November 15, 2018
Matthew Kane
President and Chief Executive Officer
Precision BioSciences, Inc.
302 East Pettigrew St., Suite A-100
Durham, NC 27701
Re: Precision BioSciences, Inc.
Draft Registration Statement on Form S-1
Submitted on October 19, 2018
CIK No. 0001357874
Dear Mr. Kane:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
Draft Registration Statement on Form S-1
Prospectus Summary, page 1
1. We note your statements of industry leadership on pages 1 and 3. Given
the early stage of
your development and the competition in this space, please tell us the
basis for your
leadership claims. Also, revise the "Overview" section on page 1 to
clarify that your
operations are preclinical in nature.
2. We note numerous performance claims on pages 1-4, and elsewhere in the
prospectus,
concerning I-Crel nucleases generally and your ARCUS neucleases and
platform. Given
your risk factor disclosures on page 15 concerning the differences
between animal and
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FirstName LastNameMatthew Kane
Precision BioSciences, Inc.
Comapany 15, 2018
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human DNA and on page 31 concerning off-target editing in humans, it
is not clear what
basis you have to make these performance claims. For instance, and
without limitation,
we refer to your disclosures concerning I-Crel's ability to achieve "a
high level of on-
target editing" and your ability to redirect ARCUS nucleases "without
compromising its
editing abilities." Accordingly, please revise to clarify the basis
for performance claims
and balance the Summary presentation to highlight challenges you face
as you advance
into clinical development. To avoid confusion, please also consider
placing disclosures
concerning the attributes of I-Crel under a heading separate from one
that addresses the
attributes of your proprietary ARCUS nucleases.
3. We refer to your table on page 3 depicting your product development
pipeline. Please
revise to remove the unidentified in vivo gene correction platform
candidate or tell us why
you believe the inclusion of this unidentified program candidate is
appropriate. Also,
revise your presentation so that all text contained in the table is
legible.
4. We refer to the final paragraph on page 3 and your disclosure on page
90 concerning the
Servier collaboration agreement. Please revise your Summary discussion
on page 3 to
explain briefly your role in the development of each antigen target
selected by Servier.
Also clarify here, and elsewhere in the prospectus, whether Servier
has selected any
antigen targets in addition to the CD19 target.
5. Please revise the Summary to explain briefly the following terms at
first use or in close
proximity thereto: "immunotherapy", "CAR T Cells", "allogeneic", "in
vivo" and "base 3'
overhangs".
6. We refer to the second paragraph on page 4 concerning your Food and
Agriculture
segment. Please revise to explain briefly how your business model is
"differentiated."
With reference to your risk factor discussion on page 12, please
revise to briefly discuss
the potential timeline for commercialization of product candidates in
this segment.
Risk Factors
We expect to take advantage..., page 15
7. Your risk factor disclosure on page 15 discusses your intention to
take advantage of a
research tax incentive program in Australia; however, your Business
discussion does not
address any operations or plans concerning Australia. Accordingly,
please revise your
Business discussion or advise.
Use of Proceeds, page 80
8. With reference to your product pipeline table on page 3 and your R&D
expense table on
page 92, please revise the Use of Proceeds section to identify the
approximate amount of
proceeds, if any, intended for each clinical and preclinical
candidate. For each candidate,
indicate whether the offering funds are intended to be used to reach a
particular stage of
development. To the extent that offering funds will not be sufficient
to complete a
Matthew Kane
FirstName LastNameMatthew Kane
Precision BioSciences, Inc.
Comapany 15, 2018
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particular stage of development, please also explain the need for
additional funding to
complete that stage of development.
Management's discussion and analysis of financial condition and results of
operations
Critical accounting policies and use of estimates
Stock-based compensation, page 104
9. Once you have an estimated offering price or range, please explain to
us how you
determined the fair value of the common stock underlying your equity
issuances and the
reasons for any differences between the recent valuations of your
common stock leading
up to this offering and the estimated offering price. This information
will help facilitate
our review of your accounting for equity issuances including stock
compensation and
beneficial conversion features.
Business
Our ARCUS genome editing platform, page 115
10. We refer to the final sentence in the first paragraph under the
heading. Please revise to
disclose how many ARCUS nucleases you have patented to date and
discuss, as
applicable, any uncertainty concerning whether an engineered nuclease
is patentable.
Our product development platform approach , page 117
11. We refer to your disclosures on pages 123 and 124 concerning the four
product candidates
in your CAR T cell development pipeline. In this section you disclose
conclusions
without providing information concerning the studies or the results
that formed the basis
for your conclusions. Accordingly, please substantially revise this
section to explain the
studies, including who conducted them, their scope and design, and the
primary and
secondary endpoints, if any.
Our food and agriculture program, page 127
12. With reference to your footnote disclosure on page 3, please revise
the Business
discussion to discuss the development stages for food and agricultural
products. Discuss,
as applicable, whether there is any regulatory significance or
implications tied to
achievement of the various field stages. In this regard, we note that
your disclosure on
page 149 discusses the process for submitting petitions requesting a
determination of non-
regulated status.
Ultra-low saturated fatty acid canola oil..., page 130
13. We note your disclosure here and elsewhere in the prospectus
highlighting your
achievement of significantly lower levels of saturated fatty acids in
edited canola oil
varieties. Please tell us, and revise, as applicable, to discuss the
challenges you face in
development of these canola oil varieties, including, as applicable,
whether you have
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FirstName LastNameMatthew Kane
Precision BioSciences, Inc.
Comapany 15, 2018
November NamePrecision BioSciences, Inc.
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observed any less desirable traits. For instance, please tell us
whether the optimized
varieties have shown altered levels of other fats or whether the
varieties have altered
cooking properties (e.g., a materially different smoke point).
License and Collaboration Agreements, page 132
14. We note your disclosure on F-28 that you entered into a research,
collaboration and
license agreement with the University of Pennsylvania that includes
three gene knockout
programs and up to three gene knockin or gene repair programs in which
the company
will provide funding to the University of Pennsylvania and receive a
license to certain
technology invented under the agreement. Please expand your License
and Collaboration
Agreement disclosure to describe the material terms of the agreement,
including financial
and termination provisions. Additionally, please file this agreement
as an exhibit or
provide an analysis supporting a determination that you are not
required to file it pursuant
to Item 601(b)(10) of Regulation S-K.
License and Collaboration Agreements
Servier, page 132
15. Please revise to discuss Servier's obligations, if any, to develop and
commercialize a
candidate following exercise of a commercial option. Discuss, as
applicable, whether the
agreement contains development and commercialization milestones that
must be achieved
by specific deadlines.
16. We note your disclosure on page 132 that you are eligible to earn
tiered royalties on net
sales of optioned products ranging from mid single-digit to low
double-digit percentages.
The upper bound of the range is very broad and therefore does not
provide investors with
a meaningful understanding of the potential royalty payments.
Accordingly, please revise
so that the range for the upper bound is discernible within 10
percentage points.
Competition, page 135
17. Please revise your discussion of competitive conditions by describing
the current
landscape for patent protections in your industry. In this regard, we
note that across
several risk factors on pages 52 to 63 you highlight risks stemming
from existing third-
party patents and patent applications. We further note your 2014
patent litigation
settlement with Cellectis. In your discussion of the competitive
landscape, identify
specific patents and patent applications, if material, as well as
their holders/applicants.
Notes to consolidated financial statements
Note 1: Description of business and summary of significant accounting policies
Share-based compensation, page F-12
18. It appears that your policy to recognize the grant-date fair value of
stock options granted
Matthew Kane
FirstName LastNameMatthew Kane
Precision BioSciences, Inc.
Comapany 15, 2018
November NamePrecision BioSciences, Inc.
November 15, 2018 Page 5
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to non-employees over the requisite service period is consistent with
the guidance
applicable to employee grants under ASC 718. Please tell us how your
policy complies
with the equity-based payments to non-employees guidance in ASC
505-50.
Recent accounting pronouncements not yet adopted, page F-12
19. Please revise your disclosure on page F-13 regarding the new revenue
recognition
standards under ASC 606 to specifically discuss your consideration of
the transition
method to be applied under ASC 606-10-65-1d.
Note 13: Collaboration and license agreements, page F-26
20. Please address the following comments related to your agreement with
Les Laboratories
Servier:
Tell us why you recognized only $5.8 million and $4.8 million of
revenue under this
agreement in 2017 and 2016, respectively, when you disclose on page
94 that you
recognize the $105.0 million upfront fee ratably over the 9.5 year
performance period
which would imply recognition of approximately $11.1 million on an
annual basis.
Revise your disclosure to clearly identify each deliverable and
separate unit of
accounting, the arrangement consideration allocated to each
separate unit of
accounting and how you will account for each. See ASC 605-25-50-2.
In this regard,
although you indicate on the top of page F-27 that "certain
development milestones
related to early-stage activities" are nonsubtantive and are
combined with the
development license into a single unit of accounting, you do not
appear to discuss the
accounting for substantive milestones or the option exercise fees
under the
arrangement.
Revise your disclosure to disclose a description and the amount of
each milestone
within the $1.6 billion of potential consideration disclosed at the
bottom of page F-26
as well as whether each is substantive as required by ACS
605-28-50-2.
Note 15: Subsequent events, page F-28
21. Please revise your disclosure here and in your contractual obligations
and commitments
disclosure on page 101 to indicate the magnitude of your commitment
under the research,
collaboration and license agreement with the University of
Pennsylvania. Otherwise, tell
us why such disclosure is not warranted.
General
22. Please provide us proofs of all graphics, visual, or photographic
information you will
provide in the printed prospectus prior to its use, for example in a
preliminary prospectus.
Please note that we may have comments regarding this material.
23. Please supplementally provide us with copies of all written
communications, as defined in
Matthew Kane
Precision BioSciences, Inc.
November 15, 2018
Page 6
Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
You may contact Mark Brunhofer at (202) 551-3638 or Mary Mast at (202)
551-3613 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Jeffrey Gabor at (202) 551-2544 or Joseph McCann at (202) 551-6262 with
any other
questions.
FirstName LastNameMatthew Kane Sincerely,
Comapany NamePrecision BioSciences, Inc.
Division of
Corporation Finance
November 15, 2018 Page 6 Office of
Healthcare & Insurance
FirstName LastName