What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2021-02-26 compared with 2020-02-26 · 132 added, 116 removed, 224 unchanged (53% of the section changed)

10 unchanged sentences

The forward-looking statements contained in this Annual Report on Form 10-K are made as of the date of this Annual Report on Form 10-K,and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

We are a leading, clinical stage genome editing company dedicated to developing potentially transformative genomic medicines to treat a broad range of serious diseases.

We have developed a proprietary genome editing platform based on CRISPR technology and we continue to expand its capabilities.

We are a leading, clinical stage gene editing company dedicated to developing potentially transformative gene-editing medicines to treat a broad range of serious diseases.

We have developed a proprietary gene editing platform based on CRISPR technology and we continue to expand its capabilities.

Our product development strategy is to target diseases of high unmet need where we aim to make differentiated, transformational medicines using our gene editing platform.

We are advancing both in vivo CRISPR medicines, in which the medicine is injected or infused into the patient to edit the cells inside their body, and engineered cell medicines, in which cells are edited with our technology and then administered to the patient.

While our discovery efforts have ranged across several diseases and therapeutic areas, the two areas where our programs are more mature are ocular diseases and engineered cell medicines to treat hemoglobinopathies and cancer.

In ocular diseases, our most advanced program is designed to address a specific genetic form of retinal degeneration called Leber congenital amaurosis 10 (“LCA10”), a disease for which we are not aware of any available therapies and only one other potential treatment in clinical trials in the United States and Europe.

In mid-2019, we initiated a Phase 1/2 clinical trial for EDIT-101 (also known as AGN-151587), an experimental medicine to treat LCA10, pursuant to an investigational new drug application (“IND”) that we filed in October 2018 and which was accepted by the United States Food and Drug Administration (“FDA”) in November 2018.

We and our partner Allergan Pharmaceuticals International Limited (together with its affiliates, “Allergan”) have begun patient screening and expect to announce patient dosing by the end of the first quarter of 2020 .

We plan to enroll approximately 18 patients in the United States and Europe.

We are advancing both in vivo gene editing medicines, in which the medicine is injected or infused into the patient to edit the cells inside their body, and ex vivo gene edited cell medicines, in which cells are edited with our technology and then administered to the patient.

While our discovery efforts have ranged across several diseases and therapeutic areas, the two areas where our programs are more mature are our in vivo medicines to treat ocular diseases and ex vivo gene edited cell medicines to treat hemoglobinopathies and cancer.

In mid-2019, we initiated our Phase 1/2 BRILLIANCE clinical trial for EDIT-101, an experimental gene-editing medicine to treat LCA10 .

We plan to enroll approximately 18 patients in the United States and Europe in up to five cohorts.

We completed dosing of the first cohort, the adult low-dose cohort, in 2020.

Due to an absence of severe adverse events and dose limited toxicity in adults treated in the first cohort, the inclusion criteria of the protocol was modified to allow inclusion of subjects with better than light perception vision only.

Although we experienced slowed enrollment in 2020 for subsequent cohorts due to the ongoing impact of the COVID-19 pandemic, in the first quarter of 2021 we initiated dosing of the second cohort, the adult mid-dose cohort.

We expect to announce initial clinical data in 2021.

In May 2015, we entered into a collaboration with Juno Therapeutics, Inc., a wholly-owned subsidiary of Bristol-Myers Squibb Company (“Juno Therapeutics”), a leader in the emerging field of immuno-oncology, to develop novel engineered alpha-beta T cell therapies for cancer and autoimmune diseases, which was amended and restated in each of May 2018 and November 2019, at which time we also entered into a related license agreement with Juno Therapeutics, which we collectively refer to as our collaboration with them.

In March 2017, we entered into a strategic alliance and option agreement with Allergan a leading global pharmaceutical company, to discover, develop, and

commercialize new gene editing medicines for a range of ocular disorders.

In March 2017, we entered into a strategic alliance and option agreement with Allergan Pharmaceuticals International Limited (together with its affiliates, “Allergan”) to discover, develop, and commercialize new gene editing medicines for a range of ocular disorders.

In July 2018, Allergan exercised its option to develop and commercialize EDIT-101 and paid us $15.0 million in connection with such exercise (the “EDIT-101 Option Exercise Payment”).

We and Allergan subsequently entered into a co-development and commercialization agreement under which we will co-develop and equally split profits and losses for EDIT-101 in the United States.

We and Allergan subsequently entered into a co-development and commercialization agreement under which we agreed to co-develop and equally split profits and losses for EDIT-101 in the United States.

In December 2018, we also received a $25.0 million payment from Allergan in connection with the acceptance of the IND for EDIT-101 (the “EDIT-101 Milestone Payment”).

Since our inception in September 2013, our operations have focused on organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio, assembling our core capabilities in genome editing, seeking to identify potential product candidates, and undertaking preclinical studies.

Except for EDIT-101, all of our research programs are still in the preclinical or research stage of development and the risk of failure of all of our research programs is high.

In August 2020, we and Allergan terminated the strategic alliance and option agreement and the co-development and commercialization agreement, and we assumed full rights to EDIT-101 and responsibility for conducting the clinical trial.

In connection with such termination, we and Allergan entered into a termination agreement, pursuant to which we made a one-time aggregate payment of $20.0 million to Allergan during the second half of 2020.

Since our inception in September 2013, our operations have focused on organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio, assembling our core capabilities in gene editing, seeking to identify potential product candidates, and undertaking preclinical studies.

Except for EDIT-101 and EDIT-301, all of our research programs are still in the preclinical or research stage of development and the risk of failure of all of our research programs is high.

We have not generated any revenue from product sales.

We have funded our operations primarily through the initial public offering of our common stock, follow-on public offerings of our common stock including through at-the-market offerings, private placements of our preferred stock, payments received under our collaboration with Juno Therapeutics and payments received under our strategic alliance and co-development and commercialization agreements with Allergan.

We have primarily financed our operations through various equity financings and payments received under our research collaboration with Juno Therapeutics and our strategic alliance with Allergan .

From inception through December 31, 2020, we raised an aggregate of $1,104.2 million to fund our operations.

5 unchanged sentences

We anticipate that our expenses will increase substantially as we continue our current research programs and our preclinical development activities;

progress the clinical development of EDIT-101 with Allergan;

progress the clinical development of EDIT-101 and EDIT-301 for the treatment of sickle cell disease;

seek to identify additional research programs and additional product candidates;

5 unchanged sentences

We do not expect to be profitable for the year ending December 31, 2021 or the foreseeable future.

Although we did not experience any significant impact on our financial condition, results of operations or liquidity due to the ongoing COVID-19 pandemic during the year ended December 31, 2020, we did experience slowed enrollment in the EDIT-101 clinical trial as a result of the COVID-19 pandemic.

The ultimate impact of the COVID-19 pandemic is highly uncertain and we do not yet know the full extent of potential delays or impacts on our business, our ability to continue to raise additional capital, the EDIT-101 or EDIT-301 clinical trials, ongoing preclinical activities, or the global economy as a whole.

In March 2020, we implemented a work from home policy, and restricted on-site activities at our facilities in Massachusetts and Colorado to certain manufacturing, laboratory and related support activities in light of the COVID-19 pandemic.

Under our return to onsite work plans, we have resumed manufacturing, laboratory and related support activities at our facilities in Massachusetts and Colorado using shifts and other capacity-limiting measures to comply with social distancing guidelines.

As such, it is uncertain as to the full magnitude that the pandemic will have directly or indirectly on our financial condition, liquidity and future results of operations.

Financial Operations Overview

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

In connection with entering into our collaboration with Juno Therapeutics in May 2015, we received an upfront payment of $25.0 million, and in each of May 2016 and July 2017, we received a milestone payment of $2.5 million.

In May 2018, in connection with the amendment and restatement of our collaboration agreement with Juno Therapeutics to expand our collaboration to add an additional research program, we received $5.0 million for amending the agreement and two $2.5 million milestone payments for technical progress in a research program.

In November 2019, we further amended and restated our collaboration with Juno Therapeutics.

Pursuant to the amended and restated collaboration, we received a $70.0 million payment from Juno Therapeutics and will no longer receive research support under such collaboration.

Through December 31, 2019 and prior to amending and restating our collaboration in November 2019, we had recognized an aggregate of $23.9 million of research support from Juno Therapeutics since entering into the collaboration.

During the year ended December 31, 2019, we recognized $6.2 million of research support from Juno Therapeutics.

As of December 31, 2019, we recorded $96.3 million of deferred revenue, all of which is classified as long-term on our consolidated balance sheet, related to the collaboration.

In connection with entering into our strategic alliance with Allergan in March 2017, we received an upfront payment of $90.0 million from Allergan (such payment, the “Allergan Upfront”).

In addition, we received $15.0 million related to the EDIT-101 Option Exercise Payment in July 2018 and $25.0 million related to the EDIT-101 Milestone Payment in December 2018.

Through December 31, 2019, we had recognized an aggregate of $44.4 million in revenue related to our strategic alliance with Allergan, which includes all of the EDIT-101 Option Exercise Payment and a

portion of the EDIT-101 Milestone Payment.

For the year ended December 31, 2019, we recognized $13.6 million in revenue in connection with the Allergan Upfront, which includes a portion of the EDIT-101 Milestone Payment.

As of December 31, 2019, we recorded $85.6 million of deferred revenue, of which $63.8 million is classified as long-term on the consolidated balance sheet.

For additional information about our revenue recognition policy related to the Juno Therapeutics collaboration or the Allergan alliance, see “—Critical Accounting Policies and Estimates—Revenue Recognition.”

For the foreseeable future, we expect substantially all of our revenue will be generated from our collaboration with Juno Therapeutics, our strategic alliance with Allergan, any other collaborations or agreements we may enter into and anticipated interest income.

In connection with our collaboration with Juno Therapeutics, we have received an aggregate of $120.5 million in payments, which have primarily consisted of the initial upfront and amendment payments, development milestone payments and research funding support.

We no longer receive research funding support.

As of December 31, 2020, we recorded $90.7 million of deferred revenue, of which $73.7 million is classified as long-term on our consolidated balance sheet.

During the year ended December 31, 2020, we recognized $5.7 million of previously deferred revenue related to Juno Therapeutics.

Under this collaboration, we will recognize revenue upon delivery of option packages to Juno Therapeutics.

We expect that our revenue will fluctuate from quarter-to-quarter and year-to-year as a result of the timing of when we deliver such option packages.

In connection with our strategic alliance with Allergan, we received an aggregate of $130.0 million in payments, which consisted of the initial upfront payment, an option exercise payment and a milestone payment.

Prior to the termination of our agreements with Allergan, certain of these payments were deferred and were being recognized over the remaining contract term using the proportional performance method.

During the third quarter of 2020, as a result of the termination of our agreements with Allergan, we recognized $63.2 million of previously deferred revenue related to Allergan.

For additional information about our revenue recognition policy related to the Juno Therapeutics collaboration or the Allergan strategic alliance, see “—Critical Accounting Policies and Estimates—Revenue Recognition” included in our Annual Report.

For the foreseeable future we expect substantially all of our revenue will be generated from our collaboration with Juno Therapeutics, and any other collaborations or agreements we may enter into.

Research and Development Expenses

7 unchanged sentences

Research and development costs are expensed as incurred.

At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of any product candidates we may identify and develop.

At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of any product

candidates we may identify and develop.

This is due to the numerous risks and uncertainties associated with developing such product candidates, including the uncertainty of:

11 unchanged sentences

A change in the outcome of any of these variables with respect to the development of any product candidates we develop would significantly change the costs, timing, and viability associated with the development of that product candidate.

As a result of Allergan’s exercise of its option to license EDIT-101 and our entry into a profit-sharing arrangement with Allergan in the United States for EDIT-101, our obligations to fund such program in the United States will represent 50% of the total costs related to developing and commercializing the program in the United States.

We do not track research and development costs on a program-by-program basis except for reimbursable amounts that relate to third-party arrangements.

Research and development activities are central to our business model.

We expect research and development costs to increase significantly for the foreseeable future as our development programs progress, including as we continue to progress the clinical development of EDIT-101 with Allergan as well as supporting preclinical studies for our other research programs.

We expect research and development costs to increase significantly for the foreseeable future as our development programs progress, including as we progress the clinical development of EDIT-101 and EDIT-301 as well as supporting preclinical studies for our other research programs.

General and Administrative Expenses

5 unchanged sentences

With respect to reimbursement of third-party intellectual property-related expenses specifically, given the ongoing nature of the opposition and interference proceedings involving the patents licensed to us under our license agreement with The Broad Institute, Inc.

(“Broad”) and the President and Fellows of Harvard College (“Harvard”), we anticipate general and administrative expenses will continue to be significant.

and the President and Fellows of Harvard College (“Harvard”), we anticipate general and administrative expenses will continue to be significant.

Other Income (Expense), Net

For the year ended December 31, 2020, other income (expense), net consisted primarily of changes in the fair value of equity securities, interest income and accretion of discounts associated with other marketable securities.

For the year ended December 31, 2019, other income (expense), net consisted primarily of interest income and accretion of discounts associated with marketable securities.

For the year ended December 31, 2018, other income (expense), net consisted primarily of interest income, accretion of discounts associated with marketable securities, and rental income from our former subtenant, partially offset by interest expense on our construction financing lease obligation.

For the year ended December 31, 2017, other income (expense), net consisted primarily of interest expense on our construction financing lease obligation and promissory notes, and amortization of premiums associated with

marketable securities, partially offset by rental income from our former subtenant, interest income, and accretion of discounts associated with marketable securities.

Critical Accounting Policies and Estimates

19 unchanged sentences

As part of the accounting for these arrangements, we must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract.

A significant portion of revenue recognized from our strategic alliance with Allergan is related to research services performed for each clinical development program whereby revenue is recognized as the underlying services are performed using a proportional performance model.

We measure proportional performance based on full time employee hours incurred relative to projected full time employee hours to complete the research services for each clinical development program.

We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

A significant portion of revenue recognized from our strategic alliance with Allergan, prior to termination, was related to research services performed for each clinical development program whereby revenue was recognized as the underlying services were performed using a proportional performance model.

Prior to the termination of the arrangement with Allergan, we measured proportional performance based on full time employee hours incurred relative to projected full time employee hours to complete the research services for each clinical development program.

We evaluated the measure of progress each reporting period and, if necessary, adjusted the measure of performance and related revenue recognition.

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in our consolidated balance sheets.

Accrued research and development expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued expenses.

This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost.

The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met.

We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time.

Examples of estimated accrued research and development expenses include fees paid to:

● CROs in connection with clinical studies;

● vendors in connection with preclinical development activities;

● vendors related to development, manufacturing and distribution of clinical trial materials.

We base our expenses related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs that conduct and manage clinical studies on our behalf.

The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows.

There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the clinical expense.

Payments under some of these contracts depend on factors such as the successful enrollment of subjects and the completion of clinical study milestones.

In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period and adjust accordingly.

Results of Operations

8 unchanged sentences

Total operating expenses

Other income, net

Other income (expense), net

Other (expense) income, net

Interest income, net

2 unchanged sentences

Collaboration and Other Research and Development Revenues

Collaboration and other research and development revenues decreased by $11.4 million, to $20.5 million for the year ended December 31, 2019 from $31.9 million for the year ended December 31, 2018.

This decrease was primarily attributable to a $7.9 million decrease in revenue recognized pursuant to our strategic alliance with Allergan, $3.9 million in revenue recognized during the second quarter of 2018 related to a one time upfront payment in connection with an out-license arrangement and a $0.2 million decrease in revenue recognized pursuant to our collaboration with Juno Therapeutics.

Collaboration and other research and development revenues increased by $70.2 million, to $90.7 million for the year ended December 31, 2020 from $20.5 million for the year ended December 31, 2019.

This increase was primarily attributable to a $57.1 million increase in the revenue recognized as a result of the termination of our strategic alliance with Allergan, a $5.1 million increase in revenue recognized pursuant to our collaboration with Juno Therapeutics, and a $8.0 million increase in revenue recognized in connection with other out-license agreements that are individually insignificant.

Research and Development Expenses

3 unchanged sentences

Percentage Change

Process and platform development expenses

External research and development expenses

Employee related expenses

Stock-based compensation expenses

Licensing and sublicensing payment expenses

Facility expenses

Stock-based compensation expenses

Sublicense and license fees

Other expenses

Success payment expenses

Total research and development expenses

The increase in research and development expenses for the year ended December 31, 2020 compared to the year ended December 31, 2019 was primarily attributable to:

● approximately $7.8 million in increased process and platform development expenses due to increased research activity, mostly relating to external research and development costs that we expect will increase further as we continue to progress the clinical development of EDIT-101;

● approximately $30.6 million in increased external research and development expenses due to increased research activity, mostly relating to external research and development costs that we expect will increase further as we progress the clinical development of EDIT-101 and EDIT-301 and further advance our current research programs and our preclinical development activities;

● approximately $27.5 million in increased sublicense and license fees resulting from success payments that were triggered during the fourth quarter of 2020 in connection to the Cpf1 license agreement and the sponsored research agreement with Broad;

● approximately $8.1 million in increased employee related expenses due to an increase in the size of our workforce;

● approximately $4.7 million in increased facility and other related expenses due to increased office and professional service expenses;

● approximately $3.0 million in increased licensing and sublicensing payment expenses, primarily due to sublicense expense recorded during the fourth quarter of 2019 in connection with receiving $70.0 million related to our amended and restated collaboration agreement with Juno Therapeutics, partially offset by sublicense fees owed to certain of our licensors in 2018 in connection with receiving milestone and other payments from our licensees.

● approximately $4.2 million in increased facility and other related expenses due to increased office space and increased professional service expenses.

These increases were partially offset by the following decreases in research and development expenses:

● approximately $12.5 million in decreased success payment expenses resulting from notes payable that were issued to Broad and settled during the second quarter of 2018 in connection with us entering into a sponsored research agreement with Broad;

● approximately $1.2 million in decreased stock-based compensation expenses mostly due to a decrease in non-employee stock option expense.

● approximately $6.3 million in decreased sublicense and license expenses resulting from sublicense expense recorded during the fourth quarter of 2019 in connection with receiving $70.0 million related to our amended and restated collaboration agreement with Juno Therapeutics compared to sublicense expense

recorded during 2020 in connection with receiving $13.0 million related to upfront and milestone payments for our collaboration agreement with Juno and our other individually insignificant out-license agreements;

● approximately $2.0 million in decreased stock-based compensation expenses resulting from forfeitures;

● approximately $1.0 million in decreased other expenses.

General and Administrative Expenses

4 unchanged sentences

Intellectual property and patent related fees

Employee related expenses

Professional service expenses

Stock-based compensation expenses

Employee related expenses

Other expenses

Facility and other expenses

Total general and administrative expenses

The increase in general and administrative expenses for the year ended December 31, 2020 compared to the year ended December 31, 2019 was primarily attributable to:

● approximately $7.6 million in increased professional services expenses primarily related to an increase in our use of consulting services;

● approximately $1.8 million in increased stock-based compensation expenses due to an increase in employee stock option expense and employee headcount;

● approximately $1.3 million in increased employee related expenses due to an increase in the size of our workforce;

● approximately $1.2 million in increased other expenses including facility-related expenses.

These increases were partially offset by an approximate $2.3 million in decreased intellectual property and patent related fees, including expenses associated with the prosecution and maintenance of patents and patent applications.

Other Income, Net

For the year ended December 31, 2019, other income, net was $7.2 million, which was primarily attributable to interest income and accretion of discounts associated with marketable securities.

For the year ended December 31, 2018, other income, net was $3.8 million, which was primarily attributable to interest income, accretion of discounts associated with marketable securities, and rental income from our former subtenant, partially offset by interest expense on our construction financing lease obligation.

● approximately $3.0 million in increased employee related expenses primarily due to an increase in the size of our workforce and the timing of hiring key executives;

● approximately $2.4 million in increased facility and other expenses resulting from additional office space leased in 2020;

● approximately $0.6 million in intellectual property and patent related fees.

These increases were partially offset by approximately $2.1 million in decreased stock-based compensation expenses resulting from a modification that occurred in 2019 with respect to which there was no similar activity in 2020 and approximately $0.8 million in decreased professional service expenses.

Total Other Income, Net

For the year ended December 31, 2020, total other income, net was $18.9 million, which was primarily attributable to the realized gains related to the sale of corporate equity securities, interest income and accretion of discounts associated with marketable securities.

For the year ended December 31, 2019, total other income, net was $7.2 million, which was primarily attributable to interest income and accretion of discounts associated with marketable securities.

Comparison of Years Ended December 31, 2019 and 2018

The following table summarizes our results of operations for the years ended December 31, 2018 and 2017, together with the changes in those items in dollars (in thousands) and the respective percentage of changes:

The following table summarizes our results of operations for the years ended December 31, 2019 and 2018, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

Dollar Change

Percentage Change

Collaboration and other research and development revenues

Collaboration revenue

Operating expenses:

2 unchanged sentences

Total operating expenses

Other income (expense), net:

Other income, net

Interest income (expense), net

Total other income (expense), net

Other expense, net:

Other expense, net

Interest expense

Total other expense, net

For our results of operations, we have included the respective percentage of changes, unless greater than 100% or less than (100)%, in which case we have denoted such changes as not meaningful (n/m).

Collaboration and Other Research and Development Revenues

Collaboration and other research and development revenues increased by $18.2 million, to $31.9 million for the year ended December 31, 2018 from $13.7 million for the year ended December 31, 2017.

This increase was primarily attributable to a $12.7 million increase in revenue recognized pursuant to our strategic alliance with Allergan, $4.0 million in revenue recognized in connection with entering into an out-license agreement and a $1.5 million increase in revenue recognized pursuant to our collaboration with Juno Therapeutics.

Collaboration and other research and development revenues decreased by $11.4 million, to $20.5 million for the year ended December 31, 2019 from $31.9 million for the year ended December 31, 2018.

Research and Development Expenses

Research and development expenses increased by $6.2 million, to $96.9 million for the year ended December 31, 2019 from $90.7 million for the year ended December 31, 2018.

The following table summarizes our research and

development expenses for the years ended December 31, 2018 and December 31, 2017, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

The following table summarizes our research and development expenses for the years ended December 31, 2019 and December 31, 2018, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

Dollar Change

Percentage Change

Process and platform development expenses

Employee related expenses

External research and development expenses

Employee and contractor related expenses

Stock-based compensation expenses

Success payment expenses

Licensing and sublicensing payment expenses

Sublicense and license fees

Facility expenses

Other expenses

Success payment expenses

Total research and development expenses

The increase in research and development expenses for the year ended December 31, 2019 compared to the year ended December 31, 2018 was primarily attributable to:

● approximately $8.3 million in increased process and platform development expenses due to increased research activity, mostly relating to external research and development costs, which was partially offset by $1.7 million in reimbursable research and development expenses associated with our profit-sharing arrangement with Allergan related to EDIT-101;

● approximately $7.8 million in increased external research and development expenses due to increased research activity, mostly relating to external research and development costs that we expect will increase further as we continue to progress the clinical development of EDIT-101;

● approximately $4.5 million in increased employee related expenses due to an increase in the size of our workforce;

● approximately $2.0 million in increased facility and other related expenses due to increased professional service and office expenses.

● approximately $4.7 million in increased facility and other related expenses due to increased office and professional service expenses;

These increases were partially offset by the following decreases in research and development expenses:

● approximately $5.9 million in decreased licensing and sublicensing payment expenses resulting primarily from $14.5 million in sublicense fees that were owed to certain of our licensors in connection with receiving the Allergan Upfront and a milestone received under our collaboration with Juno Therapeutics in 2017, partially offset by sublicense fees owed to certain of our licensors in 2017 in connection with receiving milestone and other payments from our licensees;

● approximately $2.0 million in decreased success payment expenses resulting primarily from $14.5 million in success payments due to the triggering of multiple success payment obligations under licensing agreements in 2017, offset by the $12.5 million notes payable that were issued to Broad and settled during the second quarter of 2018 in connection with us entering into a sponsored research agreement with Broad;

● approximately $0.4 million in decreased stock-based compensation expenses.

● approximately $1.2 million in decreased stock-based compensation expenses mostly due to a decrease in nonemployee stock option expense.

General and Administrative Expenses

General and administrative expenses increased by $4.5 million, to $55.0 million for the year ended December 31, 2018 from $50.5 million for the year ended December 31, 2017.

The following table summarizes our general and

administrative expenses for the years ended December 31, 2018 and December 31, 2017, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

General and administrative expenses increased by approximately $9.5 million, to $64.6 million for the year ended December 31, 2019 from $55.0 million for the year ended December 31, 2018.

The following table summarizes our general and administrative expenses for the years ended December 31, 2019 and December 31, 2018, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

Dollar Change

1 unchanged sentence

Intellectual property and patent related fees

Professional service expenses

Stock-based compensation expenses

Employee related expenses

Professional service expenses

Other expenses

1 unchanged sentence

The increase in general and administrative expenses for the year ended December 31, 2019 compared to the year ended December 31, 2018 was primarily attributable to:

● approximately $3.6 million in increased stock-based compensation expenses due to an increase in employee stock option expense;

● approximately $7.6 million in increased professional services expenses primarily related to an increase in our use of consulting services;

● approximately $1.8 million in increased stock-based compensation expenses due to an increase in employee stock option expense and employee headcount;

● approximately $1.3 million in increased employee related expenses due to an increase in the size of our workforce;

● approximately $1.2 million in increased other expenses including facility-related expenses.

● approximately $0.9 million in increased professional services expenses.

Other Income (Expense), Net

Other Income, Net

For the year ended December 31, 2019, other income, net was $7.2 million, which was primarily attributable to interest income and accretion of discounts associated with marketable securities.

For the year ended December 31, 2017, other expense, net was $0.4 million, which was primarily attributable to interest expense on our construction financing lease obligation and certain promissory notes, and amortization of premiums associated with marketable securities, partially offset by rental income from our former subtenant, interest income and accretion of discounts associated with marketable securities.

Liquidity and Capital Resources

Sources of Liquidity

From inception through December 31, 2019, we funded our operations primarily through proceeds from private placements of our preferred stock of $163.3 million, net proceeds of $444.8 million from public offerings of our common stock, the Allergan Upfront and other milestones paid by Allergan, and payments from Juno Therapeutics under our collaboration with them.

In May 2020, we entered into a sales agreement with Cowen and Company, LLC (“Cowen”) under which we are able from time to time to issue and sell shares of our common stock through Cowen for aggregate gross sales proceeds of up to $150.0 million (the “ATM Facility”).

We have not sold any shares of our common stock under this ATM Facility as of the date of this Annual Report on Form 10-K.

In June 2020, we completed a public offering in which we sold 6,900,000 shares of our common stock, inclusive of 900,000 shares of common stock sold by us pursuant to the full exercise of an option granted to the underwriters in connection with the offering and received net proceeds of approximately $203.7 million.

As of December 31, 2020, we have raised an aggregate of $648.7 million in net proceeds through the sale of shares of our common stock in public offerings and at-the-market offerings.

We also have funded our business from payments received under our research collaboration with Juno Therapeutics, our strategic alliance with Allergan, which was terminated in August 2020, and our license agreement with Beam Therapeutics, from which we received $20.0 million from the sale of our shares of common stock in October 2020.

As of December 31, 2020, we had cash, cash equivalents and marketable securities of $511.8 million.

In addition to our existing cash, cash equivalents and marketable securities we are eligible to earn milestone and option exercise payments under our collaboration agreement with Juno Therapeutics.

Additionally, under our strategic alliance with Allergan, we are eligible to earn milestone payments, certain cost reimbursement for EDIT-101 costs in the

United States and certain option exercise or extension payments.

In January 2021, we completed a public offering in which we sold 3,500,000 shares of our common stock and received net proceeds of approximately $216.9 million.

In February 2021, the underwriters in the public offering exercised their option to purchase an additional 525,000 shares, resulting in additional net proceeds to us of approximately $32.6 million.

In addition to our existing cash, cash equivalents and marketable securities we are eligible to earn milestone and other payments under our collaboration agreement with Juno Therapeutics.

Our ability to earn the milestone payments and the timing of earning these amounts are dependent upon the timing and outcome of our development, regulatory and commercial activities and, as such, are uncertain at this time.

As of December 31, 2019, our right to contingent payments under our collaboration agreement with Juno Therapeutics and our strategic alliance with Allergan are our only significant committed potential external sources of funds.

2019 At-the-Market Offerings

In March 2018, we entered into a sales agreement with Cowen, under which we are able from time to time to issue and sell shares of our common stock through Cowen for aggregate gross sales proceeds of $150.0 million (the “March 2018 ATM Program”).

Through December 31, 2019, we sold an aggregate of 5,448,428 shares of our common stock pursuant to the March 2018 ATM Program at a weighted-average price of $27.53 per share for gross proceeds of $150.0 million.

We paid Cowen a 3% cash commission on the gross sales price per share of our common stock sold under the March 2018 ATM Program.

No shares of common stock remain available for sale under the sales agreement.

As of December 31, 2020, our right to contingent payments under our collaboration agreement with Juno Therapeutics is our only significant committed potential external source of funds.

The following table provides information regarding our cash flows for the years ended December 31, 2020, 2019 and 2018, respectively (in thousands):

3 unchanged sentences

Financing activities

Net increase (decrease) in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Net Cash Used in Operating Activities

The use of cash in all periods resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital.

Net cash used in operating activities was approximately $179.8 million for the year ended December 31, 2020, which primarily consisted of operating expenses that relate to our on-going preclinical and clinical activities, patent costs and license fees, and increased costs as a result of staffing needs due to our expanding operations.

These expenses were partially offset by the recognition of deferred revenue relating to the Allergan termination and Celgene milestone payment.

Net cash used in operating activities was approximately $40.7 million for the year ended December 31, 2019.

6 unchanged sentences

This amount was offset by operating expenses that related to our on-going preclinical activities, sublicensing and success payments, intellectual property costs and increased employee related expenses due to an increase in the size of our workforce.

Net cash used in operating activities was approximately $9.4 million for the year ended December 31, 2017.

During the year ended December 31, 2017, we received a $90.0 million up-front payment associated with our strategic alliance with Allergan.

This was partially offset by revenue recognized associated with our collaboration arrangement with Juno Therapeutics and our strategic alliance with Allergan.

Additionally, we issued $14.5 million in notes payable

due to triggering success payments under licensing agreements.

This amount was offset by operating expenses that related to our on-going preclinical activities, sublicensing payments, intellectual property costs and increased employee related expenses due to an increase in the size of our workforce.

Net Cash (Used in) Provided by Investing Activities

Net cash used in investing activities was approximately $140.5 million for the year ended December 31, 2020, primarily related to the costs to acquire marketable securities of $458.4 million and costs to acquire property, plant and

equipment of $7.2 million, partially offset by proceeds from maturities of marketable securities of $305.0 million and proceeds from the sale of corporate equity securities of $20.0 million.

Net cash provided by investing activities was approximately $12.3 million for the year ended December 31, 2019, primarily related to proceeds from maturities of marketable securities of $360.5 million, partially offset by costs to acquire marketable securities of $342.2 million and costs to acquire property plant and equipment of $6.2 million.

Net cash used in investing activities was approximately $53.1 million for the year ended December 31, 2018, primarily related to costs to acquire marketable securities of $459.4 million and costs to acquire property plant and equipment of $4.8 million, partially offset by proceeds from maturities of marketable securities of $411.0 million.

Net cash used in investing activities was approximately $183.8 million for the year ended December 31, 2017, primarily related to costs to acquire marketable securities of $375.3 million and costs to acquire property plant and equipment of $2.1 million, partially offset by proceeds from maturities of marketable securities of $193.5 million.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was approximately $224.1 million for the year ended December 31, 2020, primarily related to $203.7 million in net proceeds received from offering of common stock, and $19.5 million in proceeds received from exercises of options for our common stock.

Net cash provided by financing activities was approximately $131.8 million for the year ended December 31, 2019, primarily related to $116.3 million in proceeds received from at-the-market offerings of our common stock, net of issuance costs that were paid as of December 31, 2019, $14.9 million in proceeds from exercises of options for our common stock and $0.6 million from issuances of our common stock under equity benefit plans.

Net cash provided by financing activities was approximately $86.9 million for the year ended December 31, 2018, primarily related to $76.8 million in proceeds received from at-the-market offerings of our common stock, net of issuance costs that were paid as of December 31, 2018, $10.3 million in proceeds from exercises of options for our common stock and $0.7 million from issuances of our common stock under equity benefit plans, partially offset by payments on our construction financing lease obligation of $0.9 million.

Net cash provided by financing activities was approximately $154.5 million for the year ended December 31, 2017, primarily related to $154.1 million in proceeds received from public offerings of common stock, net of issuance costs that were paid as of December 31, 2017, and $1.8 million in proceeds from exercises of options for our common stock, partially offset by payments on our construction financing lease obligation of $0.8 million and promissory notes of $0.6 million.

Funding Requirements

We expect our expenses to increase in connection with our ongoing activities, particularly as we further advance our current research programs and our preclinical development activities;

progress the clinical development of EDIT-101 with Allergan;

We expect our expenses to increase in connection with our ongoing activities, particularly as we progress the clinical development of EDIT-101 and EDIT-301;

further advance our current research programs and our preclinical development activities;

seek to identify product candidates and additional research programs;

8 unchanged sentences

If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization efforts.

We expect that our existing cash, cash equivalents and marketable securities at December 31, 2019 and anticipated interest income will enable us to fund our operating expenses and capital expenditure requirements for at least 24 months following the date of this Annual Report on Form 10-K.

We expect that our existing cash, cash equivalents and marketable securities at December 31, 2020 and anticipated interest income will enable us to fund our operating expenses and capital expenditure requirements into 2023.

We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect.

1 unchanged sentence

the scope, progress, results, and costs of drug discovery, preclinical development, laboratory testing, and clinical or natural history study trials for the product candidates we develop;

● the costs of progressing the clinical development with Allergan of EDIT-101 to treat LCA10;

● the scope, progress, results, and costs of drug discovery, preclinical development, laboratory testing, and

clinical or natural history study trials for the product candidates we develop;

● the costs of progressing the clinical development of EDIT-101 to treat LCA10;

● the costs of progressing the clinical development of EDIT-301 to treat sickle cell disease;

● the costs of IND-enabling studies for EDIT-301 to treat beta-thalassemia;

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

1 unchanged sentence

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

● the success of our collaboration with Juno Therapeutics and our strategic alliance with Allergan;

● the success of our collaboration with Juno Therapeutics;

● whether Juno Therapeutics exercises any of its options to extend the research program term and/or to certain of the research programs under our collaboration;

● whether Allergan exercises any additional options under our strategic alliance;

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

7 unchanged sentences

Adequate additional financing may not be available to us on acceptable terms, or at all.

Further, our ability to continue to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic.

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.

1 unchanged sentence

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 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.

13 unchanged sentences

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-K

Item 7. Management’s Discussion and Analysis