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Item 7. Management’s Discussion and Analysis

2022-02-24 compared with 2021-02-26 · 122 added, 178 removed, 178 unchanged (63% of the section changed)

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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 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 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 is in clinical trials in the United States and Europe.

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 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 during the second half of 2020.

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 induced human pluripotent stem cells that are subsequently differentiated into effector cells, such as natural killer (“NK”) cells, to develop medicines that can be administered to a 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 ocular diseases, our most advanced program is designed to address a specific genetic form of retinal degeneration called Leber congenital amaurosis 10 (“LCA10”), a CEP290-related retinal degenerative disorder for which we are not aware of any available therapies.

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

The BRILLIANCE trial is designed to assess the safety, tolerability, and efficacy of EDIT-101.

We initially planned to enroll up to 18 patients in the United States and Europe in up to five cohorts, and in 2021 completed dosing of the first three cohorts, the adult low-, mid- and high-dose cohorts.

We are expanding enrollment in one or more of the previously completed adult cohorts to explore dose response and support establishment of registrational trial endpoints.

We anticipate establishing these registrational trial endpoints by the end of 2022.

We remain on track to complete dosing of the pediatric mid-dose cohort in the first half of 2022, and expect to initiate dosing of the pediatric high-dose cohort in 2022.

In the third quarter of 2021, we released preliminary clinical data from the first six patients with LCA10 treated with EDIT-101 demonstrating a favorable safety profile and encouraging signals of clinical benefit.

For additional

information regarding these clinical data, please see “Business—Our Gene Editing Medicine Programs—In Vivo Gene Editing Medicines - Ocular —Leber Congenital Amaurosis 10.” We expect to provide a clinical update on the BRILLIANCE trial in the second half of 2022, including safety and efficacy assessments on all patients who have had at least six months of follow-up evaluations.

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 transfusion-dependent beta-thalassemia (“TDT”).

In January 2021, the U.S.

Food and Drug Administration (the “FDA”) cleared the start of enrollment and dosing of patients in the first phase of our Phase 1/2 clinical trial of EDIT-301, which we refer to as our RUBY trial, for the treatment of sickle cell disease.

This study is designed to validate the safety and beneficial effects of the cell editing process.

The RUBY trial is currently enrolling study participants and is on track to begin dosing in the first half of 2022 with initial clinical results expected by the end of 2022.

Prior to initiating a registrational trial, we will be required to 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, in response to an FDA partial clinical hold.

In November 2021, we filed an IND application for a Phase 1/2 clinical trial of EDIT-301 for the treatment of TDT, which was cleared by the FDA in December 2021.

We expect to initiate dosing in this trial during 2022.

In cellular therapy medicines, we continue to develop our capabilities to generate cells from induced human pluripotent stem cells to develop engineered cell medicines to treat cancer.

We have advanced development of engineered iPSC-derived NK (“iNK”) cell medicines for solid tumors and generated edited NK cells from iPSCs with significantly increased anti-cancer activity.

In December 2021, we declared a development candidate, referred to as EDIT-202, a highly differentiated iNK investigational medicine with double knock-in and double knock-out gene edits that are intended to enhance adaptive immune response and improve cell proliferation, cytolytic activity and persistence, as well as overcome suppressive tumor microenvironments.

We expect to advance EDIT-202 in preclinical development during 2022.We are also advancing alpha-beta T cell experimental medicines in collaboration with Bristol-Myers Squibb Company (“BMS”).

In May 2015, we entered into a collaboration with Juno Therapeutics, Inc., a wholly-owned subsidiary of BMS (“Juno Therapeutics”), 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.

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.

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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 .

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

We have primarily financed our operations through various equity financings and payments received under our research collaboration with BMS and our former strategic alliance with Allergan Pharmaceuticals International Limited (together with its affiliates, “Allergan”), which was terminated in August 2020.

Since inception, we have incurred significant operating losses.

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

progress the clinical development of EDIT-101 and EDIT-301;

seek to identify additional research programs and additional product candidates;

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

initiate preclinical testing and clinical trials for other product candidates we identify and develop, including preparing for and initiating the clinical development of EDIT-301 for the treatment of transfusion-dependent beta-thalassemia;

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;

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We do not expect to be profitable for the year ending December 31, 2022 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.

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, 2021, the pandemic has continuously evolved with new, more contagious, variants emerging from time to time, and near-term risks to our business remain.

In response to COVID-19 and these variants, governments have implemented a variety of responses, including government-imposed quarantines, travel restrictions and other public health safety measures.

As a result, the ultimate impact of the COVID-19 pandemic continues to be 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.

We have taken steps in line with guidance from the U.S.

Centers for Disease Control and Prevention, the Commonwealth of Massachusetts and the State of Colorado, the jurisdictions in which we primarily operate our business, to protect the health and safety of our employees and the community.

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.

Under our return to onsite work plans, we gradually resumed manufacturing, laboratory and related support activities at our facilities in Massachusetts and Colorado, and fully reopened our facilities in the third quarter of 2021 using a hybrid work model.

However, in response to the recent spread of the Omicron variant, for January and a portion of February we temporarily reimposed the work from home policy and on-site activity restrictions.

We will continue to monitor and respond to the changing conditions created by the pandemic, with focus on prioritizing the health and safety of our employees and maintaining safe and reliable operations of our facilities.

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 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.

In connection with our collaboration with BMS, we have received an aggregate of $127.5 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.

During the year ended December 31, 2021, we recognized $24.7 million of revenue related to our collaboration with BMS of which $22.7 million was previously deferred revenue.

As of December 31, 2021, we had $68.0 million of deferred revenue related to BMS, of which $56.7 million is classified as long-term on our consolidated balance sheet.

Under this collaboration, we will recognize revenue upon delivery of option packages to BMS or when milestones are achieved.

As such, we expect that our revenue will fluctuate from quarter-to-quarter and year-to-year as a result of the timing of when these events occur.

In connection with our former 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.

During the third quarter of 2020, as a result of the termination of our agreements with Allergan, we recognized $63.2 million of revenue that consisted of previously deferred revenue net of a payment made to Allergan in connection with the termination.

For additional information about our revenue recognition policy related to the BMS collaboration or the Allergan strategic alliance, see “—Critical Accounting Policies and Estimates—Revenue Recognition” included in this Annual Report on Form 10-K.

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, including our drug discovery efforts and preclinical studies under our research programs, which include:

Research and development expenses consist primarily of costs incurred for our research, preclinical development, process and scale-up development, manufacture and clinical development of our product candidates, and the performance of development activities under our collaboration agreements.

These costs are expensed as incurred and 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 activities on our behalf;

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

● consultant fees;

● costs incurred under clinical trial agreements with investigative sites;

● costs associated with conducting our preclinical, process and scale-up development, manufacturing, clinical and regulatory activities, including fees paid to third-party professional consultants, service providers and suppliers;

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

● costs incurred for the research and development activities under our collaboration agreements;

● facility costs including rent, depreciation, and maintenance expenses;

● fees for acquiring and maintaining licenses under our third-party licensing agreements, including any sublicensing or success payments made to our licensors.

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:

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These increases will include increased costs related to the hiring of additional personnel and fees to outside consultants.

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.

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 and interference proceedings involving the patents licensed to us under our license agreement with The Broad Institute, Inc.

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.

(“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 year ended December 31, 2021, other (expense) income, net consisted primarily of changes in interest income and accretion of discounts associated with other marketable securities.

For the year ended December 31, 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.

Critical Accounting Policies and Estimates

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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.

Examples of estimated accrued research and development expenses include fees paid to clinical research organizations, to investigative sites in connection with clinical trials, to sponsored research organizations, to service providers in connection with preclinical development activities and to service providers related to product manufacturing, development and distribution of clinical supplies.

We base our accrued expenses related to clinical trials on our estimates of the services performed and efforts expended pursuant to our contractual arrangements, including those with clinical research organizations.

The financial terms of these agreements are sometimes 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 service providers will exceed the level of services performed and result in a prepayment of the clinical expense.

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

If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid accordingly.

Although we do not expect our estimates to be materially different from expenses actually incurred, if our estimates of the status and timing of services performed differs from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular period.

To date, there have been no material differences from our estimates to the amounts actually incurred.

Results of Operations

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Other income, net

Other income (expense), net

Other (expense) income, net

Interest income, net

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Collaboration and Other Research and Development Revenues

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.

Collaboration and other research and development revenues decreased by $65.2 million, to $25.5 million for the year ended December 31, 2021 from $90.7 million for the year ended December 31, 2020.

This decrease was primarily attributable to $70.6 million of revenue recognized in the year ended December 31, 2020 as a result of the termination of our strategic alliance with Allergan, as well as to $7.6 million in revenue recognized in 2020 pursuant to an out-license agreement we entered into during the second quarter 2020, for which there was no similar revenue recognized during 2021.

This decrease was partially offset by an increase of $13.5 million in revenue recognized pursuant to our research collaboration with Juno Therapeutics during the year ended December 31, 2021 compared to the year ended December 31, 2020.

Research and Development Expenses

Research and development expenses increased by $61.1 million, to $158.0 million for the year ended December 31, 2020 from $96.9 million for the year ended December 31, 2019.

Research and development expenses decreased by $15.5 million, to $142.5 million for the year ended December 31, 2021 from $158.0 million for the year ended December 31, 2020.

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

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Employee related expenses

Facility expenses

Stock-based compensation expenses

Facility expenses

Sublicense and license fees

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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 $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 $4.2 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 $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;

The decrease in research and development expenses for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily attributable to:

● approximately $21.3 million in decreased sublicense and license fees resulting from success payments that were triggered during the fourth quarter of 2020 in connection to a license and sponsored research agreement with Broad which was partially offset by a success payment that was triggered during the first quarter of 2021;

● approximately $9.8 million in decreased external research and development expenses related to expenses incurred in the year ended December 31, 2020 under our profit-sharing arrangement with Allergan, including a one-time in-process research and development expense of $5.0 million for re-acquiring the rights to EDIT-101 from Allergan in the third quarter of 2020, as well as a decrease in expenses incurred

related to an in-license arrangement that we entered into during the first quarter 2020 for which there was no similar expense in 2021;

● approximately $0.6 million in decreased other expenses.

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

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

● approximately $5.0 million in increased stock-based compensation expenses primarily due to expense recognized in relation to an increase in restricted stock units granted to employees;

● approximately $3.1 million in increased facility and other related expenses primarily related to an increase in lab space.

General and Administrative Expenses

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Percentage Change

Intellectual property and patent related fees

Employee related expenses

Professional service expenses

Stock-based compensation expenses

Employee related expenses

Intellectual property and patent related fees

Facility and other expenses

Professional service expenses

Total general and administrative expenses

The increase in general and administrative expenses for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily attributable to:

● approximately $15.3 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 expenses as a result of market-based and performance-based awards that were granted to our current Chief Executive Officer and certain other employees in 2021;

● approximately $1.2 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.

● approximately $0.4 million in increased facility and other expenses.

These increases were partially offset by the following decreases in general and administrative expenses:

● approximately $6.1 million in decreased professional service expenses primarily due to additional professional service expenses incurred in the third quarter of 2020 in connection with the termination of the Allergan agreement;

● approximately $2.1 million in decreased intellectual property and patent related fees.

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, 2021, total other income, net was $0.6 million, which was primarily attributable to interest income and accretion of discounts associated with marketable securities.

Comparison of Years Ended December 31, 2020 and 2019

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 revenue

Operating expenses:

Research and development

General and administrative

Total operating expenses

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 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.

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, 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

External research and development expenses

Employee and contractor related expenses

Stock-based compensation 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 $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 $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.

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 nonemployee stock option expense.

General and Administrative Expenses

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

Percentage Change

Intellectual property and patent related fees

Professional service expenses

Stock-based compensation expenses

Employee related expenses

Other expenses

Total general and administrative expenses

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 $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.

For a discussion of our results of operations for the year ended December 31, 2020 as compared to the year ended December 31, 2019, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 26, 2021.

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 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 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.

As of December 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 and our former strategic alliance with Allergan.

As of December 31, 2021, we had cash, cash equivalents and marketable securities of $619.9 million.

In May 2021, we entered into a common stock sales agreement with Cowen and Company, LLC (“Cowen”) under which we from time to time can issue and sell shares of our common stock through Cowen in at-the-market offerings for aggregate gross sale proceeds of up to $300.0 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 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.

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Financing activities

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash, cash equivalents, and restricted cash

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.

During the year ended December 31, 2019, we received $70.0 million related to our amended and restated collaboration agreement with Juno Therapeutics, which was partially recognized in revenue during the fourth quarter of 2019, partially offset by revenue recognized related to our strategic alliance with Allergan.

This amount was offset by operating expenses that related to our on-going preclinical and clinical activities, sublicense expense, 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 $45.7 million for the year ended December 31, 2018.

During the year ended December 31, 2018, we received $25.0 million related to the EDIT-101 Milestone Payment which was partially recognized as revenue during the fourth quarter of 2018 and $15.0 million related to the EDIT-101 Option Exercise Payment which was fully recognized as revenue during the third quarter of 2018, both related to our strategic alliance with Allergan.

We received $10.0 million related to our amended and restated collaboration agreement with Juno Therapeutics which was partially recognized during 2018.

Additionally, we issued $12.5 million in notes payable to Broad and settled in shares of common stock during the second quarter of 2018 in connection with our entry into a sponsored research agreement with Broad.

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) Provided by Investing Activities

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 operating activities was approximately $163.8 million for the year ended December 31, 2021, which primarily consisted of operating expenses that relate to our on-going preclinical and clinical activities, a success payment that was settled in cash during the year, patent costs and license fees, rent expenses 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 $179.8 million for the year ended December 31, 2020, which primarily consisted of our net loss which was adjusted for a non-cash research and development expense of $27.5 million related to a success payment that was triggered during the year that was subsequently settled in shares of common stock.

The changes in working capital relate to our on-going preclinical and clinical activities, patent costs and license fees, rent expenses 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 a milestone payment.

Net Cash Used in Investing Activities

Net cash used in investing activities was approximately $54.5 million for the year ended December 31, 2021, primarily related to costs to acquire marketable securities of $409.0 million and purchases of property and equipment of $8.0 million, partially offset by proceeds from maturities of marketable securities of $362.4 million.

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 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 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 $282.1 million for the year ended December 31, 2021 and consisted of $249.5 million in net proceeds received from the offering of our common stock in the first quarter and $31.5 million in proceeds received from exercises of options for our common stock.

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 the offering of our common stock in the second quarter, and $19.5 million in proceeds received from exercises of options for our common stock.

For a discussion of our cash flows for the year ended December 31, 2019, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 26, 2021.

Funding Requirements

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seek to identify product candidates and additional research programs;

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 expenses related to the intellectual property that we in-license from such licensors;

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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 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.

Our future capital requirements will depend on many factors, including:

We expect that our existing cash, cash equivalents and marketable securities at December 31, 2021 will enable us to fund our operating expenses and capital expenditure requirements through 2023.

Our forecast of the period of time through which our existing cash and cash equivalents and investments will be adequate to support our operations is a forward-looking statement and involves significant risks and uncertainties.

We have based this forecast on assumptions that may prove to be wrong, and actual results could vary materially from our expectations, which may adversely affect our capital resources and liquidity.

We could utilize our available capital resources sooner than we currently expect.

The amount and timing of future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to :

● 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 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 progressing the clinical development of EDIT-101 to treat LCA10, including expanding trial enrollment to explore dose response and support establishment of registrational trial endpoints;

● the costs of progressing the clinical development of EDIT-301 to treat sickle cell disease and preparing for and initiating the clinical development of EDIT-301 to treat transfusion-dependent 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.

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

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Contractual Obligations

The following table summarizes our significant contractual obligations as of payment due date by period at December 31, 2020 (in thousands):

Operating lease obligations (1)

(1) Represents future minimum lease payments under our non-cancelable operating leases.

The minimum lease payments above exclude our share of the facility operating expenses and other costs that are reimbursable to the landlord under the leases.

The table above does not include potential milestone and success fees, sublicense fees, royalty fees, licensing maintenance fees, and reimbursement of patent maintenance costs that we may be required to pay under agreements we have entered into with certain institutions to license intellectual property.

As of December 31, 2021, we had non-cancelable operating leases with total future minimum lease payments of $29.1 million, of which $12.0 million will be payable in 2022.

These minimum lease payments exclude our share of the facility operating expenses, real-estate taxes and other costs that are reimbursable to the landlord under the leases.

Our agreements with certain institutions to license intellectual property include potential milestone and success fees, sublicense fees, royalty fees, licensing maintenance fees, and reimbursement of patent maintenance costs that we may be required to pay.

Our agreements to license intellectual property include potential milestone payments that are dependent upon the development of products using the intellectual property licensed under the agreements and contingent upon the achievement of development or regulatory approval milestones, as well as commercial milestones.

We have not included such potential obligations in the table above because they are contingent upon the occurrence of future events and the timing and likelihood of such potential obligations are not known with certainty.

These potential obligations are contingent upon the occurrence of future events and the timing and likelihood of such potential obligations are not known with certainty.

For further information regarding these agreements, please see “Business—Our Collaborations and Licensing Strategy.”

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

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

Off-Balance Sheet Arrangements

We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable Securities and Exchange Commission rules.

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

These contracts generally provide for termination at any time upon prior notice.

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