SEC Filing | Caribou Biosciences, Inc.

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crbu-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

______________________________________

FORM 10-Q

______________________________________

(Mark One)


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

For the quarterly period ended March 31, 2023


o			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: 001-40631

______________________________________

Caribou Biosciences, Inc.

(Exact Name of Registrant as Specified in its Charter)

______________________________________


Delaware						45-3728228
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

2929 7th Street, Suite 105 Berkeley, California						94710
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (510) 982-6030

______________________________________

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

CRBU

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 x No o

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 o

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

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

As of May 4, 2023, the registrant had 61,363,713 shares of common stock, $0.0001 par value per share, outstanding.

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		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 Statements of Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
PART II.	OTHER INFORMATION	30
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 6.	Exhibits	31
Signatures		33

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

CARIBOU BIOSCIENCES, INC. AND ITS SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share amounts)


	March 31, 2023		December 31, 2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	52,744	$	58,338
Marketable securities, short-term	175,794		189,325
Accounts receivable	1,533		202
Contract assets	1,639		2,247
Other receivables	1,670		2,215
Prepaid expenses and other current assets	6,110		7,921
Total current assets	239,490		260,248
NON-CURRENT ASSETS
Investments in equity securities	7,683		7,698
Marketable securities, long-term	62,452		69,373
Property and equipment, net	12,646		10,678
Operating lease, right of use assets	23,715		24,230
Other assets	1,476		1,538
TOTAL ASSETS	$	347,462	$	373,765
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	2,651	$	1,146
Accrued expenses and other current liabilities	12,544		16,079
Lease liabilities, current	1,022		966
Deferred revenue ($150 and $150 from related party, respectively)	10,883		9,937
Total current liabilities	27,100		28,128
LONG-TERM LIABILITIES
Deferred revenue, net of current portion	13,911		15,954
MSKCC success payments liability	1,396		1,651
Lease liabilities, non-current	26,401		26,780
Deferred tax liabilities	382		381
Total liabilities	69,190		72,894
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS’ EQUITY
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized at March 31, 2023 and December 31, 2022; no shares issued and outstanding as of March 31, 2023 and December 31, 2022	—		—
Common stock, par value $0.0001 per share, 300,000,000 shares authorized at March 31, 2023 and December 31, 2022, respectively; 61,323,523 and 61,029,184 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively	6		6
Additional paid-in-capital	504,255		499,598
Accumulated other comprehensive loss	(730)		(1,518)
Accumulated deficit	(225,259)		(197,215)
Total stockholders’ equity	278,272		300,871
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	347,462	$	373,765

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CARIBOU BIOSCIENCES, INC. AND ITS SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share amounts)


	Three Months Ended March 31,
		2023		2022
Licensing and collaboration revenue		$	3,502	$	2,664
Operating expenses:
Research and development		25,709		13,924
General and administrative		8,909		9,593
Total operating expenses		34,618		23,517
Loss from operations		(31,116)		(20,853)
Other income (expense):
Change in fair value of equity securities		(15)		(88)
Change in fair value of the MSKCC success payments liability		255		1,596
Other income, net		2,832		257
Total other income		3,072		1,765
Net loss		(28,044)		(19,088)
Other comprehensive income (loss):
Net unrealized gain (loss) on available-for-sale marketable securities, net of tax		788		(954)
Net comprehensive loss		$	(27,256)	$	(20,042)
Net loss per share, basic and diluted		$	(0.46)	$	(0.32)
Weighted-average common shares outstanding, basic and diluted		61,186,514		60,546,170

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CARIBOU BIOSCIENCES, INC. AND ITS SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands, except share amounts)


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
BALANCE—December 31, 2022	61,029,184	$	6	$	499,598	$	(1,518)	$	(197,215)	$	300,871
Issuance of common stock under employee stock plans	70,271	—		404		—		—		404
Issuance of common stock on exercise of options	55,433	—		115		—		—		115
Issuance of common stock in connection with at-the-market offering, net of offering expenses	168,635	—		1,007		—		—		1,007
Stock-based compensation expense	—	—		3,131		—		—		3,131
Net loss	—	—		—		—		(28,044)		(28,044)
Other comprehensive income	—	—		—		788		—		788
BALANCE—March 31, 2023	61,323,523	$	6	$	504,255	$	(730)	$	(225,259)	$	278,272











BALANCE—December 31, 2021	60,263,158	$	6	$	485,748	$	(135)	$	(97,794)	$	387,825
Issuance of common stock under employee stock plans	36,596	—		361		—		—		361
Issuance of common stock on exercise of options	389,855	—		629		—		—		629
Stock-based compensation expense	—	—		3,024		—		—		3,024
Net loss	—	—		—		—		(19,088)		(19,088)
Other comprehensive loss	—	—		—		(954)		—		(954)
BALANCE—March 31, 2022	60,689,609	$	6	$	489,762	$	(1,089)	$	(116,882)	$	371,797

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CARIBOU BIOSCIENCES, INC. AND ITS SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Three Months Ended March 31,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(28,044)	$	(19,088)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	589		308
Gain on disposal of fixed assets	(34)		—
Non-cash consideration for licensing and collaboration revenue	—		(128)
Change in fair value of equity securities	15		88
Stock-based compensation expense	3,131		3,024
Change in fair value of MSKCC success payments liability	(255)		(1,596)
Amortization of investment premiums	(1,494)		327
Non-cash lease expense	515		500
Changes in operating assets and liabilities:
Accounts receivable	(1,331)		779
Contract assets	607		(6)
Other receivables	545		1,313
Prepaid expenses and other current assets	1,811		(1,296)
Other assets	62		(487)
Accounts payable	1,502		(1,915)
Accrued expenses and other current liabilities	(4,138)		(2,831)
Deferred revenue, current and long-term	(1,097)		(572)
Operating lease liabilities	(323)		(85)
Other liabilities	—		(8)
Net cash used in operating activities	(27,939)		(21,673)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and maturities of marketable securities	98,665		39,300
Purchases of marketable securities	(75,931)		(110,684)
Purchases of property and equipment	(2,031)		(723)
Net cash provided by (used in) investing activities	20,703		(72,107)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and purchases of common stock under employee stock purchase plan	519		990
Proceeds from issuance of common stock related to at-the-market offering, net of offering expenses	1,123		—
Net cash provided by financing activities	1,642		990
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(5,594)		(92,790)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — BEGINNING OF PERIOD	58,384		240,466
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — END OF PERIOD	$	52,790	$	147,676
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
Cash and cash equivalents	$	52,744	$	147,630
Restricted cash	46		46
TOTAL CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	$	52,790	$	147,676

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Purchases of property and equipment included in accounts payable and accrued expenses	$	1,714	$	981
Offering costs included in accrued expenses	$	116	$	—
Right-of-use-assets obtained in exchange for new operating lease liabilities	$	—	$	26,249

The accompanying notes are an integral part of these condensed consolidated financial statements.

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CARIBOU BIOSCIENCES, INC. AND ITS SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Description of the Business, Organization, and Liquidity

Business and Organization

Caribou Biosciences, Inc. (the “Company” or “we”) is a clinical-stage Clustered Regularly Interspaced Short Palindromic Repeats (“CRISPR”) genome-editing biopharmaceutical company dedicated to developing transformative therapies for patients with devastating diseases. Our genome-editing platform, including our novel chRDNA (CRISPR hybrid RNA-DNA, or “chRDNA,” pronounced “chardonnay”) technologies, enables superior editing precision to develop cell therapies that are armored to improve antitumor activity. We are advancing a pipeline of allogeneic, or off-the-shelf, cell therapies from our chimeric antigen receptor (“CAR”) T (“CAR-T”) cell and CAR-natural killer (“CAR-NK”) cell platforms as readily available therapeutic treatments for patients.

We incorporated in October 2011 as a Delaware corporation and are headquartered in Berkeley, California. We have four wholly owned subsidiaries: Antler Holdco, LLC, incorporated in Delaware in April 2019; Microbe Holdco, LLC, incorporated in Delaware in June 2020; Arboreal Holdco, LLC, incorporated in Delaware in November 2020; and Biloba Holdco, LLC, incorporated in Delaware in April 2021. Our wholly owned subsidiaries hold interests in our equity investments and do not have operating activities.

Liquidity

We have incurred net losses and negative cash flows from operations since our inception and we had an accumulated deficit of $225.3 million as of March 31, 2023. During the three months ended March 31, 2023, we incurred a net loss of $28.0 million and used $27.9 million of cash in operating activities. We expect to continue to incur substantial losses, and our ability to achieve and sustain profitability will depend on the successful development, approval, and commercialization of our product candidates and on our achievement of sufficient revenue to support our cost structure. We may never achieve profitability and, unless and until we do, we will need to continue to raise additional capital. Our management expects that existing cash, cash equivalents, and marketable securities of $291.0 million as of March 31, 2023, will be sufficient to fund our current operating plan for at least the next 12 months from the date of issuance of our condensed consolidated financial statements.

2. Summary of Significant Accounting Policies

There have been no changes to the significant accounting policies disclosed in Note 2 to the annual consolidated financial statements for the year ended December 31, 2022 included in our Annual Report on Form 10-K (“Form 10-K”).

Basis of Presentation and Principles of Consolidation

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and include the accounts of Caribou Biosciences, Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities; the disclosure of contingent assets and liabilities at the date of our condensed consolidated financial statements; and the reported amounts of revenue, income, and expenses during the applicable reporting period. On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, common stock valuation, stock-based compensation expense, accrued expenses related to research and development activities, valuation of the Memorial Sloan Kettering Cancer Center (“MSKCC”) success payments liability, and income taxes. Our management bases its estimates on historical experience and on various other assumptions that they believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from those estimates.

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Segments

We operate and manage our business as one reportable operating segment, which is the business of developing a pipeline of allogeneic CAR-T and CAR-NK cell therapies. Our president and chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for allocating resources and evaluating financial performance. All long-lived assets are maintained in the United States.

Concentrations of Credit Risk and Other Uncertainties

Financial instruments that potentially subject us to concentration of credit risk consist of cash and cash equivalents, accounts receivable, contract assets, other receivables, and investments in marketable securities and equity securities. Substantially all of our cash and cash equivalents are deposited in accounts at two financial institutions, and account balances may at times exceed federally insured limits. We mitigate the risks by investing in high-grade instruments, limiting our exposure to one issuer, and we monitor the ongoing creditworthiness of the financial institutions and issuers.

Licensees that represent 10% or more of our revenue and accounts receivable and contract assets were as follows:


	Revenue				Accounts Receivable and Contract Assets
	Three Months Ended				As of March 31, 2023	As of December 31, 2022
	March 31, 2023		March 31, 2022
Licensee A	17.6	%	23.1	%		17.4	%	*
Licensee B	22.0	%	19.6	%		24.4	%	23.8	%
Licensee C	45.9	%	35.0	%		45.7	%	36.6	%
Total	85.5	%	77.7	%		87.5	%	60.4	%

*Less than 10%

We monitor economic conditions to identify facts or circumstances that may indicate if any of our accounts receivable are not collectible or if the contract assets should be impaired. No allowance for credit losses or contract asset impairment was recorded as of March 31, 2023 or December 31, 2022.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments–Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326). This ASU provides guidance on the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the current incurred loss impairment approach with a methodology to reflect expected credit losses and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. This ASU is to be applied on a modified retrospective approach and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, and interim reporting periods within fiscal years beginning after December 15, 2023. Early adoption is permitted for all entities for fiscal years beginning after December 15, 2018, and interim periods therein. We adopted ASU 2016-13 on January 1, 2023. The impact on our financial statements and related disclosures was not material.

3. Fair Value Measurements and Fair Value of Financial Instruments

The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements 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.

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Assets and liabilities measured at fair value are classified in their entireties based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires our management to make judgments and consider factors specific to the asset or liability.

Our financial instruments consist of Level 1, Level 2, and Level 3 financial instruments. We generally classify our marketable securities as Level 2. Instruments are classified as Level 2 when observable market prices for identical securities that are traded in less active markets are used. When observable market prices for identical securities are not available, such instruments are priced using benchmark curves, benchmarking of like securities, sector groupings, matrix pricing, and valuation models. These valuation models are proprietary to the pricing providers or brokers and incorporate a number of inputs, including in approximate order of priority: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. For certain security types, additional inputs may be used, or some of the standard inputs may not be applicable. Evaluators may prioritize inputs differently on any given day for any security based on market conditions, and not all inputs listed are available for use in the evaluation process for each security evaluation on any given day. Changes in the ability to observe valuation inputs may result in a reclassification of levels of certain securities within the fair value hierarchy. We recognize transfers into and out of levels within the fair value hierarchy in the period in which the actual event or change in circumstances that caused the transfer occurs. No such transfers occurred during the three months ended March 31, 2023. Level 1 financial instruments are comprised of money market fund investments and U.S. Treasury bills. Level 2 financial instruments are comprised of commercial paper, corporate debt securities, and U.S. government agency bonds. Financial assets and liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at least one significant model assumption or input is unobservable. Level 3 financial instruments consist of the MSKCC success payments liability.

The following table sets forth our financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):


	Fair Value Measurements as of March 31, 2023
	Total		Level 1		Level 2		Level 3
Assets:
U.S. Treasury bills ($18,946 included in cash and cash equivalents)	$	139,072	$	139,072	$	—	$	—
U.S. government agency bonds	57,330		—		57,330		—
Commercial paper ($1,811 included in cash and cash equivalents)	43,886		—		43,886		—
Money market fund investments (included in cash and cash equivalents)	31,987		31,987		—		—
Corporate debt securities	18,715		—		18,715		—
Total fair value of assets	$	290,990	$	171,059	$	119,931	$	—
Liabilities:
MSKCC success payments liability	$	1,396	$	—	$	—	$	1,396
Total fair value of liabilities	$	1,396	$	—	$	—	$	1,396

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	Fair Value Measurements as of December 31, 2022
	Total		Level 1		Level 2		Level 3
Assets:
Commercial paper ($26,669 included in cash and cash equivalents)	$	96,899	$	—	$	96,899	$	—
U.S. Treasury bills	91,966		91,966		—		—
U.S. government agency bonds ($3,976 included in cash and cash equivalents)	63,659		—		63,659		—
Corporate debt securities	36,819		—		36,819		—
Money market fund investments (included in cash and cash equivalents)	27,693		27,693		—		—
Total fair value of assets	$	317,036	$	119,659	$	197,377	$	—
Liabilities:
MSKCC success payments liability	$	1,651	$	—	$	—	$	1,651
Total fair value of liabilities	$	1,651	$	—	$	—	$	1,651

The fair value and amortized cost of cash equivalents and available-for-sale marketable securities by major security type as of March 31, 2023 and December 31, 2022 are presented in the following tables (in thousands):


	As of March 31, 2023
	Amortized Cost Basis		Unrealized Gains		Unrealized Losses		Estimated Fair Value
U.S. Treasury bills ($18,946 included in cash and cash equivalents)	$	139,537	$	65	$	(530)	$	139,072
U.S. government agency bonds	57,475		53		(198)		57,330
Commercial paper ($1,811 included in cash and cash equivalents)	43,950		4		(68)		43,886
Money market investments (included in cash equivalents)	31,987		—		—		31,987
Corporate debt securities	18,772		4		(61)		18,715
Total cash equivalents and marketable securities	$	291,721	$	126	$	(857)	$	290,990

Classified as:
Cash and cash equivalents							$	52,744
Marketable securities, short-term							175,794
Marketable securities, long-term							62,452
Total cash equivalents and marketable securities							$	290,990

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	As of December 31, 2022
	Amortized Cost Basis		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Commercial paper ($26,669 included in cash equivalents)	$	97,024	$	6	$	(131)	$	96,899
U.S. Treasury bills	92,910		1		(945)		91,966
U.S. government agency bonds ($3,976 included in cash and cash equivalents)	63,926		25		(292)		63,659
Corporate debt securities	37,002		—		(183)		36,819
Money market investments (included in cash equivalents)	27,693		—		—		27,693
Total cash equivalents and marketable securities	$	318,555	$	32	$	(1,551)	$	317,036

Classified as:
Cash and cash equivalents							$	58,338
Marketable securities, short-term							189,325
Marketable securities, long-term							69,373
Total cash equivalents and marketable securities							$	317,036

The following table sets forth a summary of the changes in the fair value of our Level 3 financial liability (in thousands):


	MSKCC Success Payments Liability
Balance at December 31, 2022	$	1,651
Change in fair value	(255)
Balance at March 31, 2023	$	1,396

Our liability for the MSKCC success payments is carried at fair value and changes are recognized as expense or income as part of other income (expense) until the success payments liability is paid or expires (Note 4). We recorded a $0.3 million and $1.6 million change in the fair value of the MSKCC success payments liability as a gain in other income (expense) in our condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2023 and 2022, respectively.

As of December 31, 2022, we utilized a Monte Carlo simulation model that models the future movement of stock prices based on several key variables. This model requires significant estimates and assumptions in determining the estimated fair value of the MSKCC success payments liability at each balance sheet date. The assumptions used to calculate the fair value of the MSKCC success payments are subject to a significant amount of judgment including the expected volatility that was estimated using available information about the historical volatility of stocks of publicly traded companies that are similar to us, the estimated term, and the estimated number and timing of valuation measurement dates. The table below summarizes key assumptions used in the valuation of MSKCC success payments liability:


	As of December 31, 2022
Fair value of common stock	$	6.28
Risk-free interest rate	3.88%
Expected volatility	79%
Probability of achieving multiple of Initial Share Price	3.0% to 10.6%
Expected term (years)	4.6 to 6.0

The computation of expected volatility was estimated using a combination of available information about the historical volatility of stocks of similar publicly traded companies for a period matching the expected term assumption and

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the historical and implied volatility of our stock. The risk-free interest rate, expected volatility, and expected term assumptions depend on the estimated timing of our phase 1 clinical trial for our CB-012 product candidate utilizing the know-how, biological materials, and intellectual property licensed under the Exclusive License Agreement, dated November 13, 2020, with MSKCC (the “MSKCC Agreement”) and the estimated timing of marketing approval for this product candidate from the U.S. Food and Drug Administration (“FDA”). In addition, we incorporated the estimated number and timing of valuation measurement dates in the calculation of the MSKCC success payments liability.

As of March 31, 2023 we did not note any significant changes to the inputs used in the MSKCC success payments liability fair value calculation, other than a change in the fair value of our common stock to $5.31 per share.

4. Significant Agreements

Since December 31, 2022, there have been no material changes to the key terms of our significant agreements. For further information regarding our significant agreements, please see Note 4 to the consolidated financial statements included in our Form 10-K.

On February 9, 2021, we entered into a Collaboration and License Agreement (as amended the “AbbVie Agreement”) with AbbVie Manufacturing Management Unlimited Company (“AbbVie”). We received an upfront cash payment of $30.0 million from AbbVie during the year ended December 31, 2021. We recognized short-term deferred revenue in the amount of $10.4 million and long-term deferred revenue in the amount of $11.3 million related to this upfront cash payment in our condensed consolidated balance sheets as of March 31, 2023. We recognized short-term deferred revenue in the amount of $9.4 million and long-term deferred revenue in the amount of $13.3 million related to this upfront cash payment in our consolidated balance sheets as of December 31, 2022.

We recognized $1.6 million and $0.9 million in revenue for the three months ended March 31, 2023 and 2022, respectively, relating to the AbbVie Agreement. As of March 31, 2023, we recorded $0.9 million in accounts receivable and as of December 31, 2022, we had recorded no amounts in accounts receivable in our condensed consolidated balance sheets. As of March 31, 2023 and December 31, 2022 we had $0.6 million and $0.9 million, respectively, in contract assets in our condensed consolidated balance sheets.

We enter into agreements with third parties to in-license intellectual property and related materials and know-how. These agreements may include non-refundable, upfront payments; annual license maintenance fees; sublicensing fees; obligations to reimburse for patent prosecution and maintenance fees; success payments; regulatory clinical and commercial milestones; and royalty payments. Our obligation to make such payments is contingent upon milestones being achieved, licensed products being commercialized, and the agreements remaining in effect.

For the three months ended March 31, 2023 and 2022, we recorded $0.4 million and $0.3 million, respectively, as research and development expense in our condensed consolidated statements of operations related to our license agreements. For the three months ended March 31, 2023 and 2022, we recorded $0.8 million and $2.6 million, respectively, as general and administrative expense for patent prosecution and maintenance costs in our condensed consolidated statements of operations and comprehensive loss, which includes reimbursements of patent prosecution and maintenance costs of $0.4 million and $1.4 million, respectively, from CRISPR Therapeutics AG and Intellia Therapeutics, Inc.

As of March 31, 2023, certain license and assignment agreements included potential future payments from us for development, regulatory, and sales milestones totaling approximately $161.2 million.

5. Revenue

Disaggregation of Revenue

We disaggregate revenue by geographical market based on the location of research and development activities of our licensees and collaborators. The following table is a summary of revenue by geographic location for the three months ended March 31, 2023 and 2022 (in thousands):


	Three Months Ended March 31,
		2023		2022
United States		$	3,385	$	2,612
Rest of world		117		52
Total		$	3,502	$	2,664

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During the three months ended March 31, 2023, we recognized $1.9 million of revenue related to performance obligations satisfied at a point in time, and we recognized $1.6 million of revenue related to performance obligations satisfied over time.

During the three months ended March 31, 2022, we recognized $1.7 million of revenue related to performance obligations satisfied at a point in time, and we recognized $0.9 million of revenue related to performance obligations satisfied over time.

Contract Balances

Accounts receivable relate to our right to consideration for performance obligations completed (or partially completed) for which we have an unconditional right to consideration. Our accounts receivable balances represent amounts that we billed to our licensees with invoices outstanding as of the end of a reporting period.

Contract assets are rights to consideration in exchange for a license that we have granted to a licensee when the right is conditional on something other than the passage of time. Our contract asset balances represent research costs related to the AbbVie Agreement, as well as royalties and milestone payments from our other license agreements that are unbilled as of the end of a reporting period.

Contract liabilities consist of deferred revenue and relate to amounts invoiced to, or advance consideration received from, licensees that precede our satisfaction of the associated performance obligations. Our deferred revenue primarily results from the upfront payment received relating to the performance obligation that is satisfied over time under the AbbVie Agreement. The remaining deferred revenue relates to upfront payments received under license agreements that also include non-refundable annual license fees, which are accounted for as material rights for license renewals and are recognized at the point in time annual license fees are paid by the licensees and the renewal periods begin.

The following table presents changes in our contract assets and liabilities during the three months ended March 31, 2023 (in thousands):


	Balance as of December 31, 2022		Additions		Deductions		Balance as of March 31, 2023
Accounts receivable	$	202	$	3,003	$	(1,672)	$	1,533

Contract assets:
Unbilled accounts receivable	$	2,247	$	1,618	$	(2,226)	$	1,639

Contract liabilities:
Deferred revenue, current and long-term	$	25,891	$	1,246	$	(2,343)	$	24,794

Unbilled accounts receivable decreased $0.6 million during the three months ended March 31, 2023, primarily due to the decrease in unbilled research costs under the AbbVie Agreement.

Deferred revenue decreased during the three months ended March 31, 2023, primarily due to a higher amount of revenue recognized compared to the amount of additional billings during the three months ended March 31, 2023.

During the three months ended March 31, 2023 and 2022, we recognized $1.1 million and $0.6 million of revenue, respectively, which were included in the opening contract liabilities balances at the beginning of the respective periods.

Transaction Prices Allocated to Remaining Performance Obligations

Remaining performance obligations represent in aggregate the amount of a transaction price that has been allocated to performance obligations not delivered as of the end of a reporting period. The value of transaction prices allocated to remaining unsatisfied performance obligations as of March 31, 2023 was approximately $38.3 million. We expect to recognize approximately $10.9 million of remaining performance obligations as revenue in the next 12 months and to recognize the remainder thereafter.

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Capitalized Contract Acquisition Costs and Fulfillment Costs

We did not incur any expenses to obtain license and collaboration agreements, and costs to fulfill those contracts do not generate or enhance our resources. As such, no costs to obtain or fulfill a contract have been capitalized in any period.

6. Balance Sheet Items

Other receivables consisted of the following (in thousands):


	March 31, 2023		December 31, 2022
Patent cost reimbursements	$	1,338	$	1,638
Accrued interest on marketable securities	332		570
Other	—		7
Total	$	1,670	$	2,215

Prepaid expenses and other current assets consisted of the following (in thousands):


	March 31, 2023		December 31, 2022
Prepaid contract manufacturing and clinical costs	$	3,538	$	4,803
Prepaid insurance	907		1,568
Prepaid income taxes	431		431
Other	1,234		1,119
Total	$	6,110	$	7,921

Property and equipment, net, consisted of the following (in thousands):


	March 31, 2023		December 31, 2022
Lab equipment	$	13,553	$	12,588
Leasehold improvements	1,933		1,876
Computer equipment	754		709
Furniture and equipment	161		161
Construction in progress	2,454		993
Total property and equipment, gross	18,855		16,327
Less: accumulated depreciation and amortization	(6,209)		(5,649)
Property and equipment, net	$	12,646	$	10,678

Depreciation and amortization expenses related to property and equipment were $0.6 million and $0.3 million, respectively, for the three months ended March 31, 2023 and 2022.

Accrued expenses and other current liabilities consisted of the following (in thousands):


	March 31, 2023		December 31, 2022
Accrued employee compensation and related expenses	$	3,220	$	5,752
Accrued research and development expenses	6,183		6,731
Accrued patent expenses	828		1,331
Accrued expenses related to sublicensing revenues	656		596
Other	1,657		1,669
Total	$	12,544	$	16,079

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7. Related Party Transactions

Private Company, Related Party

On May 15, 2020, we entered into an Exclusive License Agreement, as amended, with a private company, related party (the “Private Company License Agreement”), under which we granted the private company an exclusive worldwide license to certain CRISPR intellectual property rights and know-how in a defined field. As consideration for the exclusive license, the private company issued to us 7,500,000 shares of convertible preferred stock with an estimated fair value of $7.5 million, which was the price paid for similar shares by another investor, and which was an arm’s length transaction. This represents a material voting interest in the private company and entitles us to hold one of the four private company’s board of director seats and to jointly vote with another stockholder on a second board of director seat. As of March 31, 2023, we have appointed one of the four directors of the private company. We concluded that the private company is a variable interest entity and that we are not its primary beneficiary based on our representation on its board of directors. As the private company’s convertible preferred stock is not in substance common stock, we record this investment using the measurement alternative in accordance with ASC 321, Investments–Equity Securities. Under the measurement alternative, our investment in the private company’s convertible preferred stock was initially recorded at its estimated fair value, but the carrying value may be adjusted through earnings upon an impairment or when there is an observable price change involving the same or a similar investment with the private company. As of each of March 31, 2023 and December 31, 2022, the carrying value of the investment was $7.5 million. There have been no changes to the carrying value of the investment during the three months ended March 31, 2023. We did not recognize any revenue in connection with the Private Company License Agreement for the three months ended March 31, 2023 and 2022.

8. Leases

Operating Lease Obligations

As of March 31, 2023 we had operating leases for our laboratory and office space in Berkeley, California, consisting of approximately 75,000 square feet, with remaining lease terms up to 9.3 years. Certain of our laboratory and office space lease agreements include options to extend the terms for a period of five years and contain provisions for future rent increases. In addition to base rent, we pay our share of operating expenses and taxes.

The components of lease costs, which are included in our statements of operations and comprehensive loss, were as follows (in thousands):


	Three Months Ended March 31,
	2023		2022
Operating lease cost(1)	$	1,884	$	1,799
Short-term lease cost	63		63
Total lease cost	$	1,947	$	1,862

(1) Includes $0.6 million and $0.5 million of variable lease cost related to operating expenses and taxes for the three months ended March 31, 2023 and 2022, respectively.

Supplemental information related to our leases was as follows (in thousands):


	Three Months Ended March 31,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,093	$	871

The weighted-average remaining lease term and the weighted-average discount rate for our laboratory and office leases were as follows:


	March 31, 2023		December 31, 2022
Weighted-average remaining lease term (years)	8.1		8.3
Weighted-average discount rate	11.3	%	11.3	%

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The following table summarizes a maturity analysis of our operating lease liabilities showing the aggregate lease payments as of March 31, 2023 (in thousands):


Remainder of 2023(1)	$	2,241
2024(2)	3,883
2025	4,474
2026	5,720
2027	5,922
Thereafter	22,115
Total undiscounted lease payments	44,355
Less: imputed interest	(16,932)
Total discounted lease payments	27,423
Less: current portion of lease liability	(1,022)
Noncurrent portion of lease liability	$	26,401

(1) Reflects an offset of $1.1 million related to incentives expected to be received in 2023.

(2) Reflects an offset of $0.6 million related to incentives expected to be received in 2024.

9. Commitments and Contingencies

Research and Development Agreements

We enter into various agreements in the ordinary course of business, such as those with suppliers, contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), clinical trial sites, and the like. These agreements provide for termination at the request of either party, generally with less than one-year notice and are, therefore, cancellable contracts and, if cancelled, are not anticipated to have a material effect on our condensed consolidated financial condition, results of operations, or cash flows.

Guarantees and Indemnifications

In the normal course of business, we enter into agreements that contain a variety of representations and warranties and provide for certain indemnifications by us. Our exposure under these agreements is unknown because claims may be made against us in the future. To date, we have not paid any claims or been required to defend any action related to our indemnification obligations. As of March 31, 2023 and December 31, 2022, we did not have any material indemnification claims that were probable or reasonably possible, and consequently, we have not recorded related liabilities.

Litigation

From time to time, we may become involved in litigation arising in the ordinary course of business. We record a liability for such litigation when it is probable that future losses will be incurred and if such losses can be reasonably estimated. Significant judgment by us is required to determine both probability and the estimated amount.

On February 10, 2023, a putative class action lawsuit was filed in the U.S. District Court for the Northern District of California against our company and certain of our officers and current and former members of our board of directors, Greenhalgh v. Caribou Biosciences, Inc., et al., Case Number 3:23-cv-00609-VC (the “Greenhalgh Case”). The Greenhalgh Case was voluntarily dismissed on March 16, 2023.

On April 11, 2023, a putative class action lawsuit was filed in the U.S. District Court for the Northern District of California against our company and certain of our officers and current and former members of our board of directors, Bergman v. Caribou Biosciences, Inc., et al., Case Number 4:23-cv-01742-YGR (the “Bergman Case”). The Bergman complaint challenges disclosures regarding our company’s business, operations, and prospects, specifically with respect to the alleged durability of CB-010’s therapeutic effect and the product candidate’s clinical and commercial prospects, in alleged violation of Sections 11 and 15 of the Securities Act of 1933, as amended (the “Securities Act”) and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended. The allegations and claims asserted in the Bergman Case are the same allegations and claims asserted in the Greenhalgh Case. Plaintiff in the Bergman Case has filed a motion to consolidate the Bergman Case with the Greenhalgh case, and that motion is pending.

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Additionally, on March 22, 2023, a putative class action lawsuit was filed in Superior Court of the State of California for the County of Alameda against our company and certain of our officers and current and former members of our board of directors, Lowry v. Caribou Biosciences, Inc., et al., Case Number T23-1084 (the “Lowry Case”). The Lowry Case challenges disclosures regarding our company’s business, operations, and prospects, specifically with respect to the alleged durability of CB-010’s therapeutic effect and the product candidate’s clinical and commercial prospects, in alleged violation of Sections 11 and 15 of the Securities Act. The allegations and claims in the Lowry Case are substantially similar to the Securities Act claims asserted in the Bergman and Greenhalgh Cases. On April 26, 2023, we filed a motion to stay the Lowry Case during the pendency of the parallel federal court litigation in the Bergman Case and the Greenhalgh Case. We believe all of these lawsuits are without merit.

10. Common Stock

Common stock reserved for future issuance consisted of the following:


	As of March 31, 2023	As of December 31, 2022
Stock options, issued and outstanding	9,102,960	6,733,074
Stock options, authorized for future issuance	6,495,096	5,833,979
Stock available under our employee stock purchase plan	1,584,538	1,044,518
Unvested restricted stock units and performance-based restricted stock units	236,169	256,146
	17,418,763	13,867,717

Shelf Registration Statement

On August 9, 2022, we filed a shelf registration statement on Form S-3 (“Shelf Registration Statement”) with the U.S. Securities and Exchange Commission (“SEC”). The Shelf Registration Statement allows us to sell from time to time up to $400.0 million of common stock, preferred stock, debt securities, warrants, rights, or units comprised of any combination of these securities, for our own account in one or more offerings (including the $100.0 million of common stock reserved for our at-the-market equity offering program described below). The SEC declared the Shelf Registration Statement effective on August 16, 2022. The terms of any offering under the Shelf Registration Statement will be established at the time of such offering and will be described in a prospectus supplement to the Shelf Registration Statement filed with the SEC prior to the completion of any such offering.

At-the-market Equity Offering Program

On August 9, 2022, we also entered into an Open Market Sale AgreementSM (the “ATM Sales Agreement”) with Jefferies LLC (“Jefferies”) with respect to an at-the-market (“ATM”) equity offering program, pursuant to which, through Jefferies as sales agent, we may from time to time, sell shares of our common stock having an aggregate offering price of up to $100.0 million in gross proceeds under the Shelf Registration Statement. As of March 31, 2023, we have sold 168,635 shares of our common stock under the ATM Sales Agreement at an average price per share of $7.32 for aggregate gross proceeds of $1.2 million ($1.0 million net of offering expenses).

11. Stock-Based Compensation

Equity Incentive Plans

In July 2021, our board of directors adopted and our stockholders approved the 2021 Equity Incentive Plan (the “2021 Plan”) that became effective on July 22, 2021. As of March 31, 2023, we had 6,495,096 shares available for issuance under the 2021 Plan.

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The following table summarizes stock option activity under our equity incentive plans during the three months ended March 31, 2023:


	Stock Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)*

Outstanding at December 31, 2022	6,733,074	$	9.01	8.2	$	8,203
Options granted	2,536,340	6.06
Options exercised	(40,433)	2.84
Options cancelled or forfeited	(126,021)	10.12
Outstanding at March 31, 2023	9,102,960	$	8.20	8.5	$	4,824
Exercisable at March 31, 2023	3,019,066	$	7.30	7.2	$	3,551
Vested and expected to vest at March 31, 2023	9,102,960	$	8.20	8.5	$	4,824

*The aggregate intrinsic value is calculated as the difference between the stock option exercise price and the estimated fair value of the underlying common stock at the end of each reporting period referenced above.

Grant Date Fair Value

During the three months ended March 31, 2023 and 2022, we granted 2,536,340 and 339,030 stock options to employees with a weighted average grant date fair value of $4.13 and $6.68, respectively.

We estimated the fair value of each employee and non-employee stock option award on the grant date using the Black-Scholes option-pricing model based on the following assumptions:

Three Months Ended March 31,

2023

2022

Volatility

74.9% to 75.0%

71.7% to 72.0%

Expected term (in years)

5.0 to 6.0

5.5 to 6.0

Risk-free interest rate

3.5% to 4.1%

1.7% to 2.3%

Expected dividend yield

0.0%

As of March 31, 2023, there was $34.2 million of unrecognized stock-based compensation expense related to employee and non-employee stock options that is expected to be recognized over a weighted-average period of 2.9 years.

Restricted Stock Units

During the three months ended March 31, 2023, we did not grant any restricted stock units (“RSUs”) or performance-based RSUs (“PSUs”) under the 2021 Plan. A summary of the status of and change in unvested RSUs and PSUs as of March 31, 2023 was as follows:


	Number of Shares Underlying Outstanding RSUs and PSUs	Weighted-Average Grant Date Fair Value per RSU and PSU
Unvested, January 1, 2023	256,146	$	10.07
Vested	(15,000)	10.64
Forfeited	(4,977)	9.90
Unvested, March 31, 2023	236,169	$	10.04

The PSUs were granted to our executive officers and will vest contingent upon the achievement of a clinical milestone for CB-010 during a performance period ending December 31, 2024 and the executive officer’s continued

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employment during the performance period. As of March 31, 2023, the achievement of this milestone was not considered probable and, therefore, no stock-based compensation was recorded.

As of March 31, 2023, the total unrecognized stock-based compensation expense related to unvested RSUs was $0.9 million, which is expected to be recognized over the remaining weighted-average vesting period of 1.7 years. As of March 31, 2023, there was approximately $0.6 million of unrecognized stock-based compensation expense related to unvested PSUs.

Employee Stock Purchase Plan (“ESPP”)

In July 2021, our board of directors adopted and our stockholders approved the ESPP, which became effective on July 22, 2021. We have issued 139,384 shares of common stock under the ESPP as of March 31, 2023. We recorded $0.1 million in accrued liabilities related to contributions withheld as of March 31, 2023.

Stock-Based Compensation Expense

We recorded stock-based compensation expense related to employee and non-employee equity-based awards grants in our condensed consolidated statements of operations and comprehensive loss as follows (in thousands):


	Three Months Ended March 31,
		2023		2022
Research and development		$	1,310	$	1,100
General and administrative		1,821		1,924
Total		$	3,131	$	3,024

The above stock-based compensation expense related to the following equity-based awards (in thousands):


	Three Months Ended March 31,
		2023		2022
Stock options		$	2,798	$	2,930
ESPP		142		63
RSUs		191		31
Total		$	3,131	$	3,024

Stock-based compensation expense related to employees was $3.1 million and $2.9 million for the three months ended March 31, 2023 and 2022, respectively. There was no stock-based compensation expense related to non-employees for the three months ended March 31, 2023, and $0.1 million for the three months ended March 31, 2022.

12. 401(k) Savings Plan

In 2017, we established a defined-contribution savings plan under Section 401(k) of the Tax Code. Our 401(k) plan is available to all employees and allows participants to defer a portion of their annual compensation on a pretax basis subject to applicable laws. We also provide a 4% match for employee contributions up to a certain limit. During the three months ended March 31, 2023 and 2022, we contributed $0.3 million and $0.2 million, respectively, to our 401(k) plan.

13. Income Taxes

No income tax expense was recorded during each of the three-month periods ended March 31, 2023 and 2022 due to our operating losses.

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14. Net Loss Per Share

The following table sets forth the computation of the basic and diluted net loss per share (in thousands, except share and per share amounts):


	Three Months Ended March 31,
		2023		2022
Numerator:
Net loss		$	(28,044)	$	(19,088)
Denominator:
Weighted-average common shares outstanding used to compute net loss per share, basic and diluted		61,186,514		60,546,170
Net loss per share, basic and diluted		$	(0.46)	$	(0.32)

Because we were in a net loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods, as the inclusion of all common stock equivalents outstanding would have been anti-dilutive. Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:


	As of March 31, 2023	As of March 31, 2022
Stock options outstanding