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Item 2. Management’s Discussion and Analysis

2021-05-11 compared with 2020-11-10 · 178 added, 222 removed, 185 unchanged (68% of the section changed)

Management’s Discussion and Analysis of Financial Cond ition and Results of Operations

Management’s Discussion 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.

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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.

and elsewhere in this Quarterly Report on Form 10-Q, and in the “Item 1A.

Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

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.

We are a biotechnology company committed to establishing the leading, fully integrated platform for precision genetic medicines.

Our vision is to provide life-long cures to patients suffering from serious diseases.

To achieve this vision, we have assembled a platform that includes a suite of gene editing and delivery technologies and are in the process of developing internal manufacturing capabilities.

Our suite of gene editing technologies is anchored by our proprietary base editing technology, which potentially enables an entirely new class of precision genetic medicines that target 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.

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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.

To unlock the full potential of our base editing technology across a wide range of therapeutic applications, we are pursuing a broad suite of both clinically validated and novel delivery modalities.

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:

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

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

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and (3) 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.

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 or 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.

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.

We believe that building an integrated platform combining our gene editing capabilities with advanced delivery and manufacturing capabilities will give us the maximum flexibility to develop our own sustainable portfolio and to create a hub for partnering with other companies to unlock the full potential of precision genetic medicine across all possible applications.

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);

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

We are using base editing to pursue the development of two complementary approaches to treating sickle cell disease, a severe inherited blood disease caused by a single point mutation, E6V, in the beta globin gene (BEAM-101 and BEAM-102), and one approach to treat beta-thalassemia, another inherited blood disorder characterized by severe anemia caused by reduced production of functional hemoglobin due to insufficient expression of the beta globin protein (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.

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.

Our development candidate, 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 initiated IND-enabling studies in 2020 and expect to file an IND for BEAM-101 during the second half of 2021.

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.

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

This approach has been enabled by our inlaid base editors, or IBEs, which are architectural variants of base editors that have attributes of enhanced specificity and altered activity windows relative to foundational base editors.

Our IBEs expand the breadth of potential base editing targets by extending the range of editing windows that can be created for any given CRISPR protein used to target the DNA.

By inserting the deaminase into the CRISPR protein at various strategic positions, thereby repositioning the deaminase’s editing window, IBEs enable editing outside the traditional editing window.

BEAM-102 directly corrects the causative mutation in sickle cell disease by recreating a naturally-occurring normal human hemoglobin variant, HbG-Makassar.

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.

This variant, which was identified in humans and first published 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.

In this preclinical study, the Makassar variant does not cause hemoglobin to polymerize and red blood cells to sickle and, therefore, edited cells are cured through elimination of the disease-causing protein.

We plan to initiate IND-enabling studies for BEAM-102 during 2021.

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.

The initial indications that we plan to target with our chimeric antigen receptor T cell, or CAR-T, product candidates are relapsed, refractory T-cell acute lymphoblastic leukemia, or T-ALL, a severe disease affecting children and adults, 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.

Our proof-of-concept pre-clinical experiments have 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 were achieved without the generation of chromosomal rearrangements, as detected by sensitive methods such as UDiTaSTM or G-banded Karyotyping and with no loss of cell viability from editing.

Our proof-of-concept experiments have also demonstrated robust T cell killing of target tumor cells both in vitro and in vivo .

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.

BEAM-201 is our potent and specific anti-CD7, multiplex edited, allogeneic CAR-T development candidate for the treatment of relapsed/refractory T-ALL.

BEAM-201 is produced using a Good Manufacturing Practice, or cGMP, 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.

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:

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.

Enable an allogeneic cell source by masking BEAM-201 cells to anti-CD52 lymphodepleting agents to reduce host rejection of BEAM-201 cells.

Minimize immunosuppression of BEAM-201 cells by the tumor microenvironment and prolong efficacy for attacking the tumor.

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).

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.

We plan to initiate IND-enabling studies for BEAM-201 during 2021.

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.

We are currently using a variety of cationic lipids from various sources to advance our programs for genetic liver diseases, which include Alpha-1 Antitrypsin Deficiency, or Alpha-1, and Glycogen Storage Disease Type IA, or GSDIa (also known as Von Gierke disease).

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.

GSDIa 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).

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.

We continue to advance our liver disease programs.

In 2020, we showed the ability to directly correct the mutation causing Alpha-1, providing both in vitro and in vivo preclinical proof-of-concept for base editing to correct this disease.

We have also achieved editing levels in vivo , in preclinical models, for the correction of the two most prevalent mutations causing GSDIa, which could be clinically relevant if reproduced in humans.

An important next step for our liver disease programs is finalizing 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.

In addition, in May 2021, we announced initial data from our evaluation of various LNP formulations and mRNA production processes using an mRNA-encoding ABE and guide RNA to target the ALAS1 gene, a surrogate payload for genetic liver diseases.

The data showed improved in vivo editing in the livers of non-human primates from less than 10% initially to 52% at a total RNA dose of 1.5 mg/kg.

The data also demonstrated that these formulations were well tolerated by non-human primates at 1.5 mg/kg with mild and transient liver enzyme elevations, and showed promising interim stability, maintaining potency after 8 weeks at -20⁰C .

We are continuing to work on optimizing our LNP formulations and believe we are on track to nominate our first development candidate from our liver portfolio in the second half of 2021.

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.

We are currently evaluating AAV technology to correct one of the most prevalent mutations in the ABCA4 gene causing Stargardt disease, a progressive macular degeneration.

This mutation is known as the G1961E point mutation.

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

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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.

Delivery of genetic medicines

To complement our next-generation gene editing technologies, we are also making significant investments in a broad suite of delivery technologies to deliver our gene editing payloads to the right cells to enable potentially curative therapy.

These delivery technologies include ex vivo electroporation, nonviral vectors such as LNPs, and viral vectors such as AAVs.

In our pipeline, we have initially focused on applications of these technologies that are clinically-validated, such as ex vivo editing of blood stem cells or LNP delivery to the liver.

Longer term, we are also investing in more innovative delivery options, such as LNPs that could target other organs beyond the liver, or novel viral vectors beyond AAV.

We have also developed critical enabling capabilities such as mRNA manufacturing and cell processing for autologous and allogeneic cell therapy.

Consistent with this approach, our recent acquisition of Guide Therapeutics, Inc., or Guide, expands our ability to explore new tissues and disease indications with our editing technologies.

Guide’s proprietary screening technology, which utilizes DNA barcodes to enable high throughput in vivo LNP screening, provides us with access to an existing broad library of lipids and lipid formulations, and the ability to generate additional novel LNPs that we believe could accelerate novel nonviral delivery of gene editing payloads to tissues beyond the liver.

Collaborations

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Boston Children’s Hospital

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

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

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.

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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.

In June 2020, we announced a non-exclusive research and clinical collaboration agreement with Magenta Therapeutics Inc., or Magenta, to evaluate the potential utility of MGTA-117, Magenta’s novel targeted antibody-drug conjugate 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 is designed to precisely target only hematopoietic stem and progenitor cells, to spare 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.

Combining the precision of our base editing technology with the more targeted conditioning regimen enabled by MGTA-117 has the potential to 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.

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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.

In April 2019, we entered into a collaboration and license agreement with Verve Therapeutics Inc., or 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 more 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.

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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, 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.

In January 2021, Verve announced it had selected VERVE-101 as its lead product to be developed initially for the treatment of heterozygous familial hypercholesterolemia, or HeFH, a potentially fatal genetic heart disease.

Individuals with HeFH have a genetic mutation causing extremely high LDL-C levels in the blood.

Over time, high LDL-C builds up in the heart’s arteries, resulting in reduced blood flow or blockage, and ultimately heart attack or stroke.

Inactivation of the proprotein convertase subtilisin/kexin type 9, or PCSK9, gene has been shown to up-regulate LDL receptor expression, which leads to lower LDL-C levels.

By making a single A-to-G change in the DNA genetic sequence of PCSK9, VERVE-101 aims to inactivate the target gene.

In January 2021, Verve also reported additional preclinical proof-of-concept data in non-human primates that demonstrated the successful use of ABEs to turn off PCSK9.

Utilizing ABE technology licensed from us and an optimized guide RNA packaged in an engineered lipid nanoparticle, Verve announced data demonstrating that in vivo base editing of the PCSK9 gene in the liver of non-human primates resulted in durable and consistent lowering of blood LDL-C and blood PCSK9 protein levels following a single course of treatment.

In its studies, Verve reported that a single intravenous infusion achieved a 59% reduction in blood LDL-C at two weeks, which was maintained at six months post treatment, and that LDL-C reduction over this time period averaged 61%.

Verve also disclosed that during this same six-month time period, the average blood PCSK9 protein level was reduced by 89%.

Verve further reported that the treatment was well tolerated with no adverse events reported during the study and that in studies of 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.

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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.

to build a 100,000 square foot current 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.

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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 to address and mitigate the impact of the COVID-19 pandemic on our business.

In February 2021, we entered into an Agreement and Plan of Merger, or the Guide Merger Agreement, to acquire Guide Therapeutics, Inc., or Guide.

Pursuant to the Guide Merger Agreement, we paid Guide’s former stockholders and optionholders upfront consideration in an aggregate amount of $120.0 million, excluding customary purchase price adjustments, in shares of our common stock, based upon the volume-weighted average price of the common stock over the ten trading day period ending on February 19, 2021.

In addition, Guide’s former stockholders and optionholders will be eligible to receive up to an additional $100.0 million in technology milestone payments and $220.0 million in product milestone payments, payable in our common stock.

With the ongoing concern related to the COVID-19 pandemic in the year ended December 31, 2020 and the three months ended March 31, 2021, 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.

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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.

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.

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 duration, scope and severity of the pandemic, the duration and extent of travel restrictions and social distancing in the United States and other countries, business closures and business disruptions, the effectiveness of actions taken in the United States and other countries to contain and treat the disease, periodic spikes in infection rates, new strains of the virus that cause outbreaks of COVID-19, and the broad availability of effective vaccines.

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 three months ended March 31, 2021, 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

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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.

There have been no significant changes to our existing critical accounting policies and significant accounting policies discussed in our Annual Report on Form 10-K for the year ended December 31, 2020 except as discussed below.

Asset Acquisition s

In 2018, we adopted ASU 2017-01, Business Combinations , or ASU 2017-01, which clarified the definition of a business.

We measure and recognize asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets, which includes transaction costs, and the consideration is allocated to the items acquired based on a relative fair value methodology.

Goodwill is not recognized in asset acquisitions.

In an asset acquisition, the cost allocated to acquire in-process research and development with no alternative future use is charged to research and development expense at the acquisition date.

At the time of acquisition, we determine if a transaction should be accounted for as a business combination or acquisition of assets.

Contingent Consideration Liabilities

We may be required to make milestone payments to the former stockholders and optionholders of Guide in the form of our common stock based on the achievement of certain product and technology milestones.

The payments are accounted for under ASC 480 , Distinguishing Liabilities from Equity .

These contingent consideration liabilities are carried at fair value which was estimated by applying a probability-based model, which utilized inputs that were unobservable in the market.

The estimated fair value of contingent consideration liabilities, initially measured and recorded on the acquisition date, are considered to be a Level 3 instrument and are reviewed quarterly, or whenever events or circumstances occur that indicate a change in fair value.

The contingent consideration liabilities are recorded at fair value at the end of each reporting period with changes in estimated fair values recorded in other income (expense) in the condensed consolidated statements of operations.

The estimated fair value is determined based on probability adjusted discounted cash flow models that include significant estimates and assumptions pertaining to technology and product development.

Significant changes in any of the probabilities of success would result in a significantly higher or lower fair value measurement.

Significant changes in the probabilities as to the periods in which milestones will be achieved would result in a significantly lower or higher fair value measurement.

Financial operations overview

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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.

To date, we have financed our operations primarily through the sales of our redeemable convertible preferred stock and proceeds from our Initial Public Offering, or IPO, our follow-on offering, and private placement.

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

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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.

Our net losses for the three months ended March 31, 2021 and 2020 were $201.6 million and $30.5 million, respectively.

As of March 31, 2021, we had an accumulated deficit of $599.2 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;

build and operate our current Good Manufacturing Practice, or cGMP, facility in North Carolina, further develop our base editing platform;

continue to make investments in delivery technology for our base editors, including in connection with our recent acquisition of Guide;

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.

maintain, expand, enforce, defend and protect our intellectual property portfolio;

and continue to hire research and development, clinical and commercial personnel.

In addition, we expect to continue to incur additional costs associated with operating as a public company and implementing controls over financing reporting.

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

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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;

Expenses incurred in connection with investments in delivery technology for our base editors, including as a result of our acquisition of Guide;

the cost to obtain licenses to intellectual property, such as those with Harvard University, or Harvard, Broad Institute of MIT and Harvard, or Broad Institute, and Editas Medicine, Inc, or 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;

expenses incurred in connection with the building of our base editing platform;

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

laboratory supplies and research materials;

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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 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.

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.

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.

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our administrative functions.

General and administrative expenses also include 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,

We also expect to continue to incur increased costs associated with being a public company and implementing controls over financial reporting, 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.

Other income and expenses

Other income and expenses consist of the following items:

Change in fair value of derivative liabilities consists of remeasurement gains or losses associated with changes in success payment liabilities associated with our license agreement with Harvard, dated as of June 27, 2017, as amended, or the Harvard License Agreement, and the license agreement between Blink and Broad Institute, as amended, dated as of May 9, 2018, or the Broad License Agreement.

Change in fair value of contingent consideration liabilities consists of remeasurement gains or losses associated with changes in the technology and product contingent consideration liabilities as part of the Guide Merger.

Interest and other income (expense) , net consists primarily of interest income as well as interest expense related to our equipment financings, and mark-to-market adjustments related to our investments in equity securities.

Results of operations

Comparison of the three months ended March 31, 2021 and 2020

The following table summarizes our results of operations (in thousands) :

Three Months Ended March 31,

License revenue

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Change in fair value of derivative liabilities

Interest and other income (expense), net

Change in fair value of contingent consideration liabilities

Interest and other income, net

Total other income (expense)

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.

License revenue was approximately $6.0 thousand for the three months ended March 31, 2021 and March 31, 2020.

License revenue represents 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.

Research and development expenses were $190.1 million and $21.5 million for the three months ended March 31, 2021 and 2020, respectively.

The increase of $168.6 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.

$155.0 million of expense related to in-process research and development asset acquired from Guide as there was determined to be no alternative future use.

An increase of $7.2 million in outsourced services and lab supplies, driven primarily by external research services such as CMOs, IND studies and sponsored research agreements.

Increases of $3.0 million in personnel-related costs and $3.3 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.

These increases were due to the growth in the number of research and development employees from 110 at March 31, 2020 to 182 at March 31, 2021, and their related activities, as well as the expense allocated to research and development related to our leased facilities.

An increase of $1.4 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.

An increase of $1.1 million in other expenses, primarily related to an increase in research and development specific software costs.

A decrease of $2.3 million in milestone and license expenses.

In March 2020, we recorded a $2.3 million milestone liability as the issuance of a certain Bio Palette patent in the United States became probable.

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,

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 (expense), net

Total other income (expense)

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

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.

General and administrative expenses were $10.3 million and $6.8 million for the three months ended March 31, 2021 and 2020, respectively.

The increase of $3.5 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.

Increases of $1.2 million in personnel related costs and $0.5 million in other (primarily information technology and facility related) costs due to an increase in general and administrative employees from 24 employees as of March 31, 2020 to 34 employees as of March 31, 2021.

An increase of $0.6 million in insurance costs due to increased directors and officers insurance costs as a result of our being a public company in February 2020.

Increases of $0.5 million in corporate legal and $0.3 million in intellectual property costs due to costs related to our acquisition of Guide.

An increase of $0.5 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.

During the three months ended March 31, 2021, we recorded $1.9 million of expense related to the change in fair value of success payment liabilities as compared to $2.7 million expense for the three months ended March 31, 2020.

The success payment obligations are still outstanding as of March 31, 2021 and will continue to be revalued at each reporting period.

The first success payment will occur in June 2021.

Change in contingent consideration liabilities

During the three months ended March 31, 2021, we recorded $0.3 million of expense related to the change in fair value of the Guide technology and product contingent consideration liabilities.

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.

The increase 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 a decrease in interest income driven by decreased market rates.

Liquidity and capital resources

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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.

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

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.

We received approximately $126.6 million in net proceeds after deducting applicable underwriting discounts and offering expenses.

In January 2021, we issued and sold 2,795,700 shares of our common stock in a private placement at an offering price of $93.00 per share for aggregate gross proceeds of $260.0 million.

We received $252.0 million in net proceeds after deducting offering expenses payable by us.

To date, we have funded our operations primarily through equity offerings.

As of March 31, 2021, we had $503.5 million in cash, cash equivalents, and marketable securities.

In April 2021, we entered into an At-The-Market (“ATM”) sales agreement with Jefferies LLC (“Jefferies”), under which we may offer and sell, from time to time at prevailing market prices, shares of our common stock having aggregate gross proceeds of up to $300.0 million.

The sales agent will be entitled to compensation at a commission rate of 3.0% of the aggregate gross sales price per share sold by it under the sales agreement.

In the second quarter of 2021, we began to issue and sell securities under this sales agreement.

We sold 12,607 shares of our common stock under this agreement subsequent to March 31, 2021 through May 4, 2021 for net cash proceeds of $0.8 million, after deducting commission fees and offering expenses payable by the Company.

We are required to make success payments to Harvard and Broad Institute based on increases in the per share fair market value of our Series A-1 Preferred Stock and Series A-2 Preferred Stock or, subsequent to our IPO, our common stock.

In May 2021, the first success payment measurements occurred and success payments to Harvard and Broad Institute were calculated to be $15.0 million and $15.0 million, respectively.

We elected to make each payment in shares of our common stock, and thereby expect to issue shares of our common stock to settle these liabilities to Harvard and Broad Institute in June 2021.

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.

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 , build ing , maintain ing and operating 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.

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,

For a more detailed discussion of risks related to COVID-19, please see Part II, Item 1A, Risk F actors—Risks related to our relationships with third parties , included in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 15, 2021.

The following table summarizes our sources and uses of cash (in thousands):

Three Months Ended March 31,

Net cash used in operating activities

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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.

Net cash used in operating activities for the three months ended March 31, 2021 was $38.6 million, consisting primarily of our net loss of $201.6 million, a decrease in accrued expenses and other liabilities of $4.5 million, an increase in prepaid expenses and other current assets of $2.4 million, a decrease in accounts payable of $0.7 million and other non-cash items of $1.0 million;

offset by a change in operating lease liabilities of $6.1 million, and noncash expenses consisting primarily of in-process research and development expense of $155.0 million related to our acquisition of Guide, stock-based compensation expense of $4.6 million, change in operating lease ROU assets of $2.4 million, change in fair value of derivative liabilities of $1.9 million, depreciation and amortization expense of $1.4 million and change in contingent consideration liabilities of $0.3 million.

Net cash used in operating activities for the three months ended March 31, 2020 was $27.4 million, consisting primarily of our net loss of $30.5 million, an increase in prepaid expenses and other current assets of $3.6 million, a decrease in operating lease liabilities of $0.9 million, and decreases in accounts payable and accrued expenses of $0.1 million, offset by noncash charges consisting primarily of stock-based compensation expense of $2.8 million, change in fair value of derivative liabilities of $2.7 million, depreciation expense of $1.1 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.

For the three months ended March 31, 2021, cash used in investing activities was primarily the net purchases of marketable securities of $268.8 million, and purchases of property and equipment of $11.5 million.

We also received $0.6 million in cash from our acquisition of Guide, after the payment of acquisition costs.

For the three months ended March 31, 2020, cash used in investing activities was primarily the net purchases of marketable securities of $73.0 million, and purchases of property and equipment of $3.0 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;

Net cash provided by financing activities for the three months ended March 31, 2021 consisted primarily of proceeds from our private placement offering of $260.0 million and proceeds from the exercise of stock options of $1.8 million, offset in part by the payment of equity offering costs of $8.0 million and repayments of equipment financing liabilities of $0.5 million.

Net cash provided by financing activities for the three months ended March 31, 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;

offset by the payment of equity offering costs of $1.0 million, and repayments of equipment financing liabilities of $0.3 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

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further develop our base editing platform;

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

further develop delivery technology for our base editors, resulting from our acquisition of Guide;

continue to 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;

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.

build, maintain and operate a commercial-scale cGMP manufacturing facility.

We expect that our cash, cash equivalents and marketable securities at March 31, 2021, 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.

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

the payment of success liabilities, should we choose to pay in cash;

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

the costs of operating as a public company;

the costs of obtaining, building and expanding our manufacturing capacity.

the costs of obtaining, building, operating 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.

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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 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.

During the three months ended March 31, 2021, we entered into the second phase of our April 2019 lease for office and laboratory space to be built.

The minimum of undiscounted lease payments due under the second phase of this lease is $42.7 million.

In May 2021, the first success payment measurements occurred and success payments to Harvard and Broad Institute were calculated to be $15.0 million and $15.0 million, respectively.

We elected to make each payment in shares of our common stock, and thereby expect to issue shares of our common stock to settle these liabilities to Harvard and Broad Institute in June 2021.

Off-balance sheet arrangements

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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 2. Management’s Discussion and Analysis