Precision BioSciences Inc.
03/12/2026 | Press release | Distributed by Public on 03/12/2026 05:32
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition, results of operations, and cash flows should be read in conjunction with our Financial Statements and the related notes to those statements included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, 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 I. Item 1A. "Risk Factors" of this Annual Report on Form 10-K, our actual results could differ materially from the results described in, or implied by, these forward-looking statements. As used in this Annual Report on Form 10-K, unless the context otherwise requires, references to "we," "us," "our," the "Company" and "Precision" refer to Precision BioSciences, Inc.
A discussion regarding our financial condition, results of operations, and cash flows, including liquidity and capital resources, for the year ended December 31, 2025 compared to the year ended December 31, 2024 is presented below.
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.
Wholly-Owned Portfolio
PBGENE-HBV is our wholly owned in vivogene editing program under investigation in a global first-in-human clinical trial, ELIMINATE-B, which is designed to be a potentially curative treatment for chronic Hepatitis B infection. In patients with chronic hepatitis B, cccDNA acts as the template to make new infectious viral particles. PBGENE-HBV is the only clinical stage program that targets the elimination of cccDNA, the sole source of viral replication, leading to sustained loss of HBV DNA and other downstream viral markers.
On November 10, 2025, we reported late-breaking Phase 1 data at AASLD The Liver Meeting® 2025 from the first three ELIMINATE-B cohorts, including nine patients across 22 total doses, demonstrating safety and tolerability across repeat administrations (at doses of 0.2 mg/kg, 0.4 mg/kg, and 0.8 mg/kg at eight week intervals) with no dose-limiting toxicities reported, and evidence of cumulative, dose-dependent antiviral activity and HBsAg declines. The presentation featured substantial viral marker reductions and paired biopsy data providing first evidence consistent with direct viral DNA gene editing.
As part of the ongoing assessment of the safety and efficacy profile of PBGENE-HBV after repeat doses in Part 1 dose finding, we have administered additional doses in Cohort 3 and in parallel commenced pre-planned additional cohorts to investigate a shorter dosing interval. Cohort 4 is investigating dosing at 0.4 mg/kg every 4 weeks and Cohort 5 is investigating dosing at 0.65 mg/kg every 4 weeks to evaluate the potential for an optimized therapeutic index. In addition, to mitigate acute infusion reactions common to LNP delivered therapies, such as transient hypotension and transient elevated liver enzymes, we continue to investigate prophylactic measures per protocol. These measures include intravenous fluids, steroids, antihistamines and infusion duration across dose levels and administrations. The goal during Part 1 of the study is to select the dose and schedule that achieves the desired therapeutic index to move to the expansion phase of the ELIMINATE-B trial.
PBGENE-HBV is the first in vivo gene editing approach to prospectively employ repeat administrations of LNP. To date, 13 participants have completed more than 30 administrations of PBGENE-HBV across five cohorts. Looking ahead, we expect additional clinical biomarker and biopsy data in the first half of 2026 and expect to have completed dosing in Cohorts 3, 4, and 5. This will inform selection of an optimal dosing regimen intended to support discontinuation of nucleos(t)ide analog treatment and progression into the Part 2 expansion phase of ELIMINATE-B. We expect to share further clinical data from the PBGENE-HBV programs at hepatitis-focused medical conferences throughout 2026.
PBGENE-DMD is our wholly-owned development program for the treatment of DMD. PBGENE-DMD is designed to potentially improve function for approximately 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 microdystrophin approaches with minimal functional benefit.
In October 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. New preclinical study data supporting the potential long-term efficacy of PBGENE-DMD was presented in a poster session at the Muscular Dystrophy Association Clinical & Scientific Conference 2026 in March 2026.
In February 2026, we announced that we had received IND clearance from the FDA to advance PBGENE-DMD. IND clearance enables us to initiate IRB activities and clinical trial site activation for the FUNCTION-DMD Phase 1/2 clinical trial for PBGENE-DMD. The FUNCTION-DMD trial will include ambulatory DMD patients at highly specialized U.S clinical trial sites. Initial data from multiple patients is expected by year-end 2026, including safety and early efficacy assessment based on near full-length dystrophin protein expression from muscle biopsies.
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, 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.
Partnered In Vivo Gene Editing Program
In partnership with iECURE, an ARCUS-mediated gene insertion approach is being evaluated as a potentially curative treatment for neonatal onset OTC deficiency in the ongoing OTC-HOPE study. Recently, iECURE reached alignment with the FDA on the primary and key secondary efficacy endpoints, comparators and study size for the ongoing OTC-HOPE study which could support a Biologics License Application. In addition, ECUR-506 was granted FDA RMAT designation for neonatal onset OTC deficiency. The OTC-HOPE study is ongoing in the U.K., the U.S., Australia, and Spain. In January 2025, iECURE 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. iECURE expects to release additional patient data from the ongoing OTC-HOPE trial in the first half of 2026.
Non-Core Ex Vivo Programs
Imugene continues development of azer-cel in diffuse large B-cell lymphoma and has received written guidance from the FDA regarding the registrational pathway for azer-cel. The guidance provided clear alignment with the FDA across key elements required to support advancement into a pivotal study, including dosing regimen, patient population, endpoints, and manufacturing readiness. On October 31, 2025, we received an $8.0 million milestone payment from Imugene, comprised of $3.0 million in cash and $5.0 million in Imugene stock.
Separately, azer-cel is being evaluated by TG Therapeutics (Nasdaq: TGTX) in a Phase 1 trial in progressive multiple sclerosis. In March 2026, we announced the achievement of a clinical milestone under its license agreement with TG Therapeutics. As a result, we have earned a cash payment of $7.5 million in proceeds, inclusive of $5.25 million cash and $2.25 million for the purchase of 201,504 shares of our common stock by TG Therapeutics at $11.17 per share. Anticipated 2026 events include presentation of preliminary Phase 1 azer-cel data in progressive multiple sclerosis in the second half of 2026 and commencement of additional exploratory studies in autoimmune diseases outside of multiple sclerosis.
Common Stock Offering
On November 10, 2025, we entered into an underwriting agreement relating to the issuance and sale of 10,815,000 shares of our common stock and accompanying one-half warrants to purchase up to 5,407,500 shares of our common stockat a combined price of $6.14 per share. Further, in lieu of common stock to certain investors, we issued pre-funded warrants to purchase up to 1,400,000 shares of our common stock and accompanying one-half warrants to purchase up to 700,000 shares of our common stock at a combined price of $6.139995 per share. Each whole warrant has a five-year term and an exercise price of $7.25 per share. The offering was made pursuant to a registration statement on Form S-3.
License and Collaboration Transactions
TG Therapeutics
Under the TG License Agreement, we received an upfront cash payment of $10.0 million (the "Upfront Payment") and are entitled to receive an additional cash payment of $7.5 million as TG Therapeutics achieved a certain clinical milestone (the "Initial Milestone Payment"). We are entitled to additional payments upon the achievement of additional specified milestones of up to $288.6 million (the "Additional Milestone Payments"). As described below, up to $10.0 million of the cash payments received and potentially payable us are payable in exchange for the issuance (the "Company Stock Issuances") to TG Subsidiary of shares of our common stock.
The Upfront Payment of $10.0 million was comprised of (i) a $5.25 million cash payment that was paid to us on February 5, 2024, (ii) a $2.25 million cash payment that was paid to us on February 5, 2024 in exchange for 97,360 shares of our common stock, based on a price per share equal to a 100% premium to the VWAP of our common stock for the 30 trading days prior to the date of the TG License Agreement, and (iii) a deferred cash payment of $2.5 million that was paid to us on January 6, 2025 in exchange for 220,712 shares of our common stock, based on a price per share equal to the greater of (A) 100% premium to the VWAP of our common stock for the 30 trading days prior to the date of payment or (B) the Minimum Price.
The Initial Milestone Payment of $7.5 million will consist of (i) a $5.25 million cash milestone payment and (ii) a $2.25 million cash payment in exchange for 201,504 shares of our common stock determined based on the Minimum Price.
The Additional Milestone Payments become due upon the achievement of certain milestones as specified in the TG License Agreement. Included within the Additional Milestone Payments is a potential payment of $3.0 million in connection with achievement of a milestone specified in the TG License Agreement, payable in exchange for such number of shares of our common stock determined based on a price per share equal to the greater of (A) 100% premium to the VWAP of our common stock for the 30 trading days prior to the achievement of such milestone or (B) the Minimum Price.
Subject to the terms and conditions of the TG License Agreement, TG Therapeutics is permitted to pay up to 50% of the value of each Additional Milestone Payment (other than the Additional Milestone Payment described above that would, upon achievement, involve the issuance of $3.0 million of Shares by Precision) in freely tradable shares of common stock of TG Parent, valued based on the VWAP of the TG Parent shares of common stock on Nasdaq for the 30 trading days prior to the achievement of the applicable milestone.
If a licensed product under the TG License Agreement is approved and sold, TG Therapeutics is also required to pay us tiered royalties ranging from high-single-digit to low-double-digit percentages on net sales of the licensed product. TG Therapeutics' obligation to pay royalties to us expires on a country-by-country and licensed product-by-licensed product basis, upon the latest to occur of (i) the expiration of the last-to-expire valid claim in such country covering such licensed product; (ii) the expiration of any period of data, regulatory, or market exclusivity, or supplemental protection certificates (other than patents) covering the licensed product in such country; and (iii) a period of 10 years following the first commercial sale of the respective licensed product in such country.
Unless earlier terminated, the TG License Agreement will remain in effect on a licensed product-by-licensed product and country-by-country basis until the expiration of a defined royalty term for each licensed product and country. We may terminate the TG License Agreement if TG Therapeutics fails to initiate certain development activities with respect to the licensed product by a specified date or ceases active development of the licensed product for a specified period of time. In addition, we may terminate the TG License Agreement if TG Therapeutics or any of its affiliates or sublicensees challenges the validity of any patents controlled by us. We or TG Therapeutics may terminate the TG License Agreement (i) for material breach by the other party and a failure to cure such breach within the time period specified in the TG License Agreement or (ii) the other party's insolvency.
Sale of CAR T Platform to Imugene
On August 15, 2023, we entered into an asset purchase agreement (the "Imugene Purchase Agreement") with Imugene Limited ("Imugene Limited"), and its wholly owned subsidiary Imugene (USA) Inc. ("Imugene US" and together with Imugene Limited, "Imugene"). Pursuant to and simultaneously with the execution of the Imugene Purchase Agreement, Imugene US acquired our manufacturing infrastructure used in the development and manufacture of azer-cel, including assuming the lease to our manufacturing facility and certain contracts with respect to our manufacturing facility, and
related equipment, supplies, azer-cel clinical trial inventory and other assets related to our CAR T cell therapy platform (the "Acquired Assets"). As part of the Imugene Purchase Agreement, Imugene US hired a number of the Company's employees who were associated with our historical CAR T cell therapy operations.
In consideration for the Acquired Assets, Imugene US assumed certain liabilities, paid us $8.0 million in cash, and issued us convertible notes pursuant to the terms and conditions set forth in a convertible note subscription deed (collectively, the "Imugene Convertible Note") in an aggregate principal amount of $13.0 million. The Imugene Convertible Note was a non-interest bearing and had a maturity date of the first anniversary of the Closing Date (the "Maturity Date"). On the Maturity Date, the Imugene Convertible Note was redeemed through the payment of $9.75 million in cash, and the remaining amount of the note was converted into ordinary shares of Imugene Limited. The ordinary shares of Imugene Limited were determined using a conversion price based on the 10 days volume weighted average price of Imugene Limited's ordinary shares prior to the date of conversion.
Additionally, we entered into a license agreement with Imugene (the "Imugene License Agreement") on the Closing Date, pursuant to which we granted Imugene US certain exclusive and non-exclusive license rights to develop, manufacture, and commercialize oncological applications of our allogeneic CAR T therapy, azer-cel, and up to three additional research product candidates directed to targets that Imugene US may nominate prior to the fifth anniversary of the effective date of the Imugene License Agreement, pursuant to the terms of the Imugene License Agreement.
In addition, under the License Agreement, we are eligible to receive milestone payments of up to an aggregate of $206.0 million for azer-cel, inclusive of an $8.0 million milestone payment from Imugene which we received in October 2025, including $3.0 million in cash and $5.0 million in Imugene stock. For azer-cel, we are eligible to receive double-digit royalties on net sales. For up to three additional research programs to be developed by Imugene, we are eligible for up to $145.0 million in milestone payments and, if licensed products are approved and sold, tiered royalties ranging from the mid-single digit to low-double digit percentages on net sales of such licensed products. In addition, we are eligible to receive mid-single digit percentage-based fees for certain change of control transactions involving Imugene and for partnering transactions involving a licensed product. Imugene's obligation to pay royalties to us expires on a country-by-country and licensed product-by-licensed product basis, upon the latest to occur of certain events related to expiration of patents, regulatory exclusivity or a period of 10 years following the first commercial sale of the respective licensed product.
Unless earlier terminated, the Imugene License Agreement will remain in effect on a licensed product-by-licensed product and country-by-country basis until the expiration of a defined royalty term for each licensed product and country. We may terminate the entire Imugene License Agreement due to a challenge to our patents brought by Imugene and a breach by Imugene in any material respect of the Imugene License Agreement, the Imugene Purchase Agreement or any related transaction documents. We may also terminate the Imugene License Agreement with respect to azer-cel if Imugene fails to initiate certain development activities with respect to azer-cel by a specified date, if Imugene fails to expend certain amounts on the development of azer-cel or if Imugene ceases active development of azer-cel for a specified period of time. Either party may terminate the Imugene License Agreement (i) for material breach by the other party and a failure to cure such breach within the time period specified in the agreement or (ii) the other party's insolvency.
We concluded the Imugene License Agreement represents functional intellectual property in accordance with ASC 606 given we do not expect to provide any additional services to Imugene outside of the right to use the licensed intellectual property. As of December 31, 2025 management has constrained all remaining variable consideration related to milestone payments in the Imugene License Agreement given the level of uncertainty associated with achievement of the milestone payments. As a result of the milestone payment received in October 2025, $8.0 million of revenue was recognized under the Imugene License Agreement during the year ended December 31, 2025. There was no revenue recognized under the Imugene License Agreement during the year ended December 31, 2024.
Novartis Pharma AG
On June 14, 2022, we entered into the Novartis Agreement, which became effective on June 15, 2022 (the "Novartis Effective Date"), to collaborate to discover and develop in vivogene editing products incorporating our custom ARCUS nucleases for the purpose of seeking to research and develop potential treatments for certain diseases, including sickle cell disease and beta thalassemia.
In July 2022, we received a $50.0 million upfront cash payment under the Novartis Agreement. Additionally, on the Novartis Effective Date, Novartis made an equity investment in our common stock pursuant to a stock purchase agreement.
On October 31, 2025, we received written notice from Novartis of its termination of the Novartis Agreement. The notice informed us that Novartis was exercising its right to terminate the Novartis Agreement in its entirety without cause upon 90 days' prior written notice to us. The termination was effective on January 30, 2026. Although we and Novartis have concluded work in the area of hemoglobinopathies, we and Novartis are continuing our research collaboration in other areas of undisclosed therapeutic focus.
During the years ended December 31, 2025 and 2024, we recognized revenue under the Novartis Agreement of $26.3 million and 6.4 million, respectively. During the year ended December 31, 2025, the deferred revenue balance related to the Novartis Agreement was reduced to 0.0 million. The deferred revenue balance related to the Novartis agreement as of December 31, 2024 was $26.3 million, of which $3.0 million was included in current liabilities within the balance sheets.
iECURE
We adjust the carrying value of the iECURE equity to fair value each reporting period with any changes in fair value recorded to other income (expense). During the year ended December 31, 2025, we recorded a $2.5 million decrease in the carrying value of our iECURE equity to adjust to fair value. There was no change in the fair value of the iECURE equity during the year ended December 31, 2024.
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 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. 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 of our equity method investee, Elo Life Systems, Inc. ("Elo").
Changes in Other Fair Value Adjustments
The change in fair value represents the assessed changes in assets and liabilities carried at fair value.
We adjust the carrying value of the ordinary shares issued from Imugene to its fair value each reporting period with any changes in fair value recorded to other income (expense). 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 the March 2024 Public Offering and November 2025 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.
Loss on Disposal of Assets
Loss on disposal of assets represents the remaining net book value of disposed assets at the time of their disposal and impairment recognized on assets held for sale. This is offset by any proceeds received for assets when applicable.
Impairment Charges
Impairment charges represents the impairment of our intangible assets and long-term prepaid assets. An impairment loss is assessed when future undiscounted cash flows are less than the assets' carrying value and is recognized when the carrying value of the asset exceeds fair value. An impairment charge is recognized for the amount by which the carrying amount exceeds the fair value of the asset.
Results of Operations
Comparison of the Years Ended December 31, 2025 and December 31, 2024
The following table summarizes our results of operations for the years ended December 31, 2025 and December 31, 2024, together with the changes in those items:
| For the Years Ended December 31, | ||||||||||||||||||||
| (in thousands) | 2025 | 2024 | Change | |||||||||||||||||
| Revenue | $ | 34,264 | $ | 68,696 | $ | (34,432) | ||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Research and development | 54,172 | 59,559 | (5,387) | |||||||||||||||||
| General and administrative | 32,240 | 35,299 | (3,059) | |||||||||||||||||
| Total operating expenses | 86,412 | 94,858 | (8,446) | |||||||||||||||||
| Operating loss | (52,148) | (26,162) | (25,986) | |||||||||||||||||
| Other income (expense): | ||||||||||||||||||||
| Loss from equity method investment | (5,284) | (1,084) | (4,200) | |||||||||||||||||
| (Loss) gain on changes in other fair value adjustments | (2,666) | 258 | (2,924) | |||||||||||||||||
| Gain on change in fair value of warrant liability | 11,129 | 29,610 | (18,481) | |||||||||||||||||
| Interest expense | (1,422) | (1,782) | 360 | |||||||||||||||||
| Interest income | 4,239 | 6,763 | (2,524) | |||||||||||||||||
| Loss on disposal of assets | (421) | (436) | 15 | |||||||||||||||||
| Impairment charges | (36) | - | (36) | |||||||||||||||||
| Total other income | 5,539 | 33,329 | (27,790) | |||||||||||||||||
| (Loss) income from continuing operations | $ | (46,609) | $ | 7,167 | $ | (53,776) | ||||||||||||||
| Gain from discontinued operations | 885 | - | 885 | |||||||||||||||||
| Net (loss) income | $ | (45,724) | $ | 7,167 | $ | (52,891) | ||||||||||||||
Revenue
Revenue for the year ended December 31, 2025 was $34.3 million, compared to $68.7 million for the year ended December 31, 2024. The decrease of $34.4 million in revenue during the year ended December 31, 2025 was primarily the result of $52.7 million of revenue recognized in the prior period related to the conclusion of our agreement with Prevail Therapeutics, which represented all remaining deferred revenue under that agreement. Additionally contributing to the decrease in revenue was $9.5 million of revenue recognized under the TG License Agreement and the Caribou Biosciences, Inc. license agreement in the prior year. Partially offsetting the decrease in revenue was a $19.9 million increase in revenue compared to the prior year under the Novartis Agreement as a result of the October 2025 conclusion of the Novartis Agreement and $8.0 million in revenue recognized under the Imugene License Agreement during the year ended December 31, 2025.
Research and Development Expenses
| For the Years Ended December 31, | ||||||||||||||||||||
| (in thousands) | 2025 | 2024 | Change | |||||||||||||||||
| Direct research and development expenses by product candidate: | ||||||||||||||||||||
| PBGENE-HBV external development costs | 7,152 | 16,111 | (8,959) | |||||||||||||||||
| PBGENE-DMD external development costs | 15,298 | 1,230 | 14,068 | |||||||||||||||||
| PBGENE-3243 external development costs | 3,103 | 9,808 | (6,705) | |||||||||||||||||
| Platform development and early-stage research expenses: | ||||||||||||||||||||
| Employee-related costs (including share-based compensation) | 19,939 | 21,313 | (1,374) | |||||||||||||||||
| Laboratory supplies and services | 1,798 | 2,621 | (823) | |||||||||||||||||
| CMOs and outsourced research and development | 504 | 247 | 257 | |||||||||||||||||
| Facility-related costs, laboratory equipment, and maintenance | 2,841 | 3,082 | (241) | |||||||||||||||||
| Depreciation and amortization | 1,299 | 2,718 | (1,419) | |||||||||||||||||
| Licensing fees and other research and development costs | 2,238 | 2,429 | (191) | |||||||||||||||||
| Total research and development expenses | $ | 54,172 | $ | 59,559 | $ | (5,387) | ||||||||||||||
Research and development expenses for the year ended December 31, 2025 were $54.2 million, compared to $59.6 million for the year ended December 31, 2024. The decrease of $5.4 million was primarily due to a $15.7 million decrease in our direct expenses within the PBGENE-HBV and PBGENE-3243 programs along with a $3.8 million decrease in platform development and early-stage research expenses. These expense decreases were partially offset by a $14.1 million increase in our direct expenses within the PBGENE-DMD program.
The direct expense decrease of $9.0 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 a direct expense decrease of $6.7 million as we have pivoted to PBGENE-DMD. These decreases were offset by the $14.1 million increase in PBGENE-DMD development due to the program's acceleration in 2025. Platform development and early-stage research expenses also decreased by $3.8 million in expense in the year ended December 31, 2025 compared to the year ended December 31, 2024. The primary factors for the decrease were $1.4 million decreases in each of employee-related costs and depreciation and amortization as well as a $0.8 million decrease in laboratory supplies and services expenses.
General and Administrative Expenses
General and administrative expenses were $32.2 million for the year ended December 31, 2025 compared to $35.3 million for the year ended December 31, 2024. The decrease of $3.1 million was primarily due to a $2.2 million decrease in employee-related expenses and consulting services. The remainder of the decrease is attributable to decreases in other miscellaneous operating expenses.
Loss from Equity Method Investment
Loss from equity method investment was $5.3 million during the year ended December 31, 2025 as a result of the carrying amount adjustment on the Note Receivable. Refer to Note 11, Elo Transaction, in the accompanying notes to the financial statements for further details. Loss from equity method investment was $1.1 million during the year ended December 31, 2024, which represented our proportionate share of Elo's net loss for the period.
(Loss) Gain on Changes in Other Fair Value Adjustments
Loss on changes in fair value was $2.7 million for the year ended December 31, 2025, driven by changes in the fair value of the iECURE investment and Imugene ordinary shares issued during the period. Gain on changes in fair value was $0.3 million for the year ended December 31, 2024, primarily due to an increase in the fair value of the Imugene Convertible Note and prior Imugene ordinary share holdings.
Gain on Change in Fair Value of Warrant Liability
Gain from change in fair value of the warrant liability of $11.1 million for the year ended December 31, 2025 compared to a gain of $29.6 million for the year ended December 31, 2024, which represents the mark-to-market fair value adjustment to the outstanding warrants issued in connection with the March 2024 and November 2025 Public Offerings.
Interest Expense
Interest expense was $1.4 million and $1.8 million for the years ended December 31, 2025 and 2024, respectively. The $0.4 million decrease in interest expense was the result of lower interest rates during the year ended December 31, 2025 as compared to the year ended December 31, 2024.
Interest Income
Interest income was $4.2 million during the year ended December 31, 2025 compared to $6.8 million during the year ended December 31, 2024. The $2.6 million decrease in interest income was the result of lower interest rates during the year ended December 31, 2025 as compared to the year ended December 31, 2024.
Loss on Disposal of Assets
Loss on disposal of assets was $0.4 million during each of the years ended December 31, 2025 and 2024.
Impairment Charges
Impairment charges for intangible assets were less than $0.1 million during the year ended December 31, 2025. There were no impairment charges for intangible assets during the year ended December 31, 2024.
Income Taxes
Since our inception in 2006, we have generated cumulative federal and state NOL and R&D credit carryforwards for which we have not recorded any net tax benefit due to the uncertainty around utilizing these tax attributes within their respective carryforward periods. As of December 31, 2025, we had federal and state NOL carryforwards of $340.2 million and $317.3 million respectively, which may be available to offset future taxable income. The U.S. federal NOLs carryforward indefinitely. The state NOL carryforwards begin to expire in 2027. As of December 31, 2025, we also had federal and state R&D tax credits of $22.5 million and an amount less than $0.1 million, which begin to expire in 2029 and 2030, respectively. As of December 31, 2025, we had federal Orphan Drug credits of $13.5 million which begin to expire in 2038. As of December 31, 2025, we also have federal contribution carryforwards of $0.1 million, which begin to expire in 2026.
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 incurred significant operating losses since our inception 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 December 31, 2025, we had an accumulated deficit of $528.2 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.
As of December 31, 2025, we had cash and cash equivalents of $110.8 million and $26.3 million in restricted cash under the 2024 Term Loan and compensatory arrangements with certain of our officers, respectively. Refer to Note 14,Commitments and Contingencies, in the accompanying notes to the financial statements for more information on these compensatory arrangements. Pursuant to our July 31, 2024 amended and restated loan and security agreement with Banc of California (the "2024 Loan and Security Agreement"), 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.
As described in Part I. Item 1A. "Risk Factors," we believe that, as of the date of this Annual Report on Form 10-K, existing cash and cash equivalents, inclusive of the expected azer-cel milestone proceeds, continued fiscal and operating discipline, and availability of our ATM facility will be sufficient to fund our operating expenses and capital expenditure requirements through 2028. 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 the development of therapeutic products, we are unable to predict the timing or amount of increased 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 $137.2 million and $108.5 million as of December 31, 2025, and 2024, respectively.
The following table summarizes our sources and uses of cash for the periods presented:
| For the Years Ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | Change | ||||||||||||||
| Components of cash used in operating activities: | |||||||||||||||||
| Net (loss) income | $ | (45,724) | $ | 7,167 | $ | (52,891) | |||||||||||
| Non-cash adjustments | 9,125 | (11,613) | 20,738 | ||||||||||||||
| Changes in operating assets and liabilities | (29,244) | (53,999) | 24,755 | ||||||||||||||
| Net cash used in operating activities | $ | (65,843) | $ | (58,445) | $ | (7,398) | |||||||||||
| Net cash used in investing activities | (634) | (215) | (419) | ||||||||||||||
| Net cash provided by financing activities | 95,162 | 50,450 | 44,712 | ||||||||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | $ | 28,685 | $ | (8,210) | $ | 36,895 | |||||||||||
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 year ended December 31, 2025 was $65.8 million, compared to $58.4 million during the year ended December 31, 2024. The $7.4 million increase in cash used in operating activities was primarily
driven by a $52.9 million decrease in net income, partially offset by increases of $20.7 million in non-cash adjustments and $24.8 million in changes in operating assets and liabilities.
The increase in non-cash adjustments was primarily driven by the net change in fair value of warrants year over year as a result of the new warrants issued in the November 2025 Public Offering. Also contributing to the increase in non-cash adjustments year over year was the loss from the equity investment in Elo and the change in fair value of the iECURE investment in the year ended December 31, 2025.
The change in cash used in operating assets and liabilities was primarily driven by the net changes of deferred revenue as a result of the conclusion of Novartis collaboration in the year ended December 31, 2025 and the conclusion of the Prevail collaboration in the year ended December 31, 2024.
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 year ended December 31, 2025 was $0.6 million, compared to $0.2 million in the year ended December 31, 2024. The increase in cash used in investing activities was primarily the result of a $0.6 million increase in intangible asset purchases during the year ended December 31, 2025, partially offset by a $0.2 million decrease in property, equipment, and software purchases between the comparison periods.
Cash Provided by Financing Activities
Net cash provided by financing activities during the year ended December 31, 2025 was $95.2 million, compared to $50.5 million during the year ended December 31, 2024. The $44.7 million increase in cash provided by financing activities during the year ended December 31, 2025 was primarily due to a $33.0 million increase in net proceeds from the underwritten offerings of common stock and warrants in the year ended December 31, 2025 as compared to the year ended December 31, 2024. Additionally contributing to the increase was an $11.6 million increase in net proceeds from the issuance of common stock through the ATM facility between the comparison periods.
Debt Obligations
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. As of December 31, 2025, the outstanding principal balance on the 2024 Term Loan was $22.5 million, the stated interest rate was 5.25% and the effective interest rate was 5.62%.
Funding Requirements
We will continue to have funding requirements in connection with the continuation of our research and development efforts, potential IND and CTA submissions, potential clinical trials, and expected growth in our in vivoportfolios.
We believe that, as of the date of this Annual Report on Form 10-K, existing cash and cash equivalents, inclusive of the expected azer-cel milestone proceeds, continued fiscal and operating discipline, and availability of our ATM facility will be sufficient to fund our operating expenses and capital expenditure requirements through 2028. We expect our cash runway to be sufficient to fund PBGENE-HBV and PBGENE-DMD data milestones through 2028. 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. 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 I. Item 1A. of this Annual Report on Form 10-K 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 November 2025, we entered into an underwriting agreement relating to the offering, issuance and sale of an aggregate of 10,815,000 shares of our common stock and accompanying one-half warrants to purchase up to an aggregate of 5,407,500 shares of our common stock at a combined offering price of $6.14 per share. Additionally, in lieu of common stock to certain investors, pre-funded warrants to purchase up to 1,400,000 shares of common stock and accompanying one-half warrants to purchase up to 700,000 shares of common stock at a combined offering price of $6.13995. Each whole warrant has a five year term and an exercise price of $7.25 per share. The offering was made pursuant to a registration statement on Form S-3. Gross proceeds from the transaction were $75.0 million before deducting underwriting discounts and commissions and offering expenses of approximately $5.0 million. We intend to use the net proceeds of the offering to fund ongoing and planned research and development, and for working capital and other general corporate purposes.
Contractual Obligations and Commitments
In addition to the contractual obligations and commitments as described elsewhere in this Annual Report on Form 10-K with respect to leases, the Term Loan, 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 cancelable upon written notice.
The Company does not have any material capital expenditure commitments at December 31, 2025.
Critical Accounting Policies and Use of Estimates
Our management's discussion and analysis of financial condition and results of operations is based on our Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of our Financial Statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses and the disclosure of contingent assets and liabilities in our Financial Statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in the notes to our Financial Statements, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our Financial Statements.
Revenue Recognition
Our revenues are generated primarily through collaborative research, license, development and commercialization agreements. The terms of these agreements generally contain multiple elements, or deliverables, which may include (i) licenses, or options to obtain licenses, to use our technology, (ii) research and development activities to be performed on behalf of the collaborative partner, and (iii) in certain cases, services in connection with the manufacturing of preclinical and clinical material. Payments we receive under these arrangements typically include one or more of the following: non-refundable, upfront license fees; option exercise fees; funding of research and/or development efforts; clinical and development, regulatory, and sales milestone payments; and royalties on future product sales. We classify payments received under these agreements as revenues within our statements of operations.
ASC 606, Revenue from Contracts with Customers, applies to all contracts with customers, except for contracts that are within the scope of other standards. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
At contract inception, once the contract is determined to be within the scope of ASC 606, we evaluate the performance obligations promised in the contract that are based on goods and services that will be transferred to the customer and determine whether those obligations are both (i) capable of being distinct and (ii) distinct in the context of the contract. Goods or services that meet these criteria are considered distinct performance obligations. If both these criteria are not met, the goods and services are combined into a single performance obligation. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Arrangements that include rights to additional goods or services that are exercisable at a customer's discretion are generally considered options. We assess if these options provide a material right to the customer and, if so, these options are considered performance obligations. The exercise of a material right is accounted for as a contract modification for accounting purposes.
We recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time or over time, and if over time this is based on the use of an output or input method.
Invoices issued as stipulated in contracts prior to revenue recognition are recorded as deferred revenue. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue within current liabilities in our balance sheets. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as noncurrent deferred revenue. Amounts recognized as revenue, but not yet invoiced are generally recognized as contract assets in the other current assets line item in our balance sheets.
Milestone Payments - If an arrangement includes development and regulatory milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or the licensee's control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.
Royalties - For arrangements that include sales-based royalties, including milestone payments based on a level of sales, which are the result of a customer-vendor relationship and for which the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied. To date, we have not recognized any royalty revenue resulting from any of our licensing arrangements.
Significant Financing Component - In determining the transaction price, we adjust consideration for the effects of the time value of money if the timing of payments provides us with a significant benefit of financing. We do not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or less. We assessed each of our revenue arrangements in order to determine whether a significant financing component exists and concluded that a significant financing component does not exist in any of our arrangements.
Collaborative Arrangements - We have entered into collaboration agreements, which are within the scope of ASC 606, to discover, develop, manufacture and commercialize product candidates. The terms of these agreements typically contain multiple promises or obligations, which may include: (1) licenses, or options to obtain licenses, to use our technology, (2) research and development activities to be performed on behalf of the collaboration partner, and (3) in certain cases, services in connection with the manufacturing of preclinical and clinical material. Payments we receive under these arrangements typically include one or more of the following: non-refundable, upfront license fees; option exercise fees; funding of research and/or development efforts; clinical and development, regulatory, and sales milestone payments; and royalties on future product sales.
We analyze our collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements, to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. For collaboration arrangements within the scope of ASC 808 that contain multiple elements, we first determine which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and, therefore, are within the scope of ASC 606. For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to ASC 606. For those elements of the arrangement that are accounted for pursuant to ASC 606, we apply the five-step model described above.
Revenue related to performance obligations satisfied over time could be materially impacted as a result of changes in the estimated research effort to satisfy performance obligations or changes in the transaction price related to variable consideration. For example, in in the year ended December 31, 2025, we did not record any cumulative catch-up adjustments on contracts.
Warrant Liability
The warrants issued in the March 2024 Public Offering as well as the warrants issued in the November 2025 Public Offering were recognized as derivative warrant liabilities in accordance with ASC 815. Accordingly, we recognized the warrant instruments as liabilities at fair value and will remeasure the instruments to fair value at each balance sheet date, with changes in fair value recognized in our statements of operations, until exercised or expiration. The fair value of the warrants were initially estimated using a Black-Scholes option pricing model. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Accrued Research and Development Expenses
As part of the process of preparing our financial statements, we are required to make certain estimates and judgments in our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. Actual costs incurred could differ materially from estimates. Examples of estimated accrued research and development expenses include fees paid to the following:
•third parties in connection with performing research and development activities, conducting preclinical studies and clinical trials on our behalf;
•vendors in connection with preclinical development activities; and
•CMOs and other vendors in connection with product manufacturing and development and distribution of preclinical supplies.
We base our expenses related to preclinical studies on our estimates of the services received and efforts expended pursuant to quotes and contracts with CROs that conduct and manage preclinical studies and CMOs that manufacture product for our research and development activities on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. In accruing fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly.
Share-Based Compensation
We measure stock options and other share-based awards granted to our employees, directors, consultants and advisors based on the fair value on the date of the grant and recognize compensation expense for those awards, net of actual forfeitures, over the requisite service period, which is generally the vesting period of the respective award.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model, which uses as inputs the fair value of our common stock and assumptions we make for the expected volatility of our common stock, the expected term of the stock options, the risk-free interest rate for a period that approximates the expected term of the stock options and the our expected dividend yield. Expected volatility is estimated based on the historical volatility of our and other comparable publicly traded peer companies. The expected term of the options has been determined utilizing a weighted average value considering actual exercise history and estimated expected term based on the midpoint of final vest date and expiration date. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that we have never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.
The fair value of each restricted stock unit is determined based on the closing market price of our common stock on the date of grant.
Recent Accounting Pronouncements
Refer to Note 1, "Description of Business and Summary of Significant Accounting Policies," in the accompanying notes to the financial statements for a discussion of recent accounting pronouncements and new accounting pronouncements adopted during 2025.
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.
Precision BioSciences Inc. published this content on March 12, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 12, 2026 at 11:33 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]