What changed in this filing

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Item 1. Financial Statements

2020-11-10 compared with 2020-08-12 · 182 added, 506 removed, 390 unchanged (64% of the section changed)

4 unchanged sentences

(in thousands, except share and per share amounts)

September 30,

Current assets:

22 unchanged sentences

Preferred stock, $0.01 par value;

25,000,000 and no shares authorized at June 30, 2020 and December 31, 2019, respectively, and no shares issued or outstanding at June 30, 2020 and December 31, 2019, respectively

25,000,000 and no shares authorized, and no shares issued or outstanding at September 30, 2020 and December 31, 2019, respectively

Common stock, $0.01 par value;

250,000,000 and 205,000,000 shares authorized, 51,525,807 and 9,981,991 issued, and 49,645,737 and 7,326,185 outstanding at June 30, 2020 and December 31, 2019, respectively

250,000,000 and 205,000,000 shares authorized, 51,930,943 and 9,981,991 issued, and 50,438,740 and 7,326,185 outstanding at September 30, 2020 and December 31, 2019, respectively

Additional paid-in capital

8 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

License revenue

6 unchanged sentences

Change in fair value of derivative liabilities

Interest and other income, net

Total other expense

Unrealized gain on marketable securities

Interest and other income (expense), net

Total other income (expense)

Unrealized (loss) gain on marketable securities

Comprehensive loss

6 unchanged sentences

Beam Therapeutics Inc.

Condensed Consolidat ed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

( Unaudited )

19 unchanged sentences

Balance at June 30, 2019

Accretion of redeemable convertible preferred stock to redemption value

Vesting of restricted common stock

Stock-based compensation

Exercise of common stock options

Other comprehensive loss

Balance at September 30, 2019

Beam Therapeutics Inc.

21 unchanged sentences

Balance at June 30, 2020

Vesting of restricted common stock

Issuance of common stock related to license agreement

Stock-based compensation

Exercise of common stock options

Other comprehensive loss

Balance at September 30, 2020

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

3 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities

Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of investment premiums

Amortization of investment discount (premiums)

Stock-based compensation expense

Change in operating lease right-of-use assets

Non-cash research and development license expense

Non-cash research and development license expense, net

Change in fair value of derivative liabilities

17 unchanged sentences

Proceeds from initial public offering, net of underwriting discount

Payment of initial public offering costs

Payment of initial and follow-on public offering costs

Proceeds from equipment financings

5 unchanged sentences

Cash, cash equivalents and restricted cash—end of period

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

Beam Therapeutics Inc.

Condensed Consolidated Statements of Cash Flows - Continued

( Unaudited )

(in thousands)

Nine Months Ended September 30,

Supplemental disclosure of cash flow information:

17 unchanged sentences

Liquidity and capital resources

Since its inception, the Company has devoted substantially all of our resources to building our base editing platform and advancing development of our portfolio of programs, establishing and protecting our intellectual property, conducting research and development activities, organizing and staffing our company, business planning, raising capital and providing general and administrative support for these operations.

Since its inception, the Company has devoted substantially all of its resources to building its base editing platform and advancing development of its portfolio of programs, establishing and protecting its intellectual property, conducting research and development activities, organizing and staffing the Company, business planning, raising capital and providing general and administrative support for these operations.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry including, but not limited to, technical risks associated with the successful research, development and manufacturing of product candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations.

7 unchanged sentences

In connection with the IPO, all outstanding shares of redeemable convertible preferred stock converted into 29,127,523 shares of the Company’s common stock.

Since its inception, the Company has incurred substantial losses and had an accumulated deficit of $267.7 million as of June 30, 2020.

In October 2020, the Company issued and sold 5,750,000 shares of its common stock, including 750,000 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $23.50 per share, for aggregate gross proceeds of $135.1 million.

The Company received approximately $126.6 million in net proceeds after deducting underwriting discounts and estimated offering expenses payable by the Company.

Since its inception, the Company has incurred substantial losses and had an accumulated deficit of $302.2 million as of September 30, 2020.

The Company expects to generate operating losses and negative operating cash flows for the foreseeable future.

The Company expects that its cash, cash equivalents, and marketable securities as of June 30, 2020 of $228.0 million will be sufficient to fund its operations for at least the next twelve months from the date of issuance of these financial statements.

The Company expects that its cash, cash equivalents, and marketable securities as of September 30, 2020 of $202.2 million, along with the proceeds from its common stock offering in October 2020, will be sufficient to fund its operations for at least the next twelve months from the date of issuance of these financial statements.

The Company will need additional financing to support its continuing operations and pursue its growth strategy.

6 unchanged sentences

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification, or ASC, and Accounting Standards Update, or ASU, of the Financial Accounting Standards Board, or FASB.

Any reference in these notes to applicable guidance is meant to

refer to the authoritative GAAP as found in the Accounting Standards Codification, or ASC, and Accou nting Standards Update, or ASU, of the Financial Accounting Standards Board, or FASB.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited financial statements.

In the opinion of the Company’s management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments that are necessary to present fairly the Company’s financial position as of June 30, 2020 , the results of its operat ions and other comprehensive loss, and redeemable convertible preferred stock and stockholders’ equity (deficit), for the three and six months ended June 30, 2020 and 2019 , and cash flows for the six months ended June 30, 2020 and 2019 .

Such adjustments ar e of a normal and recurring nature.

The results for the three and six months ended June 30, 2020 are not necessarily indicative of the results for the year ending December 31, 2020, or for any future period.

These interim financial statements should be rea d in conjunction with the audited financial statements as of and for the year ended December 31, 2019, and notes thereto, which are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 30, 2020.

In the opinion of the Company’s management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments that are necessary to present fairly the Company’s financial position as of September 30, 2020, the results of its operations and other comprehensive loss, and redeemable convertible preferred stock and stockholders’ equity (deficit), for the three and nine months ended September 30, 2020 and 2019, and cash flows for the nine months ended September 30, 2020 and 2019.

Such adjustments are of a normal and recurring nature.

The results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results for the year ending December 31, 2020, or for any future period.

These interim financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2019, and notes thereto, which are included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 30, 2020.

Consolidation

3 unchanged sentences

COVID-19-related significant risks and uncertainties

With the global spread of the ongoing coronavirus disease of 2019, or COVID-19, pandemic in the first six months of 2020, the Company has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its business.

With the ongoing concern related to the COVID-19 pandemic in the first nine months of 2020, the Company has maintained and expanded its business continuity plans to address and mitigate the impact of the COVID-19 pandemic on its business.

In March 2020, to protect the health of its employees, and their families and communities, the Company restricted access to its offices to personnel who performed critical activities that must be completed on-site, limited the number of such personnel that could be present at its facilities at any one time, and requested that most of its employees work remotely.

In May 2020, restrictions eased, and the number of remote employees were reduced.

The Company expects to continue to incur additional costs to provide a safe working environment to its onsite employees.

The extent to which the COVID-19 pandemic impacts the Company’s business, its corporate development objectives, results of operations and financial condition, and the value of and market for its common stock, will continue to depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements, and the effectiveness of actions taken globally to contain and treat the disease.

In May 2020, as certain states eased restrictions, the Company established new protocols to better allow its full laboratory staff access to the Company’s facilities.

These protocols included several shifts working over a seven-day-week protocol.

The Company expects to continue incurring additional costs to ensure it adheres to the guidelines instituted by the Centers for Disease Control and Prevention, or CDC, and to provide a safe working environment to its onsite employees.

The extent to which the COVID-19 pandemic impacts the Company’s business, its corporate development objectives, results of operations and financial condition, and the value of and market for its common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements, and the effectiveness of actions taken globally to contain and treat the disease.

Disruptions to the global economy, disruption of global healthcare systems, and other significant impacts of the COVID-19 pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

While the COVID-19 pandemic did not significantly impact the Company’s business or results of operations during the six months ended June 30, 2020, the length and extent of the pandemic, its consequences, and containment efforts will determine the future impact on the Company’s operations and financial condition.

While the COVID-19 pandemic did not significantly impact the Company’s business or results of operations during the nine months ended September 30, 2020, the length and extent of the pandemic, its consequences, and containment efforts will determine the future impact on the Company’s operations and financial condition.

S ummary of significant accounting policies

9 unchanged sentences

As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities.

These estimates may change as new events occur and additional information is obtained and are recognized in the consolidated financial statements as soon as they become known.

Actual results could differ from those estimates and any such differences may be material to the Company’s financial statements.

These estimates may change as new events occur and additional information is obtained and are recognized in the consolidated financial

statements as soon as they become known.

Actual results could differ from those estimates and any such differences may be material to the Company’s financial state ments.

Cash, cash equivalents, and restricted cash

Cash and cash equivalents consist of standard checking accounts, money market accounts, and all highly liquid investments with an original maturity of three months or less at the date of purchase.

Restricted cash represents collateral provided for letters of credit issued as security deposits in connection with the Company’s leases of its corporate facilities.

Restricted cash represents collateral provided for letters of credit issued as security deposits in connection with the Company’s leases of its corporate and manufacturing facilities.

The following table reconciles cash, cash equivalents, and restricted cash reported within the Company’s condensed consolidated balance sheets to the total of the amounts shown in the condensed consolidated statements of cash flows (in thousands):

September 30,

Cash and cash equivalents

8 unchanged sentences

Property and equipment consist of the following (in thousands):

September 30,

Lab equipment

7 unchanged sentences

The following table summarizes depreciation expense incurred (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Depreciation expense

3 unchanged sentences

These investments do not have readily determinable fair values and the Company values such investments based on the cost of the equity securities adjusted for observable market transactions or impairments, if any.

As of June 30, 2020, the Company held $2.5 million of investments in privately issued corporate equity securities.

During the three and six months ended June 30, 2020, as a result of an observable market transaction (Level 2), the Company adjusted the value of its investment and recorded unrealized gains of $0.5 million in interest and other income, net in the Company’s consolidated statements of operations and other comprehensive loss.

ASC 820, Fair Value Measurements and Disclosures , establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assu mptions based on market data (observable inputs) and our own assumptions (unobservable inputs).

As of September 30, 2020, the Company held $2.5 million of investments in privately issued corporate equity securities.

During the nine months ended September 30, 2020, as a result of an observable market transaction (Level 2), the Company adjusted the value of its investment and recorded an unrealized gain of $0.5 million in interest and other income (expense), net in the Company’s consolidated statements of operations and other comprehensive loss.

ASC 820, Fair Value Measurements and Disclosures , establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and our own assumptions (unobservable inputs).

The hierarchy consists of three levels:

2 unchanged sentences

Level 3 – Unobservable inputs that reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date.

The following table sets forth the fair value of the Company’s financial assets and liabilities by level within the fair value hierarchy at June 30, 2020 (in thousands):

The following table sets forth the fair value of the Company’s financial assets and liabilities by level within the fair value hierarchy at September 30, 2020 (in thousands):

Cash equivalents:

2 unchanged sentences

Corporate notes

Treasury securities

Marketable securities:

2 unchanged sentences

Treasury securities

Government securities

Success payment liability – Harvard

21 unchanged sentences

Broad Institute

September 30,

Fair value of Series A Preferred (per share) (1)

7 unchanged sentences

At December 31, 2019, the fair value of the Series A Preferred was determined by management with the assistance of an independent third-party specialist.

At June 30, 2020, the fair value of the common stock was the market value of the Company’s common stock.

At September 30, 2020, the fair value of the common stock was the market value of the Company’s common stock.

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

1 unchanged sentence

The following table reconciles the change in the fair value of success payment liabilities based on Level 3 inputs (in thousands):

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Broad Institute

1 unchanged sentence

Changes in fair value

Balance at June 30, 2020

Balance at September 30, 2020

Marketable securities

The following table summarizes the Company’s marketable securities held at June 30, 2020 (in thousands):

The following table summarizes the Company’s marketable securities held at September 30, 2020 (in thousands):

Amortized Cost

2 unchanged sentences

Treasury securities

Government securities

The following table summarizes the Company’s marketable securities held at December 31, 2019 (in thousands):

3 unchanged sentences

The amortized cost of marketable securities is adjusted for amortization of premiums and accretion of discounts to maturity.

At June 30, 2020, the balance in accumulated other comprehensive income was comprised solely of activity related to marketable

There were no realized gains or losses recognized on the sale or maturity of marketable securities for the six months ended June 30, 2020 and 2019 and, as a result, the Company did not reclassify any amounts out of accumulated other comprehensive income for the same period.

The Company did not hold any debt securities in an unrealized loss position at June 30, 2020.

At September 30, 2020 , the balance in accumulated other comprehensive income was comprised solely of activity related to marketable securities.

There were no realized gains or losses recognized on the sale or maturity of marketable securities for the nine months ended September 30, 2020 and 20 19 and, as a result, the Company did not reclassify any amounts out of accumulated other comprehensive income for the same period.

The Company holds debt securities of companies with high credit quality and has determined that there was no material change in the credit risk of any of its debt securities.

2 unchanged sentences

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

Research costs

September 30,

Prime license costs (1)

Process development and manufacturing costs

Employee compensation and related benefits

Professional fees

Other research costs

In September 2020, the Company elected to continue its collaboration with Prime Medicine, Inc., or Prime Medicine, and recognized and $5.0 million, which represents the fair value of Beam’s common stock to be issued to Prime Medicine.

Refer to Note 8, License agreements , for further discussion of the Prime Medicine license agreement.

Operating leases

1 unchanged sentence

A February 2018 lease for 38,203 square feet of office and laboratory space, which commenced in March 2018 and terminates in September 2028.

The lease is subject to fixed-rate rent escalations and provided for $6.1 million in tenant improvements and a term extension option, which was not reasonably certain of exercise.

The lease is subject to fixed-rate rent escalations and provides for $6.1 million in tenant improvements and a term extension option, which was not reasonably certain of exercise.

An October 2018 lease for laboratory space, which commenced in April 2019 and was amended in March 2020 and April 2020.

2 unchanged sentences

Upon commencement of the March 2020 amendment, the Company recorded an operating lease right-of-use, or ROU, asset and a lease liability of $4.2 million.

Upon commencement of the April 2020 amendment, the Company recorded an operating lease right-of-use, or ROU, asset and a lease liability of $1.8 million.

Upon commencement of the April 2020 amendment, the Company recorded an operating lease ROU asset and a lease liability of $1.8 million.

Leases in June and July 2019 for office and laboratory space, both of which commenced in October 2019 and terminate in December 2021.

1 unchanged sentence

The following table summarizes operating lease costs as well as sublease income (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

Operating lease costs

3 unchanged sentences

The following table summarizes the lease term and discount rate:

September 30,

Weighted-average remaining lease term (years)

3 unchanged sentences

The following table summarizes the cash paid for amounts included in the measurement of lease liabilities (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

Operating cash flows used for operating leases

Operating lease liabilities arising from obtaining right-of-use assets

At June 30, 2020, the future minimum lease payments for the Company’s operating leases for each of the years ending December 31 were as follows (in thousands):

Operating lease liabilities arising from obtaining ROU assets

At September 30, 2020, the future minimum lease payments for the Company’s operating leases for each of the years ending December 31 were as follows (in thousands):

Remainder of 2020

2 unchanged sentences

Total operating lease liabilities

In addition to the leases discussed above, the Company is party to an April 2019 lease for office and laboratory space to be built, with the rent payments for the first phase expected to commence at the earliest in late 2021 and the rent payments for the second phase expected to commence at the earliest in the second half of 2022.

The lease will terminate 12 years from the second phase commencement date.

The lease is subject to fixed-rate rent escalations and provides for $23.4 million in tenant improvements and the option to extend the lease for two terms of 5 years each.

Upon executing the lease, the Company made a security deposit of $11.8 million in the form of a letter of credit, which is included in restricted cash as of March 31, 2020.

As the lease had not commenced, the Company has not recorded an operating lease ROU asset or lease liability for this lease in the accompanying condensed consolidated balance sheets.

The minimum amount of anticipated undiscounted lease payments due under the MIT lease is $168.7 million.

The lease is subject to fixed-rate rent escalations and provides for $23.4 million in tenant improvements and the option to extend the lease for two terms of five years each.

Upon executing the lease, the Company made a security deposit of $11.8 million in the form of a letter of credit, which is included in restricted cash as of September 30, 2020.

In October 2020, the Company gained access to the lease space and will record a ROU asset and a lease liability.

The minimum amount of anticipated undiscounted lease payments due under this lease is $177.2 million.

Further, the tabular disclosure of minimum lease payments above does not include payments due under this lease.

In August 2020, the Company entered into a lease agreement with Alexandria Real Estate Equities, Inc.

to build a 100,000 square foot manufacturing facility in Research Triangle Park, North Carolina intended to support a broad range of clinical programs.

The lease has a term of fifteen years following the commencement date and provides the Company the option to extend the lease term for two five-year terms.

It is subject to fixed rate escalation increases and also provides up to $20.0 million for reimbursement of tenant improvements.

As the lease had not commenced as of September 30, 2020 , the Company has not recorded an operating lease ROU asset or lease liability for this lease in the accompanying condensed consolidated balance sheets.

The lease payments are subject to adjustment following the determination of the total project costs of the landlord.

The initial estimate of minimum amount of undiscounted lease payments due under this lease is $63.9 million.

The Company expects to invest up to $83.0 million over a five-year period and anticipates that the facility will be operational by the first quarter of 2023.

Further, the tabular disclosure of minimum lease payments above does not include payments due under this lease.

Financing obligations

2 unchanged sentences

Further, in February 2020, the Company sold additional equipment to the leasing company for a total of $1.6 million and, concurrently, entered into a lease agreement with the leasing company to lease back the equipment for an annual rent of $0.5 million over a term of four years.

The equipment leases are being accounted for as financings as the lease terms are for substantially all the remaining economic life of the underlying equipment.

The equipment leases are being accounted for as financings as the l ease terms are for substantially all the remaining economic life of the underlying equipment.

Management concluded that control, including the significant risks and rewards of ownership, did not effectively transfer to the buyer-lessor at the inception of the sale and leaseback transactions.

As a result, the transactions are accounted for as failed sale and leasebacks and result in the recognition of financing liabilities.

The future minimum payments related to the equipment financing obligations at June 30, 2020, for each of the years ending December 31 were as follows (in thousands):

The future minimum payments related to the equipment financing obligations at September 30, 2020, for each of the years ending December 31 were as follows (in thousands):

Remainder of 2020

3 unchanged sentences

The following table summarizes the breakdown of the principal and interest portions of the equipment financing payments (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

Paydown of principal

Paydown of interest

Payment of interest

License agreements

1 unchanged sentence

Under the terms of the Harvard License Agreement, Harvard is entitled to receive success payments, determined based upon the achievement of specified multiples of the initial weighted average value of the Company’s Series A Preferred at specified valuation dates.

The Company is required to make success payments to Harvard during a period of time, or the Harvard Success Payment Period, which has been determined to be the later of (1) the ninth anniversary of the Harvard License Agreement or (2) the earlier of (a) the 12th anniversary of the Harvard License Agreement and (b) the third anniversary of the first date on which a licensed product receives regulatory approval in the United States.

During the Harvard Success Payment Period, the Company will perform a calculation on each rolling 90-day period, commencing one year after the Company’s IPO.

The Company is required to make success payments to Harvard during a period of time, or the Harvard Success Payment Period, which has been determined to be the later of (1) the ninth anniversary of the Harvard License Agreement or (2) the earlier of (a) the twelfth anniversary of the Harvard License Agreement and (b) the third anniversary of the first date on which a licensed product receives regulatory approval in the United States.

During the Harvard Success Payment Period, the Company will perform a calculation of any amounts owed to Harvard on each rolling 90-day period, commencing one year after the Company’s IPO.

The following table summarizes the Company’s success payment liability for Harvard (in thousands):

September 30,

Harvard success payment liability

The following table summarizes the expense resulting from the change in the fair value of the success payment liability for Harvard (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Change in fair value of Harvard success payment liability

As of June 30, 2020, no success payments have been paid or are due to Harvard.

In addition, Harvard was entitled to receive financing milestone payments, which were paid by the Company during the six months ended June 30, 2019.

As of September 30, 2020, no success payments have been paid or are due to Harvard.

In addition, Harvard was entitled to receive financing milestone payments, which were paid by the Company during the year ended December 31, 2019.

The annual maintenance fee under the Harvard License Agreement is recorded as research and development expense.

Patent prosecution costs are recognized as expense in the period incurred.

As of June 30, 2020, the Company determined that product development and regulatory approval milestones and royalties under the Harvard License Agreement were not probable and, as such, no amounts were recognized for the six months ended June 30, 2020.

As of September 30, 2020, the Company determined that product development and regulatory approval milestones and royalties under the Harvard License Agreement were not probable and, as such, no amounts were recognized for the nine months ended September 30, 2020.

Broad license agreement

1 unchanged sentence

The Company is required to make success payments to Broad Institute during a period of time, or the Broad Success Payment Period, which has been determined to be the earliest of (1) the twelfth anniversary of the Broad License Agreement, or (2) the third anniversary of the first date on which a licensed product receives regulatory approval in the United States.

During the Broad Success Payment Period, the Company will perform a calculation on each rolling 90-day period, commencing one year after the Company’s IPO .

The following table summarizes the Company’s success payment liability for Broad (in thousands):

Broad success payment liability

The following table summarizes the expense resulting from the change in the fair value of the success payment liability for Broad (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Change in fair value of Broad success payment liability

As of June 30, 2020 , no success payments have been paid or are due to Broad Institute.

During the Broad Success Payment Period, the Company will perform a calculation of any amounts owed to Broad Institute on each rolling 90-day period, commencing one year after the Company’s IPO .

The following table summarizes the Company’s success payment liability for Broad Institute (in thousands):

September 30,

Broad Institute success payment liability

The following table summarizes the expense resulting from the change in the fair value of the success payment liability for Broad Institute (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Change in fair value of Broad Institute success payment liability

As of September 30, 2020, no success payments have been paid or are due to Broad Institute.

In addition, Broad Institute was entitled to receive financing milestone payments, which were paid by the Company during the year ended December 31, 2019.

1 unchanged sentence

Patent prosecution costs are recognized as expense in the period incurred.

As of June 30, 2020, the Company determined that product development and regulatory approval milestones and royalties under the Broad License Agreement were not probable and, as such, no amounts were recognized for the six months ended June 30, 2020.

As of September 30, 2020, the Company determined that product development and regulatory approval milestones and royalties under the Broad License Agreement were not probable and, as such, no amounts were recognized for the nine months ended September 30, 2020.

Editas license agreement

7 unchanged sentences

In addition, the Company is required to make certain development, regulatory and commercial milestone payments to Editas upon the achievement of specified milestones.

The triggering of these milestone payments was not probable and, as such, no amounts were recognized for the six months ended June 30, 2020.

In March 2019, the Company entered into a license agreement with Bio Palette pursuant to which Beam received an exclusive (even as to Bio Palette), sublicensable license under certain patent rights related to base editing owned or controlled by Bio Palette to exploit products for the treatment of human disease throughout the world, but excluding products in the microbiome field in Asia, or the Bio Palette License Agreement.

As of September 30, 2020, the triggering of these milestone payments was not probable and, as such, no amounts were recognized for the nine months ended September 30, 2020.

In March 2019, the Company entered into a license agreement, or the Bio Palette License Agreement, with Bio Palette Co., Ltd., or Bio Palette, pursuant to which Beam received an exclusive (even as to Bio Palette), sublicensable license under certain patent rights related to base editing owned or controlled by Bio Palette to exploit products for the treatment of human disease throughout the world, but excluding products in the microbiome field in Asia.

In addition, the Company granted Bio Palette an exclusive (even as to Beam) license under certain patent rights related to base editing and gene editing owned or controlled by the Company to exploit products in the microbiome field in Asia.

2 unchanged sentences

Upon the execution of the Bio Palette License Agreement, the Company paid Bio Palette an upfront fee of $0.5 million and issued to Bio Palette 16,725 shares of its common stock valued at $0.1 million, which were recorded as research and development expense for the three months ended March 31, 2019.

Upon the issuance of a certain Bio Palette patent in the United States in June 2020, the Company made a milestone payment of $2.0 million and, in July 2020, issued to Bio Palette 175,000 shares of its common stock valued at $0.3 million, which were included within accrued expenses in the accompanying condensed consolidated balance sheets as of June 30, 2020.

The fair value of the common stock issued to Bio Palette under the Bio Palette License Agreement was measured at the inception of arrangement and expensed when the issuance of shares became probable.

Upon the issuance of a certain Bio Palette patent in the United States in June 2020 , the Company made a milestone payment of $2.0 million and , in July 2020, issue d to Bio Palett e 175,000 shares of its common stock valued at $0.3 million , which were recognized as research and development expense .

The fair value of the common stock issued to Bio Palette under the Bio Palette License Agreement was measured at the inception of arrang ement and expensed when the issuance of shares became probable.

Collaboration and license agreements

Prime Medicine

In September 2019, the Company entered into a collaboration and license agreement with Prime Medicine, Inc., or Prime Medicine, to research and develop a novel gene editing technology developed by one of Beam’s founders.

In September 2019, the Company entered into a collaboration and license agreement with Prime Medicine to research and develop a novel gene editing technology developed by one of Beam’s founders.

Under the terms of the agreement, the Company granted Prime Medicine a non-exclusive license to certain of its CRISPR technology (including Cas12b), delivery technology and certain other technology controlled by Beam to develop and commercialize gene editing products for the treatment of human diseases.

The Company is not currently using the intellectual property licensed from Prime Medicine in any of its current programs, but it is required to use commercially reasonable effort to develop new product candidates using the intellectual property licensed from Prime Medicine.

The Company is not currently using the intellectual property licensed from Prime Medicine in any of its current programs, but it is required to use commercially reasonable efforts to develop new product candidates using the intellectual property licensed from Prime Medicine.

Additionally, each party granted to the other party certain exclusive and non-exclusive licenses to certain technology developed after the effective date of the agreement and controlled by the granting party or jointly owned by the parties.

Each party has an obligation to assign rights in certain technology developed under the collaboration to the other party.

Beam has an obligation to issue $5.0 million in shares of its common stock to Prime Medicine, and Prime Medicine has an obligation to issue 5.0 million shares of its common stock to Beam, should Beam elect to extend the collaboration beyond one year.

Compa ny will record the expense and associated obligation for its share issuance if and when it elects to extend the collaboration .

Beam will record the financial statement impact of the Prime Medicine shares upon the receipt of the shares from Prime Medicine.

As of June 30, 2020, the Company determined that milestones and royalties under the agreement were not probable of recognition.

Beam has an obligation to issue $5.0 million in shares of its common stock to Prime Medicine, and Prime Medicine has an obligation to issue 5,000,000 shares of its common stock to Beam, should Beam elect to extend the collaboration beyond one year.

In September 2020, the Company elected to continue the collaboration and, in October 2020, issued 200,307 shares of the Company’s common stock to Prime Medicine.

The Company recognized $5.0 million, which represents the fair value of Beam’s common stock to be issued to Prime Medicine, as research and development expense within the accompanying condensed consolidated statements of operations and other comprehensive loss for the three and nine months ended September 30, 2020, and within accrued expenses in the accompanying condensed consolidated balance sheets as of September 30, 2020.

Additionally, in October 2020, the Company received 5,000,000 shares of Prime Medicine’s common stock and recognized $0.1 million as an offset to research and development expense within the accompanying condensed consolidated statements of operations and other comprehensive loss for the three and nine months ended September 30, 2020, and within other current assets in the accompanying condensed consolidated balance sheets as of September 30, 2020.

As of September 30, 2020, the Company determined that milestones and royalties under the agreement were not probable of recognition.

In April 2019, Beam entered into a collaboration and license agreement, or the Verve Agreement, with Verve Therapeutics, Inc., or Verve, to investigate gene editing strategies to modify genes associated with an increased risk of coronary diseases.

Under the terms of the Verve Agreement, the Company granted Verve an exclusive license to certain base editor technology and certain delivery technology, and improvements and Verve granted Beam a non-exclusive license under certain know-how and patents controlled by Verve, an interest in joint collaboration technology and an exclusive license (except as to Verve) under certain delivery technology.

As of June 30, 2020, the Company determined that milestones and royalties under the Verve Agreement were not probable of recognition.

As of September 30, 2020, the Company determined that milestones and royalties under the Verve Agreement were not probable of recognition.

Preferred and common stock

4 unchanged sentences

The Company received approximately $188.3 million in net proceeds after deducting underwriting discounts and estimated offering expenses payable by the Company.

In connection with the IPO, all outstanding shares of Preferred Stock converted into 29,127,523 shares of the Company’s common stock.

In connection with the IPO, all outstanding shares of the Company’s preferred stock converted into 29,127,523 shares of the Company’s common stock.

In October 2020, the Company issued and sold 5,750,000 shares of its common stock , including 75 0,000 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $ 23.50 per share, for aggregate gross proceeds of $135.1 million.

The Company received approximately $ 126.6 million in net p roceeds after deducting underwriting discounts and estimated offering expenses payable by the Company.

Stock option and grant plan

The 2017 Stock Option and Grant Plan adopted by the board of directors in June 2017 and amended in February and May 2019, provides for the grant of qualified incentive stock options and nonqualified stock options, restricted stock or other awards to the Company’s employees, officers, directors, advisors, and outside consultants for the issuance or purchase of shares of the Company’s common stock.

In February 2020, the Company’s board of directors adopted the Beam Therapeutics Inc.

2019 Equity Incentive Plan, or the 2019 Plan, and, subsequent to the IPO, all equity-based awards will be granted under the 2019 Plan.

The Beam Therapeutics Inc.

2017 Stock Option and Grant Plan adopted by the Company’s board of directors in June 2017 and amended in February and May 2019, provides for the grant of qualified incentive stock options and nonqualified stock options, restricted stock or other awards to the Company’s employees, officers, directors, advisors, and outside consultants for the issuance or purchase of shares of the Company’s common stock.

In October 2019, the Company’s board of directors adopted the Beam Therapeutics Inc.

2019 Equity Incentive Plan, or the 2019 Plan, and, subsequent to the IPO, all equity-based awards are granted under the 2019 Plan.

The 2019 Plan provides for grant of qualified and nonqualified stock options, stock appreciation rights, restricted and unrestricted stock and stock units, performance awards, and other share-based awards to the Company’s employees, officers, directors, advisors, and outside consultants.

As of June 30, 2020, the Company had 8,251,219 shares reserved and 2,605,173 shares available for future issuance under the 2019 Plan.

As of September 30, 2020, the Company had 8,021,083 shares reserved and 2,387,598 shares available for future issuance under the 2019 Plan.

Stock-based compensation expense recorded as research and development and general and administrative expenses in the condensed consolidated statements of operations and other comprehensive loss is as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

Research and development

4 unchanged sentences

Outstanding at December 31, 2019

Outstanding at June 30, 2020

Exercisable as of June 30, 2020

The weighted-average grant date fair value per share of options granted in the six months ended June 30, 2020 was $12.79.

As of June 30, 2020, there was $25.7 million of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of approximately 2.8 years.

Outstanding at September 30, 2020

Exercisable as of September 30, 2020

The weighted-average grant date fair value per share of options granted in the nine months ended September 30, 2020 was $13.35.

As of September 30, 2020, there was $27.2 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of approximately 2.6 years.

Restricted stock

2 unchanged sentences

Unvested as of December 31, 2019

Unvested as of June 30, 2020

At June 30, 2020, there was approximately $5.6 million of unrecognized stock-based compensation expense related to restricted stock that is expected to vest.

These costs are expected to be recognized over a weighted-average remaining vesting period of 0.7 years.

Unvested as of September 30, 2020

At September 30, 2020, there was approximately $4.7 million of unrecognized stock-based compensation expense related to restricted stock that is expected to vest.

These costs are expected to be recognized over a weighted-average period of approximately 0.6 years.

Net loss per share attributable to common stockholders

2 unchanged sentences

The Company excluded the following potential common shares, presented based on amounts outstanding at period end, from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutive effect:

As of June 30,

As of September 30,

Redeemable convertible preferred stock

2 unchanged sentences

The following table summarizes the computation of basic and diluted net loss per share attributable to common stockholders of the Company (in thousands except share and per share amounts):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Net loss attributable to common stockholders

1 unchanged sentence

Net loss per common share attributable to common stockholders, basic and diluted

During the three and six months ended June 30, 2020 and 2019, the Company recorded a full valuation allowance on federal and state deferred tax assets since management does not forecast the Company to be in a taxable position in the near future.

As discussed in Note 9, Collaboration and license agreements , as of September 30, 2020, the Company had an obligation to issue $5.0 million in shares of its common stock to Prime Medicine.

In October 2020, the Company issued 200,307 shares of Beam common stock to Prime Medicine.

The shares are considered issued for the purposes of computing earnings per share at September 30, 2020 as the Company had an obligation to issue the shares as of September 26, 2020.

During the three and nine months ended September 30, 2020 and 2019, the Company recorded a full valuation allowance on federal and state deferred tax assets since management does not forecast the Company to be in a taxable position in the near future.

Related party transactions

For the six months ended June 30, 2020 and 2019, the Company made payments of $0.1 million and $0.1 million, respectively, to its three founder shareholders for scientific consulting and other expenses.

The Company has entered into collaboration and license agreements with Prime Medicine and Verve.

The Company and Prime Medicine have a common founder and several common board members.

The Company and Verve have a common board member.

During the six months ended June 30, 2020 and 2019, the Company purchased shares of Verve series A preferred stock valued at $0.8 million and $0.4 million, respectively.

During the six months ended June 30, 2020, the company recognized unrealized gains of $0.5 million on its investment in Verve preferred stock.

S ubsequent events

Manufacturing facility

In August 2020, the Company entered into a lease agreement with Alexandria Real Estate Equities, Inc.

to build a 100,000 square foot manufacturing facility in Research Triangle Park, North Carolina intended to support a broad range of clinical programs.

The lease has a term of fifteen years following the commencement date and provides the Company the option to extend the lease term for two five-year terms.

It is subject to fixed rate escalation increases and also provides for reimbursement of tenant improvements.

The lease payments are subject to adjustment following the determination of the total project costs of the landlord.

The Company expects to invest up to $83 million over a five-year period and anticipates that the facility will be operational by the first quarter of 2023.

The project will be facilitated, in part, by a Job Development Investment Grant, or JDIG, approved by the North Carolina Economic Investment Committee, which authorizes potential reimbursements to Beam based on new tax revenues generated through the project.

The facility will be designed to support manufacturing for our ex vivo cell therapy programs in hematology and oncology and in vivo non-viral delivery programs for liver diseases, with flexibility to support manufacturing of its viral delivery programs, and ultimately, scale-up to support potential commercial supply.

Management’s Discussi on and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report on Form 10-Q.

In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.

Some of the numbers included herein have been rounded for the convenience of presentation.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed in “Risk Factors” in Part II, Item 1A.

and elsewhere in this Quarterly Report on Form 10-Q.

We are a biotechnology company committed to creating a new class of precision genetic medicines based on our proprietary base editing technology, with a vision of providing life-long cures to patients suffering from serious diseases.

Our proprietary base editing technology potentially enables an entirely new class of precision genetic medicines that targets a single base in the genome without making a double-stranded break in the DNA.

This approach uses a chemical reaction designed to create precise, predictable and efficient genetic outcomes at the targeted sequence.

Our novel base editors have two principal components:

(i) a CRISPR protein, bound to a guide RNA, that leverages the established DNA-targeting ability of CRISPR, but modified to not cause a double-stranded break, and (ii) a base editing enzyme, such as a deaminase, which carries out the desired chemical modification of the target DNA base.

We believe this design contributes to a more precise and efficient edit compared to traditional gene editing methods.

The precision of our editors has the potential to increase the impact of gene editing for a broad range of therapeutic applications.

By building on the significant recent advances in the field of genetic medicine, we believe we will be able to rapidly advance our portfolio of novel base editing programs.

Existing gene editing technologies operate by creating targeted double-stranded breaks in the DNA, and then rely on cellular mechanisms to complete the editing process.

Such approaches can be effective in the disruption of gene expression;

however, they are inefficient for precise repair or alteration of gene sequences, and can result in unwanted DNA modifications.

We believe our base editing platform offers meaningful advantages over existing approaches in gene editing and gene therapy, including:

Highly precise and predictable gene editing, designed to make only one type of base edit at the desired target location

Highly efficient and therapeutically relevant levels of gene correction, which are generally unachievable by nuclease-based methods

Broad applicability in a wide range of cell types, including both dividing and non-dividing cells

Direct chemical modification of DNA with no requirement for delivery of the corrected DNA sequence

Avoidance of unwanted DNA modifications associated with double-stranded breaks, including gene disruptions and chromosomal rearrangements such as translocations or deletions

Permanent editing of genes, creating the potential for a life-long therapeutic outcome, including the ability to treat infants or young children since the edit will be passed on by dividing cells as the child grows

Preservation of natural regulation and a normal number of copies of the gene in the cell by modification of genes in their native genomic setting

Versatile and modular product engine that can target a different gene sequence with the same base editor and a different guide RNA

We are currently advancing a broad, diversified portfolio of base editing programs against distinct editing targets.

To unlock the full potential of our base editing technology across a wide range of therapeutic applications, we are pursuing a comprehensive suite of clinically validated delivery modalities in parallel.

For a given tissue type, we use the delivery modality with the most compelling biodistribution.

Our programs are organized by delivery modality into three distinct pipelines:

electroporation for efficient delivery to blood cells and immune cells ex vivo ;

lipid nanoparticles, or LNPs, for non-viral in vivo delivery to the liver and potentially other organs in the future;

and adeno-associated viral vectors, or AAV, for viral delivery to the eye and central nervous system, or CNS.

Our base editing portfolio

The elegance and simplicity of the base editing approach provides for an efficient, precise, and highly versatile gene editing system, capable of gene correction, gene silencing/gene activation, and multiplex editing of several genes simultaneously.

We believe the flexibility and versatility of our base editors may lead to broad therapeutic applicability and transformational potential for the field of precision genetic medicines.

We have achieved proof-of-concept in vivo with long-term engraftment of ex vivo base edited human CD34 cells in mice for BEAM-101, our program that reproduces single base changes seen in individuals with Hereditary Persistence of Fetal Hemoglobin, or HPFH, that protects them from the effects of mutations causing sickle cell disease or thalassemia.

Additionally, in the second quarter of 2020,

we published data on BEAM-102, our program to directly correct the causative mutation in sickle cell disease by recreating a naturally-occurring human hemoglobin variant, Hb-G Makassar .

The Makassar variant does not cause hemoglobin to polymerize, or red cells to sickle and, therefore, edited cells ar e cured through elimination of the disease-causing protein.

With respect to our liver disease programs, also in the second quarter of 2020, we have shown the ability to directly correct the mutation causing alpha-1 antitrypsin deficiency, providing both in vitro and in vivo proof of concept for base editing to correct this disease.

We have also successfully demonstrated feasibility of base editing with each of our three delivery modalities in relevant cell types for electroporation and AAV and in vivo in mi ce for LNP.

Beyond the in vivo proofs-of-concept already established, we expect to achieve additional milestones in 2020, including the publication of additional in vivo base editing data and, provided the COVID-19 pandemic does not cause our timelines to slip materially, initiation of investigational new drug, or IND, enabling studies for at least one of our lead programs.

We expect to submit an initial wave of IND filings from this portfolio, and we remain on track to file our first IND in 2021.

The modularity of our platform means that establishing preclinical proof-of-concept of base editing using a particular delivery modality will also potentially reduce risk and accelerate the timeline for additional product candidates that we may develop targeting the same tissue.

In some cases, a new product candidate may only require changing the guide RNA.

Subsequent programs using the same delivery modality can also take advantage of shared capabilities and resources of earlier programs.

In this way, we view each delivery modality as its own unique pipeline, where the success of any one program may pave the way for a large number of additional programs to progress quickly to the clinic.

Ex vivo electroporation for hematologic diseases and oncology

Sickle Cell Disease and Beta-Thalassemia

Sickle cell disease, a severe inherited blood disease, is caused by a single point mutation, E6V, in the beta globin gene at the sixth amino acid.

This mutation causes the mutated form of hemoglobin, or HbS, to aggregate into long, rigid molecules that bend red blood cells into a sickle shape under conditions of low oxygen.

Sickled cells obstruct blood vessels and die prematurely, ultimately resulting in anemia, severe pain (crises), infections, stroke, organ failure, and early death.

Sickle cell disease is the most common inherited blood disorder in the United States, affecting an estimated 100,000 individuals, of which a significant proportion are of African-American descent (1:365 births).

Beta-thalassemia is another inherited blood disorder characterized by severe anemia caused by reduced production of functional hemoglobin due to insufficient expression of the beta globin protein.

Transfusion-dependent beta-thalassemia, or TDBT, is the most severe form of this disease, often requiring multiple transfusions per year.

Patients with TDBT suffer from failure to thrive, persistent infections, and life-threatening anemia.

The incidence of symptomatic beta-thalassemia is estimated to be 1:100,000 worldwide, including 1:10,000 in Europe.

In the United States, based on affected birth incidence of 0.7 in 100,000 births, and increasing survival rates, we expect the population of individuals affected by this disease to be more than 1,400 and rising.

The only potentially curative therapy currently available for patients with sickle cell disease or beta-thalassemia is allogeneic Hematopoietic Stem Cell Transplant, or HSCT;

however, this procedure holds a high level of risk, particularly Graft-versus-Host Disease, or GvHD, resulting in a low number of patients opting for this treatment.

We are using base editing to pursue two complementary approaches to treating sick le cell disease and one to treat beta-thalassemia:

a differentiated approach to activating fetal hemoglobin which could be used in treatments for both sickle cell disease and beta-thalassemia (BEAM-101);

a novel approach to directly correcting the sickle mutation (BEAM-102).

Recreating naturally-occurring protective mutations to activate fetal hemoglobin

The beneficial effects of the fetal form of hemoglobin, or HbF, to compensate for mutations in adult hemoglobin were first identified in individuals with a condition known as HPFH.

Individuals who carry mutations that would have typically caused them to be beta-thalassemia or sickle cell disease patients, but who also have HPFH, are asymptomatic or experience a much milder form of their disease.

HPFH is caused by single base changes in the regulatory region of the genes, HBG1 and HBG2, which prevents binding of one or more repressor proteins and increases the expression of gamma globin, which forms part of the HbF tetramer.

Using base editing, we reproduce these specific, naturally occurring base changes in the regulatory elements of the gamma globin genes, preventing binding of repressor proteins and leading to re-activation of gamma globin expression, and thus the increase in gamma globin levels.

Our in vitro and in vivo characterization of BEAM-101 using ex vivo delivery achieved precise and efficient editing of human CD34+ hematopoietic stem and progenitor cells, or HSPCs, resulting in long-term engraftment and therapeutically-relevant increases in target gene expression in mice.

In vitro characterization of BEAM-101:

We demonstrated >90% editing in healthy donor CD34 cells in vitro .

We demonstrated gamma globin upregulation following erythroid differentiation is highly correlated (R 2 =0.993) with editing rates, where at >90% editing we achieve >60% increase in gamma globin in healthy donor CD34+ cells.

Successful editing of CD34+ cells from a homozygous sickle cell disease patient, demonstrating a greater than 60% increase in gamma globin levels with a concomitant decrease to less than 40% sickle beta globin levels in vitro after in vitro differentiation.

In vivo performance of BEAM-101:

We demonstrated that edited CD34+ cells from a healthy human donor engraft with high chimerism and maintain >90% editing after 16 weeks in immunocompromised mice.

We demonstrated after 16-week engraftment that base edited cells lead to successful multilineage reconstitution with >90% base editing achieved in sorted human HSPCs, myeloid, lymphoid and erythroid cells.

We replicated these findings with cells from a second donor at 18 weeks post-engraftment.

Direct correction of the sickle cell mutation

Our second base editing approach for sickle cell disease, BEAM-102, is a direct correction of the causative sickle mutation at position 6 of the beta globin gene.

By making a single A-to-G edit, we have demonstrated in primary human CD34+ cells isolated from sickle cell disease patients the ability to create the naturally occurring Makassar variant of hemoglobin.

This variant, which was originally identified in humans in 1970, has the same function as the wild-type variant and does not cause sickle cell disease.

Distinct from other approaches, cells that are successfully edited in this way are fully corrected, no longer containing the sickle protein.

BEAM-102 uses ex vivo delivery of our adenine base editor, or ABE, to edit CD34+ HSPCs.

In cells isolated from donors with sickle cell disease, we achieved greater than 80% correction of the sickle point mutation to the HbG-Makassar variant, following in vitro erythroid differentiation.

As expected, we observed the simultaneous reduction of HbS to less than 20% of control levels.

More than 70% of erythroid colonies derived from edited patient cells showed biallelic editing (yielding cells that no longer produce any sickle protein at all), 20% had monoallelic editing (with one sickle allele and one corrected allele, likely conferring a level of protection similar to patients with “sickle cell trait” who do not show significant symptoms of disease), and 2% were unedited.

Further, the correction of the HbS protein to the HbG-Makassar variant was shown to significantly reduce the propensity of in vitro differentiated erythroid cells to sickle when subjected to hypoxia.

These findings represent therapeutic levels of correction and support advancement of this program to potentially address the underlying genetic cause of sickle cell disease.

Published modeling studies suggest that as little as 20% correction of HbS may be sufficient to cure the disease.

Ex vivo electroporation for multiplex editing of advanced cell therapies

CAR-T Cell Therapies in Immunology/Oncology

We believe base editing is an ideal tool to simultaneously multiplex edit many genes without unintended on-target effects, such as genomic rearrangements or activation of the p53 pathway, that can result from simultaneous editing with nucleases through the creation of double strand breaks.

The ability to create a large number of multiplex edits in T cells could endow CAR-T cells and other

cell therapies with combinations of features that may dramatically enhance their therapeutic potential in treating hematological or solid tumors.

Proof-of-concept experiments have now demonstrated the ability of base editors to efficiently modify up to 8 genomic loci simultaneously in primary human T cells with efficiencies ranging from 85-95% as measured by flow cytometry of target protein knockdown.

Importantly, these results are achieved without the generation of chromosomal rearrangements, as detected by a sensitive method (UDiTaS TM ) and with no loss of cell viability from editing.

The proof-of-concept experiments have also demonstrated robust T cell killing of target tumor cells.

Our initial focus will be on hematologic malignancies, and we are developing allogeneic CAR-T product candidates that have four edits each.

This multiplex editing will enable a high degree of engineering and functionality, including the following simultaneous edits:

Prevent graft-vs-host.

Elimination of the existing TCR to ensure that the CAR-T cell only attacks the CAR antigen on the tumor and not the patient’s healthy cells.

Enable allogeneic cell source.

Another edit to enable the use of healthy donor cells.

Minimize interference by the tumor microenvironment.

An additional edit to minimize exhaustion by the T cell and prolong efficacy for attacking the tumor.

Prevent fratricide.

Additional edits to eliminate antigens that are shared between malignant cells and CAR-T cells, to prevent fratricide (i.e., CAR-T cells attacking each other before they can attack the tumor).

The initial indications that we plan to target with these product candidates are relapsed, refractory, pediatric T-cell Acute Lymphoblastic Leukemia, or T-ALL, and pediatric Acute Myeloid Leukemia, or AML.

We believe that our approach has the potential to produce higher response rates and deeper remissions than existing approaches.

Non-Viral delivery for liver diseases

Alpha-1 Antitrypsin Deficiency

Alpha-1 Antitrypsin Deficiency, or Alpha-1, is a severe inherited genetic disorder that can cause progressive lung and liver disease.

The most severe form of ALPHA-1 arises when a patient has a point mutation in both copies of the SERPINA1 gene at amino acid 342 position (E342K, also known as the PiZ mutation or the “Z” allele).

This point mutation causes alpha-1 antitrypsin, or AAT, to misfold, accumulating inside liver cells rather than being secreted, resulting in very low levels (10%-15%) of circulating AAT.

As a consequence, the lung is left unprotected from neutrophil elastase, resulting in progressive, destructive changes in the lung, such as emphysema, which can result in the need for lung transplants.

The mutant AAT protein also accumulates in the liver, causing liver inflammation and cirrhosis, which can ultimately cause liver failure or cancer and require patients to undergo a liver transplant.

It is estimated that approximately 60,000 individuals in the United States have two copies of the Z allele.

There are currently no curative treatments for patients with ALPHA-1.

With the high efficiency and precision of our base editors, we aim to utilize our ABEs to enable the programmable conversion of A-to-T and G-to-C base pairs and precisely correct the E342K point mutation back to the wild type sequence.

For a recent study, we engineered novel ABEs and guide RNAs capable of correcting the PiZ mutation, and then applied a proprietary non-viral lipid nanoparticle formulation to deliver the optimized reagents to the livers of a PiZ transgenic mouse model.

This direct editing approach resulted in an average of 16.9% correction of beneficial alleles at 7 days and 28.8% at three months.

This significant increase over the period suggests that corrected hepatocytes may have a proliferative advantage relative to uncorrected cells.

In addition, treated mice demonstrate decreased alpha-1 antitrypsin, or A1AT, globule burden within the liver and a durable, significant increase in serum A1AT active protein at three months, roughly 4.9-fold higher than in controls, levels which we believe would be therapeutic if achieved in patients.

These data indicate the potential for base editing as a one-time therapy to treat both lung and liver manifestations of Alpha-1 antitrypsin deficiency.

Glycogen Storage Disease 1a

Glycogen Storage Disease Type 1A, also known as Von Gierke disease, is an inborn disorder of glucose metabolism caused by mutations in the G6PC gene, which results in low blood glucose levels that can be fatal if patients do not adhere to a strict regimen of slow-release forms of glucose, administered every one to four hours (including overnight).

There are no disease-modifying therapies available for patients with GSD1a.

Our approach to treating patients with glycogen storage disease 1a, or GSD1a, is to apply base editing via LNP delivery to repair the two most prevalent mutations that cause the disease, R83C and Q347X.

It is estimated that these two-point mutations account for 900 and 500 patients, respectively, in the United States, representing approximately 59% of all GSD1a patients.

Animal studies have shown that as little as 11% of normal G6Pase activity in liver cells is sufficient to restore fasting glucose;

however, this level must be maintained in order to preserve glucose control and alleviate other serious, and potentially fatal, GSD1a sequelae

We have identified product candidates that can correct up to 80% of th e alleles in cells harboring the Q347X point mutation and approximately 60% of the alleles in cells harboring the R83C mutation as shown in the figures below.

Correction of at least 11% is expected to be clinically relevant and potentially disease modifyin g for GSD1a patients .

Viral delivery for ocular and CNS disorders

Stargardt Disease

Stargardt Disease is an inherited disorder of the central region of the retina, causing progressive vision loss typically beginning in adolescence and ultimately leading to central and night vision blindness.

The most prevalent mutation in the ABCA4 gene that leads to Stargardt disease is the G1961E point mutation.

Approximately 5,500 individuals in the United States are affected by this mutation.

Our base editing approach is to repair the G1961E point mutation in the ABCA4 gene.

Disease modeling using tiny spot stimuli, or light stimuli through holes that are equivalent in size to a single photoreceptor cell, suggests that only 12%-20% of these cells are sufficient to preserve vision.

We anticipate, therefore, that editing percentages in the range of 12%-20% of these cells would be disease-modifying, since each edited cell will be fully corrected and protected from the biochemical defect.

Given that the base editor is larger than the packaging capacity of a single AAV, we use a split AAV system that delivers the base editor via two AAV vectors.

Once inside the cell, the two halves of the editor are recombined to create a functional base editor.

In a human retinal pigment epithelial cell line (ARPE-19 cells) in which we have knocked in the ABCA4 G1961E point mutation, we have demonstrated the precise correction of approximately 75% of the disease alleles at 5 weeks after dual infection with the split AAV system.

Collaborations

We believe our base editing technology has potential across a broad array of genetic diseases.

To fully realize this potential, we have established and will continue to seek out innovative collaborations, licenses, and strategic alliances with pioneering companies and with leading academic and research institutions.

Additionally, we have and will continue to pursue relationships that potentially allow us to accelerate our preclinical research and development efforts.

These relationships will allow us to uphold our vision of maximizing the potential of base editing to provide life-long cures for patients suffering from serious diseases.

Ex vivo electroporation for hematologic diseases and oncology

Boston Children’s Hospital

In July 2020, we formed a strategic alliance with Boston Children’s Hospital.

Under the terms of the agreement, we will sponsor research programs at Boston Children’s to facilitate development of disease-specific therapies using our proprietary base editing technology.

Boston Children’s will also serve as a clinical site to advance bench-to-bedside translation of our pipeline across certain therapeutic areas of interest, including programs in sickle cell disease and pediatric leukemias and exploration of new programs targeting other diseases.

Magenta Therapeutics

In June 2020, we announced a non-exclusive research and clinical collaboration agreement with Magenta Therapeutics to evaluate the potential utility of MGTA-117, Magenta’s novel targeted ADC for conditioning of patients with sickle cell disease and beta-thalassemia receiving our base editing therapies.

Conditioning is a critical component necessary to prepare a patient’s body to receive the edited cells, which carry the corrected gene and must engraft in the patient’s bone marrow in order to be effective.

Today’s conditioning regimens rely on nonspecific chemotherapy or radiation, which are associated with significant toxicities.

MGTA-117 precisely targets only hematopoietic stem and progenitor cells, sparing immune cells, and has shown high selectivity, potent efficacy, wide safety margins and broad tolerability in non-human primate models.

MGTA-117 may be capable of clearing space in bone marrow to support long-term engraftment and rapid recovery in patients.

Combining the precision of our base editing technology with the more targeted conditioning regimen enabled by MGTA-117 could further improve therapeutic outcomes for patients suffering from these severe diseases.

We will be responsible for clinical trial costs related to development of our base editors when combined with MGTA-117, while Magenta will continue to be responsible for all other development costs of MGTA-117.

Non-Viral delivery for liver diseases

Verve Therapeutics

In April 2019, we entered into a collaboration and license agreement with Verve, a company focused on developing genetic medicines to safely edit the genome of adults to permanently lower LDL cholesterol and triglyceride levels and thereby treat coronary heart disease.

This collaboration allows us to fully realize the potential of base editing in treating cardiovascular diseases, an area outside of our core focus where the Verve team has significant, world-class expertise.

Under the terms of the agreement, Verve received exclusive access to our base editing technology, gene editing, and delivery technologies for human therapeutic applications against certain cardiovascular targets.

In exchange, we received 2,556,322 shares of Verve common stock.

Additionally, we will receive milestone payments for certain clinical and regulatory events and retains the option, after the completion of Phase 1 studies, to participate in future development and commercialization, and share 50 percent of U.S.

profits and losses, for any product directed

against these targets.

Verve granted to us a non-exclusive license under know-how and patents controlled by Verve, and an interest in joint collaboration technology.

Either party may owe the other party other milestone payments for c ertain clinical and regulatory events related to the delivery technology products.

Royalty payments may become due by either party to the other based on the net sales of any commercialized delivery technology products under the agreement.

In June 2020, Verve reported preclinical proof-of-concept data in non-human primates that demonstrated the successful use of adenine base editors to turn off a gene in the liver.

Utilizing ABE technology licensed from us and an optimized guide RNA packaged in an engineered lipid nanoparticle, Verve evaluated in vivo liver base editing to turn off proprotein convertase subtilisin/kexin type 9 (PCSK9), a gene whose protein product elevates blood LDL cholesterol or angiopoietin-like protein 3 (ANGPTL3), a gene whose protein product elevates blood triglyceride-rich lipoproteins.

We believe these proof-of-concept data, which show we can safely edit the primate genome, represent the first successful application of the base editing technology in non-human primates

In two separate studies, seven animals were treated with the drug product targeting the PCSK9 gene and seven additional animals with the drug product targeting the ANGPTL3 gene.

Whole liver editing, blood protein and lipid levels were measured at two weeks and compared to baseline.

The program targeting PCSK9 showed an average of 67% whole liver PCSK9 editing, which translated into an 89% reduction in plasma PCSK9 protein and resulted in a 59% reduction in blood LDL cholesterol levels.

The program targeting ANGPTL3 showed an average of 60% whole liver ANGPTL3 editing, which translated into a 95% reduction in plasma ANGPTL3 protein and resulted in a 64% reduction in blood triglyceride levels and 19% reduction in LDL cholesterol levels.

In addition, in studies in primary human hepatocytes, clear evidence of on-target editing was observed with no evidence of off-target editing.

Per the terms of our agreement with Verve, we can exercise our right to participate in the future development and commercialization of any programs at the completion of Phase I studies.

Viral delivery for ophthalmology and CNS diseases

In July 2020, we announced a research collaboration with the Institute of Molecular and Clinical Ophthalmology Basel (IOB).

Founded in 2018 by a consortium that includes Novartis, the University Hospital of Basel and the University of Basel, IOB is a leader in basic and translational research aimed at treating impaired vision and blindness.

Clinical scientists at IOB have also helped to develop better ways to measure how vision is impacted by Stargardt disease.

Additionally, researchers at IOB have developed living models of the retina, known as organoids, which can be used to test novel therapies.

Under the terms of the agreement, the companies will leverage IOB’s unique expertise in the field of ophthalmology along with our novel base editing technology to advance programs directed to the treatment of certain ocular diseases, including Stargardt disease.

Manufacturing

To realize the full potential of base editors as a new class of medicines, we are building customized and integrated capabilities across discovery, manufacturing, and preclinical and clinical development.

Due to the critical importance of high-quality manufacturing and control of production timing and know-how, we have taken steps toward establishing our own manufacturing facility, which will provide us the flexibility to manufacture numerous different drug product modalities.

We believe this investment will maximize the value of our portfolio and capabilities, the probability of technical success of our programs, and the speed at which we can provide life-long cures to patients.

In August 2020, we entered into a lease agreement with Alexandria Real Estate Equities, Inc.

to build a 100,000 square foot current Good Manufacturing Practice, or cGMP, compliant manufacturing facility in Research Triangle Park, North Carolina intended to support a broad range of clinical programs.

We will invest up to $83 million over a five-year period and anticipate that the facility will be operational by the first quarter of 2023.

The project will be facilitated, in part, by a JDIG approved by the North Carolina Economic Investment Committee, which authorizes potential reimbursements based on new tax revenues generated through the project.

The facility will be designed to support manufacturing for our ex vivo cell therapy programs in hematology and oncology and in vivo non-viral delivery programs for liver diseases, with flexibility to support manufacturing of our viral delivery programs, and ultimately, scale-up to support potential commercial supply.

For our initial waves of clinical programs, we will use contract manufacturing organizations, or CMOs, with relevant manufacturing experience in genetic medicines.

With the ongoing concern related to the COVID-19 pandemic, we have maintained and expanded the business continuity plans, implemented in the first six months of 2020, to address and mitigate the impact of the COVID-19 pandemic on our business.

In March 2020, to protect the health of our employees, and their families and communities, we restricted access to our offices to personnel who performed critical activities that must be completed on-site, limited the number of such personnel that can be present at our facilities at any one time, and requested that most of our employees work remotely.

In May 2020, as certain states eased restrictions, we established new protocols to better allow our full laboratory staff access to our facilities.

These protocols included several shifts

working over a seven days week protocol.

W e expect to continue incurring additional costs to ensure we adhere to the guidelines instituted by the Centers for Disease Control and to provide a safe working environment to our onsite employees.

The extent to which the COVID-19 pandemic impacts our business, our corporate development objectives, results of operations and financial condition, including and the value of and market for our common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements, and the effectiveness of actions taken globally to contain and treat the disease.

Disruptions to the global economy, disruption of global healthcare systems, and other significant impacts of the COVID-19 pandemic could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

While the COVID-19 pandemic did not significantly impact our business or results of operations during the six months ended June 30, 2020, the length and extent of the pandemic, its consequences, and containment efforts will determine the future impact on our operations and financial condition.

Critical accounting policies and significant judgements

Our critical accounting policies are those policies which require the most significant judgments and estimates in the preparation of our condensed consolidated financial statements.

We have determined that our most critical accounting policies are those relating to stock-based compensation, variable interest entities, fair value measurements, and leases.

There have been no significant changes to our existing critical accounting policies discussed in our Annual Report on Form 10-K for the year ended December 31, 2019.

Financial operations overview

We were incorporated on January 25, 2017 and commenced operations shortly thereafter.

Since our inception, we have devoted substantially all of our resources to building our base editing platform and advancing development of our portfolio of programs, establishing and protecting our intellectual property, conducting research and development activities, organizing and staffing our company, business planning, raising capital and providing general and administrative support for these operations.

To date, we have financed our operations primarily through the sales of our redeemable convertible preferred stock and proceeds from our IPO.

We are a development stage company, and all of our programs are at a preclinical stage of development.

To date, we have not generated any revenue from product sales and do not expect to generate revenue from the sale of products for the foreseeable future.

Since inception we have incurred significant operating losses.

Our net losses for the six months ended June 30, 2020 and 2019 were $64.7 million and $31.5 million, respectively.

As of June 30, 2020, we had an accumulated deficit of $267.7 million.

We expect to continue to incur significant expenses and increasing operating losses in connection with ongoing development activities related to our portfolio of programs as we continue our preclinical development of product candidates;

advance these product candidates toward clinical development;

further develop our base editing platform;

research activities as we seek to discover and develop additional product candidates;

maintenance, expansion enforcement, defense, and protection of our intellectual property portfolio;

and hiring research and development, clinical and commercial personnel.

In addition, we expect to continue to incur additional costs associated with operating as a public company.

As a result of these anticipated expenditures, we will need additional financing to support our continuing operations and pursue our growth strategy.

Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements.

We may be unable to raise additional funds or enter into such other agreements when needed on favorable terms or at all.

Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.

We can give no assurance that we will be able to secure such additional sources of funds to support our operations, or, if such funds are available to us, that such additional funding will be sufficient to meet our needs.

Research and development expenses

Research and development expenses consist of costs incurred in performing research and development activities, which include:

the cost to obtain licenses to intellectual property, such as those with Harvard, Broad Institute, and Editas, and related future payments should certain success, development and regulatory milestones be achieved;

personnel-related expenses, including salaries, bonuses, benefits and stock-based compensation for employees engaged in research and development functions;

expenses incurred in connection with the discovery and preclinical development of our research programs, including under agreements with third parties, such as consultants, contractors and contract research organizations;

the cost of developing and validating our manufacturing process for use in our preclinical studies and future clinical trials;

laboratory supplies and research materials;

facilities, depreciation and other expenses which include direct and allocated expenses.

We expense research and development costs as incurred.

Advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses.

The prepaid amounts are expensed as the benefits are consumed.

In the early phases of development, our research and development costs are often devoted to product platform and proof-of-concept studies that are not necessarily allocable to a specific target, therefore, we have not yet begun tracking our expenses on a program-by-program basis.

We expect that our research and development expenses will increase substantially in connection with our planned preclinical and future clinical development activities.

General and administrative expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, intellectual property, business development, finance, and administrative functions.

General and administrative expenses also include legal fees relating to intellectual property and corporate matters, professional fees for accounting, auditing, tax and consulting services, insurance costs, travel, and direct and allocated facility related expenses and other operating costs.

We anticipate that our general and administrative expenses will increase in the future to support increased research and development activities.

We also expect to incur increased costs associated with being a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with Nasdaq and SEC requirements, director and officer insurance costs, and investor and public relations costs.

Results of operations

Comparison of the three months ended June 30, 2020 and 2019

The following table summarizes our results of operations, together with the change in dollars (in thousands) :

Three Months Ended June 30,

License revenue

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense):

Change in fair value of derivative liabilities

Interest and other income, net

Total other expense

License revenue

License revenue was $6 thousand for the three months ended June 30, 2020 and 2019 representing Verve license revenue recorded under the Collaboration and License Agreement executed in April 2019.

Research and development expenses

Research and development expenses were $19.4 million and $12.7 million for the three months ended June 30, 2020 and 2019, respectively.

The increase of $6.7 million was primarily due to the following:

Increases of $2.8 million in lab supplies and outsourced services, $1.9 million in personnel-related costs, and $1.3 million in facility-related costs, including depreciation.

These increases were due to the growth in the number of research and development employees from 69 at June 30, 2019 to 127 at June 30, 2020, and their related activities, as well as the expense allocated to research and development related to our leased facilities.

An increase of $0.3 million in stock compensation from additional stock option awards due to the increase in the number of research and development employees as well as an increase in the value of our common stock.

Research and development expenses will continue to increase as we continue our current research programs, initiate new research programs, continue our preclinical development of product candidates , and conduct future clinical trials for any of our product candidates.

General and administrative expenses

General and administrative expenses were $6.9 million and $5.0 million for the three months ended June 30, 2020 and 2019, respectively.

The increase of $2.0 million was primarily a result of a $0.8 million increase in insurance costs due to increased directors and officers insurance costs as a result of our February 2020 IPO, a $0.4 million increase in stock-based compensation due to an increase in the number of general and administrative employees from 18 employees as of June 30, 2019 to 24 employees as of June 30, 2020 as well as an increase in the value of our common stock, a $0.3 million increase in personnel related costs due to an increase in general and administrative employees, a $0.3 million increase in other administrative expenses, a $0.2 million increase in intellectual property costs, and a $0.1 million decrease in expense allocated to general and administrative expense related to our leased facilities, including depreciation.

Change in fair value of derivative liabilities

During the three months ended June 30, 2020, we recorded a $8.7 million expense related to the change in fair value of success payment liabilities as compared to a $1.0 million expense for the three months ended June 30, 2019, primarily as a result of the increase in the fair value of our common stock compared to the fair value of our Series A Preferred.

The success payment obligations are still outstanding as of June 30, 2020 and will continue to be revalued at each reporting period.

Interest and other income

The decrease in interest and other income was primarily due to an increase in interest expense resulting from our equipment financing and a decrease in interest income driven by decreased market rates.

Comparison of the six months ended June 30, 2020 and 2019

The following table summarizes our results of operations, together with the change in dollars (in thousands) :

Six Months Ended June 30,

License revenue

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense):

Change in fair value of derivative liabilities

Interest and other income, net

Total other expense

License revenue

License revenue was $12 thousand for the six months ended June 30, 2020 representing Verve license revenue recorded under the Collaboration and License Agreement executed in April 2019, compared to $6 thousand for six months ended June 30, 2019.

Research and development expenses

Research and development expenses were $40.9 million and $21.9 million for the six months ended June 30, 2020 and 2019, respectively.

The increase of $19.0 million was primarily due to the following:

Increases of $8.0 million in lab supplies and outsourced services, $4.9 million in personnel-related costs, and $2.5 million in facility-related costs, including depreciation.

These increases were due to the growth in the number of research and development employees from 69 at June 30, 2019 to 127 and June 30, 2020, and their related activities, as well as the expense allocated to research and development related to our leased facilities.

An increase of $1.6 million in stock compensation from additional stock option awards due to the increase in the number of research and development employees as well as an increase in the value of our common stock.

An increase of $1.9 million in milestone and license fees, primarily related to our agreement with Bio Palette.

We recorded a $2.3 million milestone for the six months ended June 30, 2020 as the issuance of a certain patent in the United States became probable.

General and administrative expenses

General and administrative expenses were $13.7 million and $8.9 million for the six months ended June 30, 2020 and 2019, respectively.

The increase of $4.8 million was primarily a result of a $1.3 million increase in insurance costs due to increased directors and officers insurance costs as a result of our February 2020 IPO, a $1.3 million increase in personnel related costs due to an increase in general and administrative employees from 18 employees as of June 30, 2019 to 24 employees as of June 30, 2020, a $1.0 million increase in stock-based compensation due to an increase in the number of general and administrative employees as well as an increase in the value of our common stock, a $0.7 million increase in other administrative expenses, and a $0.6 million increase in intellectual property costs.

Change in fair value of derivative liabilities

During the six months ended June 30, 2020, we recorded a $11.4 million expense related to the change in fair value of success payment liabilities as compared to a $2.0 million expense for the six months ended June 30, 2019, primarily as a result of the increase in the fair value of our common stock compared to the fair value of our Series A Preferred.

The success payment obligations are still outstanding as of June 30, 2020 and will continue to be revalued at each reporting period.

Interest and other income

The increase in interest and other income was primarily due to the change in fair value of our corporate equity securities, which are accounted for as investments in equity securities, offset by an increase in interest expense resulting from our equipment financing.

Liquidity and capital resources

Since our inception in January 2017, we have incurred significant operating losses.

We expect to incur significant expenses and operating losses for the foreseeable future as we advance the preclinical and, if successful, the clinical development of our programs.

In February 2020, we completed our IPO in which we issued and sold 12,176,471 shares of our common stock, including 1,588,235 shares of common stock sold pursuant to the underwriters’ full exercise of their option to purchase additional shares, at a public offering price of $17.00 per share.

We received net proceeds from our IPO of $188.3 million, after deducting underwriting discounts and estimated offering expenses payable by us.

To date, we have funded our operations primarily with proceeds from the sales of Preferred Stock and through proceeds from our IPO.

As of June 30, 2020, we had $228.0 million in cash, cash equivalents, and marketable securities.

To date, we have not generated any revenue from product sales and do not expect to generate revenue from the sale of products for the foreseeable future.

We anticipate the need for additional capital in order to continue to fund our research and development, including our plans for preclinical and clinical trials, and new product development, as well as to fund general operations.

As and if necessary, we will seek to raise these additional funds through various potential sources, such as equity and debt financings or through corporate collaboration and license agreements.

Especially in light of the COVID-19 pandemic, we can give no assurances that we will be able to secure such additional sources of funds to support our operations, or, if such funds are available to us, that such additional financing will be sufficient to meet our needs.

For a more detailed discussion of risks related to COVID-19, please see Part II., Item 1A., Risk factors—Risks related to our relationships with third parties , in this Quarterly Report on Form 10-Q.

The following table summarizes our sources and uses of cash for the six months ended June 30, 2020 and 2019 (in thousands):

Six Months Ended June 30,

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net change in cash, cash equivalents and restricted cash

Operating activities

Net cash used in operating activities for the six months ended June 30, 2020 was $50.2 million, consisting primarily of our net loss of $64.7 million, an increase in prepaid expenses and other current assets of $4.2 million, and a decrease in operating lease liabilities of $1.8 million, offset by noncash charges consisting primarily of change in fair value of derivative liabilities of $11.4 million, stock-based compensation expense of $5.6 million, depreciation expense of $2.2 million, and change in operating lease ROU assets of $2.0 million.

Net cash used in operating activities for the six months ended June 30, 2019 was $37.2 million, consisting primarily of our net loss of $31.5 million, and a decrease in financing milestone liabilities of $13.8 million resulting from payment of these liabilities, offset by increases in accounts payable and accrued expenses of $3.0 million, and noncash charges consisting primarily of stock-based

compensation expense of $2.9 million, change in fair value of derivative l iabilities of $ 2 .0 million, and depreciation expense of $ 1.6 million.

Investing activities

For the six months ended June 30, 2020, cash used in investing activities was primarily the net purchases of marketable securities of $47.8 million, and purchases of property and equipment of $5.4 million.

For the six months ended June 30, 2019, cash used in investing activities was the net purchases of marketable securities of $88.5 million, and purchases of property and equipment of $8.9 million.

Financing activities

Net cash provided by financing activities for the six months ended June 30, 2020 consisted primarily of proceeds from our IPO of $192.5 million, net of underwriting discounts, and net proceeds of $1.6 million from equipment financing, and proceeds from the exercise of stock options of $0.5 million, offset by the payment of IPO costs of $1.7 million, and repayments of equipment financing liabilities of $0.7 million.

Net cash provided by financing activities for the six months ended June 30, 2019 consisted primarily of the net proceeds from the issuance of Series B Preferred Stock of $37.9 million.

Funding requirements

Our operating expenses are expected to increase substantially as we continue to advance our portfolio of programs.

Specifically, our expenses will increase if and as we:

continue our current research programs and our preclinical development of product candidates from our current research programs;

seek to identify additional research programs and additional product candidates;

initiate preclinical testing and clinical trials for any product candidates we identify and develop;

maintain, expand, enforce, defend, and protect our intellectual property portfolio and provide reimbursement of third-party expenses related to our patent portfolio;

seek marketing approvals for any of our product candidates that successfully complete clinical trials;

establish a sales, marketing, and distribution infrastructure to commercialize any medicines for which we may obtain marketing approval;

further develop our base editing platform;

hire additional personnel including research and development, clinical and commercial personnel;

add operational, financial, and management information systems and personnel, including personnel to support our product development;

acquire or in-license products, intellectual property, medicines and technologies;

build and maintain a commercial-scale current Good Manufacturing Practices manufacturing facility;

continue to operate as a public company.

We expect that our cash, cash equivalents and marketable securities at June 30, 2020 will enable us to fund our current and planned operating expenses and capital expenditures for at least the next 12 months.

We have based these estimates on assumptions that may prove to be imprecise, and we may exhaust our available capital resources sooner that we currently expect.

Because of the numerous risks and uncertainties associated with the development our programs, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates.

Our future funding requirements will depend on many factors including:

the cost of continuing to build our base editing platform;

the costs of acquiring licenses for the delivery modalities that will be used with our product candidates;

the scope, progress, results, and costs of discovery, preclinical development, laboratory testing, manufacturing and clinical trials for the product candidates we may develop;

the costs of preparing, filing, and prosecuting patent applications, maintainin g and enforcing our intellectual property and proprietary rights, and defending intellectual property-related claims;

the costs, timing, and outcome of regulatory review of the product candidates we may develop;

the costs of future activities, including product sales, medical affairs, marketing, manufacturing, distribution, coverage and reimbursement for any product candidates for which we receive regulatory approval;

the success of our license agreements and our collaborations;

our ability to establish and maintain additional collaborations on favorable terms, if at all;

the achievement of milestones or occurrence of other developments that trigger payments under any additional collaboration agreements we obtain;

the extent to which we acquire or in-license products, intellectual property, and technologies;

the costs of operating as a public company.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements.

We do not have any committed external source of funds.

Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.

If we raise funds through additional collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates, or we may have to grant licenses on terms that may not be favorable to us.

If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual obligations

We enter into contracts in the normal course of business with contract research organizations and other vendors to assist in the performance of our research and development activities and other services and products for operating purposes.

These contracts generally provide for termination on notice, and therefore are cancelable contracts and not included in the table of contractual obligations and commitments.

During the six months ended June 30, 2020, except for the minimum rental commitments disclosed in Note 7, Leases , to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q, there were no significant changes to our contractual obligations and commitments described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2019.

Off-balance sheet arrangements

We did not have during the periods presented and we do not currently have any off-balance sheet arrangements, as defined under the applicable regulations of the SEC.

For the nine months ended September 30, 2020 and 2019, the Company made payments of $0.1 million and $0.1 million, respectively, to each of its three founder shareholders for scientific consulting and other expenses.

The Company and Verve are parties to a collaboration and license agreement and have a common board member.

During the nine months ended September 30, 2020 and 2019, the Company purchased shares of Verve series A preferred stock valued at $0.8 million and $0.4 million, respectively.

During the nine months ended September 30, 2020, the Company recognized unrealized gains of $0.5 million on its investment in Verve preferred stock.

The Company purchased certain materials from Verve amounting to $0.3 million, which is recorded as research and development expenses within the accompanying condensed consolidated statements of operations and other comprehensive loss for the nine months ended September 30, 2020, and within accrued expenses in the accompanying condensed consolidated balance sheets as of September 30, 2020.

The Company also sold certain materials to Verve amounting to $0.2 million, which is recorded as interest and other income (expense), net within the accompanying condensed consolidated statements of operations and other comprehensive loss for the nine months ended September 30, 2020, and within prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets as of September 30, 2020.

Prime Medicine

The Company and Prime Medicine are parties to a collaboration and license agreement and have a common founder and several common board members.

In September 2020, the Company elected to continue its collaboration with Prime Medicine and, in October

2020, as required by the terms under its collaboration and license agreement with Prime Medicine, issued 200,307 shares of the Company’s common stock to Prime Medicine.

T he Company recognized $5.0 milli on, which represents the fair value of Beam’s common stock to be issued to Prime Medicine, as research and development expense within the accompanying condensed consolidated statements of operations and other comprehensive loss for the nine months ended Se ptember 30, 2020 , and within accrued expenses in the accompanying condensed consolidated balance sheets as of September 30, 2020.

Additionally, in October 2020, the Company received 5 ,000,00 0 shares of Prime Medicine’s common stock and recognized $ 0.1 mill ion as an offset to research and development expense within the accompanying condensed consolidated statements of operations and other comprehensive loss for the nine months ended September 30, 2020 , and within other current assets in the accompanying cond ensed consolidated balance sheets as of September 30, 2020.

Additionally, in September 2019, in connection with the Company’s collaboration and license agreement with Prime Medicine, the Company executed a letter agreement, as amended, to provide certain interim management and startup services to Prime Medicine for up to March 2021.

Prime Medicine is obligated to reimburse the Company’s out-of-pocket costs incurred in connection with performing the services and, beginning in October 2020, will pay the Company a $30 thousand monthly service fee.

For the nine months ended September 30, 2020, the Company did not recognize any amounts for performing such services or incur any out-of-pocket expenses.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements