be imprecise, and we could utilize our available capital resources sooner than we expect. There are no assurances that we will be successful in obtaining an adequate level of financing as and when needed to finance our operations on terms acceptable to us or at all, particularly in light of current global macroeconomic conditions. If we are unable to obtain sufficient financing on a timely basis or on favorable terms, we may be required to significantly delay, alter reduce or eliminate one or more of our research or product development programs and/or commercialization efforts, or to grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves. We may also be otherwise unable to execute our business plan or growth strategy, or capitalize on business opportunities as desired. Any of these events could materially adversely affect our financial condition and business prospects. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, it is difficult to estimate with certainty the amount of our working capital requirements. Our future funding requirements will depend on many factors, including:
•the ability to collaborate and partner with third parties to fund any or all of our programs;
•the progress, costs and results of our additional research and preclinical development programs including our in vivopipeline and our planned IND or CTA submissions and potential biologics license application ("BLA") submissions;
•the outcome, timing and cost of meeting regulatory requirements established by the FDA and other comparable foreign regulatory authorities;
•our ability to establish and maintain strategic collaborations, licensing or other agreements and the financial terms of such agreements;
•the scope, progress, results and costs of any product candidates that we may derive from ARCUS or any other product candidates we may develop alone or with collaborators;
•the extent to which we in-license or acquire rights to other products, product candidates or technologies;
•the costs and timing of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against any intellectual property-related claims; and
•the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any product candidates for which we or our collaborators obtain marketing approval.
Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of public or private equity or debt financings, collaboration agreements, other third-party funding, strategic alliances, licensing arrangements and marketing and/or distribution arrangements. See "Risk Factors - We will need substantial additional funding, and if we are unable to raise a sufficient amount of capital when needed on acceptable terms, or at all, we may be forced to delay, reduce or eliminate some or all of our research programs, product development activities and commercialization efforts." in Part II, Item 1A. of this Quarterly Report on Form 10-Q for a further discussion of our ability to generate and obtain adequate amounts of funding in connection with our continuing operations.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders' ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our shareholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through other third-party funding, collaboration agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, product development and research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to significantly delay, alter, reduce or eliminate one or more of our research or product development programs and/or commercialization efforts, or to grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves. We may also be otherwise unable to execute our business plan, growth strategy, or capitalize on business opportunities as desired.
Common Stock Offering
In March 2024, we entered into an underwriting agreement relating to the offering, issuance and sale of an aggregate of 2,500,000 shares of our common stock and warrants to purchase up to an aggregate of 2,500,000 shares of our common stock at a combined offering price of $16.00 per share. Each warrant has an exercise price per share of $20.00, is immediately exercisable and will expire on March 5, 2029. The offering was made pursuant to a registration statement on Form S-3.
Contractual Obligations and Commitments
In addition to the contractual obligations and commitments as described elsewhere in this Quarterly Report on Form 10-Q with respect to leases, outstanding indebtedness and intellectual property licenses, we also enter into contracts in the normal course of business with CMOs, universities, and other third parties for preclinical research studies, testing, manufacturing services, and other services and products for operating purposes. These contracts are generally cancellable upon written notice. Except for the compensatory arrangements described in Note 4, Commitments and Contingencies, there have been no material changes to our contractual obligations from those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
We do not have any material capital expenditure commitments as of September 30, 2025.
Critical Accounting Policies and Use of Estimates
Our critical accounting policies and estimates are described in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Use of Estimates" in our Annual Report on Form 10-K. We have reviewed those critical accounting policies and estimates for the nine months ended September 30, 2025. There have been no significant changes in our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Smaller Reporting Company Status
We are a "smaller reporting company" as defined under applicable regulations promulgated by the SEC. We will continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. As a smaller reporting company, we are able to take advantage of certain exemptions from disclosure requirements, including presenting only the two most recent fiscal years of audited financial statements and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
We cannot predict whether investors will find our common stock less attractive if we rely on the exemptions available to smaller reporting companies. If investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be reduced or more volatile. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.
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