advm-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

___________________________________________________________________

FORM 10-Q

___________________________________________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36579

___________________________________________________________________

Adverum Biotechnologies, Inc.

(Exact name of registrant as specified in its charter)

___________________________________________________________________


Delaware						20-5258327
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

100 Cardinal Way

Redwood City, CA

(Address of principal executive offices)

94063

(Zip Code)

(650) 656-9323

(Registrant’s telephone number, including area code)

___________________________________________________________________

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


Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, $0.0001 par value	ADVM	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

Smaller reporting company

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of May 6, 2022, there were 98,770,349 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

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Adverum Biotechnologies, Inc.

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			Page

PART I—FINANCIAL INFORMATION			5

Item 1. Financial Statements			5
Condensed Consolidated Balance Sheets as of M arch 3 1 , 202 2 and December 31, 202 1 (unaudited)			5
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 3 1 , 202 2 and 202 1 (unaudited)			6
Condensed Consolidated Statements of Stockholders’ Equity for the three months ended Ma r ch 3 1 , 202 2 and 202 1 (unaudited)			7
Condensed Consolidated Statements of Cash Flows for the th ree months ended March 3 1 , 202 2 and 202 1 (unaudited)			8
Notes to Condensed Consolidated Financial Statements (unaudited)			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			13
Item 3. Quantitative and Qualitative Disclosures About Market Risk			19
Item 4. Controls and Procedures			19

PART II—OTHER INFORMATION			21

Item 1. Legal Proceedings			21
Item 1A. Risk Factors			21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			61
Item 3. Defaults Upon Senior Securities			61
Item 4. Mine Safety Disclosures			61
Item 5. Other Information			62
Item 6. Exhibits			63

SIGNATURES			64

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RISK FACTORS SUMMARY

Investing in common stock involves numerous risks, including the risks described in “Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q. Below are some of these risks, any one of which could materially adversely affect our business, financial condition, results of operations, and prospects.

•We have incurred significant operating losses since inception, and we expect to incur significant losses for the foreseeable future. We may never become profitable or, if achieved, be able to sustain profitability.

•We expect that our cash, cash equivalents, and short-term investments will be sufficient to fund our lead gene therapy programs for at least twelve months from the date of this filing. If this expectation proves to be wrong, we may be forced to delay, limit or terminate certain of our development efforts before then.

•We will need to raise additional funding, which may not be available on acceptable terms, or at all. If we fail to obtain additional capital necessary to fund our operations, we will be unable to successfully develop and commercialize our product candidates.

•Our business will depend substantially on the success of one or more of our product candidates. If we are unable to develop, obtain regulatory approval for, or successfully commercialize, any or all of our product candidates, our business will be materially harmed.

•Drug development is a long, expensive and uncertain process, and delay or failure can occur at any stage of development, including after commencement of any of our clinical trials or any clinical trials using our proprietary viral vectors.

•The occurrence of serious complications or side effects that outweigh the therapeutic benefit in connection with or during use of our product candidates, either in nonclinical studies or clinical trials or post-approval, could lead to discontinuation of our clinical development program, refusal of regulatory authorities to approve our product candidates or, post-approval, revocation of marketing authorizations or refusal to approve new indications, which could severely harm our business prospects, financial condition and results of operations.

•The results of nonclinical studies and early clinical trials are not always predictive of future results. Any product candidate we or any of our future development partners advance into clinical trials may not have favorable results in later clinical trials, if any, or receive regulatory approval.

•If we are unable to successfully develop and maintain robust and reliable manufacturing processes for our product candidates, we may be unable to advance clinical trials or licensure applications and may be forced to delay or terminate a program.

•If we are unable to produce sufficient quantities of our products at acceptable costs, we may be unable to meet clinical or potential commercial demand, lose potential revenue, have reduced margins, or be forced to terminate a program.

•We and our contractors are subject to significant regulation with respect to manufacturing and testing our product candidates. We have a limited number of vendors on which we rely, including, in some cases, single source vendors, and the contract vendors on which we rely may not continue to meet regulatory requirements, may have limited capacity, or may have other factors limiting their ability to comply with their contracts with us.

•We are subject to many manufacturing and distribution risks, any of which could substantially increase our costs and limit supply of our product candidates.

•We have relied, and expect to continue to rely, on third parties to conduct some or all aspects of our vector production, process development, assay development, product manufacturing, product testing, protocol development, and research, and these third parties may not perform satisfactorily.

•We will rely on third parties to conduct some nonclinical testing and all of our planned clinical trials. If these third parties do not meet our deadlines or otherwise fail to conduct the trials as required, our clinical development programs could be delayed or unsuccessful and we may not be able to obtain regulatory approval for or commercialize our product candidates when expected or at all.

•Our success depends on our ability to protect our intellectual property and our proprietary technologies.

•Claims by third parties that we infringe their proprietary rights may result in liability for damages or prevent or delay our developmental and commercialization efforts.

•We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and in-licenses.

•Our rights to develop and commercialize our product candidates are subject in part to the terms and conditions of licenses granted to us by other companies and universities.

•The patent protection and patent prosecution for some of our product candidates are dependent on third parties.

•We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

•Third party patent rights could delay or otherwise adversely affect our planned development and sale of product candidates of our programs.

•We may not be able to obtain intellectual property rights or protect our intellectual property rights throughout the world.

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•Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

•If we do not obtain patent term extensions for patents covering our product candidates, our business may be materially harmed.

•Final marketing approval for our product candidates by the FDA or other regulatory authorities outside the U.S. for commercial use may be delayed, limited or denied, any of which would adversely affect our ability to generate operating revenue.

•Even if we receive regulatory approval, we still may not be able to successfully commercialize any of our product candidates, and the revenue that we generate from its sales, if any, could be limited.

•If our competitors develop treatments for the target indications of our product candidates that are approved, marketed more successfully, or demonstrated to be safer or more effective or easier to administer than our product candidates, our commercial opportunity will be reduced or eliminated.

•Even if we obtain marketing approval for any of our product candidates, they could be subject to restrictions or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our product candidates, when and if any of them are approved.

•Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it difficult for us to sell our product candidates profitably.

•Any suspension of, or delays in the commencement or completion of, clinical trials for our product candidates could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.

•Negative public opinion and increased regulatory scrutiny of gene therapy and genetic research may damage public perception of our product candidates or adversely affect our ability to conduct our business or obtain marketing approvals for our product candidates.

•We are dependent on the services of our key executives and clinical and scientific staff, and if we are not able to retain these members of our management or recruit additional management, clinical and scientific personnel, our business will suffer.

•We may encounter difficulties in managing our growth and expanding our operations successfully.

•The coronavirus (“COVID-19”) pandemic has impacted our business practices and the effects of its continued impact on our business, results of operations, and financial condition will depend on future developments, which cannot be predicted.

•The trading price of the shares of our common stock has been and could continue to be highly volatile, and purchasers of our common stock could incur substantial losses.

•If we sell shares of our common stock or securities convertible into or exercisable for shares of our common stock in future financings, pursuant to our at-the-market sales agreement, licensing or collaboration arrangements, or acquisitions, stockholders may experience immediate dilution and, as a result, our stock price may decline.

•Our failure or perceived failure to comply with existing or future laws, regulations, contracts, self-regulatory schemes, standards, and other obligations related to privacy, data protection, and data security (including security incidents) could harm our business. Our compliance or the actual or perceived failure to comply with such obligations could increase the costs of our services, limit their use or adoption, and otherwise negatively affect our operating results and business.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Adverum Biotechnologies, Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)


	March 31, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	89,652	$	34,195
Short-term investments	181,403		270,993
Lease incentive receivables	—		5,709
Prepaid expenses and other current assets	9,062		6,248
Total current assets	280,117		317,145
Operating lease right-of-use assets	84,874		86,000
Property and equipment, net	37,223		33,060

Restricted cash	2,503		2,503
Deferred rent receivable	2,457		769
Deposit and other long-term assets	220		250
Total assets	$	407,394	$	439,727
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	3,245	$	1,387
Accrued expenses and other current liabilities	17,633		18,047
Lease liability, current portion	2,359		1,886

Total current liabilities	23,237		21,320

Lease liability, net of current portion	100,178		101,108
Other non-current liabilities	1,027		1,114
Total liabilities	124,442		123,542

Stockholders’ equity:
Preferred stock	—		—
Common stock	10		10
Additional paid-in capital	970,349		964,965
Accumulated other comprehensive loss	(1,423)		(714)
Accumulated deficit	(685,984)		(648,076)
Total stockholders’ equity	282,952		316,185
Total liabilities and stockholders' equity	$	407,394	$	439,727

See accompanying notes to condensed consolidated financial statements

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Adverum Biotechnologies, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share data)

(Unaudited)


	Three Months Ended March 31,
		2022		2021
License revenue		$	—	$	7,500

Operating expenses:
Research and development		22,964		19,980
General and administrative		15,169		16,163

Total operating expenses		38,133		36,143
Operating loss		(38,133)		(28,643)
Other income, net		244		207
Net loss before income taxes		(37,889)		(28,436)
Income tax provision		(19)		—
Net loss		(37,908)		(28,436)
Other comprehensive income (loss):
Net unrealized loss on marketable securities		(723)		(22)
Foreign currency translation adjustment		14		(33)
Comprehensive loss		$	(38,617)	$	(28,491)
Net loss per share — basic and diluted		$	(0.38)	$	(0.29)
Weighted-average common shares used to compute net loss per share - basic and diluted		98,596		97,750

See accompanying notes to condensed consolidated financial statements

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Adverum Biotechnologies, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive (Loss)/Income		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount
Balance at December 31, 2021	98,381	$	10	$	964,965	$	(714)	$	(648,076)	$	316,185
Stock-based compensation expense	—	—		5,381		—		—		5,381
Common stock issued upon exercise of stock options	15	—		3		—		—		3
Common stock issued upon release of restricted stock units	371	—		—		—		—		—

Foreign currency translation adjustments	—	—		—		14		—		14
Unrealized loss on marketable securities, net	—	—		—		(723)		—		(723)
Net loss	—	—		—		—		(37,908)		(37,908)
Balance at March 31, 2022	98,767	$	10	$	970,349	$	(1,423)	$	(685,984)	$	282,952




Balance at December 31, 2020	97,549	$	10	$	937,134	$	(261)	$	(502,536)	$	434,347
Stock-based compensation expense	—	—		7,224		—		—		7,224
Issuance of common stock, net of issuance costs of $5	121	—		1,689		—		—		1,689
Common stock issued upon exercise of stock options	9	—		51		—		—		51
Common stock issued upon release of restricted stock units	248	—		—		—		—		—

Foreign currency translation adjustments	—	—		—		(33)		—		(33)
Unrealized loss on marketable securities, net	—	—		—		(22)		—		(22)
Net loss	—	—		—				(28,436)		(28,436)
Balance at March 31, 2021	97,927	$	10	$	946,098	$	(316)	$	(530,972)	$	414,820

See accompanying notes to condensed consolidated financial statements.

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Adverum Biotechnologies, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net loss	$	(37,908)	$	(28,436)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,425		1,166
Stock-based compensation expense	5,381		7,224
Amortization of premium and accrued interest on marketable securities	212		855

Other	(92)		(42)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(2,916)		(1,279)
Other assets	(1,658)		(464)
Operating lease right-of-use asset	1,126		332
Accounts payable	1,437		(763)
Accrued expenses and other current liabilities	(1,207)		(396)
Other non-current liabilities	19		—

Lease liability and lease incentive receivable	5,252		(502)

Net cash used in operating activities	(28,929)		(22,305)
Cash flows from investing activities:
Purchases of marketable securities	(29,750)		(82,667)
Maturities of marketable securities	118,507		90,650

Purchases of property and equipment	(4,374)		(1,404)
Net cash provided by investing activities	84,383		6,579
Cash flows from financing activities:
Proceeds from offerings of common stock, net of issuance costs	—		1,694

Proceeds from issuance of common stock pursuant to option exercises	3		51



Repayment of loan	—		(240)
Net cash provided by financing activities	3		1,505
Net increase (decrease) in cash and cash equivalents and restricted cash	55,457		(14,221)
Cash and cash equivalents and restricted cash at beginning of period	36,698		63,423
Cash and cash equivalents and restricted cash at end of period	$	92,155	$	49,202
Cash and cash equivalents	89,652		45,422
Restricted cash	2,503		3,780
Cash and cash equivalents and restricted cash at end of period	$	92,155	$	49,202
Supplemental schedule of noncash investing and financing information

Fixed assets in accounts payable, accrued expenses and other current liabilities	$	2,616	$	805

See accompanying notes to condensed consolidated financial statements.

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Adverum Biotechnologies, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Basis of Presentation

Adverum Biotechnologies, Inc. (the “Company” or “Adverum”) was incorporated in Delaware on July 17, 2006 and is headquartered in Redwood City, California. The Company is a clinical-stage gene therapy company targeting unmet medical needs in ocular and rare diseases. The Company develops gene therapy product candidates intended to provide durable efficacy by inducing sustained expression of a therapeutic protein.

The Company has not generated any revenue from the sale of products since its inception. The Company has experienced net losses since its inception and had an accumulated deficit of $686.0 million as of March 31, 2022. The Company expects to incur losses and have negative net cash flows from operating activities as it engages in further research and development activities. As of March 31, 2022, the Company had cash, cash equivalents and short-term investments of $271.1 million, which the Company believes will be sufficient to fund its operations for at least twelve months from the date of issuance of these financial statements.

Basis of Presentation — The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and follow the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the Company’s consolidated financial information. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year or any other future period. The balance sheet as of December 31, 2021 is derived from the audited consolidated financial statements at that date but does not include all of the information required by U.S. GAAP for complete consolidated financial statements.

The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC.

2. Summary of Significant Accounting Policies

Use of Estimates

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities and the reported amounts of expenses in the condensed consolidated financial statements and the accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to clinical trial accruals, fair value of assets and liabilities, impairment of long-lived assets, income taxes, and stock-based compensation. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“Topic 326”) and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, ASU 2019-05, and ASU 2019-11. The standard requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect collectability. Topic 326 also eliminates the concept of “other-than-temporary” impairment when evaluating available-for-sale debt securities and instead focuses on determining whether any impairment is a result of a credit loss or other factors. An entity will recognize an allowance for credit losses on available-for-sale debt securities rather than an other-than-temporary impairment that reduces the cost basis of the investment. Topic 326 will become effective for the Company on January 1, 2023. Early adoption is permitted. The Company is currently evaluating the impact of adopting Topic 326, but does not expect the effect of adoption to be material.

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3. Fair Value Measurements and Fair Value of Financial Instruments

The authoritative guidance on the fair value hierarchy for disclosure of fair value measurements is as follows:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The fair value of Level 1 securities is determined using quoted prices in active markets for identical assets. Level 1 securities consist of highly liquid money market funds. Financial assets and liabilities are considered Level 2 when their fair values are determined using inputs that are observable in the market or can be derived principally from or corroborated by observable market data such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities. In addition, Level 2 financial instruments are valued using comparisons to like-kind financial instruments and models that use readily observable market data as their basis. U.S. government and agency securities, commercial paper, and corporate bond are valued primarily using market prices of comparable securities, bid/ask quotes, interest rate yields and prepayment spreads and are included in Level 2.

The following is a summary of the Company’s cash equivalents and short-term investments:


	March 31, 2022
	Amortized Cost Basis		Unrealized Gains		Unrealized Losses		Estimated Fair Value
	(In thousands)
Level 1:
Money market funds	$	607	$	—	$	—	$	607
Level 2:
U.S. government and agency securities	62,209		—		(811)		61,398
Commercial paper	181,168		1		(179)		180,990
Corporate bonds	23,197		7		(58)		23,146
Total cash equivalents and short-term investments	267,181		8		(1,048)		266,141
Less: cash equivalents	(84,741)		(1)		4		(84,738)
Total short-term investments	$	182,440	$	7	$	(1,044)	$	181,403


	December 31, 2021
	Amortized Cost Basis		Unrealized Gains		Unrealized Losses		Estimated Fair Value
	(In thousands)
Level 1:
Money market funds	$	10,311	$	—	$	—	$	10,311
Level 2:
U.S. government and agency securities	62,268		—		(218)		62,050
Commercial paper	177,215		1		(61)		177,155
Corporate bonds	47,323		—		(39)		47,284

Total cash equivalents and short-term investments	297,117		1		(318)		296,800
Less: cash equivalents	(25,808)		—		1		(25,807)
Total short-term investments	$	271,309	$	1	$	(317)	$	270,993

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As of March 31, 2022, $38.5 million of marketable securities had remaining maturities between one and two years. The remainder of the marketable securities have a remaining maturity of less than one year. As the Company may sell these securities at any time for use in current operations even if the securities have not yet reached maturity, all marketable securities are classified as current assets in the Company's consolidated balance sheet. Management regularly reviews all of the Company’s investments for other-than-temporary declines in estimated fair value. Management determined that the gross unrealized losses on the Company’s marketable securities as of March 31, 2022 were temporary in nature and none were in a continuous loss position for 12 months or more. Management concluded that none of the Company’s marketable securities were other-than-temporarily impaired as of March 31, 2022.

4. Balance Sheet Components

Property and Equipment, Net

Property and equipment, net consists of the following:


	March 31, 2022		December 31, 2021
	(In thousands)
Computer equipment and software	$	1,234	$	1,224
Laboratory equipment	14,500		12,778
Furniture and fixtures	1,136		1,136
Leasehold improvements	26,696		26,701
Construction in progress	8,256		4,395
Total property and equipment	51,822		46,234
Less accumulated depreciation and amortization	(14,599)		(13,174)
Property and equipment, net	$	37,223	$	33,060

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:


	March 31, 2022		December 31, 2021
	(In thousands)
Employee compensation	$	7,172	$	9,209
Accrued nonclinical, clinical and process development costs	5,246		4,953
State income tax payable	1,432		1,318
Accrued professional services	1,067		550
Other	2,716		2,017
Total accrued expenses and other current liabilities	$	17,633	$	18,047

5. Equity Incentive Awards

Stock Options

The following table summarizes the Company’s option activity and related information:


	Number of Options (in thousands)	Weighted- Average Exercise Price
Balance at December 31, 2021	13,288	$	9.34
Options granted	5,735	1.40
Options exercised	(15)	0.19
Options forfeited	(2,837)	6.60
Balance at March 31, 2022	16,171	$

SEC Form 10-Q filed by Adverum Biotechnologies Inc.