Editas Medicine, Inc. 10-Q

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 fiscal year ended December 31, 2023, which was filed with the Securities and Exchange Commission (“SEC”) on February 28, 2024 (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 clinical stage gene editing company dedicated to developing potentially transformative genomic 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 where gene editing can be used to enable or enhance therapeutic outcomes for patients, while maximizing probability of technical, regulatory and commercial success. We are focused on advancing gene editing medicines to treat hemoglobinopathies, beginning with the continued development of our current ex vivo renizgamglogene autogedtemcel (“reni-cel”) (formerly known as EDIT-301) program and leveraging the insights gained from this program to pursue next generation in vivo gene editing medicines targeting hematopoietic stem cells (“HSCs”). We are also pursuing the development of in vivo gene editing medicines for other organs and tissues that we believe will significantly differentiate our gene editing approach from the current standards of care for serious diseases. As part of these efforts, we are using strategic partnerships and collaborations and pursuing further opportunities to extend the reach of our intellectual property portfolio and access complementary technologies to expedite our drug discovery and clinical execution objectives. Our lead program, reni-cel, is an experimental ex vivo gene-edited medicine to treat sickle cell disease (“SCD”), 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. We are investigating reni-cel in a single Phase 1/2/3 clinical trial, referred to as the RUBY trial, for the treatment of severe SCD. In 2022, we dosed the first patient in the RUBY trial, and after completing sequential dosing of the first two patients, we commenced concurrent patient dosing in the first quarter of 2023. We previously completed enrollment of the adult cohort and continue to dose adult patients. In the second quarter of 2024, we completed enrollment of the adolescent cohort and are concurrently manufacturing drug product and scheduling dosing for the initial adolescent cohort patients. Based on our discussions to date with the U.S. Food and Drug Administration (the “FDA”), we expect any future biologics license application package for reni-cel for the treatment of severe SCD to be similar in number of patients and duration of follow-up to the package submitted for a previously FDA-approved gene editing medicine for severe SCD. 16 Table of Contents In December 2021, the FDA cleared our Investigational New Drug (“IND”) application for a Phase 1/2 clinical trial of reni-cel for the treatment of TDT, which we refer to as our EdiTHAL trial. We dosed the first patient in this trial in the first quarter of 2023 and commenced concurrent patient dosing in the second quarter of 2023. We have completed enrollment of the adult cohort in the trial and continue to dose patients. In June 2024, we presented new safety and efficacy data as of a May 8, 2024 data cutoff date in 18 patients treated with reni-cel in the RUBY clinical trial and in seven patients treated with reni-cel in the EdiTHAL clinical trial. We remain on track to present additional clinical data from both the RUBY and EdiTHAL trials by year-end 2024. In the RUBY clinical trial, all 18 patients were free of vaso-occlusive events since reni-cel infusion with follow-up ranging from 2.4 to 22.8 months. Patients demonstrated early normalization of total hemoglobin (“Hb”) with a mean within the normal range at more than 14g/dL and rapid and sustained improvements in fetal hemoglobin (“HbF”) well above levels of over 40%. Across patients with at least six months follow-up, at month six, the mean total Hb was 14.3 g/dL for nine patients with a mean HbF of 48.5% for 10 patients. The mean percentage of F-cells increased early and were sustained at over 90% from month four through subsequent follow-ups for all 12 patients with at least four months follow-up. Mean corpuscular fetal hemoglobin of HbF-containing red cells (F-cells) was sustained above the anti-sickling threshold of 10 pg/F-cell by month three after reni-cel infusion for all 14 patients with at least three months follow-up. All patients in the RUBY trial showed sustained high levels of editing in the HBG1 and HBG2 promoter regions. Markers of hemolysis had been normalized or improved in patients treated with reni-cel. Reni-cel was well-tolerated and demonstrated a safety profile consistent with myeloablative conditioning with busulfan, the regimen that is necessary for current gene editing therapies for SCD and TDT, and autologous hematopoietic stem cell transplant by all 18 evaluated RUBY trial patients. Patients in the RUBY trial underwent a median of two apheresis and mobilization cycles. After reni-cel infusion, all 18 patients demonstrated successful neutrophil and platelet engraftment. Neutrophil engraftment occurred at a median of 23 days, and platelet engraftment occurred at a median of 24 days. No serious adverse events related to reni-cel treatment in the RUBY trial have been reported. In the EdiTHAL clinical trial, patients demonstrated early and robust total Hb and HbF increases, with total Hb rising above the transfusion independence threshold of 9.0 g/dL. For the six patients with at least six months follow-up, the mean total Hb and HbF concentrations at month six were 12.1 g/dL and 10.9 g/dL, respectively, which were sustained at or above the transfusion threshold from six months through subsequent follow-ups. All seven patients were transfusion free for a range of 4.1 to 12.8 months after receiving the last red blood cell transfusion at 0.5-2.2 months post-reni-cel infusion. All patients in the EdiTHAL trial showed sustained high levels of editing in the HBG1 and HBG2 promoter regions. Reni-cel was well-tolerated and demonstrated a safety profile consistent with myeloablative conditioning with busulfan and autologous hematopoietic stem cell transplant by all seven evaluated EdiTHAL trial patients. All patients in the EdiTHAL trial underwent one apheresis and mobilization cycle. After reni-cel infusion, all seven patients demonstrated successful neutrophil and platelet engraftment. Neutrophil engraftment occurred at a median of 23 days, and platelet engraftment occurred at a median of 38 days. No serious adverse events related to reni-cel treatment in the EdiTHAL trial have been reported. We are also pursuing the development of next generation in vivo administered gene editing medicines, in which the medicine is injected or infused into the patient to edit the cells inside their body. We are initially focused on editing HSCs through targeted delivery of our AsCas12a enzyme to our clinically validated HBG1 and HBG2 promotor site. Our internal development efforts leverage our indel CRISPR technology we use to upregulate the expression of the gamma globin gene, a functional homolog of the beta globin gene, through direct editing of the HBG1/2 promotor site in our ex vivo reni-cel program. Using this approach, we are pursuing an in vivo strategy aimed at driving functional upregulation of gene expression to address loss of function or deleterious mutations in genetic diseases in rare and orphan disease patient populations, from which we intend to expand to diseases with larger patient populations. We are evaluating lipid nanoparticles for delivery of gene editing cargo into multiple tissue types with multiple companies, and are also evaluating additional, next generation delivery technologies. We are on track to establish in vivo preclinical proof-of-concept for an undisclosed indication by year-end 2024. We are pursuing the right combination of gene editing and targeted delivery tools through internal development and the in-licensing of complementary technologies, while also leveraging our intellectual property portfolio to drive potential out-licensing and partnership discussions that can accelerate the achievement of our goal of delivering lifesaving medicines to patients with previously untreatable diseases. In December 2023, we and Vertex Pharmaceuticals Incorporated (“Vertex”) entered into a license agreement, under which Vertex obtained a non-exclusive license for our Cas9 gene editing technology for ex vivo gene editing 17 Table of Contents medicines targeting the BCL11A gene in the fields of SCD and TDT, including Vertex’s CASGEVY TM (exagamglogene autotemcel). We received a $50.0 million upfront cash payment in the fourth quarter of 2023 and the 2024 annual license fee of $10.0 million in the first quarter of 2024. We are eligible to receive an additional $50.0 million contingent upfront payment. We are also eligible to receive further annual license fees, ranging from $10.0 million to $40.0 million annually, inclusive of certain sales-based annual license fee increases, through 2034. We are required to pay The Broad Institute, Inc. (“Broad”) and the President and Fellows of Harvard College (“Harvard”) a mid-double-digit percentage of amounts received from Vertex under the license agreement as it relates to Cas9 technology licensed by us from Broad and Harvard. In August 2023, we entered into a license agreement with Vor Biopharma Inc. (“Vor Bio”), providing Vor Bio a non-exclusive license for the development of ex vivo Cas9 gene edited HSC therapies for the treatment and/or prevention of hematological malignancies. Under this agreement, we received an upfront payment and will be eligible for future development, regulatory and commercial milestone payments, as well as royalties on medicines utilizing the related intellectual property. In cellular therapy medicines, we are leveraging partnerships to progress engineered cell medicines to treat various cancers. We are advancing alpha-beta T-cell experimental medicines for the treatment of solid and liquid tumors in collaboration with Bristol Myers Squibb Company (“BMS”) through its wholly owned subsidiary, Juno Therapeutics, Inc. (“Juno Therapeutics”). This collaboration, which leverages our Cas9 and AsCas12a platform technologies, has resulted in 13 total programs. In March 2024, we entered into an 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. We are also party to a non-exclusive collaboration and licensing agreement with Immatics N.V. to combine gamma-delta T cell adoptive cell therapies and gene editing to develop medicines for the treatment of cancer. 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 and clinical trials. Except for reni-cel, all of our ongoing 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, payments received under our research collaboration with BMS, our former strategic alliance with Allergan Pharmaceuticals International Limited (together with its affiliates, “Allergan”), which was terminated in August 2020, and payments received in connection with our license agreement with Vertex. Since inception, we have incurred significant operating losses. Our net losses were $129.6 million and $89.3 million for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, we had an accumulated deficit of $1.4 billion. 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 reni-cel; seek to identify additional research programs and additional product candidates; initiate preclinical testing and clinical trials for other product candidates we identify and develop; maintain, expand, and protect our intellectual property portfolio, including reimbursing our licensors for such expenses related to the intellectual property that we in-license from such licensors; further develop our gene 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, 2024 or the foreseeable future. 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 $136.0 million in payments, which have primarily consisted of the initial upfront and amendment payments, development milestone payments, research funding support and certain opt-in fees. We no longer receive research funding support. During the three months ended June 30, 2024 and three months ended June 30, 2023, we did not recognize revenue related to our collaboration with BMS. As of June 30, 2024, we had $56.7 million of deferred revenue in relation to our collaboration with BMS, of which $6.5 million was classified as short-term deferred revenue and $50.2 million was classified as long-term deferred revenue on our 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. 18 Table of Contents Pursuant to the license agreement with Vertex, we received a $50.0 million upfront cash payment in the fourth quarter of 2023 upon execution of the agreement and the 2024 annual license fee of $10.0 million in the first quarter of 2024. We are eligible to receive an additional $50.0 million contingent upfront payment. We are also eligible to receive further annual license fees, ranging from $10.0 million to $40.0 million annually, inclusive of certain sales-based annual license fee increases, through 2034. For additional information about our revenue recognition policy related to the Vertex license agreement and 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 license agreements with Vertex and Vor Bio, collaboration with BMS, and any other collaborations or license agreements we may enter into. 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 the performance of development activities under our collaboration agreements. These costs are expensed as incurred and include: • employee related expenses including salaries, benefits, and stock-based compensation expense; • costs incurred under clinical trial agreements with investigative sites; • costs associated with conducting our preclinical, process and scale-up development, manufacturing, clinical and regulatory activities, including fees paid to third-party professional consultants, service providers and suppliers; • costs of purchasing lab supplies and non-capital equipment used in our preclinical activities and in manufacturing preclinical and clinical study materials; • costs incurred for 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; 19 Table of Contents • 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 • 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 our clinical trials 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 Broad and Harvard, we anticipate general and administrative expenses will continue to be significant. Other Income, Net For the six months ended June 30, 2024 and June 30, 2023, other income, net consisted primarily of interest income and the amortization of premiums or discounts on 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. 20 Table of Contents Results of Operations Comparison of the Three Months ended June 30, 2024 and 2023 The following table summarizes our results of operations for the three months ended June 30, 2024 and 2023, together with the changes in those items in dollars (in thousands) and the respective percentages of change: Three Months Ended June 30, Dollar Change Percentage Change 2024 2023 Collaboration and other research and development revenues $ 513 $ 2,887 $ (2,374) (82) % Operating expenses: Research and development 54,210 29,779 24,431 82 % General and administrative 18,206 17,202 1,004 6 % Total operating expenses 72,416 46,981 25,435 54 % Other income, net Other expense, net (1) (7) 6 (86) % Interest income, net 4,297 3,811 486 13 % Total other income, net 4,296 3,804 492 13 % Net loss $ (67,607) $ (40,290) $ (27,317) 68 % 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 were $0.5 million for the three months ended June 30, 2024 compared to $2.9 million for the same period in 2023. The decrease from the three months ended June 30, 2023 is primarily attributable to reduced drug supply activity with collaborators. Research and Development Expenses Research and development expenses increased by $24.4 million to $54.2 million for the three months ended June 30, 2024 compared to $29.8 million for the same period in 2023. The following table summarizes our research and development expenses for the three months ended June 30, 2024 and 2023, together with the changes in those items in dollars (in thousands) and the respective percentages of change: Three Months Ended June 30, Dollar Change Percentage Change 2024 2023 Employee related expenses $ 13,661 $ 10,312 $ 3,349 32 % External research and development 27,025 7,117 19,908 n/m Facility expenses 7,370 5,299 2,071 39 % Stock-based compensation expenses 2,125 2,525 (400) (16) % Sublicense and license fees 857 1,007 (150) (15) % Other expenses 3,172 3,519 (347) (10) % Total research and development expenses $ 54,210 $ 29,779 $ 24,431 82 % 21 Table of Contents The increase in research and development expenses for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was primarily attributable to: • approximately $19.9 million in increased external research and development expenses primarily related to clinical and manufacturing costs related to the accelerated progression of our reni-cel program as well as costs attributable to in vivo research and discovery; • approximately $3.3 million in increased employee-related expenses related to increased headcount to support manufacturing, quality, and clinical work related to our reni-cel program; and • approximately $2.1 million in increased facility expenses primarily related to increased rent expense incurred in connection with a lease commencement for manufacturing space in the second quarter of 2024. These increases were partially offset by the following: • approximately $0.4 million in decreased stock-based compensation expense due primarily to a reduction in the market price of our common stock, resulting in a lower valuation of equity awards granted; • approximately $0.3 million in decreased other expenses; and • approximately $0.2 million in decreased sublicense and license fees. General and Administrative Expenses General and administrative expenses increased by $1.0 million to $18.2 million for the three months ended June 30, 2024 compared to $17.2 million for the three months ended June 30, 2023. The following table summarizes our general and administrative expenses for the three months ended June 30, 2024 and 2023, together with the changes in those items in dollars (in thousands) and the respective percentages of change: Three Months Ended June 30, Dollar Change Percentage Change 2024 2023 Employee related expenses $ 4,800 $ 4,625 $ 175 4 % Professional service expenses 3,893 4,503 (610) (14) % Intellectual property and patent related fees 3,845 2,886 959 33 % Stock-based compensation expenses 2,885 2,690 195 7 % Facility and other expenses 2,783 2,498 285 11 % Total general and administrative expenses $ 18,206 $ 17,202 $ 1,004 6 % The increase in general and administrative expenses for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was primarily attributable to: • approximately $1.0 million in increased intellectual property and patent related fees due to increased legal activity; • approximately $0.3 million in increased facility and other expenses primarily related to increased facility operation costs and information technology costs; • approximately $0.2 million in increased stock-based compensation expenses; and • approximately $0.2 million in increased employee related expenses. These increases were partially offset by approximately $0.6 million in decreased professional service expenses related to expenses to support strategic initiatives and business development activities in 2023. 22 Table of Contents Other Income, Net For the three months ended June 30, 2024, and June 30, 2023 other income, net was $4.3 million and $3.8 million, respectively, which primarily relates to interest income and accretion of discounts and premiums associated with marketable securities. The increase is attributable to favorable market rates. Comparison of the Six Months ended June 30, 2024 and 2023 The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023, together with the changes in those items in dollars (in thousands) and the respective percentages of change: Six Months Ended June 30, Dollar Change Percentage Change 2024 2023 Collaboration and other research and development revenues $ 1,649 $ 12,738 $ (11,089) (87) % Operating expenses: Research and development 102,997 67,583 35,414 52 % General and administrative 37,545 40,211 (2,666) (7) % Total operating expenses 140,542 107,794 32,748 30 % Other income, net Other income (expense), net 5 (1,590) 1,595 n/m Interest income, net 9,331 7,320 2,011 27 % Total other income, net 9,336 5,730 3,606 63 % Net loss $ (129,557) $ (89,326) $ (40,231) 45 % Collaboration and Other Research and Development Revenues Collaboration and other research and development revenues decreased by $11.1 million to $1.6 million for the six months ended June 30, 2024 compared to $12.7 million for six months ended June 30, 2023. The decrease was primarily related to the sale of our wholly owned oncology assets and licenses in January 2023. Research and Development Expenses Research and development expenses increased by $35.4 million to $103.0 million for the six months ended June 30, 2024 compared to $67.6 million for the six months ended June 30, 2023. The following table summarizes our research development expenses for the six months ended June 30, 2024 and 2023, together with the changes in those items in dollars (in thousands) and the respective percentages of change: 23 Table of Contents Six Months Ended June 30, Dollar Change Percentage Change 2024 2023 Employee related expenses $ 27,344 $ 23,772 $ 3,572 15 % External research and development expenses 44,613 19,518 25,095 n/m Facility expenses 12,589 10,980 1,609 15 % Stock-based compensation expenses 5,033 4,611 422 9 % Sublicense and license fees 6,753 2,312 4,441 n/m Other expenses 6,665 6,390 275 4 % Total research and development expenses $ 102,997 $ 67,583 $ 35,414 52 % The increase in research and development expenses for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily attributable to: • approximately $25.1 million in increased external research and development expenses primarily related to clinical and manufacturing costs related to the accelerated progression of our reni-cel program as well as costs attributable to in vivo research and discovery; • approximately $4.4 million in increased sublicense and license fees paid in connection with licensing activity; • approximately $3.6 million in increased employee related expenses related to increased headcount to support manufacturing, quality, and clinical work related to our reni-cel program; • approximately $1.6 million in increased facility expenses primarily related to increased rent expense incurred in connection with a lease commencement for manufacturing space; • approximately $0.4 million in increased stock-based compensation expense; and • approximately $0.3 million in increased other expenses. General and Administrative Expenses General and administrative expenses decreased by $2.7 million to $37.5 million for the six months ended June 30, 2024 compared to $40.2 million for the six months ended June 30, 2023. The following table summarizes our general and administrative expenses for the six months ended June 30, 2024 and 2023, together with the changes in those items in dollars (in thousands) and the respective percentages of change: Six Months Ended June 30, Dollar Change Percentage Change 2024 2023 Employee related expenses $ 9,690 $ 8,752 $ 938 11 % Professional service expenses 6,808 13,506 (6,698) (50) % Intellectual property and patent related fees 7,790 7,918 (128) (2) % Stock-based compensation expenses 7,562 5,111 2,451 48 % Facility and other expenses 5,695 4,924 771 16 % Total general and administrative expenses $ 37,545 $ 40,211 $ (2,666) (7) % The decrease in general and administrative expenses for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was primarily attributable to: • approximately $6.7 million in decreased professional service expenses primarily related to one-time expenses to support strategic initiatives and business development activities in 2023; and • approximately $0.1 million in decreased intellectual property and patent related fees due to reduced legal activity related to reductions in intellectual property defense. 24 Table of Contents These decreases were partially offset by: • approximately $2.5 million in increased stock-based compensation expenses due primarily to the achievement of certain performance-based vesting of restricted stock units in 2024; • approximately $0.9 million in increased employee related expenses related to increased headcount to support business operations; and • approximately $0.8 million in increased facility and other expense primarily related to increased facility operation costs and information technology costs. Other Income, Net For the six months ended June 30, 2024 and June 30, 2023, other income, net was $9.3 million and $5.7 million, respectively, which was primarily attributable to interest income, partially offset by accretion of discounts associated with other marketable securities. The increase for the six months ended June 30, 2024 is attributable to increased invested balances and favorable market rates. Liquidity and Capital Resources Sources of Liquidity As of June 30, 2024, we have raised an aggregate of $1.0 billion 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 our research collaboration with BMS, our former strategic alliance with Allergan, and payments received under the license agreement with Vertex. As of June 30, 2024, we had cash, cash equivalents and marketable securities of $318.3 million. In May 2021, we entered into a common stock sales agreement with Cowen and Company, LLC (“Cowen”), under which we from time to time can issue and sell shares of our common stock through Cowen in at-the-market offerings for aggregate gross sale proceeds of up to $300.0 million (the “ATM Facility”). We amended the common stock sales agreement with Cowen in February 2024 in connection with filing a new registration statement. As of June 30, 2024, 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 and our other collaboration and license agreements. Our ability to earn applicable milestone and other payments and the timing of earning these amounts are dependent upon the timing and outcome of development, regulatory and commercial activities and, as such, are uncertain at this time. As of June 30, 2024, our right to contingent payments under our collaboration agreement with BMS and our license agreement with Vor Bio, as well as our contingent upfront payment and annual license fees with Vertex, are our only significant committed potential external source of funds. Cash Flows The following table provides information regarding our cash flows for the six months ended June 30, 2024 and 2023 (in thousands): Six Months Ended June 30, 2024 2023 Net cash (used in) provided by: Operating activities $ (106,934) $ (74,479) Investing activities 47,209 36,249 Financing activities 514 117,525 Net (decrease) increase in cash, cash equivalents, and restricted cash $ (59,211) $ 79,295 25 Table of Contents 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 $106.9 million for the six months ended June 30, 2024, which primarily consisted of operating expenses that related to increasing our research efforts, the focused progression of clinical and manufacturing activities in support of the reni-cel program, sublicense and license payments, and supporting business operations. Net cash used in operating activities was approximately $74.5 million for the six months ended June 30, 2023, which primarily consisted of progressing our reni-cel program and supporting business operations. Net Cash Provided by Investing Activities Net cash provided by investing activities was approximately $47.2 million for the six months ended June 30, 2024, primarily related to the proceeds from the maturities of marketable securities of $138.8 million, and partially offset by the purchases of marketable securities of $86.2 million and purchases of property and equipment of $5.4 million. Net cash provided by investing activities was approximately $36.2 million for the six months ended June 30, 2023, primarily related to proceeds from maturities of marketable securities of $107.6 million, partially offset by purchases of marketable securities of $68.2 million and purchases of property and equipment of $3.2 million. Net Cash Provided by Financing Activities Net cash provided by financing activities was approximately $0.5 million for the six months ended June 30, 2024, related to the proceeds received from issuance of common stock under the employee stock purchase plan of $0.3 million and exercises of options for our common stock of $0.2 million. Net cash provided by financing activities was approximately $117.5 million for the six months ended June 30, 2023, primarily related to proceeds from offering of common stock of $117.1 million after deducting underwriting discounts and commissions and other offering costs, and proceeds received from issuance of common stock under the employee stock purchase plan of $0.4 million Funding Requirements We expect our expenses to increase in connection with our ongoing activities, particularly as we progress the clinical development of reni-cel; further advance our 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; 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; 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. 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 on June 30, 2024, together with the near-term annual license fees and the contingent upfront payment payable under our license agreement with Vertex, will enable us to fund our operating expenses and capital expenditure requirements into 2026 . 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 26 Table of Contents amount and timing of future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to: • the costs of progressing the clinical development of reni-cel to treat SCD and TDT; • the scope, progress, results, and costs of clinical trials, drug discovery, preclinical development, laboratory testing, and clinical or natural history study trials for other product candidates we develop; • 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 establishing and maintaining a supply chain for the development and manufacture of our product candidates; • 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, including 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 • our ability to establish and maintain healthcare coverage and adequate reimbursement for any product candidates for which we receive regulatory approval. 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 necessary data or results required to obtain marketing approval and achieve product sales. In addition, even if we successfully identify and develop product candidates that are approved, we will require significant additional amounts in order to launch and commercialize our product candidates and 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, would result in increased fixed payment obligations and 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. 27 Table of Contents Contractual Obligations As of June 30, 2024, we had operating leases with future minimum lease payments for a total of $44.6 million, of which $10.8 million will be payable in 2024. 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. During the three months ended June 30, 2023, we entered into a license and service agreement pursuant to which we will lease manufacturing space for our continued research and development activities. The lease commenced April 1, 2024. We may terminate the license and service agreement at our discretion upon twelve months' prior written notice. 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.