SEC Filing | MeiraGTx

View:

Download DOC

Download PDF

Download XLS

Download XBRL

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 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 June 30, 2020

☐	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: 001-38520

MeiraGTx Holdings plc

(Exact Name of Registrant as Specified in its Charter)

Cayman Islands		Not applicable
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

450 East 29^th Street, 14^th Floor
New York, NY		10016
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (646) 860-7985

Not Applicable

(Former name, former address, and former fiscal year, if changed since last report)

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


Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Ordinary Shares, $0.00003881 par value per share		MGTX		The Nasdaq Global Select Market

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

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

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

Large accelerated filer ☐		Accelerated filer ☒

Non-accelerated filer ☐		Small reporting company ☒

		Emerging growth Company ☒

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

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

As of July 31, 2020, the registrant had 37,362,916 ordinary shares, $0.00003881 par value per share, outstanding.

Table of Contents

Forward-Looking Statements

This Quarterly Report on Form 10-Q (the “Form 10-Q”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this Form 10-Q that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements regarding expectations regarding meetings with global regulatory authorities and the FDA, product pipeline, anticipated product benefits, goals and strategic priorities, product candidate development and status and expectations relating to clinical trials, growth expectations or targets and pre-clinical and clinical data expectations in respect of collaborations, including, in each case, in light of the COVID-19 pandemic, as well as statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “forecast,” “estimate,” “may,” “should,” “anticipate” and similar statements of a future or forward-looking nature. These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the important factors discussed under Item 1A. “Risk Factors” in this Form 10-Q. These and other important factors could cause actual results to differ materially from those indicated by the forward-looking statements made in this Form 10-Q. Any such forward-looking statements represent management’s estimates as of the date of this Form 10-Q. While we may elect to update such forward-looking statements at some point in the future, unless required by law, we disclaim any obligation to do so, even if subsequent events cause our views to change. Thus, one should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this Form 10-Q.

Preliminary Notes

Unless the context otherwise requires, references in this Form 10-Q to “Meira,” “we,” “us”, “our” and “the Company” refer to MeiraGTx Holdings plc and its subsidiaries.

Table of Contents

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	1

Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Condensed Consolidated Statement of Shareholders’ Equity	3
	Condensed Consolidated Statement of Shareholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39

PART II.	OTHER INFORMATION	40

Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	97
Item 3.	Defaults Upon Senior Securities	97
Item 4.	Mine Safety Disclosures	97
Item 5.	Other Information	97
Item 6.	Exhibits	99
Signatures		100

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


	June 30,		December 31,
	2020		2019

ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	194,811,181	$	227,233,384
Accounts receivable - related party		24,432,392		23,337,377
Prepaid expenses		7,318,772		4,464,085
Tax incentive receivable		6,777,863		11,974,437
Other current assets		1,868,559		1,970,585
Total Current Assets		235,208,767		268,979,868

Property and equipment, net		27,807,875		23,858,108
Security deposits		705,515		951,138
In-process research and development		774,727		777,655
Restricted cash		—		123,376
Other assets		194,318		195,053
Right-of-use assets		25,920,174		29,002,448
TOTAL ASSETS	$	290,611,376	$	323,887,646

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	3,089,350	$	3,759,339
Accrued expenses		18,491,860		18,083,757
Lease obligations, current		2,137,788		1,674,210
Deferred revenue - related party, current		23,003,106		25,678,515
Total Current Liabilities		46,722,104		49,195,821

Deferred revenue - related party		50,691,547		60,535,576
Lease obligations		18,555,378		21,504,340
Asset retirement obligations		1,682,515		1,654,755
Deferred income tax liability		194,318		195,053
TOTAL LIABILITIES		117,845,862		133,085,545

COMMITMENTS

SHAREHOLDERS' EQUITY:
Ordinary Shares, $0.00003881 par value, 1,288,327,750 authorized, 37,362,416 and 36,791,906 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively		1,451		1,429
Capital in excess of par value		414,229,672		395,630,666
Accumulated other comprehensive income (loss)		2,669,474		(1,794,042)
Accumulated deficit		(244,135,083)		(203,035,952)
Total Shareholders' Equity		172,765,514		190,802,101
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	290,611,376	$	323,887,646

See Notes to Condensed Consolidated Financial Statements

Table of Contents

MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)


	For the Three-Month Periods Ended June 30,				For the Six-Month Periods Ended June 30,
	2020		2019		2020		2019

License revenue - related party	$	2,473,705	$	1,981,676	$	6,683,281	$	2,766,636

Operating expenses:
General and administrative		11,497,270		13,437,171		23,303,404		21,936,646
Research and development		16,202,065		9,771,754		24,285,405		22,747,983
Total operating expenses		27,699,335		23,208,925		47,588,809		44,684,629
Loss from operations		(25,225,630)		(21,227,249)		(40,905,528)		(41,917,993)
Other non-operating income (expense):
Foreign currency (loss) gain		(351,863)		283,175		(1,108,567)		3,001,575
Interest income		193,604		39,726		982,975		39,726
Interest expense		(34,045)		(9,454)		(68,011)		(19,028)
Loss before income taxes		(25,417,934)		(20,913,802)		(41,099,131)		(38,895,720)
Benefit for income taxes		—		91,390		—		91,390
Net loss		(25,417,934)		(20,822,412)		(41,099,131)		(38,804,330)
Other comprehensive income:
Foreign currency translation gain, net of tax of $0, for the three-month and six-month periods ended June 30, 2020, and $91,390 for the three-month and six-month periods ended June 30, 2019		517,592		1,579,882		4,463,516		446,199
Total comprehensive loss	$	(24,900,342)	$	(19,242,530)	$	(36,635,615)	$	(38,358,131)
Net loss	$	(25,417,934)	$	(20,822,412)	$	(41,099,131)	$	(38,804,330)
Basic and diluted net loss per ordinary share	$	(0.69)	$	(0.63)	$	(1.12)	$	(1.26)
Weighted-average number of ordinary shares outstanding		36,969,682		32,827,029		36,797,316		30,814,639

See Notes to Condensed Consolidated Financial Statements

Table of Contents

MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE PERIOD ENDED JUNE 30, 2020

(unaudited)


	Shareholders’ Equity
						Accumulated Other				Total
	Ordinary			Capital in Excess		Comprehensive		Accumulated		Shareholders'
	Shares	Amount		of Par Value		(Loss) Income		Deficit		Equity

Balance at December 31, 2019	36,791,906	$	1,429	$	395,630,666	$	(1,794,042)	$	(203,035,952)	$	190,802,101
Exercise of share options	26,010		1		175,076		—		—		175,077
Share-based compensation	—		—		5,682,881		—		—		5,682,881
Foreign currency translation	—		—		—		3,945,924		—		3,945,924
Net loss for the three-month period ended March 31, 2020	—		—		—		—		(15,681,197)		(15,681,197)
Balance at March 31, 2020	36,817,916	$	1,430	$	401,488,623	$	2,151,882	$	(218,717,149)	$	184,924,786
Share-based compensation	—		—		5,056,069		—		—		5,056,069
Issuance of shares in connection with asset acquisitions	544,500		21		7,684,980		—		—		7,685,001
Foreign currency translation	—		—		—		517,592		—		517,592
Net loss for the three-month period ended June 30, 2020	—		—		—		—		(25,417,934)		(25,417,934)
Balance at June 30, 2020	37,362,416	$	1,451	$	414,229,672	$	2,669,474	$	(244,135,083)	$	172,765,514

See Notes to Condensed Consolidated Financial Statements

Table of Contents

MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE PERIOD ENDED JUNE 30, 2019

(unaudited)


	Shareholders' Equity
						Accumulated Other				Total
	Ordinary			Capital in Excess		Comprehensive		Accumulated		Shareholders'
	Shares	Amount		of Par Value		Income (Loss)		Deficit		Equity

Balance at December 31, 2018	27,386,632		1,064		229,054,460		293,666		(148,289,717)	$	81,059,473
Issuance of ordinary shares in connection with a license agreement	158,832		6		1,966,334		—		—		1,966,340
Sale of ordinary shares in connection with private placement, net of issuance costs of $2,426,953	5,797,102		225		77,572,822		—		—		77,573,047
Share-based compensation	—		—		2,934,991		—		—		2,934,991
Foreign currency translation	—		—		—		(1,133,683)		—		(1,133,683)
Net loss for the three-month period ended March 31, 2019	—		—		—		—		(17,981,918)		(17,981,918)
Balance at March 31, 2019	33,342,566	$	1,295	$	311,528,607	$	(840,017)	$	(166,271,635)	$	144,418,250
Exercise of share options	225		—		1,267		—		—		1,267
Share-based compensation	—		—		4,386,123		—		—		4,386,123
Foreign currency translation, net of income taxes	—		—		—		1,579,882		—		1,579,882
Net loss for the three-month period ended June 30, 2019	—		—		—		—		(20,822,412)		(20,822,412)
Balance at June 30, 2019	33,342,791	$	1,295	$	315,915,997	$	739,865	$	(187,094,047)	$	129,563,110

See Notes to Condensed Consolidated Financial Statements

Table of Contents

MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	For the Six Months Ended June 30,
	2020		2019
Cash flows from operating activities:
Net loss	$	(41,099,131)	$	(38,804,330)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Ordinary shares issued in connection with license agreement		—		1,966,340
Share-based compensation expense		10,738,950		7,321,114
Foreign currency loss (gain)		1,108,567		(3,001,575)
Depreciation		1,755,739		1,036,283
Lease obligations		142,961		(19,454)
Loss on disposal of equipment, furniture and fixtures		105,716		—
Gain on termination of lease liability		(143,589)		—
Amortization of interest on asset retirement obligations		66,385		5,277
Issuance of shares in connection with asset acquisition		7,685,001		—
Benefit for income taxes		—		(91,390)
(Increase) decrease in operating assets:
Accounts receivable - related party		(1,136,508)		—
Prepaid expenses		(3,063,580)		(1,331,780)
Tax incentive receivable		4,628,464		—
Other current assets		(10,055)		(591,153)
Security deposits		190,839		(245,835)
Increase (decrease) in operating liabilities:
Accounts payable		(704,304)		266,910
Accrued expenses		1,153,994		(2,355,789)
Deferred revenue - related party		(6,683,281)		96,267,249
Net cash (used in) provided by operating activities		(25,263,832)		60,421,867

Cash flows from investing activities:
Purchase of property and equipment		(6,951,980)		(2,206,996)
Net cash used in investing activities		(6,951,980)		(2,206,996)

Cash flows from financing activities:
Payments on lease obligations - financing leases		(15,881)		(13,365)
Exercise of share options		175,077		1,267
Proceeds from the issuance of ordinary shares		—		80,000,000
Issuance costs in connection with ordinary shares		—		(2,426,953)
Net cash provided by financing activities		159,196		77,560,949

Net (decrease) increase in cash, cash equivalents and restricted cash		(32,056,616)		135,775,820
Effect of exchange rate changes on cash		(488,963)		417,022
Cash, cash equivalents and restricted cash at beginning of period		227,356,760		68,203,551
Cash, cash equivalents and restricted cash at end of period	$	194,811,181	$	204,396,393

Supplemental disclosure of non-cash transactions:
Issuance of shares in connection with asset acquisition	$	7,685,001	$	—
Issuance of shares in connection with a license agreement	$	—	$	1,966,340
Fixed asset acquisition included in accounts payable and accrued expenses at end of period	$	161,008	$	71,473
Lease obligations for right-of-use asset	$	—	$	24,462,830
Supplemental disclosure of cash flow information:
Cash paid for interest	$	136	$	991

See Notes to Condensed Consolidated Financial Statements

Table of Contents

MEIRAGTX HOLDINGS PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Basis of Presentation:

The Company

MeiraGTx Holdings plc and subsidiaries (the “Company” or “Meira Holdings”), an exempted company incorporated under the laws of the Cayman Islands, is a vertically integrated, clinical-stage gene therapy company with six programs in clinical development and a broad pipeline of preclinical and research programs. The Company has core capabilities in viral vector design and optimization and gene therapy manufacturing, as well as a potentially transformative gene regulation technology. Led by an experienced management team, the Company has taken a portfolio approach by licensing, acquiring and developing technologies that give depth across both product candidates and indications. The Company’s initial focus is on three distinct areas of unmet medical need: inherited retinal diseases, neurodegenerative diseases and severe forms of xerostomia. Though initially focusing on the eye, central nervous system and salivary gland, the Company intends to expand its focus in the future to develop additional gene therapy treatments for patients suffering from a range of serious diseases. The Company also owns and operates a current good manufacturing practices, or cGMP, multi-product, multi-viral vector manufacturing facility in London, United Kingdom, which includes fill and finish capabilities and can supply the Company’s clinical and potential commercial material. Additionally, on August 4, 2020, the Company entered into agreements to purchase its second cGMP viral vector manufacturing facility and its first cGMP plasmid production facility in Shannon, Ireland to expand its manufacturing and supply chain capabilities. See Note 11, Subsequent Event, for additional information.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Interim Financial Statements

The accompanying condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, the condensed consolidated financial statements include all adjustments (consisting of normal recurring accruals) necessary in order to make the condensed consolidated financial statements not misleading. Operating results for the six-month period ended June 30, 2020 are not necessarily indicative of the final results that may be expected for the year ending December 31, 2020. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “Form 10-K”).

Liquidity

The Company has not yet achieved profitable operations. There is no assurance that profitable operations, if ever achieved, could be sustained on a continuing basis. In addition, development activities, clinical and preclinical testing, and commercialization of the Company’s product candidates will require significant additional financing. The Company’s accumulated deficit at June 30, 2020 totaled $244,135,083, and management expects to incur substantial losses in future periods. The success of the Company is subject to certain risks and uncertainties, including, among others: uncertainty of product development; competition in the Company’s field of use; uncertainty of capital availability; uncertainty in the Company’s ability to enter into agreements with collaborative

Table of Contents

partners; dependence on third parties; and dependence on key personnel. For the six-months ended June 30, 2020, the Company used $25,263,832 in cash flows from operations and there are no assurances that the Company will generate positive cash flows in the future. Additionally, there are no assurances that the Company will be successful in obtaining an adequate level of financing for the development and commercialization of its product candidates.

As of June 30, 2020, the Company had cash and cash equivalents in the amount of $194,811,181, which consisted of depository accounts. On January 30, 2019, the Company entered into a collaboration, option and license agreement with Janssen Pharmaceuticals, Inc. (“Janssen”), one of the Janssen Pharmaceuticals Companies of Johnson & Johnson (the “Collaboration Agreement”), for the research, development and commercialization of gene therapies for the treatment of inherited retinal diseases (“IRD”). Under the terms of the Collaboration Agreement, the Company received an upfront payment of $100,000,000. The Company also receives funding for certain research, manufacturing, clinical development and commercialization costs, potential additional milestone payments upon the achievement of such milestones and royalties on future net sales of products. The Company estimates that its cash and cash equivalents on-hand at June 30, 2020 will be sufficient to cover its expenses for at least the next twelve months from the date of issuance of these condensed consolidated financial statements.

Risks and Uncertainties

The Company operates in an industry that is subject to intense competition, government regulation and rapid technological change. The Company’s operations are subject to significant risk and uncertainties including financial, operational, technological, regulatory and other risks, including the potential risk of business failure.

There are also many uncertainties regarding the pandemic caused by the novel coronavirus, or COVID-19, and the Company is closely monitoring the impact of the pandemic on all aspects of its business, including how the pandemic will impact its financial condition, liquidity, operations, clinical studies, employees, vendors, and industry. While the pandemic did not materially affect the Company's financial results and business operations in the six-month period ended June 30, 2020, the Company is unable to predict the impact that COVID-19 will have on its financial position and operating results in future periods due to numerous uncertainties. The Company will continue to assess the evolving impact of the COVID-19 pandemic and will make adjustments to its operations as necessary.

The Company’s capital resources and operations to date have been funded primarily with the proceeds from the Collaboration Agreement and private and public equity offerings. In the future, the Company may seek to raise additional capital through equity offerings, debt financings, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or other sources to enable it to complete the development and potential commercialization of its product candidates. The COVID-19 outbreak and mitigation measures also have had, and may continue to have, an adverse impact on global economic conditions, which could have an adverse effect on the Company’s ability to raise capital when needed.

2. Summary of Significant Accounting Policies and Recent Accounting Pronouncements:

Certain of the Company’s significant accounting policies are described below. All of the Company’s significant accounting policies are disclosed in the notes to the audited consolidated financial statements as of and for the year ended December 31, 2019 included in the Company’s Form 10-K. Since the date of such financial statements, the Company has adopted the new accounting pronouncements which are disclosed further in this note.

Consolidation

The accompanying condensed consolidated financial statements include the accounts of Meira Holdings and its wholly owned subsidiaries:

MeiraGTx Limited, a limited company incorporated under the laws of England and Wales;

MeiraGTx, LLC, a Delaware corporation (“Meira LLC”);

Table of Contents

MeiraGTx UK II Limited, a limited company incorporated under the laws of England and Wales (“Meira UK II”);

MeiraGTx Netherlands, B.V., a private company with limited liability incorporated under the laws of the Netherlands (“Meira Netherlands”);

BRI-Alzan, Inc., a Delaware corporation (“BRI-Alzan”);

MeiraGTx Bio, Inc., a Delaware corporation (“Meira Bio”);

MeiraGTx B.V., a private company with limited liability incorporated under the laws of the Netherlands (“Meira B.V.”);

MeiraGTx Ireland DAC, a designated activity company incorporated under the laws of Ireland (“Meira Ireland”);

MeiraGTx Neurosciences, Inc., a Delaware corporation (“Meira Neuro”); and

MeiraGTx UK Limited, a limited company incorporated under the laws of England and Wales (“Meira UK”).

All intercompany balances and transactions between the consolidated companies have been eliminated in consolidation.

Use of Estimates

Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these condensed consolidated financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. In preparing these condensed consolidated financial statements, management used significant estimates in the following areas, among others: collaboration revenue, the accounting for research and development costs, share-based compensation, leases, asset retirement obligations and tax incentive receivable.

Additionally, the Company has made estimates of the impact of the COVID-19 pandemic within the condensed consolidated financial statements and there may be changes to those estimates in future periods. Actual results may differ from these estimates.

Foreign Currency Contracts

The Company uses foreign currency forward contracts to protect against changes in anticipated foreign currency cash flows resulting from changes in foreign currency exchange rates, primarily associated with non-functional currency denominated expenses. These instruments are recognized on the balance sheet at their estimated fair value. The Company does not designate its foreign currency forward contracts as part of a hedging transaction. Changes in the fair value are recorded each period within the Company’s condensed consolidated statement of operations and comprehensive loss as a component of net loss. There were no foreign currency forward contracts outstanding as of June 30, 2020.

Fair Value Measurements

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most

Table of Contents

advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including the Company’s credit risk.

The Company follows ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820, for application to financial assets and liabilities. In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:

●

Level 1: Observable inputs such as quoted prices in active markets for identical assets the reporting entity has the ability to access as of the measurement date;

●

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

●

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The table below represents the values of the Company’s financial assets and liabilities that are required to be measured at fair value on a recurring basis:


	Fair Value Measurement Using:
			Significant		Significant Other		Significant
	June 30,		Observable Inputs		Observable Inputs		Unobservable
Description	2020		(Level 1)		(Level 2)		(Level 3)
Asset retirement obligations	$	1,682,515	$	—	$	—	$	1,682,515


	Fair Value Measurement Using:
			Significant		Significant Other		Significant
	December 31,		Observable Inputs		Observable Inputs		Unobservable
Description	2019		(Level 1)		(Level 2)		(Level 3)
Restricted cash	$	123,376	$	123,376	$	—	$	—
Asset retirement obligations	$	1,654,755	$	—	$	—	$	1,654,755

Leases

The Company accounts for leases in accordance with ASC 842. The Company determines if an arrangement is a lease at contract inception. A lease exists when a contract conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. The definition of a lease embodies two conditions: (1) there is an identified asset in the contract that is land or a depreciable asset (i.e., property, plant, and equipment), and (2) the Company has the right to control the use of the identified asset. The Company accounts for the lease and non-lease components as a single lease component.

From time to time the Company enters into direct financing lease arrangements that include a lessee obligation to purchase the leased asset at the end of the lease term, a bargain purchase option, or provides for minimum lease payments with a present value of 90% or more of the fair value of the leased asset at the date of lease inception.

Operating leases where the Company is the lessee are included in right-of-use (“ROU”) assets and lease obligations are included on the Company’s consolidated balance sheets. The lease obligations are initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date and subsequent reporting periods.

Table of Contents

Finance leases where the Company is the lessee are included in ROU assets and lease obligations on the Company’s consolidated balance sheets. The lease obligations are initially measured in the same manner as for operating leases and are subsequently measured at amortized cost using the effective interest method.

Key estimates and judgments include how the Company determined (1) the discount rate used to discount the unpaid lease payments to present value, (2) lease term and (3) lease payments.

ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. As most of the Company’s leases where it is the lessee do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. The Company uses the implicit rate when readily determinable.

The lease term for all of the Company’s leases includes the non-cancellable period of the lease plus any additional periods covered by either a lessee option to extend (or not to terminate) the lease that is reasonably certain to be exercised, or an option to extend (or not to terminate) the lease controlled by the lessor.

The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date less any lease incentives received.

For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, minus any accrued lease payments, less the unamortized balance of lease incentives received. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

For finance leases, the ROU asset is subsequently amortized using the straight-line method from the lease commencement date to the earlier of the end of its useful life or the end of the lease term unless the lease transfers ownership of the underlying asset, or the Company is reasonably certain to exercise an option to purchase the underlying asset. In those cases, the ROU asset is amortized over the useful life of the underlying asset. Amortization of the ROU asset is recognized and presented separately from interest expense on the lease liability.

The Company has elected not to recognize ROU assets and lease liabilities for all short-term leases that have a lease term of 12 months or less at lease commencement. Lease payments associated with short-term leases are recognized as an expense on a straight-line basis over the lease term.

Asset Retirement Obligations

Accounting for asset retirement obligations requires legal obligations associated with the retirement of long-lived assets to be recognized at fair value when incurred and capitalized as part of the related long-lived asset. In the absence of quoted market prices, the Company estimates the fair value of its asset retirement obligations using Level 3 present value techniques, in which estimates of future cash flows associated with retirement activities are discounted using a credit-adjusted risk-free rate. Asset retirement obligations currently reported as other liabilities on the condensed consolidated balance sheet were measured during a period of historically low interest rates. The impact on measurements of new asset retirement obligations using different rates in the future may be significant.

The Company uses estimates to determine the asset retirement obligations at the end of the lease term and discounts such asset retirement obligations using an estimated discount rate. Interest on the discounted asset retirement obligation is amortized over the term of the lease using the effective interest method and is recorded as interest expense in the condensed consolidated statements of operations and comprehensive loss.

Table of Contents

The change in asset retirement obligations is as follows:


	For the Six Months Ended June 30,
	2020		2019
Balance at beginning of period	$	1,654,755	$	128,119
Amortization of interest		66,385		5,277
Effects of exchange rate		(38,625)		(550)
Balance at end of period	$	1,682,515	$	132,846

Collaboration Arrangements

The Company evaluates its collaborative arrangements pursuant to ASC 808, Collaborative Arrangements (“ASC 808”) and ASC 606, Revenue from Contracts with Customers (“ASC 606”). The Company considers the nature and contractual terms of collaborative arrangements and assesses whether the arrangement involves a joint operating activity pursuant to which the Company is an active participant and is exposed to significant risks and rewards with respect to the arrangement. If the Company is an active participant and is exposed to significant risks and rewards with respect to the arrangement, the Company accounts for the arrangement as a collaboration under ASC 808. To date, the Company has entered into two separate collaboration agreements, both of which are with Janssen, which were determined to be within the scope of ASC 808.

ASC 808 does not address recognition or measurement matters related to collaborative arrangements. Payments between participants pursuant to a collaborative arrangement that are within the scope of other authoritative accounting literature on income statement classification are accounted for using the relevant provisions of that literature. If the payments are not within the scope of other authoritative accounting literature, the income statement classification for the payments is based on an analogy to authoritative accounting literature or if there is no appropriate analogy, a reasonable, rational and consistently applied accounting policy election. Payments received from a collaboration partner to which this policy applies may include upfront payments in respect of a license of intellectual property, development and commercialization-based milestones, and royalties.

Refer to the discussion in Note 8 for further information related to the accounting for the Janssen Collaboration Agreement.

Revenue Recognition

Arrangements with collaborators may include licenses to intellectual property, research and development services, manufacturing services for clinical and commercial supply, and participation on joint steering committees. The Company evaluates the promised goods or services to determine which promises, or group of promises, represent performance obligations. In contemplation of whether a promised good or service meets the criteria required of a performance obligation, the Company considers the stage of development of the underlying intellectual property, the capabilities and expertise of the customer relative to the underlying intellectual property, and whether the promised goods or services are integral to or dependent on other promises in the contract. When accounting for an arrangement that contains multiple performance obligations, the Company must develop judgmental assumptions, which may include market conditions, reimbursement rates for personnel costs, development timelines and probabilities of regulatory success to determine the stand-alone selling price for each performance obligation identified in the contract.

When the Company concludes that a contract should be accounted for as a combined performance obligation and recognized over time, the Company must then determine the period over which revenue should be recognized and the method by which to measure revenue. The Company generally recognizes revenue using a cost-based input method.

Table of Contents

The Collaboration Agreement with Janssen is accounted for under ASC 808, however, as ASC 808 does not address recognition or measurement matters such as determining the appropriate unit of accounting or when the recognition criteria are met, the Company accounts for the consideration received from Janssen in accordance with ASC 606. In accordance with ASC 606, the Company recognizes revenue when its customer or collaborator obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, it performs the following five steps:

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 within the contract; and

recognize revenue when (or as) the entity satisfies a performance obligation.

The Company only applies the five-step model to contracts when it determines that it is probable it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

At contract inception, once the contract is determined to be by analogy within the scope of ASC 606, the Company assesses the goods or services promised within the contract to determine whether each promised good or service is a performance obligation. The promised goods or services in the Company’s arrangements typically consist of a license to the Company’s intellectual property and research, development and manufacturing services. The Company may provide options to additional items in such arrangements, which are accounted for as separate contracts when the customer elects to exercise such options, unless the option provides a material right to the customer. Performance obligations are promises in a contract to transfer a distinct good or service to the customer that (i) the customer can benefit from on its own or together with other readily available resources, and (ii) is separately identifiable from other promises in the contract. Goods or services that are not individually distinct performance obligations are combined with other promised goods or services until such combined group of promises meet the requirements of a performance obligation.

The Company determines transaction price based on the amount of consideration the Company expects to receive for transferring the promised goods or services in the contract. Consideration may be fixed, variable, or a combination of both. At contract inception for arrangements that include variable consideration, the Company estimates the probability and extent of consideration it expects to receive under the contract utilizing either the most likely amount method or expected amount method, whichever best estimates the amount expected to be received. The Company then considers any constraints on the variable consideration and includes in the transaction price variable consideration to the extent it is deemed probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The Company then allocates the transaction price to each performance obligation based on the relative standalone selling price and recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) control is transferred to the customer and the performance obligation is satisfied. For performance obligations which consist of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Table of Contents

The Company records amounts as accounts receivable when the right to consideration is deemed unconditional. When consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded as deferred revenue.

Amounts received prior to satisfying the revenue recognition criteria are recognized as deferred revenue in the Company’s condensed consolidated balance sheet. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue – related party, current. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue – related party.

The Company’s collaboration revenue arrangements include the following:

Up-front License Fees: If a license is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from nonrefundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone Payments: At the inception of an agreement that includes research and development milestone payments, the Company evaluates each milestone to determine when and how much of the milestone to include in the transaction price. The Company first estimates the amount of the milestone payment that the Company could receive using either the expected value or the most likely amount approach. The Company primarily uses the most likely amount approach as that approach is generally most predictive for milestone payments with a binary outcome. Then, the Company considers whether any portion of that estimated amount is subject to the variable consideration constraint (that is, whether it is probable that a significant reversal of cumulative revenue would not occur upon resolution of the uncertainty.) The Company updates the estimate of variable consideration included in the transaction price at each reporting date which includes updating the assessment of the likely amount of consideration and the application of the constraint to reflect current facts and circumstances.

Royalties: For arrangements that include sales-based royalties, including milestone payments based on a level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company will 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, the Company has not recognized any revenue related to sales-based royalties or milestone payments based on the level of sales.

Research and Development Services: The Company is incurring research and development costs, with Janssen responsible for up to 100% of the costs, depending on the type of research and development services being performed. The Company records costs associated with the development activities as research and development expenses in the condensed consolidated statements of operations and comprehensive loss consistent with ASC 730, Research and Development. The reimbursement of the research and development costs by Janssen is representative of the joint risk sharing nature of the arrangement. The Company considered the guidance in ASC 808 and recognizes the payments received from Janssen as a reduction to research and development expense when the related costs are incurred.

Research and Development

Research and development costs are charged to expense as incurred. These costs include, but are not limited to, employee-related expenses, including salaries, benefits and travel of the Company’s research and development personnel; expenses incurred under agreements with contract research organizations and investigative sites that conduct clinical and preclinical studies and for the drug product for the clinical studies and preclinical activities; facilities; supplies; rent, insurance, certain legal fees, share-based compensation, depreciation and other costs

Table of Contents

associated with clinical and preclinical activities and regulatory operations. Research funding under collaboration agreements and refundable research and development credits / tax credits are recorded as an offset to these costs.

Costs for certain development activities, such as Company funded outside research programs, are recognized based on an evaluation of the progress to completion of specific tasks with respect to their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the condensed consolidated financial statements as prepaid expenses or accrued expenses, as the case may be.

Net Loss per Ordinary Share

Basic net loss per ordinary share is computed by dividing net loss by the weighted average number of shares of the Company’s ordinary shares assumed to be outstanding during the period of computation. Diluted net loss per ordinary share is computed similar to basic net loss per share except that the denominator is increased to include the number of additional ordinary shares that would have been outstanding if the potential ordinary shares had been issued at the beginning of the year and if the additional ordinary shares were dilutive (treasury stock method) or the two-class method, whichever is more dilutive. For all periods presented, basic and diluted net loss per ordinary share are the same, as any additional ordinary share equivalents would be anti-dilutive.

The following securities are considered to be ordinary share equivalents, but were not included in the computation of diluted net loss per ordinary share because to do so would have been anti-dilutive:


	June 30,	June 30,
	2020	2019
Restricted share units	545,000	—
Share options	4,976,621	3,547,821
Restricted ordinary shares subject to forfeiture	—	435,450
	5,521,621	3,983,271

Segment Information

Management has concluded it has a single reporting segment for purposes of reporting financial condition and results of operations.

The Company’s license revenue, research funding and deferred revenue from its Collaboration Agreement are generated in the United Kingdom.

The following table summarizes non-current assets by geographical area:


	June 30,		December 31,
	2020		2019
United States	$	14,726,222	$	14,354,792
United Kingdom		39,406,645		39,476,700
Netherlands		1,269,742		1,076,286
	$	55,402,609	$	54,907,778

Accounting Pronouncements Recently Adopted

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurements, which changes the fair value measurement disclosure requirements of ASC 820. The goal of the ASU is to improve the effectiveness of ASC 820’s disclosure requirements by providing users of the financial statements with better information about assets and liabilities measured at fair value in the financial statements and notes thereto. The guidance is applicable for fiscal years beginning after December 15, 2019 and

Table of Contents

interim periods within those years. The adoption of the provisions of ASU 2018-13 did not have a material impact on the current financial statements.

In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 (“ASU 2018-18”). The standard amends ASC 808, Collaborative Arrangements and ASC 606, Revenue from Contracts with Customers, to clarify the interaction between collaborative arrangement participants that should be accounted for as revenue under ASC 606. In transactions when the collaborative arrangement participant is a customer in the context of a unit of account, revenue should be accounted for using the guidance in Topic 606. The amendments in ASU 2018-18 are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of ASU 2018-18 did not have a material impact on the current financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which adds a new Topic 326 to the Codification and removes the thresholds that companies apply to measure credit losses on financial instruments measured at amortized cost, such as loans, receivables, and held-to-maturity debt securities. Under current GAAP, companies generally recognize credit losses when it is probable that the loss has been incurred. The revised guidance will remove all recognition thresholds and will require companies to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that the company expects to collect over the instrument’s contractual life. ASU 2016-13 also amends the credit loss measurement guidance for available-for-sale debt securities and beneficial interests in securitized financial assets. The guidance is applicable for fiscal years beginning after December 15, 2019 and interim periods within those years, however, the FASB extended the effective date for smaller reporting companies to fiscal years beginning after December 15, 2022. The Company is currently evaluating the potential impact of the adoption of this standard on its related disclosures.

3. Asset Acquisition

On April 9, 2020 (the “Closing Date”), the Company acquired Emrys Bio Inc. (“Emrys”), a pre-clinical biopharmaceutical company developing brain-derived neurotrophic factor gene therapy for treatment of genetic obesity disorders, as well as the development of gene therapy product candidates for other central nervous system diseases. The Company acquired Emrys pursuant to an Agreement and Plan of Merger (the “Emrys Merger Agreement”), dated as of April 9, 2020, by and among the Company, Emrys, and EB Acquisition, Inc., a wholly-owned subsidiary of the Company (“Merger Sub”), the Emrys stockholders and the Emrys stockholder representative, pursuant to which Merger Sub was merged with and into Emrys, with Emrys being the surviving corporation (the “Merger”). As a result of the Merger, Emrys became a wholly-owned subsidiary of the Company and was renamed MeiraGTx Bio, Inc.

As part of the entry into the Emrys Merger Agreement, the parties to the Agreement and Plan of Merger (the “Vector Merger Agreement”), dated October 5, 2018, entered into an Amendment and Waiver to the Vector Merger Agreement by and among the Company, VN Acquisition, Inc., VN Acquisition 2, Inc., the former Vector Neurosciences Inc. (“Vector”) stockholders and the Vector stockholder representative, to terminate and waive all milestone payments payable under the Vector Merger Agreement that were otherwise required if specified regulatory milestones were met, and to terminate and waive all royalty payments that were otherwise required to be paid under the Vector Merger Agreement. Several of the selling Emrys stockholders were also stockholders of Vector.

In connection with the acquisition of Emrys and the termination and waiver of the milestone and royalty payments otherwise required under the Vector Merger Agreement, the consideration to Emrys selling stockholders consisted of an aggregate of 580,000 of the Company’s ordinary shares of which (i) 232,000 ordinary shares were issued on the Closing Date, (ii) 290,000 restricted ordinary shares were issued on the Closing Date, with 50% of such restricted ordinary shares scheduled to vest on each of the first and second anniversaries of the Closing Date, and (iii) 58,000 ordinary shares will be issued 18 months following the Closing Date, provided that the shares described in clauses

Table of Contents

(ii) and (iii) are subject to certain indemnification claims under the Emrys Merger Agreement. Total consideration of $7,685,001 was based on the closing price of the Company’s ordinary shares of $13.25 per share on the Closing Date.

The Company determined this transaction represented an asset acquisition as substantially all of the value was in the intellectual property as defined by ASC 805, Business Combinations (“ASC 805”). The asset acquisition of in process research and development was recorded at a fair value of $7,685,001 as of April 9, 2020. The acquired in process research and development was immediately charged to research and development expense in the condensed consolidated statement of operations and comprehensive loss as of the acquisition date since the Company determined that there was no additional alternative use of these assets.

4. Accrued Expenses

Accrued expenses for the periods presented are comprised of the following:


	June 30,		December 31,
	2020		2019
Clinical trial costs	$	13,277,818	$	7,788,077
Compensation and benefits		1,028,831		6,850,335
Fixed assets		869,986		1,108,362
Manufacturing costs		841,866		—
Consulting		734,447		1,247,989
Professional fees		692,211		486,743
Rent		523,300		283,876
Research and development		317,864		—
Other		205,537		318,375
	$	18,491,860	$	18,083,757

5. Share-Based Compensation

Equity Incentive Plans

The Company’s 2018 Incentive Award Plan and 2016 Equity Incentive Plan (collectively, the “Plans”) were adopted by the Company’s board of directors and shareholders. Under the Plans, the Company has granted share options and restricted share units (“RSUs”) to selected officers, employees and non-employee consultants. The Company’s board of directors or a committee thereof administers the Plans. Upon the adoption of the 2018 Incentive Award Plan, the Company ceased issuing awards under the 2016 Equity Incentive Plan.

Table of Contents

Options

A summary of the Company’s share option activity related to employees, non-employee members of the board of directors and non-employee consultants as of and for the year-ended December 31, 2019 and the six-month period ended June 30, 2020 is as follows:


					Weighted-
			Weighted-		Average
			Average		Remaining
		Number of	Exercise		Contractual
		Options	Price		Life (years)
Outstanding at December 31, 2019		3,645,360		9.31	8.45	years
Granted		1,438,500		18.52
Exercised		(26,010)		6.73
Expired		—		—
Forfeited		(81,229)		16.96
Outstanding at June 30, 2020		4,976,621	$	11.93	8.24	years
Options exercisable at June 30, 2020		1,990,714	$	8.89	7.44	years
Aggregate intrinsic value of options outstanding as of June 30, 2020	$	14,624,869
Aggregate intrinsic value of options exercisable as of June 30, 2020	$	9,092,153

Options granted under the Plans have a maximum contractual term of ten years. Options granted generally vest 25% on the first anniversary of the date of grant and the balance ratably over the next 36 months. Options granted to directors when they join the board generally vest in 36 equal monthly installments following the date of grant, and annual options granted to directors generally vest on the earlier of the first anniversary of the date of grant or the day before the Company’s annual meeting of shareholders.

The total fair value of options vested during the three-month periods ended June 30, 2020 and 2019 was $3,833,603 and $2,483,808, respectively.

The total fair value of options vested during the six-month periods ended June 30, 2020 and 2019 was $5,484,528 and $3,874,750, respectively.

The weighted-average grant date fair value of options granted during the six-month periods ended June 30, 2020 and 2019 was $13.85 and $12.70, respectively.

The grant date fair values of the share options granted were estimated using the Black-Scholes option valuation model with the following ranges of assumptions:


	2020	2019
Risk-free interest rate	0.32 - 2.56%	1.76 - 2.55%
Expected volatility	90%	90%
Expected dividend yield	0%	0%
Expected life (in years)	5.5 - 6.1	5.5 - 6.1

As of June 30, 2020, the total compensation expense relating to unvested options granted that had not yet been recognized was $29,117,903, which is expected to be realized over a period of 4.0 years. The Company will issue shares upon exercise of options from ordinary shares reserved under the Plans.

Table of Contents

Restricted Share Units

On January 8, 2020 and March 6, 2020, the Company granted 505,000 and 40,000 RSUs to certain members of senior management and a consultant, respectively. The RSUs were valued at $20.30 and $16.45 per share, respectively, and the related share-based compensation expense, which is recognized ratably over the requisite service period, is included in general and administrative and research and development expenses in the condensed consolidated statements of operations and comprehensive loss.

These RSUs vest 50% on the second anniversary of the date of grant and 25% on each of the third and fourth anniversaries of the date of grant.

For the three-months ended June 30, 2020, total share-based compensation expense recorded in connection with the RSUs was $681,846, of which $640,722 was recorded as general and administrative expense and $41,124 was recorded as research and development expense.

For the six-months ended June 30, 2020, total share-based compensation expense recorded in connection with the RSUs was $1,280,141, of which $1,228,051 was recorded as general and administrative expense and $52,090 was recorded as research and development expense.

As of June 30, 2020, the total compensation expense relating to unvested RSUs granted that had not yet been recognized was $9,629,359, which is expected to be realized over a period of 3.7 years.

Restricted Ordinary Shares

On June 7, 2018, 1,306,348 restricted ordinary shares, which represented 5% of the fully-diluted outstanding shares of the Company as of such date, were issued to certain members of senior management in accordance with their employment agreements. One-third of such shares vested immediately, with the balance vesting quarterly over the next eight quarters beginning six months after the effectiveness of the Company’s registration statement on Form S-1 filed with the Securities and Exchange Commission (“SEC”) on June 7, 2018 (the “Registration Statement”). The shares were valued at $15.00 per share and the related share-based compensation expense, which is recognized over the requisite service period, is included in general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss. Additionally, under the terms of the employment agreements, the Company was required to pay the income taxes incurred by the grantees in connection with the grant of those restricted shares.

Total compensation expense in connection with the issuance of those restricted ordinary shares, in the amount of $2,969,162 and $4,112,927, of which $1,273,690 and $1,632,930 was share-based, was recorded as general and administrative expense during the three-month periods ended June 30, 2020 and 2019, respectively.

Total compensation expense in connection with the issuance of those restricted ordinary shares, in the amount of $6,545,688 and $7,885,577, of which $2,906,620 and $3,265,860 was share-based, was recorded as general and administrative expense during the six-month periods ended June 30, 2020 and 2019, respectively.

A summary of the restricted ordinary shares is as follows:


	Ordinary Shares	$ Value
Non-vested at December 31, 2019	217,726	$	3,265,890
Vested during 2020	(217,726)		(3,265,890)
Non-vested at June 30, 2020	—	$	—

Table of Contents

During the three-month and six-month periods ended June 30, 2020 and 2019 the Company recognized total share-based compensation expense in the accompanying condensed consolidated statements of operations and comprehensive loss as follows:


	Three-month periods ended June 30,
	2020		2019
Research and development	$	1,464,231	$	862,971
General and administrative		3,591,838		3,523,152
Total share-based compensation	$	5,056,069	$	4,386,123


	Six-month periods ended June 30,
	2020		2019
Research and development	$	2,882,022	$	1,697,285
General and administrative		7,856,928		5,623,829
Total share-based compensation	$	10,738,950	$	7,321,114

The Company does not expect to realize any tax benefits from its share option activity or the recognition of share-based compensation expense because the Company currently has net operating losses and has a full valuation allowance against its deferred tax assets. Accordingly, no amounts related to excess tax benefits have been reported in cash flows from operations or cash flows from financing activities for the six-month periods ended June 30, 2020 and 2019.

6. Ordinary Shares

Private Placement

On February 27, 2019, the Company issued 5,797,102 ordinary shares in a private placement for gross proceeds of $80 million, excluding offering costs of approximately $2.4 million. Johnson & Johnson Innovation – JJDC, Inc. (“JJDC”), the investment arm of Johnson and Johnson and owner of Janssen, purchased 2,898,550 of the ordinary shares issued on the same terms and conditions as the other investors in the offering.

In connection with the offering, the Company also entered into a registration rights agreement whereby, promptly following the date on which the Company becomes eligible to use a registration statement on Form S-3, but in no event later than July 31, 2019, the Company shall prepare and file a registration statement covering the resale of all of the Registrable Securities, as defined in the agreement. The Company filed the Form S-3 on July 2, 2019 and the Form S-3 was declared effective on July 16, 2019.

License Agreement

As discussed in Note 8, on March 21, 2019, the Company issued 158,832 ordinary shares in connection with a license agreement. In accordance with the license agreement, the cost basis of the shares was based on the closing share price on January 31, 2019.

7. Income Taxes

The Company did not record a provision for income taxes for the three-month and six-month periods ended June 30, 2020 and 2019, as the Company has generated losses for all periods.

The Company periodically evaluates the realizability of its deferred tax assets based on all available evidence, both positive and negative. The realization of deferred tax assets is dependent on the Company’s ability to generate sufficient future taxable income during periods prior to the expiration of tax attributes to fully utilize these assets. The Company weighed both positive and negative evidence and determined that there is a continued need for a full valuation allowance on its deferred tax assets (after consideration of the reversal of the deferred tax liabilities for the ROU assets and fixed assets) in the United States, United Kingdom and Netherlands as of June 30, 2020. Should the

Table of Contents

Company determine that it would be able to realize its remaining deferred tax assets in the foreseeable future, an adjustment to its remaining deferred tax assets would cause a material increase to income in the period such determination is made.

The intraperiod tax allocation guidance required that the Company allocate income taxes between continuing operations and other categories of earnings. When the Company had a year-to-date pre-tax loss from continuing operations and year-to-date pre-tax income in other comprehensive income, applicable GAAP (ASC 740-20-45-7) required that the Company allocate the income tax provision to other categories of earnings (including other comprehensive income), and then record a related tax benefit in operations. For the three and six-month periods ended June 30, 2019, the Company recognized net income from other comprehensive income while sustaining losses from operations. Because of the required allocation, the Company recorded on the condensed consolidated statements of operations and comprehensive loss an income tax benefit of $91,390 for the three and six-month periods ended June 30, 2019, respectively, within “benefit for income taxes” and income tax expense of $91,390 within “other comprehensive income” for the three-month and six-month periods ended June 30, 2019, respectively. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes, including removing exceptions within the general principles of Topic 740 regarding the incremental approach for intraperiod tax allocation. The Company has elected to adopt this ASU as of January 1, 2020 on a prospective basis.

New Tax Legislation

Many governments have enacted or are currently contemplating economic stimulus and financial aid measures. Many of these measures include deferring the due dates for tax payments, including both income tax and other taxes. The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted on March 27, 2020 in the United States to address the economic impacts of the COVID-19 pandemic. The CARES Act includes corporate income tax, payroll tax, and other provisions. While the Company may receive financial, tax, or other benefits under the bill, this legislation did not impact the Company during the six months ended June 30, 2020. The Company is still assessing the impact of the CARES Act and other global measures and does not expect there to be a material impact to its income tax provision for the year ending December 31, 2020.

8. Related-Party Transactions

Collaboration and License Agreements

Janssen Pharmaceuticals, Inc.

On January 30, 2019, the Company entered into a Collaboration Agreement with Janssen for the research, development and commercialization of gene therapies for the treatment of IRDs. Under the agreement, Janssen paid the Company a non-refundable upfront fee of $100.0 million. Janssen and the Company will collaborate to develop the Company’s current clinical programs in retinitis pigmentosa and two genetic forms of achromatopsia, and Janssen has the exclusive right to commercialize these three product candidates (“Clinical IRD Product Candidates”) globally.

Pursuant to the Collaboration Agreement, the Company and Janssen also agreed on a research collaboration to develop a pipeline of preclinical inherited retinal disease gene therapy candidates (“Research IRD Product Candidates”). The parties will select and prioritize the Research IRD Product Candidates and Janssen has the right to opt-in for a fee for each of the specified targets (each an “Option Target”) to obtain certain development, manufacturing and commercialization rights for the Research IRD Product Candidates.

Unless terminated earlier under certain termination clauses, the Collaboration Agreement will continue in effect, on a product-by-product and country-by-country basis, until such time as the royalty terms expire in such country. The Company has determined enforceable rights exist in the Collaboration Agreement as the termination clauses are

Table of Contents

substantive termination penalties by way of the non-refundable upfront fee and the reversion of any licensed intellectual property granted to Janssen upon the termination of the agreement.

On February 27, 2019, in connection with a private placement, the Company issued 2,898,550 ordinary shares to JJDC, the investment arm of Johnson and Johnson and owner of Janssen, on the same terms and conditions as the other investors in the offering. After the offering, JJDC became a related party.

Clinical IRD Product Candidates

Under the Collaboration Agreement, the Company and Janssen will jointly develop Clinical IRD Product Candidates to permit Janssen to commercialize such Clinical IRD Product Candidates under an exclusive license from the Company. In general, the Company will have the primary responsibility to develop each Clinical IRD Product Candidate in accordance with the development plan for each Clinical IRD Product Candidate, including where applicable, conducting any necessary research in order to submit the applicable regulatory filings to regulatory authorities. The Company will manufacture these products in its cGMP manufacturing facility for both clinical and commercial supply. Janssen will pay 100% of the clinical and commercialization costs of the products and the Company is eligible to receive untiered 20% royalties on net sales of products and additional development and commercialization milestones up to $340.0 million.

Research IRD Product Candidates

Under the Collaboration Agreement, the Company and Janssen will collaborate to develop Research IRD Product Candidates, with Janssen paying for the majority of the research costs. Janssen has the right to exclusively license any product coming out of the collaboration at the time of an investigational new drug application (“IND”) for an additional fee for each Research IRD Product Candidate. Janssen will then pay 100% of the clinical and commercialization costs for these Research IRD Product Candidates and the Company will receive an untiered royalty on net sales in the high teens as well as development milestones for each Research IRD Product Candidate.

Revenue Recognition under the Collaboration Agreement

The Collaboration Agreement is accounted for under ASC 808, however, ASC 808 does not address recognition or measurement matters. Therefore, the Company will account for the recognition and measurement of consideration under ASC 606. In determining the appro