Beam Therapeutics Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Cond ition 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, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and in the “Item 1A. Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Overview 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, which operate by creating targeted double-stranded breaks in the DNA; these breaks can result in unwanted DNA modifications. We believe that the precision of our editors will dramatically increase the impact of gene editing for a broad range of therapeutic applications. 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 in vivo viral delivery to the eye and central nervous system, or CNS. The elegance of the base editing approach combined with a tissue specific delivery modality, provides the basis for a targeted efficient, precise, and highly versatile gene editing system, capable of gene correction, gene silencing/gene activation, and multiplex editing of several genes simultaneously. We are currently advancing a broad, diversified portfolio of base editing programs against distinct editing targets, utilizing the full range of our development capabilities. 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 continue to make meaningful advancements across our programs. Within our ex vivo platform, we have identified three development candidates to date – two candidates targeting hemoglobinopathies and one candidate in our T-cell therapy program: • BEAM-101 reproduces single base changes seen in individuals with Hereditary Persistence of Fetal Hemoglobin, or HPFH, to potentially protect them from the effects of mutations causing sickle cell disease or beta thalassemia. We have achieved proof-of-concept in vivo with long-term engraftment of base edited human CD34 cells in mice for BEAM-101. Persistence of engraftment and high levels of editing have been confirmed in several preclinical studies, including in studies using material generated at a clinically relevant scale. Following conversations with regulators and supported by our off-target biology assays, we are planning to initiate IND-enabling studies in 2020 and expect to file an IND for BEAM-101 during the second half of 2021. • BEAM-102 directly corrects the causative mutation in sickle cell disease by recreating a naturally-occurring normal human hemoglobin variant, HbG-Makassar. During the second quarter of 2020, we published preclinical data on BEAM-102 demonstrating that our adenine base editors, or ABEs, can efficiently convert the causative Hemoglobin S, or HbS, point mutation, to HbG-Makassar, with high efficiency (more than 80%). The Makassar variant does not cause hemoglobin to polymerize, or red cells to sickle and, therefore, edited cells are cured through elimination of the disease-causing protein. The results from this study confirmed the ability of the Makassar variant to protect cells from sickling, even in the context of mono-allelic editing (with one sickle allele and one corrected allele). • BEAM-201 is a potent and specific anti-CD7, multiplex edited, allogeneic CAR-T development candidate for the treatment of relapsed/refractory T-cell acute lymphoblastic leukemia, or T-ALL, a severe disease affecting children and adults with a five-year overall survival of less than 25%. BEAM-201 is produced using a Good Manufacturing Practice, or GMP, -compliant, clinical-scale process in which T-cells derived from healthy donors are simultaneously base edited at four genomic loci then transduced with a lentivirus coding for an anti-CD7 CAR. The resulting cells are universally-compatible, allogeneic (“off the shelf”) CD7-targeting CAR-T cells resistant to both fratricide and immunosuppression. 20 We also continue to advance our liver disease programs . Durin g the second quarter of 2020, we showed the ability to directly correct the mutation causing A lpha-1 antitrypsin deficiency, providing both in vitro and in vivo proof of concept for base editing to correct this disease. We have also achieved editing levels , in preclinical models, for the correction of the two most prevalent mutations causing Glycogen Storage Disease Type I A , or GSD I a, that could be clinically relevant if reproduced in humans. An important next step for the liver disease programs is finalizi ng our LNP formulation, and we are making progress on developing a formulation using proof of concept targets. To date, with this formulation, we have shown high levels of editing in mice at doses consistent with clinical use. We are currently conducting n on-human primate studies to evaluate our LNP formulation and anticipate initial data in early 2021. We believe we are on track to nominate our first development candidate from our liver portfolio in 2021 . The modularity of our platform means that establishing preclinical proof-of-concept of base editing using a particular delivery modality will 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 hematology: 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. This mutation causes the mutated form of 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 sickle cell disease and one to treat beta-thalassemia: • a differentiated approach to elevating fetal hemoglobin which could be used in treatments for both sickle cell disease and beta-thalassemia (BEAM-101); and • a novel approach to directly correcting the sickle mutation (BEAM-102). BEAM-101: 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 greater than 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 greater than 90% editing we achieve greater than 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. 21 In vivo performance of BEAM-101 : • We demonstrated that edited CD34+ cells from a healthy human donor engraft with high chimerism and maintain greater than 90% editing after 16 weeks in immunocompromised mice. • We demonstrated after 16-week engraftment that base edited cells lead to successful multilineage reconstitution with greater than 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. BEAM-102: 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 ABEs to edit CD34+ HSPCs. In cells isolated from donors with sickle ce ll 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 are potentially cured, no longer producing any sickle protein at all), and another 20% of cells had monoallelic editing (with one sickle allele and one corrected allele, conferring a level of protection expected to be similar to patients with “sickle cell trait” who do not show significant symptoms of disease) – adding up to 93% of cells with potential elimination of sickle cell disease. 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 if translated into the clinic and support advancement of this program to potentially address the underlying genetic cause of sickle cell disease. Published modeling studies suggest that at least 20% of cells no longer having the propensity to sickle, either by expressing HbF or because of the elimination of HbS, may be sufficient to cure the disease. With upregulation levels of more than 60% of gamma globin for Beam-101 or by generating more than 90% of cells having at least one HbS allele corrected in the case of BEAM-102, we have shown, in preclinical models, correction levels significantly above those expected to be disease modifying. Ex vivo electroporation for multiplex editing: CAR-T cell therapies We believe base editing is a powerful 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-stranded 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. The initial indications that we plan to target with these product candidates are relapsed, refractory, T-ALL, and Acute Myeloid Leukemia, or AML. We believe that our approach has the potential to produce higher response rates and deeper remissions than existing approaches. 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. BEAM-201: Universal CD7-targeting CAR-T cells BEAM-201 is a development candidate comprising T cells derived from healthy donors that are simultaneously edited at TRAC , CD7 , CD52 and PDCD1 then transduced with a lentivirus encoding for an anti-CD7 CAR to create allogenic CD7 targeting CAR-T cells resistant to both fratricide and immunosuppression. To our knowledge, Beam-201 is the first cell therapy featuring four simultaneous edits. Using our cytosine base editor, or CBE, cells are edited to confer the following benefits: • TRAC : Prevent graft-vs-host disease via the 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. • CD52 : Enable an allogeneic cell source by masking BEAM-201 cells to anti-CD52 lymphodepleting agents to reduce host rejection of BEAM-201 cells. • PDCD1 : Minimize immunosuppression of BEAM-201 cells by the tumor microenvironment and prolong efficacy for attacking the tumor. • CD7 : Prevent fratricide by eliminating 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). 22 In vitro characterization of BEAM-201 and comparison to nuclease editing : • Simultaneous base editing at four target loci in primary human T cells using a clinical-scale process, produced 96-99% on-target editing of each of the four genes as measured by next-generation sequencing. • Simultaneous quad base editing of T cells resulted in no detected genomic rearrangements resulting from the editing process; Cas9 nuclease editing with the same four guide RNAs produced chromosomal aberrations in 22 of 100 cells evaluated. • Multiplex base editing did not negatively affect cell expansion during manufacturing, while nuclease editing induced significant loss of cell expansion. • CBE-edited cells decreased expression of the four target genes with minimal effect on other genes, including key members of the p53 pathway that are upregulated in response to DNA double-stranded breaks produced by multiplex editing with nucleases. Further characterization of BEAM-201 in vitro and in a tumor mouse model: • The GMP-compliant, clinical-scale process resulted in final BEAM-201 CAR-T cell populations with on-target editing efficiencies between 96-99.9% at each of the four target loci, and 85% CAR-expressing cells. As a result, we estimate that 91% of cells are bi-allelically quad base edited and 77% of cells have all 5 genetic modifications. We believe this is the highest level and uniformity of CAR expression and simultaneous editing across four target sites reported at clinical scale to date. • BEAM-201 cells demonstrated robust in vitro CD7-dependent cytokine production, and rapid in vitro cytotoxicity. • BEAM-201 cells also demonstrated dose-dependent clearance or control, across a 25-fold dose range, of an aggressive disseminated CCRF-CEM T-ALL tumor mouse model. Non-viral delivery for liver diseases: Alpha-1 antitrypsin deficiency and glycogen storage disorder 1a 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 used 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 clinically relevant 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. GSDIa, 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 GSDIa. Our approach to treating patients with GSDIa 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 GSDIa 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, GSDIa sequelae. We have identified product candidates that can correct up to 80% of the alleles in cells harboring the Q347X point mutation and approximately 60% of the alleles in cells harboring the R83C mutation. Correction of at least 11% is expected to be clinically relevant and potentially disease modifying for GSDIa patients. 23 Viral delivery for ocular and CNS disorders: Stargardt disease 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. We have identified a base editor that is able to edit approximately 45% of the alleles in recombinant cells carrying the human mutated sequence. 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 aggressively pursue 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 we retain 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 certain 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. 24 In June 2020, V erve 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 engineer ed 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 1 studies. Viral delivery for ophthalmology and CNS diseases Institute of Molecular and Clinical Ophthalmology Basel In July 2020, we announced a research collaboration with the Institute of Molecular and Clinical Ophthalmology Basel, or 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 and to enable our parallel investment strategy in multiple delivery modalities, 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 $83.0 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 Job Development Investment Grant 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. COVID-19 With the ongoing concern related to the COVID-19 pandemic, we have maintained and expanded the business continuity plans 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-day-week protocol. We expect to continue incurring additional costs to ensure we adhere to the guidelines instituted by the CDC 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, 25 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 o f 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 nine months ended September 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 General 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 nine months ended September 30, 2020 and 2019 were $99.1 million and $50.5 million, respectively. As of September 30, 2020, we had an accumulated deficit of $302.2 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; conduct 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; and • 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. 26 In the early phases of development, our research and development costs are often devoted to product platform and proof-of-concept studies tha t 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, including our planned build-out of our commercial-scale cGMP manufacturing facility. 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 September 30, 2020 and 2019 The following table summarizes our results of operations, together with the change in dollars (in thousands) : Three Months Ended September 30, 2020 2019 Change License revenue $ 6 $ 6 $ — Operating expenses: Research and development 29,825 12,543 17,282 General and administrative 7,502 5,487 2,015 Total operating expenses 37,327 18,030 19,297 Loss from operations (37,321 ) (18,024 ) (19,297 ) Other income (expense): Change in fair value of derivative liabilities 2,700 (1,600 ) 4,300 Interest and other income (expense), net 169 619 (450 ) Total other income (expense) 2,869 (981 ) 3,850 Net loss $ (34,452 ) $ (19,005 ) $ (15,447 ) License revenue License revenue was $6.0 thousand for the three months ended September 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 $29.8 million and $12.5 million for the three months ended September 30, 2020 and 2019, respectively. The increase of $17.3 million was primarily due to the following: • Increases of $7.4 million in lab supplies and outsourced services, driven primarily by external research services such as CMOs and sponsored research agreements. • An increase of $5.6 million in milestone and license expenses, primarily related to our agreement with Prime Medicine. During the three months ended September 30, 2020, we recognized a $5.0 million expense, which represents the fair value of our common stock to be issued to Prime Medicine as of September 30, 2020. • Increases of $2.1 million in personnel-related costs, and $1.2 million in facility-related costs, including depreciation. These increases were due to the growth in the number of research and development employees from 92 at September 30, 2019 to 136 at September 30, 2020, and their related activities, as well as the expense allocated to research and development related to our leased facilities. • An increase of $0.8 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. 27 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 $7.5 million and $5.5 million for the three months ended September 30, 2020 and 2019, respectively. The increase of $2.0 million was primarily due to the following: • Increase of $1.2 million increase in intellectual property costs, and a $0.8 million increase in insurance costs due to increased directors and officers insurance costs as a result of our being a public company, offset by a $0.7 million decrease in corporate legal expenses. • Increase of $0.6 million in personnel related costs due to an increase in general and administrative employees due to an increase in the number of general and administrative employees from 20 employees as of September 30, 2019 to 30 employees as of September 30, 2020, and $0.2 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. Change in fair value of derivative liabilities During the three months ended September 30, 2020, we recorded $2.7 million of other income related to the change in fair value of success payment liabilities as compared to $1.6 million expense for the three months ended September 30, 2019, primarily as a result of the decrease in the fair value of our common stock as of September 30, 2020 as compared to June 30, 2020. The success payment obligations are still outstanding as of September 30, 2020 and will continue to be revalued at each reporting period. Interest and other income (expense), net The decrease in interest and other income (expense), net 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 nine months ended September 30, 2020 and 2019 The following table summarizes our results of operations, together with the change in dollars (in thousands) : Nine Months Ended September 30, 2020 2019 Change License revenue $ 18 $ 12 $ 6 Operating expenses: Research and development 70,728 34,402 36,326 General and administrative 21,251 14,393 6,858 Total operating expenses 91,979 48,795 43,184 Loss from operations (91,961 ) (48,783 ) (43,178 ) Other income (expense): Change in fair value of derivative liabilities (8,700 ) (3,600 ) (5,100 ) Interest and other income (expense), net 1,533 1,907 (374 ) Total other income (expense) (7,167 ) (1,693 ) (5,474 ) Net loss $ (99,128 ) $ (50,476 ) $ (48,652 ) License revenue License revenue was $18.0 thousand for the nine months ended September 30, 2020, representing Verve license revenue recorded under the Collaboration and License Agreement executed in April 2019, compared to $12.0 thousand for nine months ended September 30, 2019. Research and development expenses Research and development expenses were $70.7 million and $34.4 million for the nine months ended September 30, 2020 and 2019, respectively. The increase of $36.3 million was primarily due to the following: • Increases of $15.3 million in lab supplies and outsourced services, driven primarily by external research services such as CMOs and sponsored research agreements. • An increase of $7.5 million in milestone and license expenses, primarily related to our agreements with Bio Palette and Prime Medicine. During the nine months ended September 30, 2020, we recognized a $5.0 million expense, which represents the 28 fair value of our common stock to be issued to Prime Medicine as of September 30, 2020 , and recorded a $2.3 million milestone paid to Bio Palette as the issuance of a certain patent in the United States became probable. • Increases of $7.0 million in personnel-related costs, and $3.7 million in facility-related costs, including depreciation. These increases were due to the growth in the number of research and development employees from 92 at September 30, 2019 to 136 and September 30, 2020, and their related activities, as well as the expense allocated to research and development related to our leased facilities. • An increase of $2.4 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. General and administrative expenses General and administrative expenses were $21.3 million and $14.4 million for the nine months ended September 30, 2020 and 2019, respectively. The increase of $6.9 million was primarily due to the following: • A $2.1 million increase in insurance costs due to increased directors and officers insurance costs as a result of our being a public company, and a $1.8 million increase in intellectual property costs, offset by a $0.5 million decrease in corporate legal expenses. • A $1.9 million increase in personnel related costs due to an increase in general and administrative employees from 20 employees as of September 30, 2019 to 30 employees as of September 30, 2020, and a $1.2 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. Change in fair value of derivative liabilities During the nine months ended September 30, 2020, we recorded $8.7 million of expense related to the change in fair value of success payment liabilities as compared to $3.6 million expense for the nine months ended September 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 September 30, 2020 and will continue to be revalued at each reporting period. Interest and other income (expense), net The decrease in interest and other income (expense), net was primarily due to an increase in the 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 through equity offerings. As of September 30, 2020, we had $202.2 million in cash, cash equivalents, and marketable securities. In October 2020, we issued and sold 5,750,000 shares of our 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. We received approximately $126.6 million in net proceeds after deducting applicable underwriting discounts and estimated offering expenses. 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, building and maintaining a commercial-scale cGMP manufacturing facility, 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. 29 Cash flows The following table summarizes our sources and uses of cash for the nine months ended September 30, 2020 and 2019 (in thousands): Nine Months Ended September 30, 2020 2019 Net cash used in operating activities $ (71,443 ) $ (54,203 ) Net cash used in investing activities (18,696 ) (83,218 ) Net cash provided by financing activities 192,329 40,580 Net change in cash, cash equivalents and restricted cash $ 102,190 $ (96,841 ) Operating activities Net cash used in operating activities for the nine months ended September 30, 2020 was $71.4 million, consisting primarily of our net loss of $99.1 million, an increase in prepaid expenses and other current assets of $3.7 million, and a decrease in operating lease liabilities of $3.2 million; offset by an increase in accrued expenses and other liabilities of $4.2 million, and noncash charges consisting primarily of change in fair value of derivative liabilities of $8.7 million, stock-based compensation expense of $8.6 million, non-cash research and development license expense, net of $5.2 million, depreciation expense of $3.5 million, and change in operating lease ROU assets of $3.1 million. Net cash used in operating activities for the nine months ended September 30, 2019 was $54.2 million, consisting primarily of our net loss of $50.5 million, a decrease in financing milestone liabilities of $13.8 million resulting from payment of these liabilities, an increase in prepaid expenses and other current assets of $2.1 million, and a decrease in operating lease liabilities of $1.4 million; offset by increases in accounts payable and accrued expenses of $2.7 million, and noncash charges consisting primarily of stock-based compensation expense of $5.0 million, change in fair value of derivative liabilities of $3.6 million, depreciation expense of $2.5 million and change in operating lease ROU assets of $1.0 million. Investing activities For the nine months ended September 30, 2020, cash used in investing activities was primarily the net purchases of marketable securities of $9.7 million, and purchases of property and equipment of $8.2 million. For the nine months ended September 30, 2019, cash used in investing activities was the net purchases of marketable securities of $72.4 million, and purchases of property and equipment of $10.4 million. Financing activities Net cash provided by financing activities for the nine months ended September 30, 2020 consisted primarily of proceeds from our IPO of $192.5 million, net of underwriting discounts, and proceeds of $1.6 million from equipment financing, and proceeds from the exercise of stock options of $1.1 million; offset by the payment of equity offering costs of $1.7 million, and repayments of equipment financing liabilities of $1.2 million. Net cash provided by financing activities for the nine months ended September 30, 2019 consisted primarily of the net proceeds from the issuance of Series B Preferred Stock of $37.9 million, and proceeds of $3.8 million from equipment financing; offset by the payment of IPO costs of $1.1 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; 30 • 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 cGMP manufacturing facility; and • continue to operate as a public company. We expect that our cash, cash equivalents and marketable securities at September 30, 2020, along with the proceeds from our common stock offering in October 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, maintaining 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; and • the costs of obtaining, building and expanding our manufacturing capacity. 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. 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. 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. 31 During the nine months ended September 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 contr actual 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.