What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-04 compared with 2021-11-09 · 121 added, 198 removed, 148 unchanged (68% of the section changed)

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The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

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.

All statements addressing our future operating performance and clinical development and regulatory timelines that we expect or anticipate will occur in the future, as well as expectations for cash runway, 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, including uncertainties inherent in the initiation and completion of pre-clinical studies and clinical trials and clinical development of our product candidates;

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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,” as updated by our subsequent filings with the SEC.

These and other risks are described in greater detail in the Annual Report under the captions “Risk Factor Summary” and Part I, “Item 1A.

Risk Factors,” as updated by our subsequent filings with the SEC.

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.

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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 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 cells, to develop medicines that can be administered to a patient.

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

have completed dosing of the first two cohorts, the adult low-dose and mid-dose cohorts, and in the third quarter of 2021 began dosing in the adult high-dose cohort.

We also are currently enrolling patients in the first of two planned pediatric cohorts .

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

In September 2021, we announced initial clinical data, consisting of preliminary patient safety and efficacy assessments, from the ongoing BRILLIANCE trial.

The initial data related to the first six patients dosed in the trial:

two in the adult low-dose cohort and four in the adult mid-dose cohort.

Patients received a single administration of EDIT-101 via subretinal injection in one eye and are monitored every three months for the first year after dosing, and less frequently in the following two years.

No dose-limiting toxicities, which are defined as vision-threatening toxicities or severe non-ocular adverse events that occur before or at the week four visit and assessed by the investigator as being related to EDIT-101 and not the administration procedure, or serious adverse events were reported in the first six adult patients treated.

Efficacy was assessed based on available data from five subjects treated in the low-dose and mid-dose cohorts who had at least three months of post-treatment follow-up, focusing on those measures demonstrated to be consistent and reproducible in subjects with CEP290-related retinal degeneration, including best corrected visual acuity (“BCVA”), full-field light sensitivity threshold (“FST”) testing and ability to navigate standardized navigation courses, or Visual Function Navigation (“VNC”).

Two of three subjects in the mid-dose cohort followed for up to six months showed early efficacy signals providing clinical evidence of gene editing and suggesting potential clinical benefits, including improvements in BCVA, FST, and/or mobility navigation.

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 currently enrolling study participants, and we expect to begin dosing in the trial in the first half 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.

We remain on track to submit an IND for EDIT-301 for the treatment of transfusion-dependent beta-thalassemia by the end of 2021.

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

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.

In April 2022, we announced the treatment of the first patient in the pediatric mid-dose cohort, and we expect to complete dosing of this cohort in the first half of 2022 and to initiate dosing of the pediatric high-dose cohort later 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 Part I, “Item 1.

Business—Our Gene Editing Medicine Programs—In Vivo Gene Editing Medicines - Ocular —Leber Congenital Amaurosis 10” in the Annual Report.

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”), the most severe form of beta-thalassemia, another inherited blood disorder characterized by severe anemia.

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, in response to an FDA partial clinical hold, 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 November 2021, we filed an Investigational New Drug (“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.

This trial, referred to as our EdiThal trial, is designed to assess the safety, tolerability, and preliminary efficacy of EDIT-301 for TDT.

Preparations to initiate the trial are underway, and we expect to dose the first TDT patient in 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 are advancing EDIT-202 towards IND-enabling studies.

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.

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.

We received an aggregate of $130.0 million in payments under this agreement, which consisted of the initial upfront payment, an option exercise payment, and a milestone 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 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.

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 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.

Our net losses were $151.1 million and $53.5 million for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, we had an accumulated deficit of $816.3 million.

Our net losses were $50.5 million and $56.7 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, we had an accumulated deficit of $908.2 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;

progress the clinical development of EDIT-101 for the treatment of LCA10 and EDIT-301 for the treatment of sickle cell disease;

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;

seek to identify additional research programs and additional product candidates;

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

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 TDT;

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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hire additional clinical, quality control, and scientific personnel;

and incur costs associated with operating as a public company.

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

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 nine months ended September 30, 2021, the pandemic continues to be dynamic and near-term risks to our business remain.

Vaccines are being distributed and administered, but utilization of the vaccines has been varied and new variants of the virus have emerged, and may continue to emerge, that are more contagious, which can result in increased infection rates and re-imposed governmental restrictions to reduce the spread of COVID-19.

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, 2022, 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.

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.

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

Centers for Disease Control and Prevention and 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, in light of the COVID-19 pandemic, 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.

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.

Since fully reopening our facilities, we have when needed temporarily reimposed the work from home policy and on-site activity restrictions in response to local increases in COVID-19 cases, and may do so again in the future as appropriate.

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.

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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 $126.5 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.

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, research funding support and certain opt-in fees.

We no longer receive research funding support.

As of September 30, 2021, we recorded $79.3 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 nine months ended September 30, 2021, we recognized $11.3 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.

As of March 31, 2022, we recorded $62.3 million of deferred revenue in relation to our collaboration with BMS, of which $56.7 million is classified as long-term on our condensed consolidated balance sheet.

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

For additional information about our revenue recognition policy related to the BMS collaboration, see Part II, “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Revenue Recognition” included in the Annual Report.

For the foreseeable future we expect substantially all of our revenue will be generated from our collaboration with BMS, 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 and clinical trials 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 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 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;

● consultant fees;

● costs 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 for 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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● receipt of marketing approvals from applicable regulatory authorities;

● establishing clinical, commercial manufacturing capabilities or making arrangements with third-party manufacturers;

● establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;

● obtaining and maintaining patent and trade secret protection and non-patent exclusivity;

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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 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 Income (Expense), Net

For the nine months ended September 30, 2021, other income (expense), net consisted primarily of interest income and accretion of discounts associated with other marketable securities.

For the nine months ended September 30, 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.

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

Other Income, Net

For the three months ended March 31, 2022 and 2021, other income, net consisted primarily of interest income, partially offset by accretion of discounts associated with other marketable securities.

Critical Accounting Policies and Estimates

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The effects of material revisions in estimates, if any, will be reflected in the condensed consolidated financial statements prospectively from the date of change in estimates.

There have been no material changes to our critical accounting policies from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.

There have been no material changes to our critical accounting policies from those described in Part II, “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in the Annual Report.

Results of Operations

Comparison of the Three Months ended September 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended September 30, 2021 and 2020, 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, 2022 and 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021, 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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Other income, net:

Other income (expense), net

Other (expense) income, net

Interest income, net

Total other income (expense), net

Net (loss) income

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 decreased by $56.6 million, to $6.2 million for the three months ended September 30, 2021, compared to $62.8 million for three months ended September 30, 2020.

This decrease was primarily attributable to the termination of our strategic alliance with Allergan during the third quarter of 2020 in which we recognized $59.9 million of previously deferred revenue, for which there was no similar revenue recognized during the third quarter of 2021.

Collaboration and other research and development revenues increased by $0.3 million, to $6.8 million for the three months ended March 31, 2022, compared to $6.5 million for three months ended March 31, 2021.

The revenue recognized during the first quarter of 2022 and 2021 is primarily related to BMS exercising its option to an additional program.

Research and development expenses

Research and development expenses decreased by $4.7 million, to $29.2 million for the three months ended September 30, 2021, compared to $33.9 million for the three months ended September 30, 2020.

The following table summarizes our research and development expenses for the three months ended September 30, 2021 and 2020, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

Research and development expenses decreased by $3.9 million, to $38.0 million for the three months ended March 31, 2022, compared to $41.9 million for the three months ended March 31, 2021.

The following table summarizes our research and development expenses for the three months ended March 31, 2022 and 2021, 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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Employee related expenses

Stock-based compensation expenses

Facility expenses

Sublicense and license fees

Stock-based compensation expenses

Other expenses

Sublicense and license fees

Total research and development expenses

The decrease in research and development expenses for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 was primarily attributable to:

● approximately $7.4 million in decreased external research and development expenses related primarily to 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 for which there was no similar expense in the third quarter of 2021;

● approximately $2.3 million in decreased expenses related to a COVID-19 employee retention tax credit recognized in the third quarter 2021 which is included in other expenses in the table above.

The decrease in research and development expenses for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily attributable to:

● approximately $8.0 million in decreased sublicense and license fees primarily related to the achievement of success payments under one of our license agreements in the first quarter of 2021 for which there was no similar activity in the first quarter of 2022;

● approximately $0.3 million in decreased stock-based compensation expenses.

These decreases were partially offset by:

● approximately $2.0 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 $1.6 million in increased stock-based compensation expenses primarily due to an increase in restricted stock units granted to employees;

● approximately $0.9 million in increased sublicense and license fees;

● approximately $1.0 million in increased external research and development expenses related primarily the clinical and manufacturing development of EDIT-101, EDIT-301 and our other programs;

● approximately $0.7 million in increased facility related expenses;

● approximately $0.6 million in increased other expenses.

General and administrative expenses

General and administrative expenses decreased by $3.7 million, to $16.2 million for the three months ended September 30, 2021, compared to $19.9 million for the three months ended September 30, 2020.

The following table summarizes our general and administrative expenses for the three months ended September 30, 2021 and 2020, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

General and administrative expenses decreased by $1.9 million, to $19.5 million for the three months ended March 31, 2022, compared to $21.4 million for the three months ended March 31, 2021.

The following table summarizes our general and administrative expenses for the three months ended March 31, 2022 and 2021, 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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Intellectual property and patent related fees

Other expenses

Professional service expenses

Total general and administrative expenses

The decrease in general and administrative expenses for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 was primarily attributable to:

● $4.8 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 for which there were no similar activities in the third quarter of 2021;

● approximately $1.1 million in decreased intellectual property and patent related fees;

● approximately $0.5 million in decreased other expenses related to a COVID-19 employee retention tax credit recognized in the third quarter of 2021.

These decreases were partially offset by approximately $2.6 million in increased stock-based compensation

expenses which were primarily a result of market-based and performance-based awards that were granted to our Chief Executive Officer and certain other employees in 2021.

Other income (expense), net

For the three months ended September 30, 2021, other income, net was $0.2 million, which was primarily attributable to interest income, partially offset by accretion of discounts associated with other marketable securities.

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

Comparison of the Nine Months ended September 30, 2021 and 2020

The following table summarizes our results of operations for the nine months ended September 30, 2021 and 2020, 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

Interest income, net

Total other income, net

Collaboration and other research and development revenues

Collaboration and other research and development revenues decreased by $66.2 million, to $13.1 million for the nine months ended September 30, 2021, compared to $79.3 million for the nine months ended September 30, 2020.

This decrease was primarily attributable to the recognition of $63.2 million of previously deferred revenue as a result of the termination of our strategic alliance with Allergan in 2020 as well as to $7.6 million in revenue recognized 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 $12.3 million in revenue recognized pursuant to our research collaboration with Juno Therapeutics during the nine months ended September 30, 2021, for which there was no similar revenue recognized in 2020.

Research and development expenses

Research and development expenses increased by $8.5 million, to $105.0 million for the nine months ended September 30, 2021, compared to $96.5 million for the nine months ended September 30, 2020.

The following table summarizes our research and development expenses for the nine months ended September 30, 2021 and 2020, 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

External research and development expenses

Employee related expenses

Stock-based compensation expenses

Facility 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, 2021 compared to the nine months ended September 30, 2020 was primarily attributable to:

● approximately $6.5 million in increased sublicense and license fees primarily related to the triggering of success payments under certain of our license agreements upon the achievement of market capitalization-based milestones in the first quarter of 2021 ;

● approximately $5.4 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 $4.0 million in increased stock-based compensation expenses primarily due to expense recognized in relation an increase in restricted stock units granted to employees;

● approximately $2.1 million in increased facility related expenses primarily related to increased lab and manufacturing space;

These increases were partially offset by:

● approximately $7.9 million in decreased external research and development expenses related to expenses incurred in the nine months ended September 30, 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 $1.7 million in decreased expenses related to a COVID-19 employee retention tax credit recognized in the nine months ended September 30, 2021, which is included in other expenses in the table above, offset by increased research and development related information technology expenses incurred during the nine months ended September 30, 2021.

General and administrative expenses

General and administrative expenses increased by $7.9 million, to $59.7 million for the nine months ended September 30, 2021, compared to $51.8 million for the nine months ended September 30, 2020.

The following table summarizes our general and administrative expenses for the nine months ended September 30, 2021 and 2020, 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

Stock-based compensation expenses

Intellectual property and patent related fees

Employee related expenses

Other expenses

Facility and other expenses

Professional service expenses

Total general and administrative expenses

The increase in general and administrative expenses for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 was primarily attributable to:

● approximately $14.2 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 new Chief Executive Officer and certain other employees in 2021;

● approximately $0.6 million in increased employee related expenses.

These increases were partially offset by:

● approximately $6.6 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 for which there were no similar activities in 2021;

● approximately $0.2 million in decreased intellectual property and patent related fees;

● approximately $0.2 million in decreased other expenses.

The decrease in general and administrative expenses for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily attributable to:

● approximately $1.6 million in decreased intellectual property and patent-related fees primarily resulting from decreased legal fees related to the prosecution and maintenance of our patents;

● approximately $0.6 million in decreased employee related expenses;

● approximately $0.5 million in decreased stock-based compensation expense.

These decreases were partially offset by:

● approximately $0.6 million in increased professional service expenses;

● approximately $0.2 million in increased facility and other expenses.

Other income, net

For the nine months ended September 30, 2021, other income, net was $0.5 million, which was primarily attributable to interest income, partially offset by accretion of discounts associated with other marketable securities.

For the nine months ended September 30, 2020, other 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 three months ended March 31, 2022 and 2021, other income, net was $0.2 million, which was primarily attributable to interest income, partially offset by accretion of discounts associated with other marketable securities.

Liquidity and Capital Resources

Sources of Liquidity

As of March 31, 2022, 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 BMS and our strategic alliance with Allergan, which was terminated in August 2020.

As of March 31, 2022, we had cash, cash equivalents and marketable securities of $566.4 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”).

As of September 30, 2021, we have not sold any shares of our common stock under the ATM Facility.

In January 2021, we completed a public offering whereby 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 September 30, 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 strategic alliance with Allergan, which was terminated in August 2020.

As of September 30, 2021, we had cash, cash equivalents and marketable securities of $657.0 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.

As of March 31, 2022, we have not sold any shares of our common stock under the ATM Facility.

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 BMS.

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, 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 nine months ended September 30, 2021 and 2020 (in thousands):

Nine Months Ended

September 30,

As of March 31, 2022, our right to contingent payments under our collaboration agreement with BMS 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, 2022 and 2021 (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 $129.2 million for the nine months ended September 30, 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 $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, including a $17.5 million termination fee related to the termination of our agreements with Allergan, 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 $49.2 million for the three months ended March 31, 2022, 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 Investing Activities

Net cash used in investing activities was approximately $31.6 million for the nine months ended September 30, 2021, primarily related to costs to acquire marketable securities of $304.6 million and purchases of property and equipment of $5.1 million, partially offset by proceeds from maturities of marketable securities of $278.1 million.

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

Net cash provided by investing activities was approximately $56.4 million for the three months ended March 31, 2022, primarily related to proceeds from maturities of marketable securities of $119.0 million, partially offset by costs used to acquire marketable securities of $60.4 million.

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 Financing Activities

Net cash provided by financing activities was approximately $281.0 million for the nine months ended September 30, 2021 and consisted of $249.5 million in net proceeds received from the offering of our common stock and $31.1 million in proceeds received from exercises of options for our common stock.

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 September 30, 2020, and $10.8 million in proceeds received from exercises of options for our common stock.

Net cash provided by financing activities was approximately $0.2 million for the three months ended March 31, 2022 primarily related to proceeds received from exercises of options for our common stock.

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.

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, including EDIT-301 for the treatment of transfusion-dependent beta-thalassemia;

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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We do not expect to generate significant recurring revenue unless and until we obtain regulatory approval for and commercialize a product candidate.

Furthermore, since 2016 we have incurred, and in future years we expect to continue to incur, significant costs associated with operating as a public company.

Furthermore, we expect to continue to incur significant costs associated with operating as a public company.

Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.

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 as of September 30, 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.

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

We expect that our existing cash, cash equivalents and marketable securities at March 31, 2022 will enable us to fund our operating expenses and capital expenditure requirements into early 2024.

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 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 and initiating any clinical trial 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 TDT;

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

● the success of our collaboration with Juno Therapeutics;

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

● the success of our collaboration with BMS;

● whether BMS 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 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.

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Contractual Obligations

The following table summarizes our significant contractual obligations as of payment due date by period at September 30, 2021 (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 March 31, 2022, we had non-cancelable operating leases with future minimum lease payments for a total of $25.4 million, of which $8.3 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 payments 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.

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

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 SEC rules.

Effects of Inflation

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, 2021 or 2020.

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

For further information regarding these agreements, please see Part I, “Item 1.

Business—Our Collaborations and Licensing Strategy” in the Annual Report.

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-Q

Item 2. Management’s Discussion and Analysis