UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended ~~March 31,~~September 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: 001-36289

_______________________________________________________

Genocea Biosciences, Inc.

(Exact Name of Registrant as Specified in Its Charter)



Delaware						51-0596811
(State or Other Jurisdiction of Incorporation or Organization)						(IRS Employer Identification No.)



100 Acorn Park Drive
Cambridge, ~~Massachusetts~~	Massachusetts	02140
(Address of Principal Executive Offices)			(Zip Code)

Registrant’s Telephone Number, Including Area Code: (617) 876-8191

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, $0.001 par value per share

GNCA

NASDAQ

Capital 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. Yesx☒ 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). Yesx☒ 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. (Check one):

Large accelerated filer

¨☐

Accelerated filer

x☒

Non-accelerated filer

¨☐

Smaller reporting company

x☒

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¨☐ Nox☒

As of ~~April 28,~~October 27, 2020, there were ~~27,643,773~~51,635,257 shares of the registrant’s Common Stock, par value $0.001 per share, outstanding.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, our clinical results and other future conditions. The words “anticipate”, “believe”, “contemplate”, “continue”, “could”, “estimate”, “expect”, “forecast”, “goal”, “intend”, “may”, “plan”, “potential”, “predict”, “project”, “should”, “target”, “will”, “would”, or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed in our Annual Report on Form 10-K and other filings with the Securities Exchange Commission (the “SEC”), including the following:

•our estimates regarding the timing and amount of funds we require to conduct clinical trials for GEN-009 ~~to continue preclinical studies~~ and ~~file an investigational new drug (“IND”) for~~ GEN-011, to continue preclinical studies for our other product candidates and to continue our investments in immuno-oncology;

•our estimates regarding expenses, future revenues, capital requirements, the sufficiency of our current and expected cash resources and our need for additional financing;

•the timing of, and our ability to, obtain and maintain regulatory approvals for our product candidates;

•the ~~availability~~effect of ~~materials~~the novel coronavirus (COVID-19) pandemic on the economy generally and ~~equipment,~~on our business and operations specifically, including our research and development efforts, our clinical trials and our employees, and the potential disruptions in supply chains ~~resulting from~~and to our third party manufacturers, including the ~~international public health emergency associated with the novel coronavirus (COVID-19);~~availability of materials and equipment;

•the potential benefits of strategic partnership agreements and our ability to enter into strategic partnership arrangements;

•our intellectual property position;

•the rate and degree of market acceptance and clinical utility of any approved product candidate;

•our ability to quickly and efficiently identify and develop product candidates; and

•our commercialization, marketing and manufacturing capabilities and strategies.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make or collaborations or strategic partnerships we may enter into. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Quarterly Report on Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, we have not independently verified such data.

Genocea Biosciences, Inc.

Form 10-Q

For the Quarter Ended ~~March 31,~~September 30, 2020

TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited)

Condensed Consolidated Balance Sheets as of ~~March 31,~~September 30, 2020 and December 31, 2019

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended ~~March 31,~~September 30, 2020 and 2019

Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended ~~March 31,~~September 30, 2020 and 2019

Condensed Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 and 2019

Notes to Unaudited Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

1821

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

2431

Item 4.

Controls and Procedures

2431

PART II. OTHER INFORMATION

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Genocea Biosciences, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(in ~~thousands)~~thousands, except share amounts)


	March 31, 2020			December 31, 2019				September 30, 2020		December 31, 2019
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	26,509		$	40,127		Cash and cash equivalents	$	87,625	$	40,127

Prepaid expenses and other current assets	2,562			1,457			Prepaid expenses and other current assets	2,703		1,457
Total current assets	29,071			41,584			Total current assets	90,328		41,584
Property and equipment, net	2,474			2,617			Property and equipment, net	3,021		2,617
Right of use assets	11,782			6,306			Right of use assets	10,737		6,306
Restricted cash	631			631			Restricted cash	631		631
Other non-current assets	1,234			1,473			Other non-current assets	1,481		1,473
Total assets	$	45,192		$	52,611		Total assets	$	106,198	$	52,611

Liabilities and stockholders’ equity							Liabilities and stockholders’ equity
Current liabilities:							Current liabilities:
Accounts payable	$	860		$	553		Accounts payable	$	567	$	553
Accrued expenses and other current liabilities	4,077			4,611			Accrued expenses and other current liabilities	5,784		4,611
Deferred revenue							Deferred revenue	1,641		0
Lease liabilities	2,028			1,117			Lease liabilities	2,080		1,117
Current portion of long-term debt	7,700			—			Current portion of long-term debt	13,743		—
Total current liabilities	14,665			6,281			Total current liabilities	23,815		6,281
Non-current liabilities:							Non-current liabilities:
Warrant liabilities							Warrant liabilities	53,237		2,486
Lease liabilities, net of current portion							Lease liabilities, net of current portion	8,941		5,395
Long-term debt, net of current portion	5,815			13,407			Long-term debt, net of current portion	0		13,407
Warrant liability	1,705			2,486
Lease liabilities, net of current portion	9,994			5,395
Total liabilities	32,179			27,569			Total liabilities	85,993		27,569
Commitments and contingencies (Note 5)
Commitments and contingencies (Note 6)							Commitments and contingencies (Note 6)
Stockholders’ equity:							Stockholders’ equity:
Preferred stock, $0.001 par value; (shares authorized of 25,000,000 at March 31, 2020 and December 31, 2019; 1,635 shares issued and outstanding at March 31, 2020 and December 31, 2019)	701			701
Common stock, $0.001 par value; (shares authorized of 85,000,000 at March 31, 2020 and December 31, 2019, 27,643,773 shares issued and outstanding at March 31, 2020 and 27,452,900 shares issued and outstanding at December 31, 2019)	28			27
Preferred stock, $0.001 par value; (shares authorized of 25,000,000 at September 30, 2020 and December 31, 2019; no shares issued and outstanding at September 30, 2020 and 1,635 shares issued and outstanding at December 31, 2019)							Preferred stock, $0.001 par value; (shares authorized of 25,000,000 at September 30, 2020 and December 31, 2019; no shares issued and outstanding at September 30, 2020 and 1,635 shares issued and outstanding at December 31, 2019)	0		701
Common stock, $0.001 par value; (shares authorized of 170,000,000 at September 30, 2020 and 85,000,000 at December 31, 2019, 51,563,631 shares issued and outstanding at September 30, 2020 and 27,452,900 shares issued and outstanding at December 31, 2019)							Common stock, $0.001 par value; (shares authorized of 170,000,000 at September 30, 2020 and 85,000,000 at December 31, 2019, 51,563,631 shares issued and outstanding at September 30, 2020 and 27,452,900 shares issued and outstanding at December 31, 2019)	52		27
Additional paid-in capital	356,091			355,268			Additional paid-in capital	379,836		355,268
Accumulated deficit	(343,807		)	(330,954		)	Accumulated deficit	(359,683)		(330,954)
Total stockholders’ equity	13,013			25,042			Total stockholders’ equity	20,205		25,042
Total liabilities and stockholders’ equity	$	45,192		$	52,611		Total liabilities and stockholders’ equity	$	106,198	$	52,611

See accompanying notes to unaudited condensed consolidated financial statements.

Genocea Biosciences, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share data)

See accompanying notes to unaudited condensed consolidated financial statements.

Genocea Biosciences, Inc.

Condensed Consolidated Statements of Stockholders' Equity

See accompanying notes to unaudited condensed consolidated financial statements.

Genocea Biosciences, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)


	Three Months Ended March 31,							Nine Months Ended September 30,
	2020			2019				2020		2019
Operating activities							Operating activities
Net loss	$	(12,853	)	$	(15,567	)	Net loss	$	(28,729)	$	(29,594)
Adjustments to reconcile net loss to net cash used in operating activities							Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	276			272			Depreciation and amortization	867		825
Stock-based compensation	384			429			Stock-based compensation	1,403		1,392

Change in fair value of warrant liability	(781		)	5,787			Change in fair value of warrant liability	(11,770)		(289)
Gain on sale of equipment	(13		)	—

Allocation of proceeds to transaction expenses							Allocation of proceeds to transaction expenses	4,219		0
Non-cash interest expense	109			162			Non-cash interest expense	336		471
Asset impairment	97			—			Asset impairment	97		0
Gain on sale of equipment							Gain on sale of equipment	0		(19)
Changes in operating assets and liabilities	(1,015		)	(1,382		)	Changes in operating assets and liabilities	1,568		(1,534)
Net cash used in operating activities	(13,796		)	(10,299		)	Net cash used in operating activities	(32,009)		(28,748)
Investing activities							Investing activities
Purchases of property and equipment	(233		)	(221		)	Purchases of property and equipment	(1,214)		(989)
Proceeds from sale of equipment	16			—			Proceeds from sale of equipment	26		19
Net cash used in investing activities	(217		)	(221		)	Net cash used in investing activities	(1,188)		(970)
Financing activities							Financing activities
Proceeds from issuance of common stock, net	440			—			Proceeds from issuance of common stock, net	80,740		52,171
Proceeds from issuance of common stock under employee benefit plans							Proceeds from issuance of common stock under employee benefit plans	66		69
Payments on finance lease	(45		)	—			Payments on finance lease	(111)		0
Proceeds from equity offerings, net of issuance costs	—			14,026

Repayment of long-term debt	—			(841		)	Repayment of long-term debt	0		(1,919)
Proceeds from exercise of stock options	—			12
Net cash provided by financing activities	395			13,197			Net cash provided by financing activities	80,695		50,321
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(13,618	)	$	2,677
Net increase in cash, cash equivalents and restricted cash							Net increase in cash, cash equivalents and restricted cash	$	47,498	$	20,603
Cash, cash equivalents and restricted cash at beginning of period	40,758			26,677			Cash, cash equivalents and restricted cash at beginning of period	40,758		26,677
Cash, cash equivalents and restricted cash at end of period	$	27,140		$	29,354		Cash, cash equivalents and restricted cash at end of period	$	88,256	$	47,280
Non-cash financing activities and supplemental cash flow information							Non-cash financing activities and supplemental cash flow information
Right-of-use asset obtained in exchange for lease liabilities	$	5,931		$	1,686		Right-of-use asset obtained in exchange for lease liabilities	$	5,931	$	5,385
Cash paid in connection with operating lease liabilities	$	394		$	406		Cash paid in connection with operating lease liabilities	$	1,800	$	1,226
Cash paid for interest	$	261		$	289		Cash paid for interest	$	787	$	843

Property and equipment included in accounts payable and accrued expenses							Property and equipment included in accounts payable and accrued expenses	$	181	$	150

See accompanying notes to unaudited condensed consolidated financial statements.

Genocea Biosciences, Inc.

Notes to Condensed Consolidated Financial Statements

1. Organization and operations

Genocea Biosciences, Inc. (the “Company”) is a biopharmaceutical company that was incorporated in Delaware on August 16, 2006 and has a principal place of business in Cambridge, Massachusetts. The Company seeks to discover and develop novel cancer immunotherapies using its ATLAS^TM proprietary discovery platform. The ATLAS platform profiles each patient's CD4⁺ and CD8⁺ T cell immune responses to every potential target or “antigen” in that patient's tumor. The Company believes that this approach optimizes antigen selection for immunotherapies such as cancer vaccines and cellular therapies. Consequently, the Company believes that ATLAS could lead to more immunogenic and efficacious cancer immunotherapies.

The Company’s most advanced program is GEN-009, a personalized neoantigen cancer vaccine, for which it is conducting a Phase 1/2a clinical trial. The GEN-009 program uses ATLAS to identify neoantigens, or immunogenic tumor mutations unique to each patient, for inclusion in each patient's GEN-009 vaccine. The Company is also advancing GEN-011, a neoantigen-specific adoptive T cell therapy program that also relies on ~~ATLAS,~~ATLAS. In September 2020, the Company received notice from the U.S. Food and ~~expects~~Drug Administration (“FDA”) that it has accepted the Company's Investigational New Drug (“IND”) Application for GEN-011 to ~~file an IND in the second quarter of 2020.~~initiate a Phase 1/2a clinical trial. The Company is currently initiating sites for this clinical trial.

The Company is devoting substantially all of its efforts to product research and development, initial market development, and raising capital. The Company has not generated any product revenue related to its primary business purpose to date and is subject to a number of risks and uncertainties common to companies in the biotech and pharmaceutical industry, including, but not limited to, the risks associated with the uncertainty of success of its preclinical and clinical trials; the challenges associated with gaining regulatory approval of product candidates; the risks associated with commercializing pharmaceutical products, if approved for marketing and sale; the potential for development by third parties of new technological innovations that may compete with the Company’s products; the dependence on key personnel; the challenges of protecting proprietary technology; the need to comply with government regulations; the high cost of drug development; ~~compliance with government regulations,~~ competition from other companies; the uncertainty of being able to secure additional capital when needed to fund operations; and the challenges and uncertainty associated with the ~~recent~~ outbreak of the coronavirus, or referred to as COVID-19, that have arisen in the global economy, that could adversely impact the Company's operations, supply chain, preclinical development work, clinical trials and ability to raise capital.

~~Accounting Standards Update (“ASU”), 2014-15,~~ ~~Presentation of Financial Statements-Going Concern (Subtopic 205-40), also referred to as~~ Accounting Standards Codification (“ASC”) 205-40, (“Presentation of Financial Statements-Going Concern (“ASC 205-40”), requires the Company to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the financial statements are issued. As of ~~March 31,~~September 30, 2020, the Company had an accumulated deficit of ~~$343.8~~$359.7 million and anticipates that it will continue to incur significant operating losses for the foreseeable future as it continues to develop its product candidates. Until such time, if ever, as the Company can generate substantial product revenue and achieve profitability, the Company expects to finance its cash needs through a combination of equity offerings, strategic transactions, ~~and~~or other sources of funding. If the Company is unable to raise additional funds when needed, the Company may be required to implement further cost reduction strategies, including ceasing development of GEN-009, GEN-011 or other corporate programs and activities.

As reflected in the consolidated financial statements, the Company had available cash and cash equivalents of ~~$26.5~~$87.6 million at ~~March 31,~~September 30, 2020. In addition, the Company had cash used in operating activities of ~~$13.8~~$32.0 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2020. ~~These factors, combined with the~~The Company’s ~~forecast of~~available cash ~~required~~and cash equivalents at September 30, 2020 are expected to fund operations ~~for a period of at least one year from the date of issuance of these consolidated financial statements, raise substantial doubt about the Company’s ability~~ to ~~continue as a going concern.~~mid-2022.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

2. Summary of significant accounting policies

~~The following is a summary of significant accounting policies followed in the preparation of these condensed consolidated financial statements.~~

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company's audited consolidated financial statements and the accompanying notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 (“2019 Form 10-K”). The Company's accounting policies are described in the “Notes to Consolidated Financial Statements” in the Company's 2019 Form 10-K and updated, as necessary, in the Company's Quarterly Reports on Form 10-Q. The December 31, 2019 condensed consolidated balance sheet data presented for comparative purposes were derived from the Company's audited financial statements but do not include all disclosures required by U.S. GAAP. The results of operations for the three and nine months ended ~~March 31,~~September 30, 2020 are not necessarily indicative of the operating results for the full year or for any other subsequent interim period.

Basis of presentation

The accompanying unaudited condensed consolidated financial statements include those accounts of the Company and a wholly owned subsidiary after elimination of all intercompany accounts and transactions. The Company operates as ~~one~~1 segment, which is discovering, researching, developing and commercializing novel cancer immunotherapies.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates its estimates, which include, but are not limited to, estimates related to clinical trial accruals, estimates related to prepaid and accrued manufacturing and research and development expenses, ~~stock-based compensation expense,~~revenue recognition, and ~~warrants~~warrant liabilities, which could change period to ~~purchase redeemable securities.~~period based on changes in facts and circumstances. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.

Significant accounting policies

There were no changes to significant accounting policies during the ~~three~~nine months ended ~~March 31,~~September 30, 2020, as compared to the those disclosed in the 2019 Form ~~10-K.~~10-K, except as set forth below.

Foreign Currency Translation

Realized and unrealized gains and losses resulting from foreign currency transactions denominated in currencies other than the functional currency are reflected as other (expense) income, net in the consolidated statements of operations in accordance with ASC Topic 830, Foreign Currency Matters (“ASC 830”).

In accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled in exchange for these goods and services. To achieve this core principle, the Company applies the following five steps: 1) identify the customer contract; 2) identify the contract’s performance obligations; 3) determine the transaction price; 4) allocate the transaction price to the performance obligations; and 5) recognize revenue when or as a performance obligation is satisfied.

Licensing arrangements are analyzed to determine whether the promised goods or services, which include licenses and research and development materials and services, are distinct or whether they must be accounted for as part of a combined performance obligation. If the license is considered not to be distinct, the license would then be combined with other promised goods or services as a combined performance obligation. Certain contracts contain options to obtain future goods or services at a discount, which would not be provided without entering into the contract. These options are considered material rights, and therefore, are accounted for as separate performance obligations.

The transaction price is determined based on the consideration to which the Company will be entitled. The consideration promised may include fixed amounts, variable amounts, or both. For milestone payments, the Company estimates the amount of variable consideration by using the most likely amount method. In making this assessment, the Company evaluates factors such as the clinical, commercial and other risks that must be overcome to achieve the milestone. The Company re-evaluates the probability of achievement of such variable consideration and any related constraints at each reporting period. The Company includes variable consideration in the transaction price to the extent it is 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.

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price among the performance obligations on a relative standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to a performance obligation or to a distinct good or service that forms part of a single performance obligation.

The Company allocates the transaction price based on the estimated standalone selling price of the underlying performance obligations. The Company must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. The Company utilizes key assumptions to determine the standalone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs to complete the respective performance obligation. Certain variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated to each performance obligation are consistent with the amount the Company would expect to receive for each performance obligation. The transaction price is generally allocated to each separate performance obligation on a relative standalone selling price basis.

When a performance obligation is satisfied, revenue is recognized for the amount of the transaction price allocated to that performance obligation on a relative standalone selling price basis, which excludes estimates of variable consideration that are constrained. Significant management judgment is required in determining the level of effort required under an arrangement and the period over which the Company is expected to complete its performance obligations under an arrangement.

For performance obligations consisting of licenses and other promises, the Company utilizes judgment to assess whether the combined performance obligation is satisfied over time or at a point in time and the recognition pattern of non-refundable, up-front fees.

Contract liabilities

The Company records a contract liability, classified as deferred revenue on its condensed consolidated balance sheet, when it has received payment but has not yet satisfied the related performance obligations. In the event of an early termination of a contract with customer, any contract liabilities would be recognized in the period in which all Company obligations under the agreement have been fulfilled.

New Accounting Pronouncements

The following new accounting pronouncements were adopted by the Company on January 1, 2020:

In 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables and available-for-sale debt securities. The Company early adopted the standard on January 1, 2020. Based on the composition of the Company's investment portfolio, which includes only money market funds, and the insignificance of the Company's other financial assets, current market conditions, and historical credit loss activity, the adoption of this standard did not have a material impact on the Company's consolidated financial statements and related disclosures.

In 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The new standard requires public entities to disclose certain new information and modifies some disclosure requirements. The Company adopted the standard on the required effective date of January 1, 2020. This standard did not have a material impact on the Company's disclosures.

In 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). ASU 2018-15 requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Accounting Standards Codification 350-40 to determine which implementation costs to defer and recognize as an asset. The Company adopted the standard on the required effective date of January 1, 2020. This standard did not have a material impact on the Company's consolidated financial statements and related disclosures.

The following new accounting ~~pronouncements have~~pronouncement has been issued but ~~are~~is not yet effective:

In 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"). ASU 2019-12 simplifies the accounting for income taxes and will be effective beginning after December 15, 2020. The Company is currently evaluating the impact of ASU 2019-12 in the consolidated financial statements, including accounting policies, processes, and systems.

~~Other accounting standards~~

In May 2020, the Company entered into a material transfer agreement (the “MTA”) with Shionogi & Co., Ltd. (“Shionogi”) pursuant to which the Company agreed to transfer certain HSV-2 antigens from its GEN-003 program to Shionogi to evaluate the potential development of a novel HSV-2 vaccine. In connection with the agreement, the Company provided Shionogi with an option to negotiate an exclusive development and commercialization license for the HSV-2 antigens.

Under the terms of the MTA, Shionogi paid the Company a total of $3.0 million in non-refundable, creditable (with respect to the up-front fee pursuant to a development and commercialization agreement) fees. Prior to the expiration of the MTA, Shionogi has the option to negotiate a development and commercialization agreement. If executed, the terms of the development and commercialization agreement are expected to include an upfront payment, regulatory and sales milestones, and tiered royalties. Final terms of the development and commercialization agreement will be based on evaluation of the HSV-2 assets and overall diligence. If licensed, Shionogi will assume responsibility for global development and commercialization of an HSV-2 vaccine product.

Management evaluated the promised goods and services within the MTA and determined those which represented separate performance obligations. As a result, management concluded there were two separate performance obligations at the inception of the MTA: (i) a combined performance obligation consisting of a limited use research license and the delivery of the initial antigen materials and (ii) the right to negotiate a license prior to expiration of the MTA, which was deemed to be a material right. The Company determined that ~~have been issued or proposed by~~ the ~~FASB or other standards-setting bodies that do not require adoption until a future date~~exclusive limited use research license and the delivery of the initial antigen materials should be combined as they are not ~~expected~~capable of being distinct. A third party would not be able to ~~have~~provide the initial antigen materials as it contains the Company’s proprietary intellectual property and Shionogi could not benefit from the research license without the initial antigen materials. The Company determined that the option to negotiate the development and commercialization agreement prior to the expiration of the MTA is a material ~~impact~~right. The $3.0 million fee associated with the MTA is creditable against the upfront fee for the development and commercialization agreement and represents a discount that would otherwise not be available to the customer without entering into the MTA.

The Company estimated the standalone selling price of the initial antigen materials based on the ~~Company’s consolidated financial statements~~expected cost plus a margin approach. The Company developed its standalone selling price for the material right by applying a probability-weighted likelihood that Shionogi will exercise its option to license the HSV-2 assets.

At inception, the transaction price was comprised of fixed and variable consideration. In the three months ended September 30, 2020, the Company determined a constraint was no longer required. As a result, the Company revised its initial relative sales price analysis to include the variable consideration so that the total transaction price is $3.0 million.

The initial amount allocated to the limited use research license and the delivery of the initial antigen materials, or $0.9 million, was recognized upon ~~adoption.~~delivery of the materials to Shionogi in the three months ended June 30, 2020. In the three months ended September 30, 2020, the Company recorded an additional $0.5 million of license revenue attributable to the variable consideration that is now included in the transaction price. In the nine months ended September 30, 2020, the Company recorded $1.4 million in license revenue related to the MTA with Shionogi. The $1.6 million allocated to the material right is considered a contract liability and is recorded as deferred revenue on the Company's condensed balance sheet. Revenue associated with the material right will be recognized upon either (i) the execution of a development and commercialization agreement or (ii) the termination of the MTA.

3.4. Fair value of financial instruments

The Company has certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.

•Level 1—Fair values are determined by utilizing quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access;

•Level 2—Fair values are determined by utilizing quoted prices for similar assets and liabilities in active markets or other market observable inputs such as interest rates, yield curves and foreign currency spot rates; and

•Level 3—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The Company's financial assets consist of cash equivalents and the Company's financial liabilities consist of a warrant ~~liability.~~liabilities.

The fair value of the Company’s cash equivalents is determined using quoted prices in active markets. The Company's cash equivalents consist of money market funds that are classified as Level 1.

The fair value of the Company’s warrant ~~liability~~liabilities is determined using a Monte Carlo simulation. See Note 8.9. Warrants for assumptions used and methodologies utilized in calculating the estimated fair value. The Company’s warrant ~~liability is~~liabilities are classified as Level 3.

The following table sets forth the Company's assets and liabilities that are measured at fair value on a recurring basis as of ~~March 31,~~September 30, 2020 and December 31, 2019 (in thousands):


			Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	Total		(Level 1)		(Level 2)		(Level 3)
September 30, 2020
Assets:
Cash equivalents	$	87,278	$	87,278	$	0	$	0
Total assets	$	87,278	$	87,278	$	0	$	0

Liabilities:
Warrant liabilities	$	53,237	$	0	$	0	$	53,237
Total liabilities	$	53,237	$	0	$	0	$	53,237

December 31, 2019
Assets:
Cash equivalents	$	39,971	$	39,971	$	0	$	0
Total assets	$	39,971	$	39,971	$	0	$	0

Liabilities:
Warrant liabilities	$	2,486	$	0	$	0	$	2,486
Total liabilities	$	2,486	$	0	$	0	$	2,486

Quoted prices in active markets Significant other observable inputs Significant unobservable inputs

Total (Level 1) (Level 2) (Level 3)
March 31, 2020

Assets:
Cash equivalents $ 25,985
$ 25,985
$ —
$ —
Total assets $ 25,985
$ 25,985
$ —
$ —

Liabilities:
Warrant liability $ 1,705
$ —
$ —
$ 1,705
Total liabilities $ 1,705
$ —
$ —
$ 1,705

December 31, 2019

Assets:
Cash equivalents $ 39,971
$ 39,971
$ —
$ —
Total assets $ 39,971
$ 39,971
$ —
$ —

Liabilities:
Warrant liability $ 2,486
$ —
$ —
$ 2,486
Total liabilities $ 2,486
$ —
$ —
$ 2,486

The following table reflects the change in the Company’s Level 3 warrant ~~liability~~liabilities (in thousands):

Warrant Liability
Balance at December 31, 2019 $ 2,486
Change in fair value (781 )
Balance at March 31, 2020 $ 1,705

4.5. Accrued expenses and other current liabilities

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

March 31, December 31,
2020 2019
Research and development costs $ 2,507
$ 1,607
Payroll and employee-related costs 730
2,245
Other current liabilities 840
759
Total $ 4,077
$ 4,611

5.6. Commitments and contingencies

As of ~~March 31,~~September 30, 2020, the Company has ~~leases~~a lease for ~~three~~two floors of lab and office space in a multi-tenant building in Cambridge, Massachusetts.

~~In July~~ On January 1, 2019, the Company ~~exercised~~adopted ASU 2016-02, Leases (Topic 842), (“ASC 842”), using the required retrospective approach and utilizing the effective date as the date of initial application. The Company's lease contains both an ~~option~~extension of an existing lease and an expansion for additional office and lab ~~space from March 2020 through~~space. Both the extension and the expansion expire in February 2025. The Company's right to use and control the expansion space began in March 2020. As a result, ~~of the Company's right to use and control the space,~~ the Company recognized an increase in the right of use (“ROU”) assets of $5.9 million and associated lease liabilities of $5.8 million in ~~March~~the first quarter of 2020. The Company has the option to extend the lease term for an additional five years, which is not included in the Company's ROU assets and associated lease liabilities as of ~~March 31,~~September 30, 2020.

In May 2019, the Company entered into a lease extension for office and lab space through February 2025. As a result of the lease term extension, the Company recognized an increase in the ROU assets of $5.4 million and associated lease liabilities of $5.3 million. The associated lease obligation for the extension is included in the Company’s ROU assets and associated lease liabilities as of March 31, 2020. The Company has the option to extend the lease terms for an additional five years, which is not included in the Company's ROU assets and associated lease liabilities as of March 31, 2020.

For the three months ended ~~March 31,~~September 30, 2020 and 2019 lease expense, net of sublease income, was ~~$0.5~~$0.7 million and $0.4 million, respectively. For the nine months ended September 30, 2020 and 2019 lease expense, net of sublease income, was $2.0 million and $1.1 million, respectively.

The weighted average remaining lease term and weighted average discount rate of the Company's operating leases are as follows:

March 31, 2020 March 31, 2019
Weighted average remaining lease term in years 4.92
0.92
Weighted average discount rate 8.13 % 10.00 %

In December 2019, the Company entered into an agreement to lease lab equipment for a term of 15 months. The Company determined that the agreement qualifies as a finance lease based on the criteria that the Company holds the option to purchase the asset and is reasonably certain to exercise at the end of the lease term. The ROU asset and lease liability were calculated using an incremental borrowing rate of 7.95%. Lease payments on this lease began in January 2020.

The following table summarizes the presentation in the Company's consolidated balance sheets:

The minimum lease payments related to the Company's operating and finance leases in accordance with ASC 842 as of ~~March 31,~~September 30, 2020 were as follows (in thousands):

At ~~March 31,~~September 30, 2020 and December 31, 2019, the Company ~~has~~had an outstanding letter of credit of $0.6 million, with a financial institution related to a security deposit for the office and lab space lease, which is secured by cash on deposit and expires onin February ~~28,~~ 2025.

Contractual obligations

The Company has entered into certain agreements with various universities, contract research organizations (“CROs”) and contract manufacturing organizations (“CMOs”), which generally include cancellation clauses.

Harvard University License Agreement

The Company has an exclusive license agreement with Harvard University (“Harvard”), granting the Company an exclusive, worldwide, royalty-bearing, sublicensable license to three patent families, to develop, make, have made, use, market, offer for sale, sell, have sold and import licensed products and to perform licensed services related to the ATLAS discovery platform. The Company is also obligated to pay Harvard milestone payments up to $1.6 million in the aggregate upon the achievement of certain development and regulatory milestones. As of ~~March 31,~~September 30, 2020, the Company has paid $0.3 million in aggregate milestone payments. The Company is obligated under this license agreement to use commercially reasonable efforts to develop, market and sell licensed products in compliance with an agreed upon development plan. In addition, the Company is obligated to achieve specified development milestones and in the event the Company is unable to meet its development milestones for any type of product or service, absent any reasonable proposed extension or amendment thereof, Harvard has the right, depending on the type of product or service, to terminate this agreement with respect to such products or to convert the license to a non-exclusive, non-sublicensable license with respect to such products and services.

Upon commercialization of our products covered by the licensed patent rights or discovered using the licensed methods, the Company is obligated to pay Harvard royalties on the net sales of such products and services sold by the Company, the Company's

affiliates, and the Company's sublicensees. This royalty varies depending on the type of product or service but is in the low single digits. The sales-based royalty due by the Company’s sublicensees is the greater of the applicable royalty rate or a percentage in the high single digits or the low double digits of the royalties the Company receives from such sublicensee, depending on the type of product. Based on the type of commercialized product or service, royalties are payable until the expiration of the last-to-expire valid claim under the licensed patent rights or for a period of 10 years from first commercial sale of such product or service. The royalties payable to Harvard are subject to reduction, capped at a specified percentage, for any third-party payments required to be made. In addition to the royalty payments, if the Company receives any additional revenue (cash or non-cash) under any sublicense, the Company must pay Harvard a percentage of such revenue, excluding certain categories of payments, varying from the low single digits to up to the low double digits depending on the scope of the license that includes the sublicense.

~~This~~The license agreement with Harvard will expire on a product-by-product or service-by-service and country-by-country basis until the expiration of the last-to-expire valid claim under the licensed patent rights. The Company may terminate the agreement at any time by giving Harvard advance written notice. Harvard may also terminate the agreement in the event of a material breach by the Company that remains uncured; in the event of our insolvency, bankruptcy, or similar circumstances; or if the Company challenges the validity of any patents licensed to us.

Oncovir License and Supply Agreement

In January 2018, the Company entered into a License and Supply Agreement with Oncovir, Inc. (“Oncovir”). The agreement provides the terms and conditions under which Oncovir will manufacture and supply an immunomodulator and vaccine adjuvant, Hiltonol® (poly-ICLC) (“Hiltonol”), to the Company for use in connection with the research, development, use, sale, manufacture, commercialization and marketing of products combining Hiltonol with the Company's technology (the “Combination Product”). Hiltonol is the adjuvant component of GEN-009, which will consist of synthetic long peptides or neoantigens identified using the Company's proprietary ATLAS platform, formulated with Hiltonol.

Oncovir granted the Company a non-exclusive, assignable, royalty-bearing worldwide license, with the right to grant sublicenses through one tier, to certain of Oncovir’s intellectual property in connection with the research, development, or commercialization of Combination Products, including the use of Hiltonol, but not the use of Hiltonol for manufacturing or the use or sale of Hiltonol alone. The license will become perpetual, fully paid-up, and royalty-free on the later of January 25, 2028 or the date on which the last valid claim of any patent licensed to the Company under the agreement expires.

Under this agreement, the Company is obligated to pay Oncovir low to mid six figure milestone payments upon the achievement of certain clinical trial milestones for each Combination Product and the first marketing approval for each Combination Product in certain territories, as well as tiered royalties in the low-single digits on a product-by-product basis based on the net sales of Combination Products.

The Company may terminate the agreement upon a decision to discontinue the development of the Combination Product or upon a determination by the Company or an applicable regulatory authority that Hiltonol or a Combination Product is not clinically safe or effective. The agreement may also be terminated by either party due to a material uncured breach by the other party, or due to the other party’s bankruptcy, insolvency, or dissolution.

~~6. Long-term debt~~7. Debt

In April 2018, the Company entered into an amended and restated loan and security agreement with Hercules Capital, ~~Inc.~~Inc (“Hercules”), which was subsequently amended in November 2019 (as amended, the “2018 Term Loan”). The 2018 Term Loan provides a $14.0 million term loan. The 2018 Term Loan matures on May 1, 2021 and accrues interest at a floating rate per annum equal to the greater of (i) 8.00%, or (ii) the sum of 3.00% plus the prime rate. The 2018 Loan Agreement provides for interest-only payments until January 1, 2021. Thereafter, payments will include equal installments of principal and interest through maturity. The 2018 Term Loan may be prepaid subject to a prepayment charge. The Company is obligated to pay an additional end of term charge of $1.0 million at maturity.

The 2018 Term Loan is secured by a lien on substantially all assets of the Company, other than intellectual property. Hercules has a perfected first-priority security interest in certain cash, cash equivalents and investment accounts. The 2018 Term Loan contains non-financial covenants, representations and a Material Adverse Effect provision, as defined herein. There are no financial covenants. A “Material Adverse Effect” means a material adverse effect upon: (i) the business, operations, properties, assets or condition (financial or otherwise) of the Company; (ii) the ability of the Company to perform the secured obligations in accordance with the terms of the loan documents, or the ability of agent or lender to enforce any of its rights or remedies with respect to the secured obligations; or (iii) the collateral or agent’s liens on the collateral or the priority of such liens. Any event that has a Material Adverse Effect or would reasonably be expected to have a Material Adverse Effect is an event of default under the Loan Agreement and repayment of amounts

due under the Loan Agreement may be accelerated by Hercules under the same terms as an event of default. As of ~~March 31,~~September 30, 2020, the Company was in compliance with all covenants of the 2018 Term Loan. The 2018 Term Loan is automatically redeemable upon a change in control. ~~The Company believes acceleration of~~At September 30, 2020, the ~~repayment of amounts outstanding under the loan is remote, and therefore, the~~entire debt balance is ~~classified according to~~current based on the contractual payment ~~terms at March 31, 2020.~~terms.

In connection with the 2018 Term Loan, the Company issued common stock warrants to Hercules (the “Hercules Warrant”). See Note 8.9. Warrants.

As of ~~March 31,~~September 30, 2020 and December 31, 2019, the Company had outstanding borrowings of ~~$13.5~~$13.7 million and $13.4 million, respectively. Interest expense was $0.4 million for ~~each of~~ the three months ended ~~March 31,~~September 30, 2020 and ~~2019.~~2019, and $1.1 million and $1.3 million for the nine months ended September 30, 2020 and 2019, respectively.

Future principal payments of $14.0 million, including the ~~End~~end of ~~Term Charges,~~term charges, are ~~as follows (in thousands):~~due in 2021.

March 31, 2020
2020 $ —
2021 13,960
Total $ 13,960

7.8. Stockholders' equity

Effective June 2, 2020, the Company increased the number of authorized shares of common stock from 85.0 million shares to 170.0 million shares.

2020 Private Placement

In July 2020, the Company completed a private placement (the “2020 Private Placement”) and received net cash proceeds of approximately $74.5 million. In connection with the 2020 Private Placement, the Company issued approximately 21.4 million shares of its common stock, approximately 12.2 million pre-funded warrants to purchase additional shares of its common stock (the “2020 Pre-Funded Warrants”) and warrants to purchase approximately 33.6 million shares of its common stock (the “2020 Warrants”). See Note 9. Warrants.

In connection with the 2020 Private Placement, the Company incurred approximately $5.4 million of issuance costs. The Company allocated approximately $1.2 million of the issuance costs to the common stock and 2020 Pre-Funded Warrants within additional paid-in capital and immediately expensed approximately $4.2 million of the issuance costs allocated to the liability classified 2020 Warrants as other expenses.

Agreement with Lincoln Park Capital

In October 2019, the Company entered into a purchase agreement with Lincoln Park Capital (“LPC”) pursuant to which LPC purchased $2.5 million of shares of the Company's common stock at a purchase price of $2.587 per share. In addition, for a period of ~~thirty~~30 months, the Company has the right, at its sole discretion, to sell up to an additional $27.5 million of the Company's common stock based on prevailing market prices of its common stock at the time of each sale. In consideration for entering into the purchase agreement, the Company issued ~~289,966~~approximately 0.3 million shares of its common stock to LPC as a commitment fee. The purchase agreement limits the Company's sales of shares of common stock to LPC to ~~5,227,323~~approximately 5.2 million shares of common stock, representing 19.99% of the shares of common stock outstanding on the date of the purchase agreement. The purchase agreement also prohibits the Company from directing LPC to purchase any shares of common stock if those shares, when aggregated with all other shares of the Company's common stock then beneficially owned by LPC and its affiliates, would result in LPC and its affiliates having beneficial ownership, at any single point in time, of more than 9.99% of the then total outstanding shares of the Company's common stock.

In ~~January~~the nine months ended September 30, 2020, the Company sold ~~186,986~~approximately 1.5 million shares of common stock resulting in approximately $3.5 million of net proceeds. As of September 30, 2020, the Company had approximately $24.0 million remaining under its agreement with LPC.

At-the-market equity offering program

In 2015, the Company entered into an agreement, as amended, with Cowen and Company, LLC to ~~LPC,~~establish an at-the-market equity offering program (“ATM”) pursuant to which it was able to offer and sell up to $50.0 million of the Company's common stock at prevailing market prices. In the nine months ended September 30, 2020, the Company sold approximately 1.0 million shares under the ATM program and received net proceeds of $2.7 million, after deducting commissions. Through September 30, 2020, the Company has sold an aggregate of approximately ~~$0.4 million.~~1.5 million shares under the ATM and received approximately $6.7 million in net proceeds. As of September 30, 2020, the Company had approximately $43.1 million in gross proceeds remaining under the ATM.

2019 Public Offering

In June 2019, the Company entered into an underwriting agreement relating to the public offering of ~~10,500,000~~10.5 million shares of the Company’s common stock, at a price of $3.50 per share, for gross proceeds of approximately $36.8 million (the “2019 Public Offering”). The Company also granted the underwriters an option to purchase up to approximately an additional ~~1,575,000~~1.6 million shares of common stock (“Overallotment Option”). ~~On June 26, 2019, the~~The underwriters exercised this option in full. The Company received approximately $5.5 million in gross proceeds from the ~~underwriter’s~~underwriters’ exercise of the Overallotment Option. In connection with the 2019 Public Offering, inclusive of the Overallotment Option, the Company received net proceeds of $38.4 million.

2019 Private Placement

In February 2019, the Company completed a private placement ~~financing transaction~~ (the ~~“Private~~“2019 Private Placement”)~~. The~~ and received net cash proceeds of $13.8 million. In connection with the 2019 Private Placement, the Company issued ~~3,199,998~~approximately 3.2 million shares of common stock, prefunded warrants ~~(the “Pre-Funded Warrants”)~~ to purchase ~~531,250~~approximately 0.5 million shares of common stock (the ~~“Pre-Funded Warrant Shares”~~“2019 Pre-Funded Warrants”), and warrants ~~(the “Private Placement Warrants”)~~ to purchase up to ~~932,812~~approximately 0.9 million shares of common stock (the ~~“Warrant Shares”~~“2019 Warrants”). ~~The shares, Pre-Funded~~See Note 9. Warrants and Private Placement Warrants (collectively, the “Units”) were sold at a purchase price of $4.02 per Unit. The Company received net cash proceeds of approximately $13.8 million for the purchase of the shares, Pre-Funded Warrant Shares and Warrant Shares. See ~~Note 8. Warrants~~.

The Company had the option to issue additional shares of common stock in a second closing (the “Second Closing”) for gross proceeds of up to $24.2 million. The occurrence of the Second Closing was conditioned on top-line results from Part A of the Company's Phase 1/2a clinical trial for GEN-009 and a decision by the Company's board of directors to proceed with the Second

Closing. In June 2019, the Company announced top-line results from this trial but elected not to proceed with the Second Closing. In lieu of the Second Closing, the Company proceeded with the 2019 Public Offering.

~~At-the-market equity offering program~~

In 2015, the Company entered into an agreement, as amended, with Cowen and Company, LLC to establish an at-the-market equity offering program (“ATM”) pursuant to which it was able to offer and sell shares of its common stock at prevailing market prices from time to time. Through March 31, 2020, the Company has sold an aggregate of 463,887 shares under the ATM and received approximately $4.0 million in net proceeds.

As of ~~March 31,~~September 30, 2020, the Company had the following potentially issuable shares of common stock related to unexercised warrants ~~outstanding:~~outstanding (shares in thousands):

The exercise price and the number of shares are subject to adjustment upon a merger event, reclassification of the shares of common stock, subdivision or combination of the shares of common stock or certain dividends payments. The Company determined that the Hercules Warrant should be equity classified in accordance with ASC 480, Distinguishing Liabilities from Equity ("“ASC ~~480"~~480”) for all periods presented.

2018 ~~Public Offering~~ Warrants

In January 2018, the Company entered into ~~two~~2 underwriting agreements, the first relating to the public offering of ~~6,670,625~~approximately 6.7 million shares of the Company’s common stock, par value $0.001 per share, and accompanying warrants to purchase up to ~~3,335,313~~approximately 3.3 million shares of common stock (“2018 ~~Public Offering~~ Warrants”). The exercise price and the number of shares are subject to adjustment upon a merger event, reclassification of the shares of common stock, subdivision or combination of the shares of common stock or certain dividends payments. In the event of an “Acquisition,” defined generally to include a merger or consolidation resulting in the sale of 50% or more of the voting securities of the Company, the sale of all, or substantially all, of the assets or voting securities of the Company, or other change of control transaction, as defined in the 2018 ~~Public Offering~~ Warrants, the Company will be obligated to use its best efforts to ensure that the holders of the 2018 ~~Public Offering~~ Warrants receive new warrants from the surviving or acquiring entity (the “Acquirer”). The new warrants to purchase shares in the Acquirer shall have the same expiration date as the 2018 ~~Public Offering~~ Warrants and a strike price that is based on the proportion of the value of the Acquirer’s stock to the Company’s common stock. If the Company is unable, despite its best efforts, to cause the Acquirer to issue new warrants in the Acquisition as described above, then, if the Company’s stockholders are to receive cash in the Acquisition, the Company will settle the 2018 ~~Public Offering~~ Warrants in cash and if the Company’s stockholders are to receive stock in the Acquisition, the Company will issue shares of its common stock to each Warrant holder.

The Company determined that the 2018 ~~Public Offering~~ Warrants should be liability classified in accordance with ASC 480. As the 2018 ~~Public Offering~~ Warrants are liability-classified, the Company remeasures the fair value at each reporting date. The Company initially recorded the 2018 ~~Public Offering~~ Warrants at their estimated fair value of approximately $18.2 million. In connection with the Company's remeasurement of the 2018 ~~Public Offering~~ Warrants to fair value, the Company recorded expense of $0.3 million and income of ~~approximately $0.8 million and expense of approximately $5.8~~$2.2 million for the three months ended ~~March 31,~~September 30, 2020 and 2019, respectively, and income of $0.7 million and $0.3 million for the nine months ended September 30, 2020 and 2019, respectively. The fair value of the warrant liability related to the 2018 Warrants is approximately ~~$1.7~~$1.8 million and $2.5 million as of ~~March 31,~~September 30, 2020 and December 31, 2019, respectively.

The following table details the assumptions used in the Monte Carlo simulation models used to estimate the fair value of the ~~Warrant Liability~~2018 Warrants as of ~~March 31,~~September 30, 2020 and December 31, 2019, respectively:

March 31, 2020 December 31, 2019
Stock price $ 1.72
$ 2.07
Volatility 50.0% - 124.5%
50.0% - 116.6%
Remaining term (years) 2.8
3.1
Expected dividend yield —
—
Risk-free rate 0.3 % 1.6 %
Annual acquisition event probability 30.0 % 20.0 %

~~Private Placement~~2019 Warrants and ~~Prefunded~~2019 Pre-Funded Warrants

The exercise price of the warrants is subject to appropriate adjustment in the event of stock dividends, subdivisions, stock splits, stock combinations, reclassifications, reorganizations or a change of control affecting our common stock. The Company determined that the ~~Private Placement~~2019 Warrants and the 2019 Pre-Funded Warrants should be equity classified in accordance with ASC ~~480~~Topic 815, Derivatives and Hedging (“ASC 815”) for ~~the period ended March 31, 2020.~~all periods presented. The Company also determined that the 2019 Pre-Funded Warrants should be included in the determination of basic earnings per share in accordance with ASC 260, Earnings per Share.

2020 Warrants and 2020 Pre-Funded Warrants

In July 2020, in connection with the 2020 Private Placement, the Company issued common stock, 2020 Pre-Funded Warrants and ~~employee~~2020 Warrants.The exercise price of the 2020 Pre-Funded Warrants and the 2020 Warrants is subject to adjustment in the event of stock dividends, subdivisions, stock splits, stock combinations, reclassifications, reorganizations or a change of control affecting the Company's common stock. The Company determined that the 2020 Pre-Funded Warrants should be equity classified in accordance with ASC 815. The Company also determined that the 2020 Pre-Funded Warrants should be included in the determination of basic earnings per share in accordance with ASC 260.

The holders of the 2020 Warrants are entitled to down round protection until July 24, 2021. For one year after the closing of the 2020 Private Placement, the Company is required to obtain shareholder approval for the adjustment to the exercise price as a result of any common stock issuance at a price per share less than $2.25. As a result, the Company determined that the 2020 Warrants should be liability classified in accordance with ASC 815 for the period from issuance through July 2021. As the 2020 Warrants are liability-classified, the Company remeasures the fair value at each reporting date. The Company initially recorded the 2020 Warrants at their estimated fair value of approximately $62.5 million. In connection with the Company's remeasurement of the 2020 Warrants to fair value, the Company recorded income of approximately $11.1 million for the three and nine months ended September 30, 2020. The fair value of the warrant liability related to the 2020 Warrants is approximately $51.4 million as of September 30, 2020.

The following table details the assumptions used in the Monte Carlo simulation models used to estimate the fair value of the 2020 Warrants as of September 30, 2020, respectively:


	September 30, 2020			Issuance Date
Stock price*	$	2.29		$	2.69
Volatility	115.6		%	110.6		%
Remaining term (years)	3.8			4.0
Expected dividend yield	0			0
Risk-free rate	0.23		%	0.22		%
Annual acquisition event probability	40.0		%	40.0		%

*The stock price input at the issuance date was adjusted to reflect a discount for lack of marketability.

10. Employee benefit plans

In June 2020, the Company’s stockholders approved an increase of 2.8 million shares to the Company's Amended and Restated 2014 Equity Incentive Plan. As of September 30, 2020, there were approximately 2.5 million shares remaining for future issuance.

The Company issues stock options and restricted stock units (“RSUs”) to employees, which generally vest ratably over a four year service period. The Company measures the fair value of stock options on the date of grant using the Black-Scholes option pricing model. The Company measures the fair value of RSUs on the date of grant using the underlying common stock fair value.

Stock-based compensation expense

Total stock-based compensation expense recognized for stock options and RSUs is as follows (in thousands):

Three Months Ended March 31,

2020 2019
Research and development 160
182
General and administrative $ 224
$ 247
Total $ 384
$ 429

The following table summarizes stock option activity ~~(shares in~~(in thousands):

The following table summarizes RSU activity (shares in thousands):

Shares Weighted-Average Grant Date Fair Value
Outstanding as of December 31, 2019 —
$ —
Granted 45
$ 1.98
Vested —
$ —
Forfeited/cancelled —
$ —
Outstanding as of March 31, 2020 45
$ 1.98

Employee stock purchase plan

In February 2014, the Company’s board of directors adopted the 2014 Employee Stock Purchase Plan and subsequently amended the plan in June 2018 (the “ESPP”). The ESPP authorizes the issuance of up to ~~337,597~~approximately 0.3 million shares of common stock to participating eligible employees and provides for two six-month offering periods. As of ~~March 31,~~September 30, 2020, there were ~~217,985~~approximately 0.2 million shares remaining for future issuance under the plan.

~~10.~~11. Net loss per share

Basic and diluted net loss per share was calculated as follows for the three and nine months ended ~~March 31,~~September 30, 2020 and ~~2019:~~2019 (in thousands, except per share amounts):

The following potential common ~~stock equivalents outstanding as of March 31, 2020 and 2019, presented on an as converted basis,~~shares were excluded from the calculation of net loss per share ~~for the periods presented,~~ due to their anti-dilutive effect for the three and nine months ended September 30, 2020 and 2019 (in thousands):

The 2020 Warrants have been included in the calculation of diluted net loss per share as the warrants are both liability-classified and in-the-money. The Company used the treasury stock method to determine the number of dilutive shares.

Three Months Ended March 31,
2020 2019
Warrants 4,591
4,600
Stock options 1,370
1,299
RSUs 45
—
Total 6,006
5,899

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the unaudited consolidated financial information and the notes thereto included in this Quarterly Report on Form 10-Q. The following disclosure contains forward-looking statements that involve risk and uncertainties. Our actual results and timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those discussed in our Annual Report on Form 10-K.

Overview

We are a biopharmaceutical company that seeks to discover and develop novel cancer immunotherapies using our ATLAS^TM proprietary discovery platform. The ATLAS platform profiles each patient's CD4⁺and CD8⁺ T cell immune responses to every potential target or “antigen” in that patient's tumor. We believe that this approach optimizes antigen selection for immunotherapies such as cancer vaccines and cellular therapies by identifying the antigens to which the patient can respond. Consequently, we believe that ATLAS could lead to more immunogenic and efficacious cancer immunotherapies.

Our most advanced program is GEN-009, a personalized neoantigen cancer vaccine, for which we are conducting a Phase 1/2a clinical trial. The GEN-009 program uses ATLAS to identify neoantigens, or immunogenic tumor mutations unique to each patient, for inclusion in each patient's GEN-009 vaccine. We are also advancing GEN-011, a neoantigen-specific adoptive T cell therapy program that also relies on ATLAS. ~~We expect to file an IND~~In September 2020, we received notice from the U.S. Food and Drug Administration (“FDA”) that it has accepted our Investigational New Drug (“IND”) Application for GEN-011 ~~in the second quarter of 2020.~~to initiate a Phase 1/2a clinical trial. We are currently initiating clinical sites for our GEN-011 program.

ATLAS Platform

Harnessing and directing the T cell arm of the immune system to kill tumor cells is increasingly viewed as having potential in the treatment of many cancers. This approach has been effective against hematologic malignancies and, more recently, certain solid tumors. Vaccines or cellular therapies employing this approach must target specific differences from normal tissue present in a tumor, such as antigens arising from genetic mutations. However, the discovery of optimal antigens for such immunotherapies has been particularly challenging for two reasons. First, the genetic diversity of human T cell responses means that effective antigens vary from person to person. Second, the number of candidate antigens can be very large, with up to thousands of candidates per patient in some cancers. An effective antigen selection system must therefore account both for each patient's tumor and for their T cell repertoire.

ATLAS achieves effective antigen selection by employing components of the T cell arm of the human immune system from each patient. Using ATLAS, we can measure each patient's T cell responses to a comprehensive set of candidate neoantigens, tumor-associated antigens and tumor-associated viral antigens for their own cancer, allowing us to select those targets associated with the anti-tumor T cell responses that may kill that individual's cancer. We believe that ATLAS represents the most comprehensive and accurate system for antigen discovery. Further, we believe ATLAS identifies a novel candidate antigen profile, that of inhibitory T cell responses. Previously, all candidate antigens were thought either to be targets of effective anti-tumor responses (stimulatory), or irrelevant. However, using ATLAS, we have identified inhibitory antigens we call Inhibigens^TM, which are shown to promote tumor progression in preclinical studies. We have also discovered that an antigen can be stimulatory in one patient and inhibitory in another, reinforcing the importance of selecting each patient's potentially immunogenic antigens.

The ATLAS portfolio comprises ~~three~~seven patent families and potentially two additional patent families. The first two families ~~comprise~~are comprised of issued U.S. patents, with patent terms until at least ~~2031 and~~ 2030, ~~respectively,~~ as well as granted foreign patents and pending U.S. and foreign applications. The third family is directed to ATLAS-based methods for cancer diagnosis, prognosis and patient selection, as well as related compositions. This patent family ~~currently comprises~~is comprised of pending applications in eleven foreign jurisdictions and ~~a pending~~an allowed U.S. application. Patents issuing from these applications are expected to have a patent term until at least ~~March~~ 2038. The four further families and two potential additional families currently comprise PCT applications or provisional applications, and are directed to various methods using ATLAS-identified antigens, to dose regimen for GEN-009, and to our cell-based therapy GEN-011.

Our Immuno-Oncology Programs

Our cancer immunotherapies include a vaccine that is designed to educate T cells to recognize and attack specific cancer targets, and a cellular therapy intended to introduce T cells that have been educated to attack these targets. We believe that neoantigen vaccines could be used in combination with existing treatment approaches for cancer to potentially direct and enhance an individual’s T cell response to his or her cancer, thereby potentially effecting better clinical outcomes. We also believe that isolating and expanding T cell populations targeting specific neoantigens through adoptive cell therapy could provide meaningful clinical benefit.

The following describes our active immuno-oncology programs in development:

Discovery

Pre-IND

Phase 1/2a

Pivotal

Status & Anticipated Milestones

GEN-009

Neoantigen vaccine

• ASCO 2019 Top 10 IO abstract

• Remaining patients data expected in Q4 2020

GEN-011

Neoantigen cell therapy

• Initiated phase I/IIa clinical trial

Toolbox of novel assets to enable additional programs

Shared neoantigens

Tumor-associated antigens

Viral cancer antigens

Our lead program, GEN-009, is an adjuvanted neoantigen peptide vaccine candidate. Using ATLAS to identify specific neoantigens, we manufacture a personalized vaccine for each patient using only those neoantigens determined by ATLAS to be stimulatory to that patient's anti-tumor immune responses. We are currently conducting a Phase 1/2a clinical trial for GEN-009 across a range of solid tumor types:

•Part A of the trial is assessing the safety and immunogenicity of GEN-009 as monotherapy in certain cancer patients with no evidence of disease; and

•Part B of the trial ~~for which we have commenced dosing patients,~~ is ~~designed to assess~~assessing the safety, immunogenicity, and preliminary antitumor activity of GEN-009 in combination with ICI therapy in patients with advanced or metastatic tumors.

The patients in Part A of the trial had little to no detectable tumor at the time of vaccination with GEN-009, but were still at risk of relapse. In the data from the eight dosed patients we observed the following:


•	~~100% of patients had measurable CD4~~⁺~~and CD8~~⁺ ~~T cell responses to their GEN-009 vaccine;~~

•100% of patients had measurable CD4+ and CD8+ T cell responses to their GEN-009 vaccine;

•Responses were detected against 99% of the administered vaccine neoantigens (N=88 administered antigens), a response rate in excess of that which has been reported previously by others in response to candidate neoantigen vaccines;


•	~~GEN-009 elicited CD8~~⁺ ~~T cell responses~~ ~~ex vivo, which is a measure of T cell effector function, for 41% of vaccine neoantigens and CD4~~⁺ ~~T cell responses to 51% of neoantigens;~~


•	~~GEN-009 elicited broad immune responses using an~~ ~~in vitro~~ ~~stimulation assay, which is a measure of central memory responses, with 87% of neoantigens eliciting a CD4~~⁺ ~~response and 57% of neoantigens eliciting a CD8~~⁺ ~~response;~~

•GEN-009 elicited CD8+ T cell responses ex vivo, which is a measure of T cell effector function, for 41% of vaccine neoantigens and CD4+ T cell responses to 51% of neoantigens;

•GEN-009 elicited broad immune responses using an in vitro stimulation assay, which is a measure of central memory responses, with 87% of neoantigens eliciting a CD4+ response and 57% of neoantigens eliciting a CD8+ response;

•GEN-009 was well tolerated, with no dose-limiting toxicities observed; and

•Through ~~April~~October 8, 2020, only one of the eight vaccinated patients has developed a ~~recurrent~~recurrence of their tumor.

In Part B of the GEN-009 trial we continue to see immune responses including:

•Antigen-specific CD4+ and CD8+ T cell responses;

•Responses to multiple antigens in each patient, measured through both ex vivo and in vitro stimulation assays; and

•Strong magnitude of response.

We believe the above data confirms the potential antigen selection advantages of ATLAS.

We also disclosed Part B data demonstrating evidence that GEN-009 can provide clinical benefit to patients taking checkpoint inhibitor (CPI) therapy.Among the first five patients for whom post-vaccination tumor scans were available, three patients’ tumors achieved independent RECIST™ criteria responses.We believe this novel signal is consistent with a GEN-009-driven benefit to patients receiving CPIs.We intend to report longer-term data from these patients and initial data from a larger patient cohort during the fourth quarter of ~~2019, we began dosing patients for~~2020.

We have completed initial enrollment in our GEN-009 Part B ~~of our GEN-009 study. We anticipate reporting these preliminary clinical results in the third quarter of 2020.~~trial. We believe that the current patients enrolled are sufficient to determine whether a preliminary clinical signal can be ~~seen, therefore,~~seen. Therefore, we have paused enrollment in our GEN-009 Part B trial. Upon review of the ~~preliminary~~ clinical results, including longer term follow-up, we will consider whether it is appropriate to continue the study.

We also are advancing GEN-011, an adoptive T cell therapy specific for neoantigens identified by ATLAS. Adoptive T cell therapies offer an alternative treatment in solid tumors. GEN-011 extracts and specifically expands ATLAS-identified neoantigen-specific T cells from each patient's peripheral blood. ~~We expect to file an~~In September 2020, we received notice from the FDA that it has accepted our IND ~~application~~Application for GEN-011 ~~with the U.S. Food and Drug Administration (“FDA”) in the second quarter of 2020, with preliminary~~to initiate a Phase 1/2a clinical ~~results anticipated in the first half of 2021.~~trial. We are currently initiating sites for this clinical trial.

We continue to conduct research, principally to explore Inhibigen^TM biology and ways to further strengthen ATLAS. We also continue to explore additional program opportunities. The COVID-19 pandemic has ~~materially~~ affected our ability to continue such efforts, however, so we cannot provide specific timelines for these efforts to translate into new clinical candidates, which might include

non-personalized cancer immunotherapies targeting shared neoantigens, non-mutated tumor-associated antigens, cancers of viral origin such as cancers driven by Epstein-Barr virus infection and ~~Inhibigens~~^TM.Inhibigens.

Business Update Regarding COVID-19

The current COVID-19 pandemic has presented a substantial public health and economic challenge around the world and is affecting our employees, patients, communities and business operations, as well as the U.S. economy and financial markets. The full extent to which the COVID-19 pandemic will directly or indirectly affect our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19, the actions taken to contain it or treat its impact and the economic impact on local, regional, national and international markets.

To date, we have been able to continue our operations and do not anticipate any material interruptions for the foreseeable future. However, we are continuing to assess the potential impact of the COVID-19 pandemic on our business and operations, including our expenses, supply chain and pre-clinical and clinical trials. Our office-based employees have been working from home since mid-March 2020 and will continue to do so for the foreseeable future.

Our third-party contract manufacturing partners continue to operate their manufacturing facilities at or near normal levels. While we currently do not anticipate any interruptions in our supply chain, it is possible that the COVID-19 pandemic and response efforts may have an impact in the future on our and/or our third-party suppliers and contract manufacturing partners' ability to manufacture our products or the products of our partners.

Financing and business operations

We commenced business operations in August 2006. We have financed our operations primarily through the issuance of our equity securities, debt financings, and amounts received through grants. As of ~~March 31,~~September 30, 2020, we had received an aggregate of ~~$399.7~~$485.8 million in gross proceeds from the issuance of equity securities and gross proceeds from debt facilities and an aggregate of $7.9 million from grants. At ~~March 31,~~September 30, 2020, our cash and cash equivalents were ~~$26.5~~$87.6 million.

Since inception, we have incurred significant operating losses. We expect to incur significant expenses and increasing operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year. We will need to generate significant revenue to achieve profitability, and we may never do so.

We have not generated any revenues from product sales to date and we do not expect to generate revenues from product sales for the foreseeable future. Our revenues for the three and nine months ended September 30, 2020 were from the material transfer agreement (“MTA”) with a strategic partner, Shionogi & Co. Ltd (“Shionogi”). See “Note 3 – Revenue” to the notes to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

In July 2020, we entered into a private placement financing transaction in which we issued shares of our common stock, pre-funded warrants to purchase shares of our common stock, and warrants to purchase shares of our common stock for aggregate gross cash proceeds of approximately $79.9 million, before deducting fees to the placement agent and other offering expenses payable by us (the “2020 Private Placement”). We incurred approximately $5.4 million of offering-related expenses, resulting in total net proceeds of approximately $74.5 million.

In the nine months ended September 30, 2020, we sold approximately 1.0 million shares under our ATM program and received net proceeds of $2.7 million, after deducting commissions. For the nine months ended September 30, 2019, we sold no shares under the ATM program. As of September 30, 2020, we had approximately $43.1 million in gross proceeds remaining under the ATM.

In October 2019, we entered into a purchase agreement with Lincoln Park Capital (“LPC”) pursuant to which LPC purchased $2.5 million of shares of our common stock at a purchase price of $2.587 per share. In addition, for a period of 30 months, we have the right, at our sole discretion, to sell up to an additional $27.5 million of our common stock based on prevailing market prices of our common stock at the time of each sale. In consideration for entering into the purchase agreement, we issued ~~289,966~~approximately 0.3 million shares of our common stock to LPC as a commitment fee. The purchase agreement limits our sales of shares of common stock to LPC to ~~5,227,323~~approximately 5.2 million shares of common stock, representing 19.99% of the shares of common stock outstanding on the date of the purchase agreement. The purchase agreement also prohibits us from directing LPC to purchase any shares of common stock if those shares, when aggregated with all other shares of our common stock then beneficially owned by LPC and its affiliates, would result in LPC and its affiliates having beneficial ownership, at any single point in time, of more than 9.99% of the then total outstanding shares of our common stock. In ~~January~~the nine months ended September 30, 2020, we sold ~~186,986~~1.5 million shares of common stock to LPC, for net proceeds of approximately ~~$0.4~~$3.5 million. As of September 30, 2020, we had approximately $24.0 million remaining under our agreement with LPC.

In June 2019, we completed an underwritten public offering in which we sold ~~10,500,000~~10.5 million shares of our common stock at a price of $3.50 per share, for gross proceeds of approximately $36.8 million. ~~This underwritten public offering~~We also ~~included an overallotment option for~~granted the underwriters ~~for 1,575,000~~an option to purchase up to approximately an additional 1.6 million shares ~~which they~~of common stock. The underwriters exercised this option in ~~full on June 26, 2019.~~full. This generated additional gross proceeds of $5.5 million. We incurred approximately $3.9 million of offering-related expenses, resulting in total net proceeds of $38.4 million.

In February 2019, we completed a private placement financing transaction in which we issued shares of our common stock, pre-funded warrants to purchase shares of our common stock, and warrants to purchase shares of our common stock for gross cash proceeds of $15.0 million. We incurred $1.2 million of offering-related expenses, resulting in total net proceeds of approximately $13.8 million.

As reflected in our consolidated financial statements, we used cash to fund operating activities of ~~$13.8~~$32.0 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 and had ~~$26.5~~$87.6 million available in cash and cash equivalents at ~~March 31,~~September 30, 2020. In addition, ~~our net losses were $12.9 million for the three months ended March 31, 2020, and~~ we had an accumulated deficit of ~~$343.8 million. We~~$359.7 million and we anticipate that we will continue to incur significant operating losses for the foreseeable future as we continue to develop our product candidates. Until such time, if ever, as we attempt to generate substantial product revenue and achieve profitability, we expect to finance our cash needs through a combination of equity offerings and strategic transactions, and other sources of funding. If we are unable to raise additional funds when needed, we may be required to implement ~~further~~ cost reduction strategies, including ceasing development of GEN-009, GEN-011, and other corporate programs and activities. These factors, combined with our forecast of cash required to fund operations for a period of at least one year from the date of issuance of these consolidated financial statements, raise substantial doubt about our ability to continue as a going concern.

~~We believe that our~~Our available cash and cash equivalents at ~~March 31,~~September 30, 2020 are ~~sufficient~~expected to ~~support our operating expenses and capital expenditure requirements into the first quarter of 2021.~~fund operations to mid-2022.

Costs related to clinical trials can be unpredictable and there can be no guarantee that our current balances of cash and cash equivalents combined with proceeds received from other sources, will be sufficient to fund our trials or operations through this period. These funds will not be sufficient to enable us to conduct pivotal clinical trials for, seek marketing approval for, or commercially launch GEN-009, GEN-011 or any other product candidate. Accordingly, we will be required to obtain further funding through public or private equity offerings, collaboration and licensing arrangements, or other sources. Adequate additional financing may not be available to us on acceptable terms, or at all, which could result in a decision to pause or delay development or advancement of clinical trials for one or more of our product candidates. Similarly, we may decide to pause or delay development or advancement of clinical trials for one or more of our product candidates if we believe that such development or advancement is imprudent or impractical.

Financial Overview

Revenues

We have not generated any revenues from product sales to date and we do not expect to generate revenues from product sales for the foreseeable future. Our revenue was derived from the MTA with Shionogi. For additional information about our revenue recognition policy, see “Note 2-Summary of significant accounting policies” to the notes to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

Research and development expenses

Research and development expenses consist primarily of costs incurred to advance our preclinical and clinical candidates, which include:

•salary and related expenses;

•expenses incurred under agreements with contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), consultants, and other vendors that conduct our clinical trials and preclinical activities;

•costs of acquiring, developing, and manufacturing clinical trial materials and lab supplies; and

•facility costs, depreciation, and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance, and other supplies.

We expense internal research and development costs ~~to operations~~ as incurred. Nonrefundable advanced payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been ~~received rather than when the payment is made.~~received.

The following table identifies research and development expenses for our product candidates as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Discovery and pre-IND	$	3,722	$	2,289	$	11,075	$	4,797
Phase 1/2a programs	2,135		3,768		10,544		13,076

Other research and development	1,691		769		4,504		2,262
Total research and development	$	7,548	$	6,826	$	26,123	$	20,135

Three Months Ended March 31,
2020 2019
Phase 1/2a programs $ 4,793
$ 4,720
Discovery and pre-IND 3,809
788
Other research and development 1,385
952
Total research and development $ 9,987
$ 6,460

~~Phase 1/2a programs are Phase 1 or Phase 2 development activities.~~ Discovery and pre-IND includes costs incurred to support our discovery research and translational science efforts up to the initiation of Phase 1 development. Phase 1/2a programs are Phase 1 or Phase 2 development activities. Other research and development include costs that are not specifically allocated to active ~~product candidates,~~programs, including facilities costs, depreciation expense, and other costs.

General and administrative expenses

General and administrative expenses consist primarily of salaries and related expenses for personnel in executive and other administrative functions. Other general and administrative expenses include facility costs, ~~and~~ professional fees associated with consulting, corporate and intellectual property legal expenses, and accounting services.

Other ~~income~~ income/(expense)

Other ~~income~~ income/(expense) consists of the change in the fair value of the warrant liability, transaction expenses, interest expense, net of interest income, gains and ~~other expense for miscellaneous items, such as the transaction expenses.~~losses on sale and disposal of assets, and gains and losses on foreign currency.

Critical Accounting Policies and Significant Judgments and Estimates

We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as critical because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used. The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, ~~we evaluate~~management makes estimates ~~which include~~and exercises judgement in revenue recognition, prepaid and accrued research and development expenses and the fair value of our warrant ~~liability.~~liability, which could change period to period based on changes in facts and circumstances. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from those estimates or assumptions.

~~There were no changes to our~~ These critical accounting policies ~~during the three months ended March 31, 2020, as compared to those identified~~are described in ~~the Company's~~our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019.~~2019, and there have been no changes to such policies, except for our policy related to revenue recognition noted below. It is important that the

discussion of our operating results that follow be read in conjunction with the critical accounting policies disclosed in our Annual Report on Form 10-K, as filed with the SEC on February 13, 2020.

Revenue Recognition

In applying ASC Topic 606 Revenue from Contracts with Customers, management must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. We utilize key assumptions to determine the standalone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs to complete the respective performance obligation. We also utilize judgement in assessing whether or not variable consideration is constrained or if it can be allocated specifically to one or more performance obligations in the arrangement.

When a performance obligation is satisfied, revenue is recognized for the amount of the transaction price that is allocated to that performance obligation on a relative standalone selling price basis, excluding estimates of variable consideration that are constrained. For performance obligations consisting of licenses and other promises, we utilize judgment to assess whether the combined performance obligation is satisfied over time or at a point in time and the recognition pattern for the portion of the transaction price allocated to the performance obligation.

Results of Operations

Comparison of the three months ended ~~March 31,~~September 30, 2020 and 2019


	Three Months Ended September 30,				Increase
(in thousands)	2020		2019		(Decrease)
License revenue	$	453	$	—	$	453

Operating expenses:
Research and development	7,548		6,826		722
General and administrative	3,644		2,758		886
Total operating expenses	11,192		9,584		1,608
Loss from operations	(10,739)		(9,584)		(1,155)
Other income (expense):
Change in fair value of warrants	10,767		2,206		8,561
Interest expense, net	(377)		(154)		(223)
Other expense	(4,206)		—		(4,206)
Total other income	6,184		2,052		4,132
Net loss	$	(4,555)	$	(7,532)	$	2,977

License revenue

The $0.5 million increase in revenue in the three months ended September 30, 2020 compared to the three months ended September 30, 2019 relates to revenue recognized in connection with the MTA with Shionogi.

Three Months Ended March 31, Increase
(in thousands) 2020 2019 (Decrease)
Operating expenses:

Research and development $ 9,987
$ 6,460
$ 3,527
General and administrative 3,388
3,017
371
Total operating expenses 13,375
9,477
3,898
Loss from operations (13,375 ) (9,477 ) 3,898
Other income (expense):

Change in fair value of warrants 781
(5,787 ) 6,568
Interest expense, net (259 ) (302 ) 43
Other income (expense) —
(1 ) 1
Total other income 522
(6,090 ) 6,612
Net loss $ (12,853 ) $ (15,567 ) $ (2,714 )

Research and development expenses

Research and development expenses increased ~~$3.5~~$0.7 million in the three months ended ~~March 31,~~September 30, 2020, as compared to the three months ended ~~March 31,~~September 30, 2019. The increase was largely due to ~~increased~~an increase in headcount-related costs of approximately $0.8 million, partially offset by a decrease in external manufacturing costs of approximately ~~$2.3 million, increased headcount-related costs of approximately $0.5 million, increased clinical trial costs of approximately $0.3 million, and increased lab supplies costs of approximately $0.2~~$0.1 million.

General and administrative expenses

General and administrative expenses increased ~~$0.4~~$0.9 million in the three months ended ~~March 31,~~September 30, 2020, as compared to the three months ended ~~March 31,~~September 30, 2019. The increase was primarily due to ~~increased~~an increase in legal, ~~costs of approximately $0.2 million, increased~~ consulting, and professional services ~~costs~~ of approximately ~~$0.1~~$0.5 million and ~~increased~~an increase in rent expense of approximately ~~$0.1~~$0.4 million.

Change in fair value of warrants

Change in fair value of warrants reflects the non-cash change in the fair value of the 2020 Warrants and the 2018 ~~Public Offering~~ Warrants, which ~~were~~are recorded at their fair value on the date of issuance and ~~are~~then remeasured at the end of each reporting period. ~~The~~In the three months ended September 30, 2020, the increase in the change in the fair value of warrants was primarily attributed to the ~~result of a~~ decrease in our stock price inbetween the ~~three months ended March 31,~~initial valuation of our 2020 ~~as compared to an increase in our stock price in~~Warrants and the ~~three months ended March 31, 2019.~~remeasurement at September 30, 2020.

Interest expense, net

Interest expense, net, consists primarily of interest expense on our long-term debt facilities, offset by interest earned on our cash equivalents.

Other expense

Other expense consists primarily of transaction costs incurred in connection with the 2020 Private Placement.

Comparison of the nine months ended September 30, 2020 and 2019


	Nine Months Ended September 30,				Increase
(in thousands)	2020		2019		(Decrease)
License revenue	$	1,359	$	—	$	1,359

Operating expenses:
Research and development	26,123		20,135		5,988
General and administrative	10,511		8,992		1,519
Total operating expenses	36,634		29,127		7,507
Loss from operations	(35,275)		(29,127)		(6,148)
Other income (expense):
Change in fair value of warrants	11,770		289		11,481
Interest expense, net	(1,001)		(755)		(246)
Other expense	(4,223)		(1)		(4,222)
Total other income (expense)	6,546		(467)		7,013
Net loss	$	(28,729)	$	(29,594)	$	865

License revenue

The $1.4 million increase in revenue in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 relates to revenue recognized in connection with the MTA with Shionogi.

Research and development expenses

Research and development expenses increased $6.0 million in the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019. The increase was largely due to an increase in external development costs of approximately $2.7 million, an increase in headcount-related costs of approximately $2.4 million, and an increase in clinical costs of approximately $0.8 million.

General and administrative expenses

General and administrative expenses increased $1.5 million in the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019. The increase was primarily due to an increase in rent expense of approximately $1.2 million, an increase in legal, consulting and professional services expenses of approximately $0.7 million, and an increase in insurance expense of approximately $0.3 million, partially offset by a decrease in headcount-related costs of approximately $0.8 million.

Change in fair value of warrants

Change in fair value of warrants reflects the non-cash change in the fair value of the 2020 Warrants and the 2018 Warrants, which are recorded at their fair value on the date of issuance and then remeasured at the end of each reporting period. In the nine months ended September 30, 2020, the increase in the change in the fair value of warrants was primarily attributed to the decrease in our stock price between the initial valuation of our 2020 Warrants and the remeasurement at September 30, 2020.

Interest expense, net

Interest expense, net, consists primarily of interest expense on our long-term debt facilities, offset by interest earned on our cash equivalents.

Other expense

Other expense consists primarily of transaction costs incurred in connection with the 2020 Private Placement.

Liquidity and Capital Resources

Overview

Since our inception in 2006, we have funded operations primarily through proceeds from ~~public~~ issuances of common stock ~~our~~and long-term ~~debt and the private placement of our common stock.~~debt.

As of ~~March 31,~~September 30, 2020, we had approximately ~~$26.5~~$87.6 million in cash and cash equivalents.

In April 2018, we entered into an amended and restated loan and security agreement with Hercules Capital, Inc. ("Hercules"), which was subsequently amended in November 2019 (as amended, the “2018 Term Loan”). The 2018 Term Loan provides a $14.0 million term loan. The 2018 Term Loan will mature on May 1, 2021 and accrues interest at a floating rate per annum equal to the greater of (i) 8.00% or (ii) the sum of 3.00% plus the prime rate. The 2018 Term Loan provides for interest-only payments until January

1, 2021. Thereafter, payments will include equal installments of principal and interest through maturity. The 2018 Term Loan may be prepaid subject to a prepayment charge. We are also obligated to pay an end of term charge of $1.0 million at maturity. As of ~~March 31,~~September 30, 2020, ~~the Company~~we had outstanding borrowings of ~~$13.5~~$13.7 million.

We have not generated any revenues from product sales to date and we do not expect to generate revenues from product sales for the foreseeable future. Our revenues for the nine months ended September 30, 2020 and 2019 were primarily from the MTA with Shionogi.

In July 2020, we completed the 2020 Private Placement and received net cash proceeds of approximately $74.5 million. In connection with the 2020 Private Placement, we issued approximately 21.4 million shares of our common stock, approximately 12.2 million pre-funded warrants to purchase additional shares of our common stock and warrants to purchase approximately 33.6 million shares of our common stock.

In October 2019, we entered into a purchase agreement with LPC pursuant to which LPC purchased $2.5 million of shares of our common stock at a purchase price of $2.587 per share. In addition, for a period of 30 months, we have the right, at our sole discretion, to sell up to an additional $27.5 million of our common stock based on prevailing market prices of our common stock at the time of each sale. In consideration for entering into the purchase agreement, we issued ~~289,966~~approximately 0.3 million shares of our common stock to LPC as a commitment fee. The purchase agreement limits our sales of shares of common stock to LPC to ~~5,227,323~~approximately 5.2 million shares of common stock, representing 19.99% of the shares of common stock outstanding on the date of the purchase agreement. The purchase agreement also prohibits us from directing LPC to purchase any shares of common stock if those shares, when aggregated with all other shares of our common stock then beneficially owned by LPC and its affiliates, would result in LPC and its affiliates having beneficial ownership, at any single point in time, of more than 9.99% of the then total outstanding shares of our common stock. In ~~January~~the nine months ended September 30, 2020, ~~the Company~~we sold ~~186,986~~approximately 1.5 million shares of common stock to LPC, for net proceeds of approximately ~~$0.4~~$3.5 million. As of September 30, 2020, we had approximately $24.0 million remaining under our agreement with LPC.

In June 2019, we entered into an underwriting agreement relating to the underwritten public offering of ~~10,500,000~~10.5 million shares of our common stock, par value $0.001 per share, at a price to the public of $3.50 per share, for gross proceeds of approximately $36.8 million (the “2019 Public Offering”). We also granted the underwriters an option to purchase up to an additional ~~1,575,000~~approximately 1.6 million shares of common ~~stock (“Overallotment Option”).~~stock. In June 2019, the underwriters exercised this option in full. We received approximately $5.5 million in gross proceeds from the ~~underwriter’s~~underwriters’ exercise of ~~the Overallotment Option.~~their option to purchase additional shares (the “Overallotment Option”). In connection with the 2019 Public Offering, inclusive of the Overallotment Option, we incurred approximately $3.9 million of offering-related expenses, resulting in total net proceeds of $38.4 million.

In February 2019, we completed a private placement ~~financing transaction~~ (the ~~“Private~~“2019 Private Placement”). We issued 3,199,998 shares (the “Shares”) of common stock, prefunded warrants (the “Pre-Funded Warrants”) to purchase 531,250 shares of common stock (the “Pre-Funded Warrant Shares”), and warrants (the “Private Placement Warrants”) to purchase up to 932,812 shares of common stock (the “Warrant Shares”). The Shares, Pre-Funded Warrants and Private Placement Warrants (collectively, the “Units”) were sold at a purchase price of $4.02 per Unit. We received net cash proceeds of $13.8 million. In connection with the 2019 Private Placement, we issued approximately ~~$13.8~~3.2 million ~~for the~~shares of common stock, pre-funded warrants to purchase approximately 0.5 million shares of ~~the Shares, Pre-Funded Warrant Shares~~common stock and ~~Warrant Shares.~~warrants to purchase up to approximately 0.9 million shares of common stock.

Cash Flows

The following table summarizes our sources and uses of cash for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 and 2019 (in thousands):


	Three Months Ended March 31,							Nine Months Ended September 30,
	2020			2019				2020		2019
Net cash used in operating activities	$	(13,796	)	$	(10,299	)	Net cash used in operating activities	$	(32,009)	$	(28,748)
Net cash used in investing activities	(217		)	(221		)	Net cash used in investing activities	(1,188)		(970)
Net cash provided by financing activities	395			13,197			Net cash provided by financing activities	80,695		50,321
Net (decrease) increase in cash and cash equivalents	$	(13,618	)	$	2,677
Net increase in cash and cash equivalents							Net increase in cash and cash equivalents	$	47,498	$	20,603

Operating Activities

Net cash used in operating activities increased ~~$3.5~~$3.3 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2019. The increase in cash used in operations ~~for the three months ended March 31, 2020 was primarily related~~is attributed to an increase in our research and development expenses due to the ~~development~~advancement of ~~our preclinical~~GEN-009 and ~~clinical candidates.~~GEN-011.

Investing activities

Net cash used by investing activities was for the purchases of property and equipment in both periods ending ~~March 31,~~September 30, 2020 and 2019, respectively.

Financing Activities

Net cash provided by financing activities ~~decreased $12.8~~increased $30.4 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2019. In the ~~three~~nine months ended ~~March 31,~~September 30, 2020, the ~~Company~~2020 Private Placement generated net proceeds of $74.5 million, we sold shares of common stock to

LPC for net proceeds of approximately ~~$0.4~~$3.5 million and we sold shares under our ATM program and received net proceeds of approximately $2.7 million. In the ~~three~~nine months ended ~~March 31,~~September 30, 2019, the 2019 Private Placement generated net proceeds of $13.8 million and the 2019 Public Offering generated net proceeds of $38.4 million, offset by the repayment of long-term debt of $1.4 million.

Operating Capital Requirements

Our primary uses of capital are for ~~compensation~~salaries and related expenses for personnel, manufacturing costs for preclinical and clinical materials, third-party clinical trial services, laboratory and related supplies, legal and other regulatory expenses, and general overhead costs. We expect these costs will continue to be the primary operating capital requirements for the near future.

We expect that our existing cash and cash equivalents are sufficient to support our operations into the first quarter of 2021. As reflected in the consolidated financial statements, we had available cash and cash equivalents of $26.5 million at March 31, 2020. In addition, we had cash used in operating activities of $13.8 million for the three months ended March 31, 2020. These factors, combined with our forecast of cash required to ~~fund operations for a period of at least one year from the date of issuance of these financial statements, raise substantial doubt about our ability to continue as a going concern.~~mid-2022. We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products coupled with the global economic uncertainty that has arisen with the ~~recent~~ outbreak of the coronavirus, or referred to as COVID-19, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:

•the timing and costs of our planned clinical trials for ~~GEN-009;~~GEN-009 and GEN-011;

•the progress, timing, and costs of manufacturing GEN-009 and GEN-011 for planned clinical trials;

~~the outcome, timing, and costs of seeking regulatory approvals, including an IND application for GEN-011;~~

•the terms and timing of any future collaborations, grants, licensing, consulting, or other arrangements that we may establish;

•the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights, including milestone payments, royalty payments and patent prosecution fees that we are obligated to pay pursuant to our license agreements;

•the costs of preparing, filing, and prosecuting patent applications, maintaining and protecting our intellectual property rights, and defending against intellectual property related claims;

•the extent to which we in-license or acquire other products and technologies;

•the receipt of marketing approval;

•the costs of commercialization activities for GEN-009, GEN-011 and other product candidates, if we receive marketing approval, including the costs and timing of establishing product sales, marketing, distribution, and manufacturing capabilities; and

•revenue received from commercial sales of our product candidates.

We will need to obtain substantial additional funding in order to complete clinical trials and receive regulatory approval for GEN-009, GEN-011 and our other product candidates. To the extent that we raise additional capital through the sale of our common stock, convertible securities, or other equity securities, the ownership interests of our existing stockholders may be materially diluted and the terms of these securities could include liquidation or other preferences that could adversely affect the rights of our existing stockholders. In addition, debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends, that could adversely affect our ability to conduct our business. If we are unable to raise capital when needed or on attractive terms, we could be forced to significantly delay, scale back, or discontinue the development of GEN-009, GEN-011 or our other product candidates, seek collaborators at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available, and relinquish or license, potentially on unfavorable terms, our rights to GEN-009, GEN-011 or our other product candidates that we otherwise would seek to develop or commercialize ourselves.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3.Quantitative and Qualitative Disclosures about Market Risk

We had cash and cash equivalents of approximately ~~$26.5~~$87.6 million as of ~~March 31,~~September 30, 2020. The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income without significantly increasing risk. Our primary exposure to market risk relates to fluctuations in interest rates, which are affected by changes in the general level of U.S. interest ~~rates.~~rates, including interest rate changes resulting from the impact of the COVID-19 pandemic. Given the short-term nature of our cash and cash equivalents, we believe that a sudden change in market interest rates would not be expected to have a material impact on our financial condition and/or results of operations. We do not own any derivative financial instruments.

We do not believe that our cash, cash equivalents and marketable securities have significant risk of default or illiquidity. While we believe our cash and cash equivalents do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. In addition, we maintain significant amounts of cash, cash equivalents and marketable securities at one or more financial institutions that are in excess of federally insured limits.

Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation had a material effect on our results of operations during the ~~three~~nine months ended ~~March 31,~~September 30, 2020.

Item 4.Controls and Procedures

Management’s Evaluation of our Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~March 31,~~September 30, 2020 (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our principal executive officer and principal financial officer have concluded based upon the evaluation described above that, as of ~~March 31,~~September 30, 2020, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

During the three months ended ~~March 31,~~September 30, 2020, there have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Securities Exchange Act of 1934, as amended, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.Legal Proceedings

In the ordinary course of business, we are from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating to intellectual property, commercial arrangements and other matters. We do not believe we are currently party to any pending legal action, arbitration proceeding or governmental proceeding, the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business or operating results. We are not a party to any material proceedings in which any director, member of senior management or affiliate of ours is either a party adverse to us or our subsidiaries or has a material interest adverse to us or our subsidiaries.

Item 1A.Risk Factors

There have been no material changes from the risk factors set forth in the Company's Annual Report Form 10-K for the year ended December 31, 2019 ~~except as set forth below.~~

~~A pandemic, epidemic or outbreak of an infectious disease, such as the novel coronavirus, or COVID-19, has and may in the future adversely affect our business.~~

An outbreak of COVID-19 occurred in China in December 2019 and has spread around the world. The Center for Disease Control (CDC) has recognized this outbreak as a pandemic which has caused shutdowns to businesses and cities worldwide while disrupting supply chains, business operations, travel, consumer confidence, and business sentiment. The situation is ever evolving and its effects both short-term and long-term remain unknown. The spread of COVID-19 has resulted in certain disruptions to our business and may result in future additional disruptions to our business. Examples of both include without limitation the following:


•	~~The COVID-19 pandemic has materially affected our ability to conduct research, principally to explore Inhibigen~~^TM ~~biology and ways to further strengthen ATLAS and other program opportunities.~~

The health and wellbeing of our employees and suppliers is at risk- if a critical threshold of our personnel, or the personnel of our suppliers, were to be diagnosed with COVID-19, placed in quarantine due to potential exposure to COVID-19, or need to care for family members diagnosed with COVID-19, it may result in significant manufacturing and business disruption.

Our clinical sites may no longer be able to continue with the GEN-009 clinical trial or limit patient enrollment which could have a material impact on our milestones and timelines. Further, clinical sites may not be engaging in new clinical programs which could have a material impact on our GEN-011 program.

We have asked most employees who are not directly involved in our GEN-009 and GEN-011 clinical programs to work from home, which could impact our ability to effectively plan, execute, communicate and maintain our corporate culture. The increase in working remotely could increase our cyber security risk, create data accessibility concerns, and make us more susceptible to communication disruptions, any of which could adversely impact our business operations.

~~Stay at home orders have significantly limited the ability of individuals from traveling outside the home which may limit our ability to hire new employees or backfill terminated employees.~~

Equity and debt markets have experienced significant volatility since the spread of COVID-19 into the United States. Should significant volatility continue or they experience declines due to the economic impact of COVID-19, we may not be able to raise capital at a reasonable valuation or at all.

The full extent to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the ~~actions to treat or contain COVID-19 or to otherwise limit its impact, among others.~~Company's Quarterly Report Form 10-Q for the quarter ended March 31, 2020.

Disruptions at the FDA and other government agencies caused by funding shortages or global health concerns could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, cleared or approved, or commercialized in a timely manner or at all, which could negatively impact our business.

The ability of the FDA to review and clear or approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions

at the FDA and other agencies may also slow the time necessary for marketing applications, clinical trial authorizations or other regulatory submissions to drug candidates to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical employees and stop critical activities.

Separately, in response to the global pandemic of COVID-19, on March 10, 2020, the FDA announced its intention to postpone most foreign inspections of manufacturing facilities and products through April 2020, and subsequently, on March 18, 2020, the FDA announced its intention to temporarily postpone routine surveillance inspections of domestic manufacturing facilities. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our marketing applications, clinical trial authorizations, or other regulatory submissions, which could have a material adverse effect on our business.

Item 6.Exhibits


Exhibit Number						Exhibit
3.1						Fifth Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, File No. 001-36289, filed on February 12, 2014)

~~Exhibit~~ ~~Number~~ 3.2						Certificate of Amendment to the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, File No. 001-36289, filed on June 25, 2018)
10.1*
3.3						~~Employment Letter Agreement between Girish Aakalu~~Certificate of Amendment to the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, File No. 001-36289, filed on May 21, 2019)

3.4						Certificate of Amendment to Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, File No. 001-36289, filed on June 2, 2020)

3.5						Certificate of Correction to the Certificate of Amendment to the Restated Certificate of Incorporation of Genocea Biosciences, Inc.~~, dated December 6, 2018~~(incorporated by reference to Exhibit 3.5 to the Company’s Quarterly Report on Form 10-Q, File No. 001-36289, filed on July 23, 2020)

10.2*4.1						~~Employment Letter Agreement between Thomas Davis and Genocea Biosciences, Inc., dated October 1, 2018~~Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current report on Form 8-K, File No. 001-36289, filed on July 22, 2020)

~~10.3*†~~4.2						Form of ~~Restricted Stock Unit Award Agreement under~~Warrant (incorporated by reference to Exhibit 4.2 to the ~~Genocea Biosciences, Inc. 2014 Equity Incentive Plan~~Company’s Current report on Form 8-K, File No. 001-36289, filed on July 22, 2020)

31.1						Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002 by Chief Executive Officer

31.2						Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002 by Chief Financial Officer

32.1						Certification of periodic financial report pursuant to Section 906 of Sarbanes Oxley Act of 2002 by Chief Executive Officer

32.2						Certification of periodic financial report pursuant to Section 906 of Sarbanes Oxley Act of 2002 by Chief Financial Officer

~~101~~101.INS*						~~The following materials from~~Inline XBRL Instance Document (the instance document does not appear in the ~~Company’s Quarterly Report on Form 10-Q for~~Interactive Data File because its XBRL tags are embedded within the ~~quarter ended March 31, 2020, formatted~~Inline XBRL document)

101.SCH*						Inline XBRL Taxonomy Extension Schema Document.

101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*						Cover Page Interactive Date File (formatted as Inline XBRL with applicable taxonomy extension information contained in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019, (ii) Condensed Consolidated Statements of Operations and Comprehensive Income for the three months ended March 31, 2020 and 2019, (iii) Condensed Consolidated Statements of Stockholders' Equity (Deficit) for the three months ended March 31, 2020 and 2019, (iv) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 and (v) Notes to Unaudited Condensed Consolidated Financial StatementsExhibits 101)

*Filed ~~herewith.~~herewith

~~† Indicates a compensatory plan.~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	Genocea Biosciences, Inc.

Date: ~~April 30,~~October 29, 2020	By:	/s/ WILLIAM D. CLARK
		William D. Clark
		President and Chief Executive Officer and Director
		(Principal Executive Officer)

Date: ~~April 30,~~October 29, 2020	By:	/s/ DIANTHA DUVALL
		Diantha Duvall
		Chief Financial Officer
		(Principal Financial and Accounting Officer)


	Operating leases			Finance lease			Total				Operating leases		Finance lease		Total
2020	$	2,110		$	89		$	2,199		2020	$	703	$	22	$	725
2021	2,871			23			2,894			2021	2,871		23		2,894
2022	2,943			—			2,943			2022	2,943		0		2,943
2023	3,017			—			3,017			2023	3,017		0		3,017
2024 and thereafter	3,609			—			3,609			2024 and thereafter	3,609		0		3,609
Total lease payments	$	14,550		$	112		$	14,662		Total lease payments	$	13,143	$	45	$	13,188
Less imputed interest	(2,635		)	(5		)	(2,640		)	Less imputed interest	(2,166)		(1)		(2,167)
Total	$	11,915		$	107		$	12,022		Total	$	10,977	$	44	$	11,021


	Shares	Exercise price		Expiration date	Classification
Hercules Warrant	41	$	6.80	Q2 2023	Equity
2018 Warrants	3,617	$	9.60	Q1 2023	Liability
2019 Warrants	933	$	4.52	Q1 2024	Equity
2019 Pre-Funded Warrants	531	$	0.08	Q1 2039	Equity
2020 Warrants	33,613	$	2.25	Q3 2024	Liability
2020 Pre-Funded Warrants	12,223	$	0.01		Equity
	50,958



	Shares	Exercise price		Expiration date	Classification
Hercules Warrant	41,177	$	6.80	Q2 2023	Equity
2018 Public Offering Warrants	3,616,944	$	9.60	Q1 2023	Liability
Private Placement Warrants	932,812	$	4.52	Q1 2024	Equity
Pre-Funded Warrants	531,250	$	0.08	Q1 2039	Equity
	5,122,183


	Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding at December 31, 2019	1,323	$	11.65		$	0
Granted	1,322	$	2.09
Exercised	(4)	$	1.66
Forfeited/cancelled	(256)	$	3.72
Outstanding at September 30, 2020	2,385	$	7.21	8.3	$	404
Exercisable at September 30, 2020	829	$	14.70	6.7	$	39



	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding at December 31, 2019	1,323		$	11.65		$	—
Granted	66		$	1.99
Exercised	—		$	—
Cancelled	(19	)	$	4.85
Outstanding at March 31, 2020	1,370		$	11.28	7.90	$	—
Exercisable at March 31, 2020	585		$	18.90	6.72	$	—


								Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended March 31,							2020		2019		2020		2019
License revenue							License revenue	$	453	$	0	$	1,359	$	0
	2020			2019
Operating expenses:							Operating expenses:
Research and development	$	9,987		$	6,460		Research and development	7,548		6,826		26,123		20,135
General and administrative	3,388			3,017			General and administrative	3,644		2,758		10,511		8,992
Total operating expenses	13,375			9,477			Total operating expenses	11,192		9,584		36,634		29,127
Loss from operations	(13,375		)	(9,477		)	Loss from operations	(10,739)		(9,584)		(35,275)		(29,127)
Other income (expense):							Other income (expense):
Change in fair value of warrants	781			(5,787		)	Change in fair value of warrants	10,767		2,206		11,770		289
Interest expense, net	(259		)	(302		)	Interest expense, net	(377)		(154)		(1,001)		(755)
Other income (expense)	—			(1		)
Other expense							Other expense	(4,206)		0		(4,223)		(1)
Total other income (expense)	522			(6,090		)	Total other income (expense)	6,184		2,052		6,546		(467)
Net loss	$	(12,853	)	$	(15,567	)	Net loss	$	(4,555)	$	(7,532)	$	(28,729)	$	(29,594)


Comprehensive loss	$	(12,853	)	$	(15,567	)	Comprehensive loss	$	(4,555)	$	(7,532)	$	(28,729)	$	(29,594)
Net loss per share - basic and diluted	$	(0.46	)	$	(1.22	)
Weighted-average number of common shares used in computing net loss per share	28,141			12,713

Net loss per share:							Net loss per share:
Basic							Basic	$	(0.08)	$	(0.28)	$	(0.76)	$	(1.62)
Diluted							Diluted	$	(0.26)	$	(0.28)	$	(1.01)	$	(1.62)
Weighted-average number of shares used in computing net loss per share:							Weighted-average number of shares used in computing net loss per share:
Basic							Basic	55,492		26,681		37,657		18,297
Diluted							Diluted	61,130		26,681		39,550		18,297


				Preferred Shares Amount		Additional Paid-In Capital		Accumulated Deficit		Total Stockholders' Equity
	Common Shares
	Shares	Amount
Balance at December 31, 2019	27,453	$	27	$	701	$	355,268	$	(330,954)	$	25,042
Issuance of common stock, net	187	1		—		439		—		440
Stock-based compensation expense	—	—		—		384		—		384
Issuance of common stock under employee benefit plans	4	—		—		—		—		—
Net loss	—	—		—		—		(12,853)		(12,853)
Balance at March 31, 2020	27,644	$	28	$	701	$	356,091	$	(343,807)	$	13,013
Issuance of common stock, net	2,287	2		—		5,797		—		5,799
Stock-based compensation expense	—	—		—		486		—		486
Issuance of common stock under employee benefit plans	33	—		—		60		—		60

Net loss	—	—		—		—		(11,321)		(11,321)
Balance at June 30, 2020	29,964	$	30	$	701	$	362,434	$	(355,128)	$	8,037
Issuance of common stock, net	21,391	22		—		16,162		—		16,184
Stock-based compensation expense	—	—		—		533		—		533
Issuance of common stock under employee benefit plans	4	—		—		6		—		6
Conversion of preferred stock to common stock	205	—		(701)		701		—		—
Net loss	—	—		—		—		(4,555)		(4,555)
Balance at September 30, 2020	51,564	$	52	$	0	$	379,836	$	(359,683)	$	20,205


	September 30,		December 31,
	2020		2019
Payroll and employee-related costs	$	2,429	$	2,245
Research and development costs	2,110		1,607
Other current liabilities	1,245		759
Total	$	5,784	$	4,611



	March 31,		December 31,
	2020		2019
Research and development costs	$	2,507	$	1,607
Payroll and employee-related costs	730		2,245
Other current liabilities	840		759
Total	$	4,077	$	4,611


	September 30, 2020
Weighted average remaining lease term in years	4.42
Weighted average discount rate	8.13	%


Leases (in thousands)	Classification	September 30, 2020		December 31, 2019
Assets
Operating	Lease ROU asset	$	10,677	$	6,156
Finance	Lease ROU asset	60		150
Total lease assets		$	10,737	$	6,306
Liabilities
Current
Operating	Lease liabilities	$	2,036	$	990
Finance	Lease liabilities	44		127
Non-current
Operating	Lease liabilities, net of current portion	8,941		5,373
Finance	Lease liabilities, net of current portion	0		22
Total lease liabilities		$	11,021	$	6,512


	September 30, 2020			December 31, 2019
Stock price	$	2.29		$	2.07
Volatility	50.0% - 98.6%			50.0% - 116.6%
Remaining term (years)	2.3			3.1
Expected dividend yield	0			0
Risk-free rate	0.15		%	1.62		%
Annual acquisition event probability	25.0		%	20.0		%


	Shares	Weighted-Average Grant Date Fair Value
Outstanding as of December 31, 2019	0	$	0
Granted	601	$	2.11
Vested	0	$	0
Forfeited/cancelled	(56)	$	1.89
Outstanding as of September 30, 2020	545	$	2.13

March 31, 2020

March 31, 2019

Weighted average remaining lease term in years

Weighted average discount rate