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Item 2. Management’s Discussion and Analysis

2021-05-06 compared with 2020-11-06 · 114 added, 180 removed, 147 unchanged (67% of the section changed)

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All statements addressing our future operating performance and clinical development and regulatory timelines that we expect or anticipate will occur in the future, are forward-looking statements.

There are a number of important risks and uncertainties that could cause our actual results to differ materially from those indicated by forward-looking statements.

There are a number of important risks and uncertainties that could cause our actual results to differ materially from those indicated by forward-looking statements, including uncertainties inherent in the initiation and completion of pre-clinical studies and clinical trials and clinical development of our product candidates;

availability and timing of results from pre-clinical studies and clinical trials;

whether interim results from a clinical trial will be predictive of the final results of the trial or the results of future trials;

expectations for regulatory approvals to conduct trials or to market products and availability of funding sufficient for our foreseeable and unforeseeable operating expenses and capital expenditure requirements.

These and other risks are described in greater detail in our Annual Report under the captions “Risk Factor Summary” and “Risk Factors,” and in other filings that we may make with the SEC in the future.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements.

Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make.

We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the section entitled “Risk Factors” in Part II, Item 1A that could cause actual results or events to differ materially from the forward-looking statements that we make.

Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.

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The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, 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 genome 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, an experimental medicine to treat LCA10.

The first patient was dosed in the first quarter of 2020 and we plan to enroll approximately 18 patients in the United States and Europe in up to five cohorts.

We have completed dosing of the adult low-dose cohort.

This trial remains active and open for enrollment.

We continue to enroll patients, but enrollment has been slowed due to the ongoing impact of the coronavirus disease of 2019 (“COVID-19”) pandemic.

For our engineered cell medicines, our lead program is EDIT-301, an experimental medicine to treat sickle cell disease and beta-thalassemia.

We have initiated IND-enabling studies for EDIT-301 and aim to submit to the U.S.

Food and Drug Administration an investigational new drug application (“IND”) for EDIT-301 for the treatment of sickle cell disease by the end of 2020.

In addition, EDIT-201 is our experimental allogeneic healthy-donor NK cell medicine for the treatment of solid tumors.

We are advancing in vivo gene-editing medicines, in which the medicine is injected or infused into the patient to edit the cells inside their body, ex vivo gene-edited cell medicines, in which cells collected from a patient are edited with our technology and then administered back to that same patient, and cellular therapy medicines, in which we use our technology to edit cells collected from a donor to develop medicines that can be administered to a separate patient.

While our discovery efforts have ranged across several diseases and therapeutic areas, the areas where our programs are more mature are in our in vivo gene-editing medicines to treat ocular diseases, our ex vivo gene-edited cell medicines to treat hemoglobinopathies, and our cellular therapy medicines to treat 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 or dose limiting toxicity in adults treated in the first cohort, the inclusion criteria of the protocol were 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 from the first two cohorts by the end of 2021.

For our ex vivo gene-edited cell medicines, our lead program is EDIT-301, an experimental medicine to treat sickle cell disease , a severe inherited blood disease that causes premature death, and beta-thalassemia, another inherited blood disorder characterized by severe anemia.

In December 2020, we submitted an investigational new drug application (“IND”) to the U.S.

Food and Drug Administration (“FDA”) for the initiation of a Phase 1/2 clinical trial of EDIT-301, which we refer to as our RUBY trial, for the treatment of sickle cell disease.

In January 2021, the FDA cleared the start of enrollment and dosing of patients in the first phase of the trial (which is designed to validate the safety and beneficial effects of the cell editing process).

The RUBY trial is active and recruiting patients for enrollment.

We expect to begin dosing in the RUBY trial by the end of 2021.

In parallel, the FDA has imposed a partial clinical hold and requested we develop a potency assay to ensure that the characteristics of the product released are as expected and confirmed by clinical data collected in the first patients treated.

We also aim to submit an IND for EDIT-301 for the treatment of beta-thalassemia by the end of 2021 .

In cellular therapy medicines, we continue to develop our capabilities to generate cells from induced pluripotent stem cells to develop engineered cell medicines to treat cancer and are also advancing alpha-beta T cell experimental medicines.

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 Pharmaceuticals International Limited (which is referred to together with its affiliates as “Allergan”), a leading global pharmaceutical company, 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 we subsequently entered into a co-development and commercialization agreement with Allergan under which we will co-develop and equally split profits and losses for EDIT-101 in the United States.

Allergan was acquired by AbbVie, Inc.

On August 5, 2020, we entered into a termination agreement with Allergan pursuant to which, among other things, we and Allergan terminated the strategic alliance and option agreement and the co-development and commercialization agreement.

As a result of the termination of our collaboration with Allergan, we regained full global rights to research, develop, manufacture, and commercialize our ocular product candidates, including EDIT-101 for the treatment of LCA10.

Under the termination agreement, Allergan granted us a non-exclusive, royalty-bearing right and license, including the right to grant sublicenses (through multiple tiers), to certain Allergan know-how that is necessary to develop, manufacture and commercialize EDIT-101.

In addition, we are obligated to use commercially reasonable efforts to develop and commercialize a product directed to each of four collaboration targets, one of which is LCA10.

Under the termination agreement, we agreed to make a one-time aggregate payment of $20.0 million to Allergan, of which $17.5 million had been paid as of September 30, 2020.

In addition, we will make certain payments on achievements of clinical and regulatory milestones up to $20.0 million for each target program and aggregated sales milestones for all products covered by the termination agreement up to $90.0 million.

We are also obligated to pay royalties in a low-single digit percentage, subject to reduction under specified circumstances, on net sales of specified products.

Our obligation to pay royalties will expire on a country-by-country and product-by-product basis upon the later of the expiration of regulatory-based exclusivity with respect to such product in such country and the tenth anniversary of the first commercial sale of such product.

We and Allergan also entered into a transition services agreement to facilitate the transfer of the LCA10 program from Allergan to us.

As a result of the termination of the agreements with Allergan, we now have full responsibility for the Phase 1/2 clinical trial for EDIT-101 and expect that our research and development expenses will increase significantly for the foreseeable future as our development programs progress.

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 and clinical 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 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 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”).

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.

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

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

Since inception, we have incurred significant operating losses.

Our net losses were $53.5 million and $96.0 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, we had an accumulated deficit of $602.7 million.

Our net losses were $56.7 million and $37.7 million for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, we had an accumulated deficit of $721.9 million.

We expect to continue to incur significant expenses and operating losses for the foreseeable future.

Our net losses may fluctuate significantly from quarter to quarter and from year to year.

We anticipate that our expenses will increase substantially as we continue our current research programs and our preclinical development activities, including those related to EDIT-301 and EDIT-201;

progress the clinical development of EDIT-101;

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 for the treatment of LCA10 and EDIT-301 for the treatment of sickle cell disease;

seek to identify additional research programs and additional product candidates;

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

maintain, expand, and protect our intellectual property portfolio, including reimbursing our licensors for such expenses related to the intellectual property that we in-license from such licensors;

maintain, expand, and

protect our intellectual property portfolio, including reimbursing our licensors for such expenses related to the intellectual property that we in-license from such licensors;

further develop our genome editing platform;

hire additional clinical, quality control, and scientific personnel;

and incur additional costs associated with operating as a public company.

and incur costs associated with operating as a public company.

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 nine months ended September 30, 2020, we have recently experienced slowed enrollment in the EDIT-101 clinical trial as a result of the COVID-19 pandemic.

The ultimate impact of the COVID-19 pandemic, particularly in light of its current resurgence, 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 clinical trial, ongoing preclinical activities, including those related to EDIT-301 and EDIT-201, or the global economy as a whole.

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 three months ended March 31, 2021, 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.

Under our return to onsite work plans, we have resumed manufacturing, laboratory and related support activities at our facilities in Massachusetts and Colorado using 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.

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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 our collaboration with Juno Therapeutics, we have received an aggregate of $120.0 million in payments, which have primarily consisted of the initial upfront and amendment payments, development milestone payments and research funding support.

In connection with our collaboration with Juno Therapeutics, we have received an aggregate of $126.0 million in payments, which have primarily consisted of the initial upfront and amendment payments, development milestone payments, research funding support and certain opt-in fees.

We no longer receive research funding support.

As of September 30, 2020, we recorded $96.3 million of deferred revenue, of which $79.3 million is classified as long-term on our condensed consolidated balance sheet.

There was no revenue recognized under the collaboration with Juno Therapeutics during the nine months ended September 30, 2020.

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.

As of March 31, 2021, we recorded $85.0 million of deferred revenue in relation to our collaboration with Juno Therapeutics, of which $56.7 million is classified as long-term on our condensed consolidated balance sheet.

During the three months ended March 31, 2021, we recognized $5.7 million of previously deferred revenue related to our collaboration with Juno Therapeutics.

Under this collaboration, we will recognize revenue upon delivery of option packages to Juno Therapeutics or upon receipt of development milestone payments.

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 or receive such milestone payments.

For additional information about our revenue recognition policy related to the Juno Therapeutics collaboration, 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

Research and development expenses consist primarily of costs incurred for our research and development activities, which include:

● drug discovery efforts and preclinical and clinical studies under our research programs;

Research and development expenses consist primarily of costs incurred for our research and development activities, including our drug discovery efforts and preclinical studies and clinical trials under our research programs, which include:

● employee-related expenses including salaries, benefits, and stock-based compensation expense;

● costs of funding research performed by third parties that conduct research and development and preclinical

and clinical activities on our behalf;

● costs of funding research performed by third parties that conduct research and development and preclinical and clinical activities on our behalf;

● costs of purchasing lab supplies and non-capital equipment used in our preclinical activities and in manufacturing preclinical study materials;

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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 the termination of our profit-sharing arrangement with Allergan in the United States for EDIT-101, we are now obligated to fund all of the costs related to developing and commercializing the LCA10 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 as well as supporting preclinical studies for our other research programs, including EDIT-301.

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 and EDIT-301 as well as supporting preclinical studies for our other research programs.

General and Administrative Expenses

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We also anticipate increased expenses related to reimbursement of third-party patent-related expenses and expenses associated with operating as a public company, including costs for audit, legal, regulatory, and tax-related services, director and officer insurance premiums, and investor relations costs.

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

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 agreements 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.

Other (Expense) Income, Net

For the nine months ended September 30, 2020, other (expense) income, 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 nine months ended September 30, 2019, other (expense) income, net consisted primarily of interest income and accretion of discounts associated with marketable securities, partially offset by loss on disposal of property and equipment.

Other Income, Net

For the three months ended March 31, 2021, other income, net consisted primarily of interest income and accretion of discounts associated with other marketable securities.

For the three months ended March 31, 2020, other income, net consisted primarily of interest income and accretion of discounts associated with marketable securities, partially offset by loss on disposal of property and equipment.

Critical Accounting Policies and Estimates

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Results of Operations

Comparison of the Three Months ended September 30, 2020 and 2019

The following table summarizes our results of operations for the three months ended September 30, 2020 and 2019, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

Comparison of the Three Months ended March 31, 2021 and 2020

The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

Three Months Ended

September 30,

Dollar Change

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Total operating expenses

Other (expense) income, net:

Other expense, net

Other income, net:

Other income, net

Interest income, net

Total other (expense) income, net

Net income (loss)

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).

Total other income, net

Collaboration and other research and development revenues

Collaboration and other research and development revenues increased by $59.0 million, to $62.8 million for the three months ended September 30, 2020 from $3.8 million for three months ended September 30, 2019.

This increase was primarily attributable to the recognition of $59.9 million of previously deferred revenue as a result of the termination of our strategic alliance with Allergan.

Collaboration and other research and development revenues increased by $0.8 million, to $6.5 million for the three months ended March 31, 2021 from $5.7 million for three months ended March 31, 2020.

This increase was primarily attributable to the recognition of $5.7 million of previously deferred revenue related to Juno Therapeutics in the three months ended March 31, 2021, compared to no revenue recognized related to Juno Therapeutics for the three months ended March 31, 2020, and the recognition in the three months ended March 31, 2020 of $4.4 million of previously deferred revenue in connection with our strategic alliance with Allergan, which was terminated in August 2020, and for which no revenue was recognized in connection with such alliance in the three months ended March 31, 2021.

Research and development expenses

Research and development expenses increased by $11.2 million, to $33.9 million for the three months ended September 30, 2020 from $22.7 million for the three months ended September 30, 2019.

The following table summarizes our research and development expenses for the three months ended September 30, 2020 and 2019, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

Research and development expenses increased by $7.3 million, to $41.9 million for the three months ended March 31, 2021 from $34.6 million for the three months ended March 31, 2020.

The following table summarizes our research and development expenses for the three months ended March 31, 2021 and 2020, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

Three Months Ended

September 30,

Dollar Change

Percentage Change

Process and platform development expenses

External research and development expenses

Employee related expenses

Facility expenses

Sublicense and license fees

Stock-based compensation expenses

Facility expenses

Other expenses

Sublicense and license fees

Total research and development expenses

The increase in research and development expenses for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 was primarily attributable to:

● approximately $8.9 million in increased process and platform development expenses related primarily to the clinical and manufacturing development of EDIT-101 and our other programs, including a one-time in-process research and development expense of $5.0 million for re-acquiring the rights to EDIT-101 from Allergan;

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).

The increase in research and development expenses for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily attributable to:

● approximately $9.0 million in increased sublicense and license fees primarily related to the payment of success payments under certain of our license agreements upon the achievement of market capitalization-based milestones in the first quarter of 2021;

● approximately $1.4 million in increased employee related expenses primarily due to an increase in the size of our workforce including the expansion of our research and development organization;

● approximately $0.9 million in increased stock-based compensation expenses;

● approximately $0.8 million in increased facility related expenses;

● approximately $0.4 million in increased other expenses.

These increases were partially offset by approximately $0.7 million in decreased stock-based compensation expenses resulting from forfeitures.

As a result of the termination of our agreements with Allergan, we expect that our research and development costs will increase as we are now obligated to fund all of the costs related to developing and commercializing the LCA10 program in the United States.

In addition, we anticipate that we will increase headcount in our clinical and development organization as a result of the transfer from Allergan to us of the Phase 1/2 clinical trial of EDIT-101 for the treatment of LCA10 as part of the termination of the arrangement with Allergan.

These increases were partially offset by approximately $5.2 million in decreased external research and development expenses related to expenses incurred in the three months ended March 31, 2020 under our profit-sharing arrangement with Allergan and expenses incurred related to an in-license arrangement entered into during the first quarter of 2020 for which there were no similar expenses in the first quarter of 2021.

These decreases were partially offset by increases in external research and development expenses related primarily to the clinical and manufacturing development of EDIT-101 and our other programs.

As a result of the termination of our agreements with Allergan, our research and development costs have increased, and we expect will continue to increase as we are now obligated to fund all of the costs related to developing and commercializing the LCA10 program in the United States.

In addition, we will increase headcount in our clinical and development organization as a result of the transfer from Allergan to us of the Phase 1/2 clinical trial of EDIT-101 for the treatment of LCA10 as part of the termination of the arrangement with Allergan.

General and administrative expenses

General and administrative expenses increased by $4.2 million, to $19.9 million for the three months ended September 30, 2020 from $15.7 million for the three months ended September 30, 2019.The following table summarizes our general and administrative expenses for the three months ended September 30, 2020 and 2019, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

General and administrative expenses increased by $3.7 million, to $21.4 million for the three months ended March 31, 2021 from $17.8 million for the three months ended March 31, 2020.The following table summarizes our general and administrative expenses for the three months ended March 31, 2021 and 2020, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

Three Months Ended

September 30,

Dollar Change

Percentage Change

Professional service expenses

Intellectual property and patent related fees

Employee related expenses

Stock-based compensation expenses

Facility and other expenses

Total general and administrative expenses

The increase in general and administrative expenses for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 was primarily attributable to:

● approximately $2.3 million in increased professional service expenses in connection with the termination of the Allergan agreement;

● approximately $0.9 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 $0.8 million in increased facility and other expenses resulting from additional office space leased in 2020;

● approximately $0.2 million in increased intellectual property and patent related fees.

Other (expense) income, net

For the three months ended September 30, 2020, other (expense) income, net was an expense of $1.2 million, which was primarily attributable to the unrealized losses related to corporate equity securities, partially offset by interest income.

For the three months ended September 30, 2019, other (expense) income, net was income of $1.6 million, which was primarily attributable to interest income and accretion of discounts associated with marketable securities.

Comparison of the Nine Months ended September 30, 2020 and 2019

The following table summarizes our results of operations for the nine months ended September 30, 2020 and 2019, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

Nine Months Ended

September 30,

Dollar Change

Percentage Change

Collaboration and other research and development revenues

Operating expenses:

Research and development

General and administrative

Total operating expenses

Other income, net

Other income (expense), net

Interest income, net

Total other income, 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 $71.1 million to $79.3 million for the nine months ended September 30, 2020 from $8.2 million for the nine months ended September 30, 2019.

This increase was primarily attributable to the recognition of $63.0 million of previously deferred revenue as a result of the termination of our strategic alliance with Allergan, as well as an increase of $7.7 million in revenue recognized pursuant to an out-license agreement we entered into during the second quarter of 2020, and a $0.4 million increase in revenue recognized pursuant to other license and collaboration arrangements during the nine months ended September 30, 2020.

Research and development expenses

Research and development expenses increased by $34.4 million, to $96.5 million for the nine months ended September 30, 2020 from $62.1 million for the nine months ended September 30, 2019.

The following table summarizes our research and development expenses for the nine months ended September 30, 2020 and 2019, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

Nine Months Ended

September 30,

Dollar Change

Percentage Change

Process and platform development expenses

Employee related expenses

Facility expenses

Stock-based compensation expenses

Sublicense and license fees

Other expenses

Total research and development expenses

The increase in research and development expenses for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was primarily attributable to:

● approximately $21.8 million in increased process and platform development expenses related primarily to the clinical and manufacturing development of EDIT-101 and our other programs, including a one-time in-process research and development expense of $5.0 million for re-acquiring the rights to EDIT-101 from Allergan and expenses incurred under the profit-sharing arrangement with Allergan related to EDIT-101 prior to the termination of the agreement and expenses incurred related to an in-license arrangement entered into during the first quarter of 2020;

● approximately $7.5 million in increased employee related expenses primarily due to an increase in the size of our workforce including the expansion of our development organization;

● approximately $3.6 million in increased facility expenses primarily due additional lab and manufacturing space leased in 2020;

● approximately $3.1 million in increased sublicense and license fees primarily related to sublicense fees that were owed to our licensors in connection with an out-license agreement that we entered into during the second quarter of 2020 and additional license fees that we incurred during the quarter ;

● approximately $0.6 million in increased other expenses primarily due to increase software license fees.

These increases were partially offset by approximately $2.2 million in decreased stock-based compensation expenses resulting primarily from forfeitures.

In addition, we anticipate that we will increase headcount in our clinical and development organization as a result of the transfer from Allergan to us of the Phase 1/2 clinical trial of EDIT 101 for the treatment of LCA10 as part of the termination of the agreement with Allergan.

General and administrative expenses

General and administrative expenses increased by $4.2 million, to $51.8 million for the nine months ended September 30, 2020 from $47.6 million for the nine months ended September 30, 2019.

The following table summarizes our general and administrative expenses for the nine months ended September 30, 2020 and 2019, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

Nine Months Ended

September 30,

Dollar Change

Percentage Change

Intellectual property and patent related fees

Employee related expenses

Other expenses

Professional service expenses

Stock-based compensation expenses

Facility and other expenses

Total general and administrative expenses

The increase in general and administrative expenses for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was primarily attributable to:

● 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 $2.5 million in increased facility and other expenses resulting from additional office space leased in 2020.

These increases were partially offset by approximately $1.2 million in decreased stock-based compensation expenses resulting from a modification that occurred in 2019 with respect to which there was no similar activity for in 2020 and approximately $0.1 million in decreased intellectual property and patent related expenses.

Other (expense) income, net

For the nine months ended September 30, 2020, other (expense) income, net was income of $15.5 million, which was primarily attributable to the unrealized gains related to corporate equity securities, interest income and accretion of discounts associated with marketable securities.

For the nine months ended September 30, 2019, other (expense) income, net was income of $5.5 million, which was primarily attributable to interest income and accretion of discounts associated with marketable securities, partially offset by a loss on disposal of property and equipment.

The increase in general and administrative expenses for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 was primarily attributable to approximately $5.1 million in increased stock-based compensation expenses related to the acceleration of vesting of certain equity awards held by our former Chief Executive Officer in connection with her separation from our company in February 2021 as well as stock-based

compensation expense recorded on equity awards granted in connection with the hiring of our new Chief Executive Officer in February 2021.

The increase was partially offset by:

● approximately $1.1 million in decreased professional service expenses primarily due to decreased use of consulting services;

● approximately $0.3 million in decreased intellectual property and patent related fees.

Other income, net

For the three months ended March 31, 2021, other income, net was $0.2 million, which was primarily attributable to interest income.

For the three months ended March 31, 2020, other income, net was income of $8.9 million, which was primarily attributable to the unrealized gains related to corporate equity securities, interest income and accretion of discounts associated with marketable securities.

Liquidity and Capital Resources

Sources of Liquidity

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 Quarterly Report on Form 10-Q.

In June 2020, we completed a public offering whereby 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 process of approximately $203.7 million.

As of September 30, 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 and our strategic alliance with Allergan, which was terminated in August 2020.

As of September 30, 2020, we had cash, cash equivalents and marketable securities of $541.3 million.

In January 2021, we completed a public offering whereby we sold 3,500,000 shares of our common stock and received net process 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.

As of March 31, 2021, we have raised an aggregate of $898.0 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.

As of March 31, 2021, we had cash, cash equivalents and marketable securities of $723.2 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 September 30, 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 nine months ended September 30, 2020 and 2019 (in thousands):

Nine Months Ended

September 30,

As of March 31, 2021, 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 three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended

Net cash (used in) provided by:

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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 $139.7 million for the nine months ended September 30, 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.

Net cash used in operating activities was approximately $49.5 million for the three months ended March 31, 2021, 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 cash inflows from license fees received in the period.

Net cash used in operating activities was approximately $81.7 million for the nine months ended September 30, 2019, which primarily consisted of operating expenses that related to our strategic alliance with Allergan which decreased deferred revenue, partially offset by an upfront payment received related to an out-license arrangement.

This amount was offset by operating expenses that related to our on-going preclinical and clinical activities, patent costs and license fees, costs related to obtaining additional research facilities and increased costs as a result of staffing needs due to our expanding operations.

Net cash used in operating activities was approximately $54.1 million for the three months ended March 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 unrealized gains associated with our corporate equity securities.

Net Cash Used in Investing Activities

Net cash used in investing activities was approximately $31.6 million for the nine months ended September 30, 2020, primarily related to costs used to acquire marketable securities of $300.4 million and costs to acquire property and equipment of $5.8 million, partially offset by proceeds from maturities of marketable securities of $274.5 million.

Net cash provided by investing activities was approximately $4.4 million for the nine months ended September 30, 2019, primarily related to higher proceeds from maturities of marketable securities than purchases of marketable securities that were partially offset by $4.5 million in equipment purchases.

Net cash provided by investing activities was approximately $3.2 million for the three months ended March 31, 2021, primarily related to proceeds from maturities of marketable securities of $130.8 million partially offset by costs used to acquire marketable securities of $127.4 million.

Net cash provided by investing activities was approximately $46.5 million for the three months ended March 31, 2020, primarily related to proceeds from maturities of marketable securities of $115.0 million, partially offset by costs to acquire marketable securities of $66.4 million and costs to acquire property and equipment of $2.2 million.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was approximately $215.0 million for the nine months ended September 30, 2020, and consisted of $203.8 million in net proceeds received from offering of common stock, of which $0.2 million of expenses related to the offering were unpaid at quarter-end, and $10.8 million in proceeds received from exercises of options for our common stock.

Net cash provided by financing activities was approximately $47.2 million for the nine months ended September 30, 2019, and consisted of $41.2 million in proceeds received from at-the-market offerings of our common stock, $5.8 million in proceeds from exercises of options for our common stock and $0.3 million from the issuance of our common stock under our equity plans.

Net cash provided by financing activities was approximately $261.5 million for the three months ended March 31, 2021 and consisted of $249.5 million in net proceeds received from the offering of our common stock and $12.0 million in proceeds received from exercises of options for our common stock.

Net cash provided by financing activities was approximately $3.0 million for the three months ended March 31, 2020 and consisted of $3.0 million in proceeds received from exercises of options for our common stock.

Funding Requirements

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

further advance our current research programs and our preclinical development activities, including those related to EDIT-301 and EDIT-201;

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;

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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 September 30, 2020 and anticipated interest income will enable us to fund our operating expenses and capital expenditure requirements into 2023.

We expect that our existing cash, cash equivalents and marketable securities as of March 31, 2021 and anticipated interest income will enable us to fund our operating expenses and capital expenditure requirements well 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.

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● 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;

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

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

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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.

Further, our ability to continue to raise additional capital may be adversely impacted by potential worsening global economic conditions and potential 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.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our stockholders.

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.

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.

1 unchanged sentence

Contractual Obligations

During the nine months ended September 30, 2020, there were no material changes to our contractual obligations and commitments described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report.

During the three months ended March 31, 2021, there were no material changes to our contractual obligations and commitments described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report.

Off-Balance Sheet Arrangements

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Inflation would generally affect our business by increasing our cost of labor and clinical trial costs.

We do not believe that inflation had a material effect on our business, financial condition or results of operations during the nine months ended September 30, 2020 or 2019.

We do not believe that inflation had a material effect on our business, financial condition or results of operations during the three months ended March 31, 2021 or 2020.

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