Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the Securities and Exchange Commission (“SEC”) on February 24, 2022 (the “Annual Report”).
This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. 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, 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; availability and timing of results from pre-clinical studies and clinical trials; whether interim results from a clinical trial will be predictive of the final results of the trial or the results of future trials; expectations for regulatory approvals to conduct trials or to market products and availability of funding sufficient for our foreseeable and unforeseeable operating expenses and capital expenditure requirements. These and other risks are described in greater detail in 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. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.
You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
Overview
We are a leading, clinical stage genome editing company dedicated to developing potentially transformative gene editing medicines to treat a broad range of serious diseases. We have developed a proprietary gene editing platform based on CRISPR technology and we continue to expand its capabilities. Our product development strategy is to target diseases of high unmet need where we aim to make differentiated, transformational medicines using our gene editing platform. We are advancing 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 the first half of 2022 expanded enrollment in the mid- and high-dose adult cohorts to
15
Table of Contents
explore dose response and support establishment of registrational trial endpoints. We completed dosing of the first of the three initially planned cohorts, the adult low-, mid- and high-dose cohorts in 2021, and in April 2022, announced the treatment of the first patient in the pediatric mid-dose cohort. We have completed dosing of the second patient in the pediatric mid-dose cohort and continue to screen and enroll new pediatric patients, and we expect to initiate dosing of the pediatric high-dose cohort in 2022. We also continue to dose new patients in the expanded adult cohorts, and anticipate designing registrational trial criteria by the end of 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 remain on track 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 severe sickle cell disease. This study is designed to validate the safety and beneficial effects of the cell editing process. We dosed the first patient in the RUBY trial in the second quarter of 2022 and have confirmed successful neutrophil and platelet engraftment, indicating that the reinfused cells have been accepted by the patient’s body and have begun to function and create new blood cells as intended. We are enrolling additional study participants, and have successfully edited cells from patients in preparation for reinfusion. We remain on track to announce top-line clinical data by the end of 2022. In July 2022, the FDA removed the previously disclosed partial clinical hold on the RUBY trial. This enables us to include efficacy data from patients in a marketing application for EDIT-301 in the future. In December 2021, the FDA cleared our Investigational New Drug (“IND”) application for a Phase 1/2 clinical trial of EDIT-301 for the treatment of TDT. This trial, referred to as our EDITHAL trial, is designed to assess the safety, tolerability, and preliminary efficacy of EDIT-301 for the treatment of TDT. Preparations to initiate this trial are underway, and we remain on track to dose the first TDT patient in 2022. In May 2022, the FDA granted Orphan Drug Designation to EDIT-301 for the treatment of TDT.
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 BMS.
Since our inception in September 2013, our operations have focused on organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio, assembling our core capabilities in gene editing, seeking to identify potential product candidates, and undertaking preclinical studies. Except for EDIT-101 and EDIT-301, all of our research programs are still in the preclinical or research stage of development and the risk of failure of all of our research programs is high. We have not generated any revenue from product sales. We have primarily financed our operations through various equity financings and payments received under our research collaboration with BMS and our former strategic alliance with Allergan Pharmaceuticals International Limited (together with its affiliates, “Allergan”), which was terminated in August 2020.
16
Table of Contents
Since inception, we have incurred significant operating losses. Our net losses were $104.0 million and $112.0 million for the six months ended June 30, 2022 and 2021, respectively. As of June 30, 2022, we had an accumulated deficit of $961.7 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 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 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; further develop our genome editing platform; hire additional clinical, quality control, and scientific personnel; and incur additional costs associated with operating as a public company. 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 six months ended June 30, 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. 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. After previously implementing a work from home policy and restricting on-site activities at our facilities in Massachusetts and Colorado, we fully reopened these facilities in the third quarter of 2021 using a hybrid work model. We have when needed 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.
Financial Operations Overview
Revenue
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 BMS, we have received an aggregate of $128.5 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 June 30, 2022, we recorded $56.7 million of deferred revenue in relation to our collaboration with BMS, all of which 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 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 other collaborations or agreements we enter into.
17
Table of Contents
Expenses
Research and Development Expenses
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 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; and
● fees for acquiring and maintaining licenses under our third-party licensing agreements, including any sublicensing or success payments made to our licensors.
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:
● successful completion of preclinical studies, IND-enabling studies and natural history studies;
● successful enrollment in, and completion of, clinical trials;
● receipt of marketing approvals from applicable regulatory authorities;
● establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
● obtaining and maintaining patent and trade secret protection and non-patent exclusivity;
● launching commercial sales of a product, if and when approved, whether alone or in collaboration with others;
● acceptance of a product, if and when approved, by patients, the medical community, and third-party payors;
● effectively competing with other therapies and treatment options;
● a continued acceptable safety profile following approval;
● enforcing and defending intellectual property and proprietary rights and claims; and
18
Table of Contents
● achieving desirable medicinal properties for the intended indications.
A change in the outcome of any of these variables with respect to the development of any product candidates we develop would significantly change the costs, timing, and viability associated with the development of that product candidate.
Research and development activities are central to our business model. We expect research and development costs to increase significantly for the foreseeable future as our development programs progress, including as we continue to progress the clinical development of EDIT-101 and EDIT-301 as well as support preclinical studies for our other research programs.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation for personnel in executive, finance, investor relations, business development, legal, corporate affairs, information technology, facilities and human resource functions. Other significant costs include corporate facility costs not otherwise included in research and development expenses, legal fees related to intellectual property and corporate matters, and fees for accounting and consulting services.
We anticipate that our general and administrative expenses will increase in the future to support continued research and development activities and potential commercialization of any product candidates we identify and develop. 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. 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, we anticipate general and administrative expenses will continue to be significant .
Other Income, Net
For the six months ended June 30, 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
Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of our condensed consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, and experience. 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 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.
19
Table of Contents
Results of Operations
Comparison of the Three Months ended June 30, 2022 and 2021
The following table summarizes our results of operations for the three months ended June 30, 2022 and 2021, together with the changes in those items in dollars (in thousands) and the respective percentages of change:
Three Months Ended
June 30,
2022
2021
Dollar Change
Percentage Change
Collaboration and other research and development revenues
$
6,362
$
379
$
5,983
n/m
Operating expenses:
Research and development
43,659
33,753
9,906
29
%
General and administrative
16,937
22,027
(5,090)
(23)
%
Total operating expenses
60,596
55,780
4,816
9
%
Other income, net:
Other income (expense), net
235
(1)
236
n/m
Interest income, net
546
146
400
n/m
Total other income, net
781
145
636
n/m
Net loss
$
(53,453)
$
(55,256)
$
1,803
(3)
%
For our results of operations, we have included the respective percentage of changes, unless greater than 100% or less than (100)%, in which case we have denoted such changes as not meaningful (n/m).
Collaboration and other research and development revenues
Collaboration and other research and development revenues increased by $6.0 million, to $6.4 million for the three months ended June 30, 2022, compared to $0.4 million for three months ended June 30, 2021. This increase was primarily attributable to BMS’s exercise in the second quarter of 2022 of its option to an additional program under our collaboration with BMS.
Research and development expenses
Research and development expenses increased by $9.9 million, to $43.7 million for the three months ended June 30, 2022, compared to $33.8 million for the three months ended June 30, 2021. The following table summarizes our research and development expenses for the three months ended June 30, 2022 and 2021, together with the changes in those items in dollars (in thousands) and the respective percentages of change:
Three Months Ended
June 30,
2022
2021
Dollar Change
Percentage Change
External research and development expenses
$
19,937
$
13,852
$
6,085
44
%
Employee related expenses
11,740
9,748
1,992
20
%
Facility expenses
4,555
4,185
370
9
%
Stock-based compensation expenses
3,064
4,171
(1,107)
(27)
%
Sublicense and license fees
2,515
648
1,867
n/m
Other expenses
1,848
1,149
699
61
%
Total research and development expenses
$
43,659
$
33,753
$
9,906
29
%
20
Table of Contents
The increase in research and development expenses for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 was primarily attributable to:
● approximately $6.1 million in increased external research and development expenses related primarily to the clinical and manufacturing development of EDIT-101, EDIT-301 and our other programs;
● 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 $1.9 million in increased sublicense and license expenses, primarily due to license obligations related to a clinical milestone achievement, in addition to sublicense fees owed in connection with an out-license arrangement;
● approximately $0.7 million in increased other expenses; and
● approximately $0.4 million in increased facility related expenses.
These increases were partially offset by:
● approximately $1.1 million in decreased stock-based compensation expenses primarily due to a one-time equity award granted in 2021, for which there was no similar award in 2022.
General and administrative expenses
General and administrative expenses decreased by $5.1 million, to $16.9 million for the three months ended June 30, 2022, compared to $22.0 million for the three months ended June 30, 2021. The following table summarizes our general and administrative expenses for the three months ended June 30, 2022 and 2021, together with the changes in those items in dollars (in thousands) and the respective percentages of change:
Three Months Ended
June 30,
2022
2021
Dollar Change
Percentage Change
Employee related expenses
$
4,233
$
4,371
$
(138)
(3)
%
Stock-based compensation expenses
3,554
9,355
(5,801)
(62)
%
Intellectual property and patent related fees
3,437
4,754
(1,317)
(28)
%
Facility and other expenses
3,099
2,232
867
39
%
Professional service expenses
2,614
1,315
1,299
99
%
Total general and administrative expenses
$
16,937
$
22,027
$
(5,090)
(23)
%
The decrease in general and administrative expenses for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 was primarily attributable to:
● approximately $5.8 million in decreased stock-based compensation expense primarily related to performance awards granted in 2021 to our former Chief Executive Officer that were achieved or deemed probable in the second quarter of 2021, for which there was no similar expense in the second quarter of 2022;
● approximately $1.3 million in decreased intellectual property and patent-related fees primarily resulting from decreased legal fees related to the prosecution and maintenance of our patents; and
● approximately $0.1 million in decreased employee related expenses.
21
Table of Contents
These decreases were partially offset by:
● approximately $1.3 million in increased professional service expenses; and
● approximately $0.9 million in increased facility and other expenses.
Other income, net
For the three months ended June 30, 2022, other income, net was $0.8 million, which was primarily attributable to interest income and accretion of discounts associated with marketable securities.
For the three months ended June 30, 2021, other income, net was $0.1 million, which was primarily attributable to interest income partially offset by accretion of discounts associated with other marketable securities.
Comparison of the Six Months ended June 30, 2022 and 2021
The following table summarizes our results of operations for the six months ended June 30, 2022 and 2021, together with the changes in those items in dollars (in thousands) and the respective percentages of change:
Six Months Ended
June 30,
2022
2021
Dollar Change
Percentage Change
Collaboration and other research and development revenues
$
13,134
$
6,878
$
6,256
91
%
Operating expenses:
Research and development
81,635
75,690
5,945
8
%
General and administrative
36,483
43,471
(6,988)
(16)
%
Total operating expenses
118,118
119,161
(1,043)
(1)
%
Other income, net
Other income, net
1
19
(18)
(95)
%
Interest income, net
1,015
280
735
n/m
Total other income, net
1,016
299
717
n/m
Net loss
$
(103,968)
$
(111,984)
$
8,016
(7)
%
Collaboration and other research and development revenues
Collaboration and other research and development revenues increased by $6.2 million, to $13.1 million, for the six months ended June 30, 2022 from $6.9 million for six months ended June 30, 2021. This increase was primarily attributable to BMS’s exercise in the second quarter of 2022 of its option to an additional program under our collaboration with BMS.
Research and development expenses
Research and development expenses increased by $5.9 million, to $81.6 million, for the six months ended June 30, 2022 from $75.7 million for the six months ended June 30, 2021. The following table summarizes our research and development expenses for the six months ended June 30, 2022 and 2021, together with the changes in those items in dollars (in thousands) and the respective percentages of change:
22
Table of Contents
Six Months Ended
June 30,
2022
2021
Dollar Change
Percentage Change
External research and development expenses
$
34,623
$
27,513
$
7,110
26
%
Employee related expenses
23,735
19,749
3,986
20
%
Facility expenses
9,062
7,957
1,105
14
%
Stock-based compensation expenses
6,758
8,137
(1,379)
(17)
%
Other expenses
3,968
2,705
1,263
47
%
Sublicense and license fees
3,489
9,629
(6,140)
(64)
%
Total research and development expenses
$
81,635
$
75,690
$
5,945
8
%
The increase in research and development expenses for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily attributable to:
● approximately $7.1 million in increased external research and development expenses primarily attributable to the clinical and manufacturing development of EDIT-101, EDIT-301 and our other programs;
● approximately $4.0 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 $1.3 million in increased other expenses; and
● approximately $1.1 million in increased facility related expenses primarily related to increased lab and manufacturing space.
These increases were partially offset by:
● approximately $6.1 million in decreased 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 for which there were no similar fees in 2022; and
● approximately $1.4 million in decreased stock-based compensation expenses primarily due to a one-time equity award granted in 2021, for which there was no similar award in 2022.
General and administrative expenses
General and administrative expenses decreased by $7.0 million, to $36.5 million, for the six months ended June 30, 2022 from $43.5 million for the six months ended June 30, 2021. The following table summarizes our general and administrative expenses for the six months ended June 30, 2022 and 2021, together with the changes in those items in dollars (in thousands) and the respective percentages of change:
Six Months Ended
June 30,
2022
2021
Dollar Change
Percentage Change
Stock-based compensation expenses
$
11,291
$
17,593
$
(6,302)
(36)
%
Employee related expenses
8,358
9,065
(707)
(8)
%
Intellectual property and patent related fees
6,904
9,869
(2,965)
(30)
%
Facility and other expenses
5,368
4,252
1,116
26
%
Professional service expenses
4,562
2,692
1,870
69
%
Total general and administrative expenses
$
36,483
$
43,471
$
(6,988)
(16)
%
23
Table of Contents
The decrease in general and administrative expenses for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was primarily attributable to:
● approximately $6.3 million in decreased stock-based compensation expense related to the acceleration of vesting of certain equity awards held by our former Chief Executive Officer in connection with her separation from our company in February 2021, as well as stock-based compensation expense recognized related to the performance-based awards that were granted to our new Chief Executive Officer and other certain employees in 2021, under which a single performance obligation was achieved and fully recognized in 2021, for which there were no similar expenses recognized in 2022;
● approximately $3.0 million in decreased intellectual property and patent related fees primarily resulting from decreased legal fees related to the prosecution and maintenance of our patents; and
● approximately $0.7 million in decreased employee related expenses.
These decreases were partially offset by:
● approximately $1.9 million in increased professional service expenses; and
● approximately $1.1 million in increased facility and other expenses.
Other income, net
For the six months ended June 30, 2022, other income, net was $1.0 million, which was primarily attributable to interest income partially offset by accretion of discounts associated with other marketable securities.
For the six months ended June 30, 2021, other income, net was $0.3 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 June 30, 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 June 30, 2022, we had cash, cash equivalents and marketable securities of $527.6 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 June 30, 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 June 30, 2022, our right to contingent payments under our collaboration agreement with BMS is our only significant committed potential external source of funds.
24
Table of Contents
Cash Flows
The following table provides information regarding our cash flows for the six months ended June 30, 2022 and 2021 (in thousands):
Six Months Ended
June 30,
2022
2021
Net cash (used in) provided by:
Operating activities
$
(87,072)
$
(88,436)
Investing activities
52,369
8,035
Financing activities
585
278,553
Net (decrease) increase in cash, cash equivalents, and restricted cash
$
(34,118)
$
198,152
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 $87.1 million for the six months ended June 30, 2022, which primarily consisted of operating expenses that relate to our on-going preclinical and clinical activities, sublicense 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 $88.4 million for the six months ended June 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 Provided by Investing Activities
Net cash provided by investing activities was approximately $52.4 million for the six months ended June 30, 2022, primarily related to proceeds from maturities of marketable securities of $238.8 million, partially offset by costs used to acquire marketable securities of $183.5 million.
Net cash provided by investing activities was approximately $8.0 million for the six months ended June 30, 2021, primarily related to proceeds from maturities of marketable securities of $205.0 million, partially offset by costs used to acquire marketable securities of $194.2 million and purchases of property and equipment of $2.8 million.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was approximately $0.6 million for the six months ended June 30, 2022 primarily related to proceeds received from issuance of common stock under our benefit program and exercises of options for our common stock.
Net cash provided by financing activities was approximately $278.6 million for the six months ended June 30, 2021 and consisted of $249.5 million in net proceeds received from a public offering of our common stock and $28.6 million in proceeds received from exercises of options for our common stock.
Funding Requirements
We expect our expenses to increase in connection with our ongoing activities, particularly as we progress the clinical development of EDIT-101 and EDIT-301; further advance our current research programs and our preclinical development activities; seek to identify product candidates and additional research programs; 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,
25
Table of Contents
including reimbursing our licensors for expenses related to the intellectual property that we in-license from such licensors; hire additional clinical, quality control, and scientific personnel; and incur costs associated with operating as a public company. In addition, if we obtain marketing approval for any product candidate that we identify and develop, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing, and distribution to the extent that such sales, marketing, and distribution are not the responsibility of a collaborator. We do not expect to generate significant recurring revenue unless and until we obtain regulatory approval for and commercialize a product candidate. 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 at June 30, 2022 will enable us to fund our operating expenses and capital expenditure requirements into 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, including the expansion of 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;
● the costs, timing, and outcome of regulatory review of the product candidates we develop;
● 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 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;
● the extent to which we acquire or in-license other medicines and technologies;
● the costs of reimbursing our licensors for the prosecution and maintenance of the patent rights in-licensed by us; and
● the costs of operating as a public company.
Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive, and uncertain process that takes many years to complete, and we may never generate the
26
Table of Contents
necessary data or results required to obtain marketing approval and achieve product sales. In addition, any product candidate that we identify and develop, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of genomic medicines that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all .
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.
If we raise funds through additional collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations
As of June 30, 2022, we had non-cancelable operating leases with future minimum lease payments for a total of $22.0 million, of which $4.9 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. 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.