Editas Medicine, Inc. 10-Q

Item 1. Financial Statements. Editas Medicine, Inc. Condensed Consolidated Balance Sheets (unaudited) (amounts in thousands, except share and per share data) March 31, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 69,227 $ 123,652 Marketable securities 226,944 199,459 Accounts receivable 245 10,187 Prepaid expenses and other current assets 9,139 7,531 Total current assets 305,555 340,829 Marketable securities 80,605 104,024 Property and equipment, net 13,257 12,032 Right-of-use assets 31,443 33,680 Restricted cash and other non-current assets 9,487 8,588 Total assets $ 440,347 $ 499,153 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 7,966 $ 8,269 Accrued expenses 31,481 34,563 Deferred revenue, current 14,684 8,221 Operating lease liabilities 12,356 12,164 Total current liabilities 66,487 63,217 Operating lease liabilities, net of current portion 21,783 24,372 Deferred revenue, net of current portion 54,204 60,667 Other non-current liabilities 3,473 1,800 Total liabilities 145,947 150,056 Stockholders’ equity Preferred stock, $ 0.0001 par value per share: 5,000,000 shares authorized; no shares issued or outstanding — — Common stock, $ 0.0001 par value per share: 195,000,000 shares authorized; 82,234,951 and 81,767,263 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively 8 8 Additional paid-in capital 1,588,018 1,580,241 Accumulated other comprehensive (loss) income ( 326 ) 198 Accumulated deficit ( 1,293,300 ) ( 1,231,350 ) Total stockholders’ equity 294,400 349,097 Total liabilities and stockholders’ equity $ 440,347 $ 499,153 The accompanying notes are an integral part of the condensed consolidated financial statements. 3 Table of Contents Editas Medicine, Inc. Condensed Consolidated Statements of Operations (unaudited) (amounts in thousands, except share and per share data) Three Months Ended March 31, 2024 2023 Collaboration and other research and development revenues $ 1,135 $ 9,851 Operating expenses: Research and development 48,787 37,804 General and administrative 19,339 23,008 Total operating expenses 68,126 60,812 Operating loss ( 66,991 ) ( 50,961 ) Other income, net: Other income (expense), net 6 ( 1,584 ) Interest income, net 5,035 3,509 Total other income, net 5,041 1,925 Net loss $ ( 61,950 ) $ ( 49,036 ) Net loss per share, basic and diluted $ ( 0.76 ) $ ( 0.71 ) Weighted-average common shares outstanding, basic and diluted 81,938,839 68,924,180 The accompanying notes are an integral part of the condensed consolidated financial statements. 4 Table of Contents Editas Medicine, Inc. Condensed Consolidated Statements of Comprehensive Loss (unaudited) (amounts in thousands) Three Months Ended March 31, 2024 2023 Net loss $ ( 61,950 ) $ ( 49,036 ) Other comprehensive loss: Unrealized (loss) gain on marketable debt securities ( 524 ) 1,322 Comprehensive loss $ ( 62,474 ) $ ( 47,714 ) The accompanying notes are an integral part of the condensed consolidated financial statements. 5 Table of Contents Editas Medicine, Inc. Condensed Consolidated Statements of Stockholders’ Equity (unaudited) (amounts in thousands, except share data) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity Shares Amount Balance at December 31, 2023 81,767,263 $ 8 $ 1,580,241 $ 198 $ ( 1,231,350 ) $ 349,097 Exercise of stock options 21,975 — 192 — — 192 Vesting of restricted common stock awards 445,713 — — — — — Stock-based compensation expense — — 7,585 — — 7,585 Unrealized loss on marketable debt securities — — — ( 524 ) — ( 524 ) Net loss — — — — ( 61,950 ) ( 61,950 ) Balance at March 31, 2024 82,234,951 $ 8 $ 1,588,018 $ ( 326 ) $ ( 1,293,300 ) $ 294,400 Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity Shares Amount Balance at December 31, 2022 68,847,382 $ 7 $ 1,442,405 $ ( 3,601 ) $ ( 1,078,131 ) $ 360,680 Exercise of stock options — — — — — — Vesting of restricted common stock awards 146,209 — — — — — Stock-based compensation expense — — 4,507 — — 4,507 Unrealized loss on marketable debt securities — — — 1,322 — 1,322 Net loss — — — — ( 49,036 ) ( 49,036 ) Balance at March 31, 2023 68,993,591 $ 7 $ 1,446,912 $ ( 2,279 ) $ ( 1,127,167 ) $ 317,473 The accompanying notes are an integral part of the condensed consolidated financial statements. 6 Table of Contents Editas Medicine, Inc. Condensed Consolidated Statements of Cash Flows (unaudited) (amounts in thousands) Three Months Ended March 31, 2024 2023 Cash flow from operating activities Net loss $ ( 61,950 ) $ ( 49,036 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 7,585 4,507 Depreciation 1,409 1,544 Loss on disposal of fixed assets — 1,583 Net amortization of premiums and discounts on marketable securities ( 1,716 ) ( 693 ) Changes in operating assets and liabilities: Accounts receivable 9,942 4,903 Prepaid expenses and other current assets ( 1,607 ) 1,558 Right-of-use assets 2,237 7,304 Other non-current assets ( 899 ) ( 1,500 ) Accounts payable ( 1,456 ) ( 557 ) Accrued expenses ( 2,694 ) 1,427 Operating lease liabilities ( 2,396 ) ( 6,808 ) Other current and non-current liabilities, net 1,673 — Net cash used in operating activities ( 49,872 ) ( 35,768 ) Cash flow from investing activities Purchases of property and equipment ( 1,871 ) ( 1,840 ) Purchases of marketable securities ( 86,224 ) ( 40,798 ) Proceeds from maturities of marketable securities 83,350 65,905 Net cash (used in) provided by investing activities ( 4,745 ) 23,267 Cash flow from financing activities Proceeds from exercise of stock options 192 — Net cash provided by financing activities 192 — Net decrease in cash, cash equivalents, and restricted cash ( 54,425 ) ( 12,501 ) Cash, cash equivalents, and restricted cash, beginning of period 127,529 145,399 Cash, cash equivalents, and restricted cash, end of period $ 73,104 $ 132,898 Cash and cash equivalents, end of period 69,227 129,021 Restricted cash 1 3,877 3,877 Cash, cash equivalents, and restricted cash, end of period $ 73,104 $ 132,898 1 First quarter 2024 restricted cash of $ 3,877 was included in Restricted cash and other non-current assets on the Consolidated Balance Sheet 1 First quarter of 2023 restricted cash of $ 3,877 was included in Restricted cash and other non-current assets on the Consolidated Balance Sheet Supplemental disclosure of cash and non-cash activities: Fixed asset additions included in accounts payable and accrued expenses $ 1,644 $ 370 7 Table of Contents Cash paid in connection with operating lease liabilities 3,847 3,897 Remeasurement of operating lease liabilities and right-of-use assets due to lease modification 794 ( 3,781 ) The accompanying notes are an integral part of the condensed consolidated financial statements. 8 Table of Contents Editas Medicine, Inc. Notes to Condensed Consolidated Financial Statements (unaudited) 1. Nature of Business Editas Medicine, Inc. (the “Company”) is a clinical stage gene editing company dedicated to developing potentially transformative genomic medicines to treat a broad range of serious diseases. The Company was incorporated in the state of Delaware in September 2013. Its principal offices are in Cambridge, Massachusetts. Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, and raising capital. The Company has primarily financed its operations through various equity financings, payments received under a research collaboration with Juno Therapeutics, a wholly-owned subsidiary of the Bristol-Myers Squibb Company (“BMS”), payments received under a strategic alliance and option agreement with Allergan Pharmaceuticals International Limited (together with its affiliates, “Allergan”) and payments received in conjunction with the Company’s license agreement with Vertex Pharmaceuticals, Inc. (“Vertex”). The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations and ability to transition from pilot-scale manufacturing to large-scale production of products. Liquidity In June 2023, the Company completed a public offering in which it sold 12,500,000 shares of its common stock and received net proceeds of approximately $ 117.1 million after deducting underwriting discounts and commissions and other offering costs. In May 2021, the Company entered into a common stock sales agreement with Cowen and Company, LLC (“Cowen”), under which the Company from time to time can issue and sell shares of its common stock through Cowen in at-the-market offerings for aggregate gross sale proceeds of up to $ 300.0 million (the “ATM Facility”). The Company amended the common stock sales agreement with Cowen in February 2024 in connection with filing a new registration statement. As of March 31, 2024, the Company has not sold any shares of its common stock under the ATM Facility. The Company has incurred annual net operating losses in every year since its inception. As of May 8, 2024, the issuance date of the consolidated financial statements, the Company expects that its existing cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the issuance date of the consolidated financial statements. The Company had an accumulated deficit of $ 1.3 billion at March 31, 2024, and will require substantial additional capital to fund its operations. The Company has never generated any product revenue. There can be no assurance that the Company will be able to obtain additional debt or equity financing or generate product revenue or revenues from collaborative partners, on terms acceptable to the Company, on a timely basis or at all. The failure of the Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Company’s business, results of operations, and financial condition. 2. Summary of Significant Accounting Policies Unaudited Interim Financial Information The condensed consolidated financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the “Annual Report”). The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Editas Securities Corporation and Editas Medicine, LLC. All intercompany transactions and balances 9 Table of Contents of the subsidiaries have been eliminated in consolidation. In the opinion of management, the information furnished reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the results for the reported interim periods. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The three months ended March 31, 2024 and 2023 are referred to as the first quarter of 2024 and 2023, respectively. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period. Summary of Significant Accounting Policies The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies,” to the consolidated financial statements included in the Annual Report. There have been no material changes to the significant accounting policies previously disclosed in the Annual Report. 3. Cash Equivalents and Marketable Securities Cash equivalents and marketable securities consisted of the following at March 31, 2024 (in thousands): Amortized Cost Allowance for Credit Losses Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash equivalents and marketable securities: Government agency securities $ 59,302 $ — $ — $ ( 202 ) $ 59,100 U.S. Treasuries 223,583 — 66 ( 136 ) 223,513 Money market funds 69,227 — — — 69,227 Corporate notes/bonds 24,990 — — ( 54 ) 24,936 Commercial paper — — — — — Total $ 377,102 $ — $ 66 $ ( 392 ) $ 376,776 Cash equivalents and marketable securities consisted of the following at December 31, 2023 (in thousands): Amortized Cost Allowance for Credit Losses Gross Unrealized Gains Gross Unrealized Losses Fair Value Cash equivalents and marketable securities: Government agency securities $ 103,507 $ — $ — $ ( 327 ) $ 103,180 Money market funds 123,652 — — — 123,652 Corporate notes/bonds 30,920 — — ( 86 ) 30,834 U.S. Treasuries 168,858 — 611 — 169,469 Commercial paper — — — — — Total $ 426,937 $ — $ 611 $ ( 413 ) $ 427,135 As of March 31, 2024, the Company did not hold any marketable securities that had been in an unrealized loss position for more than twelve months. Furthermore, the Company has determined that there were no material changes in the credit risk of the securities. As of March 31, 2024, the Company holds 13 securities with an aggregate fair value of $ 80.6 million that had remaining maturities greater than one year . There were no realized gains or losses on available-for-sale securities during the three months ended March 31, 2024 or 2023. 10 Table of Contents 4. Fair Value Measurements Assets measured at fair value on a recurring basis as of March 31, 2024 were as follows (in thousands): March 31, 2024 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Cash equivalents: Money market funds $ 69,227 $ 69,227 $ — $ — Marketable securities: Government agency securities 59,100 — 59,100 — Corporate notes/bonds 24,936 — 24,936 — U.S. Treasuries 223,513 223,513 — — Restricted cash and other non-current assets: Money market funds 3,877 3,877 — — Total financial assets $ 380,653 $ 296,617 $ 84,036 $ — Assets measured at fair value on a recurring basis as of December 31, 2023 were as follows (in thousands): December 31, 2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Cash equivalents: Money market funds $ 123,652 $ 123,652 $ — $ — Marketable securities: Government agency securities 103,180 — 103,180 — Corporate notes/bonds 30,834 — 30,834 — U.S. Treasuries 169,469 169,469 — — Restricted cash and other non-current assets: Money market funds 3,877 3,877 — — Total financial assets $ 431,012 $ 296,998 $ 134,014 $ — 5. Accrued Expenses Accrued expenses consisted of the following (in thousands): March 31, 2024 December 31, 2023 External research and development expenses $ 19,122 $ 16,204 Employee related expenses 8,649 11,280 Sublicense and license fees 486 5,063 Intellectual property and patent related fees 2,174 983 Professional service expenses 432 750 Other expenses 618 283 Total accrued expenses $ 31,481 $ 34,563 11 Table of Contents 6. Property and Equipment, net Property and equipment, net consisted of the following (in thousands): March 31, 2024 December 31, 2023 Laboratory and manufacturing equipment $ 25,791 $ 25,043 Leasehold improvements 9,773 9,648 Computer equipment 1,076 1,062 Construction-in-progress 3,655 2,060 Furniture and office equipment 264 264 Software 272 215 Total property and equipment 40,831 38,292 Less: accumulated depreciation ( 27,574 ) ( 26,260 ) Property and equipment, net $ 13,257 $ 12,032 7. Commitments and Contingencies In the second quarter of 2023 , the Company entered into a license and service agreement pursuant to which it will lease manufacturing space for its continued research and development activities. As of March 31, 2024, the lease has not commenced for accounting purposes and it is not expected to commence until the second quarter of 2024. The license and service agreement provides for total remaining lease payments of up to $ 85.4 million over a 10-year lease term. The Company may terminate the license and service agreement in its discretion upon twelve months' prior written notice. The Company is a party to a number of license agreements under which the Company licenses patents, patent applications and other intellectual property from third parties. As such, the Company is obligated to pay licensors for various costs including upfront licenses fees, annual license fees, certain licensor expense reimbursements, success payments, research funding payments, and milestones triggerable upon certain development, regulatory, and commercial events as well as royalties on future products. These contracts are generally cancellable, with notice, at the Company’s option and do not have significant cancellation penalties. The terms and conditions as well as the accounting analysis for the Company’s significant commitments and contingencies are described in Note 8, “Commitments and Contingencies” to the consolidated financial statements included in the Annual Report. There have been no material changes to the terms and conditions, or the accounting conclusions, previously disclosed in the Annual Report. Licensor Expense Reimbursement The Company is obligated to reimburse The Broad Institute, Inc. (“Broad”) and the President and Fellows of Harvard College (“Harvard”) for expenses incurred by each of them associated with the prosecution and maintenance of the patent rights that the Company licenses from them pursuant to the license agreement by and among the Company, Broad and Harvard, including the interference and opposition proceedings involving patents licensed to the Company under the license agreement, and other license agreements between the Company and Broad. As such, the Company anticipates that it has a substantial commitment in connection with these proceedings until such time as these proceedings have been resolved, but the amount of such commitment is not determinable. The Company incurred an aggregate of $ 2.0 million and $ 3.0 million in expense during the three months ended March 31, 2024 and 2023, respectively, for such reimbursement. 8 . Collaboration Agreements The Company has entered into multiple collaborations, out-licenses and strategic alliances with third parties that typically involve payments to or from the Company, including up-front payments, payments for research and development services, option payments, milestone payments and royalty payments to or from the Company. The terms and conditions as well as the accounting analysis for the Company’s significant collaborations, out-licenses and strategic alliances are described in Note 9, “Collaboration Agreements” to the consolidated financial statements included in the Annual Report. There have been no other material changes to the terms and conditions, or the accounting conclusions, previously disclosed in the Annual Report. 12 Table of Contents Collaboration Revenue As of March 31, 2024, the Company’s contract liabilities were primarily related to the Company’s collaboration with BMS. The following table presents changes in the Company’s accounts receivable and contract liabilities for the three months ended March 31, 2024 (in thousands): Balance at December 31, 2023 Additions Deductions Balance at March 31, 2024 Accounts receivable $ 10,187 $ 58 $ ( 10,000 ) $ 245 Contract liabilities: Deferred revenue $ 68,888 $ — $ — $ 68,888 Amendment to BMS Collaboration Agreement In March 2024, the Company entered into an amendment (“2024 Amendment”) to extend the collaboration to November 2026, with options to extend the collaboration for up to an additional two years , and provided BMS the ability to select up to three new gene targets for research. Accounting Assessment The Company evaluated the 2024 Amendment and concluded that the agreement qualifies as a contract with a customer under Accounting Standards Codification 606 (“ASC 606”). The contract modification was accounted for on a prospective basis as if it were a termination of the existing contract and the creation of a new contract since the promised goods and services were distinct from the goods and services that were transferred on or before the effective date of the amendment. The Company has identified the following performance obligations under the 2024 Amendment: eighteen material rights for additional development and commercialization licenses for other gene editing tools specific to a gene target and enzyme combination (or a “Program”). As of the amendment date and March 31, 2024, the total transaction price was appropriately $ 56.7 million comprised of the remaining deferred revenue balance that was not recognized pursuant to the 2019 Amended Collaboration Agreement. The Company utilized the most likely amount method to estimate any development and regulatory milestone payments to be received as well extension term fees. As of March 31, 2024, there were no milestone or extension term fees included in the transaction price. The Company considers the stage of development and the risks associated with the remaining development required to achieve the milestone, as well as whether the achievement of the milestone is outside the control of the Company or BMS. The outstanding milestone payments and extension term fees were fully constrained as of March 31, 2024, as a result of the uncertainty of whether any of the milestones will be achieved or the term would be extended. The Company has determined that any commercial milestones and sales-based royalties will be recognized when the related sales occur. The Company reevaluates the transaction price at each reporting period and as uncertain events are resolved or other changes in circumstances occur. The Company concluded that rights and attributes of each of the development and commercialization licenses are identical for both the license granted at inception and the licenses that may be issued in the future upon exercise of the associated option. Each development and commercialization license is differentiated only by the Program to which it relates. The Company has considered the early stage of the science and the uncertainty of success and concluded that the probability of scientific success and opt-in is equal amongst all Programs. In addition, each Program is multi-functional, and a combination of Programs can be utilized in the development of a product candidate. As such, the Company concluded that the standalone selling price of each material right is the same. The Company will recognize the transaction price allocated to each material right when the material right is exercised, lapsed or expired. During the three months ended March 31, 2024, the Company did not recognize any of the $ 56.7 million transaction price. As of March 31, 2024, $ 6.5 million was classified as short-term deferred revenue and $ 50.2 million as long-term deferred revenue in the accompanying consolidated balance sheets. 13 Table of Contents 9 . Stock-based Compensation Total compensation cost recognized for all stock-based compensation awards in the condensed consolidated statements of operations was as follows (in thousands): Three Months Ended March 31, 2024 2023 Research and development $ 2,908 $ 2,086 General and administrative 4,677 2,421 Total stock-based compensation expense $ 7,585 $ 4,507 Restricted Stock Unit Awards The following is a summary of restricted stock unit awards activity for the three months ended March 31, 2024: Shares Weighted Average Grant Date Fair Value Per Share Unvested restricted stock unit awards as of December 31, 2023 2,107,147 $ 11.96 Issued 1,300,125 $ 9.85 Vested ( 445,713 ) $ 12.66 Forfeited ( 232,725 ) $ 15.31 Unvested restricted stock unit awards as of March 31, 2024 2,728,834 $ 10.55 The restricted stock units issued in the three months ended March 31, 2024 include 392,100 units granted to certain employees that contain performance-based vesting provisions. The expense related to the performance-based vesting of restricted stock units was $ 3.4 million for the three months ended March 31, 2024. There was no expense related to the performance-based vesting of restricted stock units for the three months ended March 31, 2023. The Company recognizes the fair value of the performance-based units through the expected achievement date if the performance-based vesting provisions are deemed probable. As of March 31, 2024, total unrecognized compensation expense related to unvested restricted stock unit awards was $ 3.3 million, which the Company expects to recognize over a remaining weighted-average period of 2.94 years. Stock Options The following is a summary of stock option activity for the three months ended March 31, 2024: Shares Weighted Average Exercise Price Remaining Contractual Life (years) Aggregate Intrinsic Value Outstanding at December 31, 2023 6,149,645 $ 16.47 6.89 $ 3,195 Granted 1,982,225 $ 9.73 Exercised ( 21,975 ) $ 8.72 Cancelled ( 318,532 ) $ 14.95 Outstanding at March 31, 2024 7,791,363 $ 14.84 7.64 $ 296 Exercisable at March 31, 2024 2,912,017 $ 21.76 5.18 $ 241 As of March 31, 2024, total unrecognized compensation expense related to stock options was $ 1.2 million, which the Company expects to recognize over a remaining weighted-average period of 2.99 years. 14 Table of Contents 10. Net Loss per Share Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock and potentially dilutive securities outstanding for the period determined using the treasury stock and if converted methods. Contingently issuable shares are included in the calculation of basic loss per share as of the beginning of the period in which all the necessary conditions have been satisfied. Contingently issuable shares are included in diluted loss per share based on the number of shares, if any, that would be issuable under the terms of the arrangement if the end of the reporting period was the end of the contingency period, if the results are dilutive. For purposes of the diluted net loss per share calculation, unvested restricted stock unit awards and outstanding stock options are considered to be common stock equivalents, but they were excluded from the Company’s calculation of diluted net loss per share allocable to common stockholders because their inclusion would have been anti-dilutive. Therefore, basic and diluted net loss per share applicable to common stockholders were the same for all periods presented. The following common stock equivalents were excluded from the calculation of diluted net loss per share allocable to common stockholders because their inclusion would have been anti-dilutive: March 31, 2024 2023 Unvested restricted stock unit awards 2,728,834 1,989,201 Outstanding stock options 7,791,363 6,159,208 Total 10,520,197 8,148,409 15 Table of Contents