Q32 Bio Inc. 10-K

Item 9A. Controls and Procedures. Limitations on effectiveness of controls and procedures In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Evaluation of disclosure controls and procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2020. Management’s annual report on internal control over financial reporting Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management concluded that, as of December 31, 2020, our internal control over financial reporting was effective. 105 Attestation report of the registered public accounting firm This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm due to an exemption established by the JOBS Act for "emerging growth companies." Changes in internal control over financial reporting There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None. 106 PART III Item 10. Directors, Executive Officers and Corporate Governance. Directors and Executive Officers The following table sets forth the name, age and position of each of our executive officers and directors. Name Age Position Executive Officers: Arthur O. Tzianabos, Ph.D. 57 President and Chief Executive Officer and Director W. Bradford Smith 65 Chief Financial Officer, Treasurer and Secretary Albert Seymour, Ph.D. 53 Chief Scientific Officer Tim Kelly 52 Chief Technical Operations Officer Gabriel M. Cohn, M.D. 62 Chief Medical Officer Directors: Steven Gillis, Ph.D. (3) 67 Director Richard J. Gregory, Ph.D. (2) 63 Director Kush M. Parmar, M.D., Ph.D. (2) 40 Chairman of the Board Matthew R. Patterson (1) 49 Director Jeffrey V. Poulton (1) 53 Director Alise S. Reicin, M.D. (3) 60 Director Mary Thistle (1) 61 Director (1) Member of the audit committee. (2) Member of the compensation committee. (3) Member of the nominating and corporate governance committee. Arthur O. Tzianabos, Ph.D. has served as our President, Chief Executive Officer and member of our board of directors since April 2016. Dr. Tzianabos joined Homology from OvaScience, Inc., a biotechnology company (which has since merged with and into Millendo Therapeutics, Inc.), where he served as President and Chief Scientific Officer from September 2013 to March 2016. Prior to OvaScience, Dr. Tzianabos spent eight years at Shire plc, a biotechnology company, where he served in positions of increasing responsibility, including Senior Director, Discovery Research, Vice President, Program Management and Senior Vice President and Head, Research and Early Development. From 1992 to 2005, Dr. Tzianabos was a faculty member at Harvard Medical School and maintained laboratories at the Channing Laboratory, Brigham and Women’s Hospital and the Department of Microbiology and Molecular Genetics at Harvard Medical School. Dr. Tzianabos currently serves as a director of Stoke Therapeutics, Inc. and is Chairman of the board of directors of Akouos, Inc. Dr. Tzianabos previously served as a director of BIND Therapeutics, Inc. Dr. Tzianabos holds a B.S. in Biology from Boston College and a Ph.D. in Microbiology from the University of New Hampshire. We believe Dr. Tzianabos’ extensive academic and clinical experience, as well as his knowledge of the industry, qualifies him to serve on our board of directors. W. Bradford Smith has served as our Chief Financial Officer and Treasurer since April 2017 and our Secretary since July 2017. From March 2014 to April 2017, Mr. Smith was Chief Financial Officer of Ocular Therapeutix, Inc., a biopharmaceutical platform company. Prior to joining Ocular Therapeutix, Inc., Mr. Smith served as the Chief Financial Officer of OmniGuide, Inc., a medical device company, from July 2008 to March 2014. Mr. Smith holds a B.S. in Biology from Tufts University and an M.B.A. from the Whittemore School of Business and Economics at the University of New Hampshire. Albert Seymour, Ph.D. has served as our Chief Scientific Officer since April 2016. Prior to joining Homology, Dr. Seymour was Senior Vice President, Head of Global Research and Nonclinical Development at Shire plc, a biotechnology company, from 2011 to 2016. Dr. Seymour received his B.A. in Biology from the University of Delaware, an M.S. from Johns Hopkins University School of Medicine and his Ph.D. in Human Genetics from the University of Pittsburgh. Tim Kelly has served as our Chief Technical Operations Officer since April 2018, and prior to that, he served as our Senior Vice President of Technical Operations from May 2017 to April 2018. From January 2017 to May 2017, Mr. Kelly served as Head of Technical Operations at Sarepta Therapeutics, Inc., a biopharmaceutical company. Prior to that, Mr. Kelly spent eight years, from 2009 to 2017, at Shire plc, a biotechnology company, where he served most recently as Senior Vice President and Head of Biologics Operating Unit from May 2016 to January 2017, and prior to that served in roles of increasing responsibility, including Interim Head of Technical Operations from August 2015 to April 2016 and Head of Product Strategy 107 & Planning from 2014 to July 2015. He was previously the Head of Technical Operations at UCB S.A. in Belgium. Mr. Kelly also held roles of increasing responsibility at Biogen Idec, including Senior Director of International Operations. Mr. Kelly holds a B.S. with emphasis in Engineering Mechanics from the United States Air Force Academy and an M.B.A. from Troy University. Gabriel M. Cohn, M.D. has served as our Chief Medical Officer since December 2019. Prior to joining Homology, Dr. Cohn was Vice President, Clinical Development Lead at AVROBIO, Inc., a clinical-stage gene therapy company, from November 2017 to November 2019. Prior to AVROBIO, Dr. Cohn served as Vice President and Head of Global Clinical and Medical Affairs at OvaScience, Inc., a biotechnology company, from 2015 to July 2017. Prior to that, Dr. Cohn spent seven years at Shire plc, a biotechnology company, including Shire Human Genetic Therapies (HGT), where he most recently held the position of Senior Medical Director, Clinical Sciences from 2012 to 2015, and prior to that served in roles of increasing responsibility including Interim Global Franchise Medical Lead, Gaucher Disease in 2011 and Medical Director, North America from 2008 to 2011. Prior to joining the biotechnology industry, Dr. Cohn served as the Chief, Division of Clinical and Reproductive Genetics and Medical Director, Genetic Services at Baystate Medical Center and as Assistant Professor at Tufts University School of Medicine. He began his academic career as the Director, Reproductive Genetics at SUNY Health Science Center (HSC) at Syracuse (now Upstate). Dr. Cohn has a B.S. in Biology from Brooklyn College, an M.D. from SUNY HSC at Syracuse School of Medicine and an M.B.A. from University of Massachusetts Amherst. Directors Steven Gillis, Ph.D. has served as a member of our board of directors since 2016. Since 2005, Dr. Gillis has been a managing director at ARCH Venture Partners, a venture capital firm. From 1994 to 2005, Dr. Gillis served as Chief Executive Officer and chairman of the board of directors of Corixa Corporation, which he co-founded in October 1994. Previously, Dr. Gillis served as Director, Head of Research and Development, Chief Scientific Officer and acting Chief Executive Officer of Immunex Corporation, which he co-founded, from 1981 until his departure in 1994. As a former director and chairman of Trubion Pharmaceuticals, Inc., Dr. Gillis led its acquisition by Emergent BioSolutions in the fall 2010. Dr. Gillis currently serves as a director of Takeda Pharmaceutical Company Limited (and as director of Shire plc prior to its acquisition by Takeda), and serves as a director and chairman of VBI Vaccines Inc. Dr. Gillis also currently serves as a director of several private companies. Dr. Gillis previously served as a director at and Pulmatrix, Inc. from 2008 to 2020, at PhaseRx, Inc. from 2008 to 2018 and at bluebird bio, Inc. from 2011 to 2015. Dr. Gillis received his B.A. in Biology and English from Williams College and his Ph.D. in Biological Science from Dartmouth College. We believe that Dr. Gillis’s knowledge of immunology and experience in the venture capital industry, particularly with biotechnology and pharmaceutical companies, qualifies him to serve as a member of our board of directors. Richard J. Gregory, Ph.D. has served as a member of our board of directors since 2015. Prior to his retirement, Dr. Gregory served as Executive Vice President and Chief Scientific Officer of ImmunoGen, Inc., a biotechnology company, from 2015 until August 2019. Prior to joining ImmunoGen, Inc., he spent 25 years at Genzyme Corporation, a biotechnology company, in roles of increasing responsibility, including Senior Vice President and Head of Research from 2003 until Genzyme Corporation’s acquisition by Sanofi in 2011, and Head of Research and Development for Genzyme from 2011 through 2014. Dr. Gregory serves as a director of ProMIS Neurosciences, Inc. Dr. Gregory received his B.A. in Science from Virginia Tech and holds a Ph.D. from the University of Massachusetts, Amherst, and completed his post-doctoral work at the Worcester Foundation for Experimental Biology. We believe that Dr. Gregory’s knowledge of immunology qualifies him to serve as a member of our board of directors. Kush M. Parmar, M.D., Ph.D. has served as a member of our board of directors since 2015 and as Chairman of the Board since March 2018. Dr. Parmar is a Managing Partner at 5AM Venture Management LLC, an early stage venture capital firm focused on the life sciences, where he has been since 2010. Before joining 5AM, from 2002 to 2010, he was at Harvard Medical School, where he was an NIH-sponsored M.D./Ph.D. physician scientist fellow in the joint Harvard-MIT Health Sciences and Technology Program. Dr. Parmar currently serves on the boards of 5:01 Acquisition Corp. and Akouos, Inc., as well as the boards of numerous private companies. He previously served as a board member or observer for Arvinas, Inc., Achaogen, Inc., Audentes Therapeutics, Inc. (acquired by Astellas Pharma Inc.), Pulmatrix, Inc. and scPharmaceuticals Inc. He is a member of the scientific advisory boards of Penn Medicine, Princeton University’s Department of Molecular Biology, and the Grace Science Foundation, and is a fellow of the Society of Kauffman Fellows. Before joining 5AM, Dr. Parmar completed clinical clerkships at the Massachusetts General & Brigham and Women’s Hospitals, attended courses at Harvard Business School and consulted for an oncology startup. He also founded a non-profit international development organization, the Cruz Blanca Initiative. He holds an A.B. in Molecular Biology and Medieval Studies from Princeton University, a Ph.D. in Experimental Pathology from Harvard University, and an M.D. from Harvard Medical School. We believe that Dr. Parmar’s experience in the life sciences industry, his experience as a venture capitalist and senior executive, as well as his service on the boards of directors of numerous companies provide him with the qualifications to serve as a director of our company. 108 Matthew R. Patterson has served as a member of our board of directors since 2018. Mr. Patterson is the co-founder of Audentes Therapeutics, Inc., a biotechnology company, and has served in the role of Strategic Advisor since January 2020. Previously, he served as its Chief Executive Officer from November 2012 until Audentes’ acquisition by Astellas Pharma Inc. in January 2020. Mr. Patterson also served as Audentes’ Chairman of the board of directors and formerly served as President until May 2018. Prior to that, Mr. Patterson was the Entrepreneur-In-Residence at OrbiMed Advisors LLC. Prior to OrbiMed, Mr. Patterson served in roles at Amicus Therapeutics, Inc., BioMarin Pharmaceutical Inc. and Genzyme Corporation. Mr. Patterson serves as a director of Vor Biopharma, Inc. and 5:01 Acquisition Corp., and also serves as a director of several private companies . Mr. Patterson holds a B.A. from Bowdoin College. We believe that Mr. Patterson’s experience in the biotechnology and biopharmaceutical industries, as well as his service on the board of directors of a public company provide him with the qualifications to serve as a director of our company. Jeffrey V. Poulton has served as a member of our board of directors since July 2020. Mr. Poulton has served as Executive Vice President and Chief Financial Officer at Alnylam Pharmaceuticals, Inc., a biopharmaceutical company, since August 2019. Prior to joining Alnylam, Mr. Poulton served as Chief Financial Officer of Indigo Agriculture, a plant microbiome company, from January 2018 to April 2019, where he supported the initial commercial scale-up of the business, including expansion outside the U.S. Between 2003 and December 2017, Mr. Poulton held various roles of increasing responsibility at Shire plc, most recently as Chief Financial Officer and a member of Shire’s Executive Committee and Board of Directors from January 2015 to December 2017. During his tenure at Shire, Mr. Poulton also led Shire’s rare disease U.S., LATAM and Asia Pacific commercial operations, as well as Shire’s global rare disease business unit. Prior to Shire, Mr. Poulton led corporate finance and business development initiatives in both the gas and electric utilities industry and the materials manufacturing sector, serving in financial leadership positions at Cinergy Corp. and PPG Industries. Mr. Poulton also served in the United States Navy as a Commissioned Officer. Mr. Poulton holds a B.A. in Economics from Duke University and an M.B.A. from Indiana University. We believe that Mr. Poulton is qualified to serve on our board of directors due to his finance background and industry experience. Alise Reicin, M.D. has served as a member of our board of directors since July 2019. Dr. Reicin has served as Chief Executive Officer of Tectonic Therapeutic, Inc., a biotechnology company, since August 2020. Prior to Tectonic. Dr. Reicin served as President, Global Clinical Development at Celgene Corporation, a pharmaceutical company, from November 2018 to December 2019. Prior to Celgene, she served as Head of Global Clinical Development at EMD Serono, a pharmaceutical company, from May 2015 through October 2018. Prior to EMD Serono, Dr. Reicin served as VP, Program Leadership Oncology at Merck and Co., a pharmaceutical company. She holds a B.A. in Biochemistry from Barnard College of Columbia University and an M.D. from Harvard Medical School. We believe that Dr. Reicin’s clinical expertise and leadership roles in the biotechnology and biopharmaceutical industries provide her with the qualifications to serve as a director of our company. Mary Thistle has served as a member of our board of directors since 2018. Ms. Thistle has served as Special Advisor to the Bill & Melinda Gates Medical Research Institute, a non-profit biotech organization, since the fall of 2020, and previously served as the organization’s Chief of Staff from January 2018 until assuming her current role. Prior to that, she held senior leadership positions at Dimension Therapeutics, Inc., a gene therapy company, including Chief Operating Officer from 2016 to 2017 and Chief Business Officer from 2015 to 2016. Prior to joining Dimension Therapeutics, Inc., she spent six years at Cubist Pharmaceuticals, Inc., a biopharmaceutical company, where she held various leadership positions, including Senior Vice President, Business Development from 2014 to 2015, Vice President, Business Development from 2012 to 2013 and Senior Director, Business Development from 2009 to 2012. Prior to that, she held various positions at ViaCell, Inc. and PerkinElmer Inc. Ms. Thistle currently serves on the board of directors of Ziopharm Oncology, Inc., as well as the boards of several private companies. Ms. Thistle holds a B.S. in Accounting from the University of Massachusetts, Boston. We believe that Ms. Thistle is qualified to serve on our board of directors due to her finance background and industry experience. Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires our directors, executive officers and stockholders who beneficially own more than 10% of any class of our equity securities registered pursuant to Section 12 of the Exchange Act (collectively, the “Reporting Persons”) to file initial statements of beneficial ownership of securities and statements of changes in beneficial ownership of securities with respect to our equity securities with the SEC. Based on our review of the copies of such forms filed with the SEC and upon any written representations of the Reporting Persons received by us, we believe that there has been compliance with all Section 16(a) filing requirements applicable to such Reporting Persons with respect to the year ended December 31, 2020. 109 Code of Ethics We have a written Code of Business Conduct and Ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have posted a current copy of the code on our website at www.homologymedicines.com in the “Investors” section under “Corporate Governance.” In addition, we intend to post on our website all disclosures that are required by law or the listing standards of The Nasdaq Stock Market LLC (“Nasdaq”) concerning any amendments to, or waivers from, any provision of the code. The information contained on our website is not incorporated by reference into this Annual Report on Form 10‑K. Audit Committee and Audit Committee Financial Expert We have a separately-designated standing audit committee (“Audit Committee”). The members of the Audit Committee are Matthew R. Patterson, Jeffrey V. Poulton and Mary Thistle. Ms. Thistle serves as the Chairperson of the Audit Committee. The members of our Audit Committee meet the requirements for financial literacy under the applicable rules of the SEC and Nasdaq. Our board of directors has determined that Ms. Thistle is an “audit committee financial expert” as defined by Item 407(d)(5)(ii) of Regulation S-K. Item 11. Executive Compensation. This section discusses the material components of our 2020 compensation program for our principal executive officer and next three most highly compensated executive officers who are named in the 2020 Summary Compensation Table below. These “named executive officers” and their positions are: • Arthur O. Tzianabos, Ph.D., President and Chief Executive Officer; • Albert Seymour, Ph.D., Chief Scientific Officer; and • W. Bradford Smith, Chief Financial Officer. 2020 Summary Compensation Table The following table sets forth information concerning the compensation of our named executive officers for the years ended December 31, 2019 and 2020: Name and principal position Fiscal Year Salary $ Bonus $ Option Awards $ (1) Non-Equity Incentive Plan Compensation $ All Other Compensation $ (2) Total $ Arthur O. Tzianabos, Ph.D. 2020 563,200 — — 309,760 13,000 885,960 President and Chief Executive Officer 2019 537,600 — 4,217,097 295,680 12,500 5,062,877 Albert Seymour, Ph.D. 2020 426,800 — — 170,720 10,057 607,577 Chief Scientific Officer 2019 405,600 — 1,295,756 162,240 13,231 1,876,827 W. Bradford Smith 2020 406,700 — — 162,680 13,000 582,380 Chief Financial Officer, Treasurer and Secretary 2019 384,200 — 1,307,536 153,680 14,880 1,860,296 (1) Amounts reflect the full grant date fair value of stock options granted during the applicable year computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual. We provide information regarding the assumptions used to calculate the value of all option awards in Note 12 to our consolidated financial statements included in this Annual Report on Form 10-K. (2) Amount shown represents 401(k) matching contributions. For additional information, refer to the discussion below under the heading “Narrative Disclosure to Summary Compensation Table —Retirement Plans.” Narrative Disclosure to Summary Compensation Table The primary elements of compensation for our named executive officers are base salary, annual performance bonuses and long-term equity-based compensation awards. The named executive officers also generally participate in employee benefit plans and programs that we offer to our other full-time employees on the same basis. 110 20 20 Salaries The named executive officers receive a base salary to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities. The following table shows the annual base salaries for 2020 and 2021 of our named executive officers. The 2021 annual base salaries became effective January 1, 2021. Name 2020 Annual Base Salary ($) 2021 Annual Base Salary ($) Arthur O. Tzianabos, Ph.D. 563,200 583,100 Albert Seymour, Ph.D. 426,800 450,000 W. Bradford Smith 406,700 445,300 2020 Bonuses We offer our named executive officers the opportunity to earn annual cash bonuses to compensate them for attaining short-term company and individual goals as approved by our board of directors. For 2020, bonuses were based on attaining corporate goals relating to product development, manufacturing processes, and raising equity capital and individual goals related to each named executive officer’s area of responsibility within the Company. The 2020 target bonus amounts, expressed as a percentage of annual base salary, of our named executive officers were 55% for Dr. Tzianabos, 40% for Dr. Seymour and 40% for Mr. Smith. In December 2020, our board of directors met to review performance against the 2020 bonus goals and, based on its determination that the corporate and individual goals had been achieved at 100% of target level, approved cash bonuses for the named executive officers in the amounts set forth in the Non-Equity Incentive Plan Compensation column of the 2020 “Summary Compensation Table” above. In December 2020, our board of directors approved maintaining the same target bonus amounts for each of our named executive officers for 2021. Equity Compensation We did not make any grants of equity awards to our named executive officers in 2020. However, we typically offer stock options to our employees, including our named executive officers, as the long-term incentive component of our compensation program. Stock options allow our employees to purchase shares of our common stock at a price equal to the fair market value of our common stock on the date of grant, as determined by the board of directors. Initial stock option grants to newly hired employees generally vest as to 25% of the underlying shares on either the first anniversary of the date of grant or a specified vesting commencement date and in equal monthly installments over the following 36 months, subject to the holder’s continued service with us. Since 2017, stock options granted from time to time as periodic awards to existing employees generally vest in 48 equal monthly installments on the first day of each calendar month following the vesting commencement date, subject to the holder’s continued service with us through the applicable vesting dates. Historically, our stock options have been intended to qualify as “incentive stock options” to the extent permitted under Internal Revenue Code of 1986, as amended, and, prior to the completion of our initial public offering, allowed “early exercise” of an unvested option in exchange for shares of restricted stock subject to the same vesting schedule as the underlying stock option. We maintain the 2018 Incentive Award Plan to facilitate the grant of cash and equity incentives to directors, employees (including our named executive officers) and consultants of our company and to enable our company to obtain and retain services of these individuals. Please refer to our Outstanding Equity Awards at 2020 Fiscal Year End table below for additional information regarding the stock options held by our named executive officers. Retirement Plans We maintain a 401(k) retirement savings plan for our employees, including our named executive officers, who satisfy certain eligibility requirements. Our named executive officers are eligible to participate in the 401(k) Plan on the same terms as other full-time employees. We provide matching contributions under the plan of 50% of the first 6% of each participant’s eligible compensation contributed. Employee contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. Employees are immediately and fully 111 vested in their own contributions. Employer contributions vest over three years according to the employees’ years of service. We believe that providing a vehicle for tax deferred retirement savings though our 401(k) P lan adds to the overall desirability of our executive compensation package and further incentivizes our employees, including our named executive officers, in accordance with our compensation policies. Employee Benefits Our named executive officers are eligible to participate in our employee benefit plans and programs, which include medical, dental, and vision benefits, health spending accounts, and short- and long-term disability, accidental death and dismemberment, and life insurance, to the same extent as our other full-time employees generally, subject to the terms and eligibility requirements of those plans. Outstanding Equity Awards at 2020 Fiscal Year-End The following table summarizes the number of shares of common stock underlying outstanding equity incentive plan awards for each named executive officer as of December 31, 2020. Option Awards Name Vesting Commencement Date Number of Securities Underlying Unexercised Options (#) Exercisable (1) Number of Securities Underlying Unexercised Options (#) Unexercisable (1) Per Share Option Exercise Price ($) Option Expiration Date Arthur O. Tzianabos, Ph.D. 4/1/2016 462,135 (2) — (2) 0.47 4/22/2026 1/1/2018 375,242 139,411 6.63 12/7/2027 3/27/2018 63,492 28,884 16.00 3/27/2028 1/1/2019 97,270 105,730 24.28 12/14/2028 1/1/2020 82,041 275,959 19.92 12/11/2029 Albert Seymour, Ph.D. 1/1/2018 55,702 20,715 6.63 12/7/2027 3/27/2018 - 4,176 16.00 3/27/2028 1/1/2019 35,458 38,542 24.28 12/14/2028 1/1/2020 25,208 84,792 19.92 12/11/2029 W. Bradford Smith 4/5/2017 89,786 (2) 13,618 (2) 0.63 4/6/2027 1/1/2018 46,283 17,213 6.63 12/7/2027 3/27/2018 34,155 15,556 16.00 3/27/2028 1/1/2019 42,166 45,834 24.28 12/14/2028 1/1/2020 25,437 85,563 19.92 12/11/2029 (1) Except as otherwise described below, stock options have a term of ten years from the grant date and vest and become exercisable in 48 equal monthly installments based upon the executive’s completion of each full month of service following the vesting commencement date, subject to the named executive officer’s continued employment with the Company through each applicable vesting date and potential accelerated vesting as described under the heading “Employment Agreements” below. In addition, stock options granted to our named executive officers prior to 2018 permitted early exercise in exchange for restricted stock. As a result, all of such options were exercisable as of December 31, 2020. The number of shares for which each such option is shown as being exercisable and unexercisable represents, respectively, the number of shares for which each such option was vested and unvested as of December 31, 2020. (2) Awards vest as to 25% of the underlying shares on the first anniversary of the specified vesting commencement date and in equal monthly installments over the following 36 months, subject to the named executive officer’s continued employment with the Company through each applicable vesting date and potential accelerated vesting as described under the heading “Employment Agreements” below. Employment Agreements We have entered into employment agreements with each of our named executive officers. The employment agreements are for unspecified terms. Under their respective employment agreements, if we terminate Dr. Tzianabos, Dr. Seymour or Mr. Smith without “cause” or he resigns for “good reason,” subject to his timely executing a release of claims and continued compliance with a separate restrictive covenant agreement, he is entitled to receive (i) base salary continuation for a period of nine months (or, for Dr. Tzianabos, 12 months), (ii) payment of all bonuses earned but unpaid as of the date of termination and (iii) direct payment of or reimbursement for continued medical, dental or vision coverage pursuant to COBRA for up to nine 112 months (or, for Dr. Tzianabos, 12 months), less the amount he would have had to pay to receive such coverage as an active employee based on the cost sharing levels in effect on his termination date. If we terminate Dr. Tzianabos, Dr. Seymour or Mr. Smith without “cause” or he resigns for “good reason,” in either case, on or within 12 months following a change in control, then, in lieu of the severance benefits described above, subject to his timely executing a release of claims, he is entitled to receive (i) an amount in cash equal to 1.0 times (or, for Dr. Tzianabos, 1.5 times) the sum of his base salary plus target annual bonus for the year of termination, (ii) payment of all bonuses earned but unpaid as of the date of termination, (iii) direct payment of or reimbursement for continued medical, dental or vision coverage pursuant to COBRA for up to 12 months (or, for Dr. Tzianabos, 18 months), less the amount he would have had to pay to receive such coverage as an active employee based on the cost sharing levels in effect on his termination date, and (iv) accelerated vesting of all unvested equity or equity-based awards that vest solely based on the passage of time, with any such awards that vest based on the attainment of performance-vesting conditions being governed by the terms of the applicable award agreement. Each of our named executive officers has agreed to refrain from competing with us or soliciting our employees, in each case, while employed and following his termination of employment for any reason for a period of 12 months. For purposes of the employment agreements, “cause” generally means the named executive officer’s refusal to substantially perform the duties associated with his position with our company or to carry out the reasonable and lawful instructions of the board of directors concerning duties or actions consistent with his position, his breach of a material provision of the employment agreement which remains uncured (to the extent capable of cure) for a period of 30 days following written notice from our company, his conviction, plea of no contest or nolo contendere or imposition of unadjudicated probation for any felony or crime involving moral turpitude, his unlawful use (including being under the influence) or possession of illegal drugs on our premises or while performing his duties and responsibilities under the employment agreement, or his commission of any act of fraud, embezzlement, misappropriation, willful misconduct, or breach of fiduciary duty against us. For purposes of the employment agreements, “good reason” generally means, subject to certain cure rights, the named executive officer’s termination of employment due to a reduction in salary or target bonus, a material decrease in authority or areas of responsibility, our company’s breach of any one or more of the material provisions of the employment agreement, or a relocation by our company of the named executive officer’s primary office to a location more than 25 miles from the named executive officer’s primary office on the date of the agreement. Non-Employee Director Compensation The following table sets forth in summary form information concerning the compensation that was earned by or paid to each of our non-employee directors during the year ended December 31, 2020. Dr. Tzianabos, our Chief Executive Officer, received no compensation for his service as a director during the year ended December 31, 2020. 2020 Director Compensation Table Name Fees Earned or Paid in Cash ($) Option Awards ($)(1) Total ($) Steven Gillis, Ph.D. 48,000 164,759 (2) 212,759 Richard J. Gregory, Ph.D. 48,750 164,759 (2) 213,509 Kush M. Parmar, M.D., Ph.D. 85,000 164,759 (2) 249,759 Matthew R. Patterson 47,500 164,759 (2) 212,259 Jeffrey V. Poulton (3) 23,750 342,900 (4) 366,650 Alise S. Reicin, M.D. 44,000 164,759 (2) 208,759 Mary Thistle 55,000 164,759 (2) 219,759 (1) Amounts reflect the grant date fair value of stock options granted during the applicable year computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual. We provide information regarding the assumptions used to calculate the value of all option awards in Note 12 to our consolidated financial statements included in this Annual Report on Form 10-K. (2) Represents the grant date fair value of an option to purchase 18,000 shares of our common stock granted to each then-current non-employee director on June 10, 2020 with an exercise price of $16.32 per share. 113 (3) Mr. Poulton was appointed to our board of directors on July 21, 2020. Mr. Poulton’s fees for his board and committee service were prorated as if he had served during the entire second half of 2020. (4) Represents the grant date fair value of an initial grant of an option to purchase 36,000 shares of our common stock with an exercise price of $16.48 per share granted to Mr. Poulton upon his appointment as a director on July 21, 2020. The table below shows the aggregate numbers of shares subject to option awards held as of December 31, 2020 by each non-employee director. None of our non-employee directors held any other outstanding equity awards as of December 31, 2020. Options Outstanding Name Exercisable Unexercisable Total Steven Gillis, Ph.D. 36,145 28,595 64,740 Richard J. Gregory, Ph.D. 36,145 28,595 64,740 Kush M. Parmar, M.D., Ph.D. 36,145 28,595 64,740 Matthew R. Patterson 38,411 27,279 65,690 Jeffrey V. Poulton (3) — 36,000 36,000 Alise S. Reicin, M.D. 10,282 38,878 49,160 Mary Thistle 36,145 28,595 64,740 We maintain a compensation program for our non-employee directors under which each non-employee director receives the following amounts for their service on our board of directors. As amended effective January 1, 2020, our non-employee director compensation program provides for the following: • an option to purchase 36,000 shares of our common stock upon the director’s initial election or appointment to our board of directors (the “Initial Award”), • if the director has served on our board of directors for at least six months as of the date of an annual meeting of stockholders, an option to purchase 18,000 shares of our common stock on the date of the annual meeting (the “Annual Award”), • an annual director fee of $40,000, and • if the director serves on a committee of our board of directors or in the other capacities stated below, an additional annual fee as follows: • chairman of the board or lead independent director, $35,000, • chairman of the audit committee, $15,000, • audit committee member other than the chairman, $7,500, • chairman of the compensation committee, $10,000, • compensation committee member other than the chairman, $5,000, • chairman of the nominating and corporate governance committee, $8,000, and • nominating and corporate governance committee member other than the chairman, $4,000. Stock options granted to our non-employee directors under the program have an exercise price equal to the fair market value of our common stock on the date of grant and expire not later than ten years after the date of grant. Stock options granted upon a director’s initial election or appointment vest in three equal installments on each of the first three anniversaries of the date of grant. Stock options granted annually to directors vest in a single installment on the earlier of the day before the next annual meeting or the first anniversary of the date of grant. In addition, all unvested stock options vest in full upon the occurrence of a change in control. Director fees under the program are payable in arrears in four equal quarterly installments not later than the fifteenth day following the final day of each calendar quarter, provided that the amount of each payment is prorated for any portion of a quarter that a director is not serving on our board. 114 Item 12. Security Ownership of Certain Beneficial Own ers and Management and Related Stockholder Matters. Equity Compensation Plan Information The following table provides information on our equity compensation plans as of December 31, 2020. Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans(4) Equity compensation plans approved by security holders (1) 5,840,824 (2) $ 15.18 (3) 3,437,197 Equity compensation plans not approved by security holders — — — Total 5,840,824 $ 15.18 3,437,197 (1) Consists of the 2015 Stock Incentive Plan, as amended (the “2015 Plan”), the 2018 Incentive Award Plan (the “2018 Plan”) and the 2018 Employee Stock Purchase Plan (the “2018 ESPP”). (2) Includes 1,661,468 outstanding options to purchase stock under the 2015 Plan and 4,179,356 outstanding options to purchase stock under the 2018 Plan. (3) As of December 31, 2020, the weighted-average exercise price of outstanding options under the 2015 Plan was $3.95 and the weighted-average exercise price of outstanding options under the 2018 Plan was $19.65. (4) Includes 2,397,547 shares available for future issuance under the 2018 Plan and 1,039,650 shares available for issuance under the 2018 ESPP (of which 48,792 shares were issued with respect to the purchase period in effect as of December 31, 2020, which purchase period ended on February 26, 2021). As of March 26, 2018, in connection with our initial public offering, no further grants are made under the 2015 Plan. The 2018 Plan provides for an annual increase on the first day of each calendar year beginning on January 1, 2019 and ending on and including January 1, 2028, by an amount equal to the lesser of (i) 4% of the aggregate number of shares of common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of common stock as determined by our board of directors (but no more than 20,887,347 shares may be issued upon the exercise of incentive stock options), plus any shares that were subject to awards outstanding under the 2015 Plan as of the effective date of the 2018 Plan which are forfeited, expire, lapse for any reason or are settled for cash without the issuance of shares. The 2018 ESPP provides for an annual increase on the first day of each calendar year beginning on January 1, 2019 and ending on and including January 1, 2028, by an amount equal to the lesser of (i) 1% of the aggregate number of shares of common stock outstanding on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of common stock as is determined by our board of directors, provided that no more than 4,778,738 shares of our common stock may be issued under the 2018 ESPP. Security Ownership of Certain Beneficial Owners and Management The following table sets forth certain information with respect to holdings of our common stock by (i) stockholders who beneficially owned more than 5% of the outstanding shares of our common stock, and (ii) each of our directors (which includes all nominees), each of our named executive officers and all directors and executive officers as a group as of March 1, 2021, unless otherwise indicated. The number of shares beneficially owned by each stockholder is determined under rules issued by the SEC. Under these rules, beneficial ownership includes any shares as to which a person has sole or shared voting power or investment power. Applicable percentage ownership is based on 50,482,124 shares of common stock outstanding as of March 1, 2021. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options, warrants or other rights held by such person that are currently exercisable or will become exercisable within 60 days of March 1, 2021 are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person. 115 Unless otherwise indicated, the address of each beneficial owner listed below is One Patriots Park, Bedford, MA 01730. We believe, based on information provided to us that each of the stockholders listed below has sole voting and investment power with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable. Name of Beneficial Owner Number of Shares Beneficially Owned Percentage 5% or Greater Stockholders Entities affiliated with ARCH Venture Fund (1) 5,768,694 11.4 % Pfizer Inc. (2) 5,000,000 9.9 % Entities affiliated with 5AM Ventures (3) 4,535,919 9.0 % JPMorgan Chase & Co. (4) 3,441,712 6.8 % TLS Beta Pte. Ltd. (5) 3,220,293 6.4 % BlackRock, Inc. (6) 2,763,142 5.5 % Named Executive Officers and Directors Arthur O. Tzianabos, Ph.D. (7) 1,255,023 2.4 % Albert Seymour, Ph.D. (8) 318,335 * W. Bradford Smith (9) 263,965 * Steven Gillis, Ph.D. (1)(10) 5,815,434 11.5 % Richard J. Gregory, Ph.D. (11) 57,546 * Kush M. Parmar, M.D., Ph.D. (3)(12) 4,582,659 9.1 % Matthew R. Patterson (13) 43,234 * Jeffrey V. Poulton — * Alise S. Reicin, M.D. (14) 10,282 * Mary Thistle (15) 46,740 * All executive officers and directors as a group (12 persons) (16) 12,650,058 24.0 % *Less than 1% (1) Based on a Schedule 13G filed with the SEC on February 13, 2020 and the Company's records. Consists of 4,631,031 shares of common stock held by ARCH Venture Fund VIII, L.P. (“ARCH Fund VIII”) and 1,137,663 shares of common stock held by ARCH Venture Fund VIII Overage, L.P. (“ARCH Fund Overage”). The sole general partner of ARCH Fund VIII is ARCH Venture Partners VIII, L.P. (“ARCH Partners VIII”), which may be deemed to beneficially own the shares held by ARCH Fund VIII. The sole general partner of ARCH Partners VIII and ARCH Fund Overage is ARCH Venture Partners VIII, LLC (“ARCH VIII LLC”), which has shared voting and dispositive power over the shares of common stock held by each of ARCH Fund VIII and ARCH Fund Overage. ARCH Partners VIII and ARCH VIII LLC disclaim beneficial ownership of such shares, except to the extent of any pecuniary interest therein. The managing directors of ARCH VIII LLC are Keith L. Crandell, Clinton Bybee and Robert Nelsen, and they may be deemed to have shared voting and dispositive power over the shares of common stock held by ARCH Fund VIII and ARCH Fund Overage. Messrs. Crandell, Bybee and Nelsen disclaim beneficial ownership of such shares, except to the extent of any pecuniary interest therein. Steven Gillis, M.D., Ph.D., one of our directors, is a managing director at ARCH Venture Partners. Director Steven Gillis owns an interest in ARCH Partners VIII but does not have voting or investment control over the shares held by ARCH Fund VIII, and disclaims beneficial ownership of such shares, except to the extent of any pecuniary interest therein. The address of ARCH Fund VIII and ARCH Fund Overage is 8755 West Higgins Road, Suite 1025, Chicago, Illinois 60631. (2) Based on a Schedule 13G filed with the SEC on November 19, 2020, Pfizer Inc. has sole voting and dispositive power over all 5,000,000 shares. The address of Pfizer Inc. is 235 East 42nd Street, New York, NY 10017. ( 3 ) Based on a Schedule 13G filed with the SEC on February 16, 2021 and the Company's records. Consists of 4,354,484 shares of common stock held by 5AM Ventures IV, L.P. (“Ventures IV”), as to which Ventures IV has shared voting and dispositive power, and 181,435 shares of common stock held by 5AM Co-Investors IV, L.P. (“Co-Investors IV”), as to which Co-Investors IV has shared voting and dispositive power. 5AM Partners IV, LLC (“Partners IV”) is the sole general partner of Ventures IV and Co-Investors IV. Dr. John Diekman, Andrew J. Schwab and Dr. Scott M. Rocklage, are the managing members of Partners IV and, along with Partners IV, have shared voting and investment power over the shares beneficially owned by Ventures IV and Co-Investors IV. Kush M. Parmar, M.D., Ph.D., one of our directors, is an 116 affiliate of Ventures IV. Each of Partners IV, Dr. Diekman, Mr. Schwab and Dr. Rocklage disclaim beneficial ownership of such shares except to the extent of its or their recurring interest therein. The address of all entities affiliated with 5AM Ventures is 501 2nd Street, Suite 350, San Francisco, CA 94107. (4) Based solely on a Schedule 13G filed with the SEC on January 25, 2021, JPMorgan Chase & Co. has sole voting power over 3,054,192 shares and sole dispositive power over 3,441,712 shares. The address of Blackrock, Inc. is 383 Madison Avenue, New York, NY 10179. (5) Based solely on a Schedule 13G filed with the SEC on April 11, 2018, Temasek Holdings (Private) Limited, Fullerton Management Pte Ltd and Temasek Life Sciences Private Limited each has shared voting and dispositive power over 3,220,293 shares of common stock, V-Sciences Investments Pte Ltd has shared voting and dispositive power over 625,000 shares of common stock, and TLS Beta Pte. Ltd. has shared voting and dispositive power over 2,595,293 shares of common stock. The principal business address of Temasek Holdings (Private) Limited, Fullerton Management Pte Ltd, Temasek Life Sciences Private Limited, V-Sciences Investments Pte Ltd and TLS Beta Pte. Ltd. is 60B Orchard Road #06-18 Tower 2, The Atrium@Orchard, Singapore 238891. (6) Based solely on a Schedule 13G filed with the SEC on February 2, 2021, Blackrock, Inc. has sole voting power over 2,724,076 shares and sole dispositive power over 2,763,142 shares. The address of Blackrock, Inc. is 55 East 52nd Street, New York, NY 10055. (7) Includes options to purchase 1,177,518 shares of common stock that are or will be immediately exercisable by Dr. Tzianabos within 60 days of March 1, 2021. (8) Includes options to purchase 189,318 shares of common stock that are or will be immediately exercisable by Dr. Seymour within 60 days of March 1, 2021. (9) Consists of options to purchase 263,965 shares of common stock that are or will be immediately exercisable by Mr. Smith within 60 days of March 1, 2021. (10) Includes options to purchase 46,740 shares of common stock that are or will be immediately exercisable by Dr. Gillis within 60 days of March 1, 2021. (11) Includes options to purchase 46,740 shares of common stock that are or will be immediately exercisable by Dr. Gregory within 60 days of March 1, 2021. (12) Includes options to purchase 46,740 shares of common stock that are or will be immediately exercisable by Dr. Parmar within 60 days of March 1, 2021. (13) Consists of options to purchase 43,234 shares of common stock that are or will be immediately exercisable by Mr. Patterson within 60 days of March 1, 2021. (1 4 ) Consists of options to purchase 10,282 shares of common stock that are or will be immediately exercisable by Ms. Reicin within 60 days of March 1, 2021. (1 5 ) Consists of options to purchase 46,740 shares of common stock that are or will be immediately exercisable by Ms. Thistle within 60 days of March 1, 2021. (1 6 ) Includes options to purchase 12,650,058 shares of common stock that are or will be immediately exercisable within 60 days of March 1, 2021. Item 13. Certain Relationships and Related Transactions, and Director Independence. Policies and Procedures for Related Person Transactions Our board of directors has adopted a written Related Person Transaction Policy, setting forth the policies and procedures for the review and approval or ratification of related person transactions. Under the policy, our finance department is primarily responsible for developing and implementing processes and procedures to obtain information regarding related persons with respect to potential related person transactions and then determining, based on the facts and circumstances, whether such potential related person transactions do, in fact, constitute related person transactions requiring compliance with the policy. If 117 our finance department determines that a transaction or relationship is a related person transaction requiring compliance with the policy, our Chief Financial Officer is required to present to the audit committee all relevant facts and circumstances relating to the related person transaction. Our audit committee must review the relevant facts and circumstances of each related person transaction, including if the transaction is on terms comparable to those that could be obtained in arm's length dealings with an unrelated third party and the extent of the related person's interest in the transaction, take into account the conflicts of interest and corporate opportunity provisions of our code of business conduct and ethics, and either approve or disapprove the related person transaction. If advance audit committee approval of a related person transaction requiring the audit committee's approval is not feasible, then the transaction may be preliminarily entered into by management upon prior approval of the transaction by the chair of the audit committee subject to ratification of the transaction by the audit committee at the audit committee's next regularly scheduled meeting; provided, that if ratification is not forthcoming, management will make all reasonable efforts to cancel or annul the transaction. If a transaction was not initially recognized as a related person, then upon such recognition the transaction will be presented to the audit committee for ratification at the audit committee's next regularly scheduled meeting; provided, that if ratification is not forthcoming, management will make all reasonable efforts to cancel or annul the transaction. Our management will update the audit committee as to any material changes to any approved or ratified related person transaction and will provide a status report at least annually of all then current related person transactions. No director may participate in approval of a related person transaction for which he or she is a related person. The following are certain transactions, arrangements and relationships with our directors, executive officers and stockholders owning 5% or more of our outstanding common stock since January 1, 2019. Stock Purchase Agreement with Pfizer On November 9, 2020, we entered into a stock purchase agreement, or the Stock Purchase Agreement, with Pfizer Inc., or Pfizer, which holds approximately 9.9% of our common stock as of March 1, 2021, pursuant to which Pfizer purchased 5,000,000 shares of our common stock through a private placement transaction at a purchase price of $12.00 per share, for an aggregate purchase price of $60.0 million. Under the Stock Purchase Agreement, Pfizer was granted an exclusive right of first refusal, or ROFR, for a 30-month period beginning on the date of the closing of the private placement to negotiate a potential collaboration on the development and commercialization of HMI-102 and HMI-103. Pfizer may exercise its right of first refusal under the ROFR one time for each of HMI-102 and HMI-103 during the ROFR period. Additionally, Pfizer has designated a member to join our Scientific Advisory Board to participate in matters related to the development of these programs. For more information regarding Pfizer and its equity holdings, see Part III, Item 12. “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters—Security Ownership of Certain Beneficial Owners and Management.” 2019 Follow-On Offering In April 2019, we completed a registered public offering pursuant to which we issued and sold an aggregate of 6,388,889 shares of our common stock (including 833,333 shares sold pursuant to the underwriters’ full exercise of their option to purchase additional shares) at a public offering price of $22.50 per share for aggregate net proceeds to us of approximately $134.5 million. The following table sets forth the number of shares of common stock purchased in our registered public offering by certain former holders of more than 5% of our common stock: Name Shares of Common Stock Purchased Total Purchase Price Entities affiliated with Deerfield (affiliate of Cameron Wheeler, Ph.D., who resigned from our board of directors in July 2019) 533,333 $ 11,999,993 Entities affiliated with T. Rowe Price Group, Inc. 719,464 $ 16,187,940 Employment Agreements We have entered into employment agreements with our named executive officers. For more information regarding these agreements, see Item 11. “Executive Compensation—Narrative Disclosure to Compensation Tables—Employment Agreements.” Indemnification Agreements We have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us or will require us to indemnify each director (and in certain cases their related venture capital funds) and executive officer to the fullest extent permitted by Delaware law, including indemnification of expenses such as 118 attorneys’ fees, judgments, fines and settlement amounts incurred by the director or executive officer in any action or proceeding, including any action or proceeding by or in right of us, arising out of the person’s services as a director or executive officer. Director Independence Steven Gillis, Ph.D., Richard J. Gregory, Ph.D., Kush M. Parmar, M.D., Ph.D., Matthew R. Patterson, Alise S. Reicin, M.D., Jeffrey V. Poulton and Mary Thistle each qualify as “independent” in accordance with the listing requirements of Nasdaq. The Nasdaq independence definition includes a series of objective tests, including that the director is not, and has not been for at least three years, one of our employees and that neither the director nor any of his family members has engaged in various types of business dealings with us. In addition, as required by Nasdaq rules, our board of directors has made a subjective determination as to each independent director that no relationships exist, which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management, including that Dr. Gillis and Dr. Parmar are affiliated with certain of our significant stockholders. Arthur O. Tzianabos, Ph.D. is not independent because he is the President and Chief Executive Officer of Homology. There are no family relationships among any of our directors or executive officers. 119 Item 14. Principal Accoun tant Fees and Services. The following table summarizes the fees of Deloitte & Touche LLP, our independent registered public accounting firm, billed to us in each of the last two fiscal years for audit services and billed to us in each of the last two fiscal years for other services: 2020 2019 Fee Category (in thousands) Audit Fees $ 598 $ 602 Tax Fees 20 13 All Other Fees 2 28 Total $ 620 $ 643 Audit Fees Audit fees consist of fees for the audit of our consolidated financial statements, the review of the unaudited interim financial statements included in our quarterly reports on Form 10-Q and other professional services provided in connection with statutory and regulatory filings or engagements and services associated with the issuance of comfort letters and the issuance of consents on registration statements. Tax Fees Tax fees consist of fees for tax compliance, tax advice, and tax planning services. All Other Fees All other fees consist of an annual license fee for use of accounting research software and in 2019, fees for services performed related to the adoption the Financial Accounting Standards Board issued Accounting Standards Update Topic 606, Revenue from Contracts with Customers . Audit Committee Pre-Approval Policy and Procedures  The Audit Committee has adopted a policy (the “Pre-Approval Policy”) that sets forth the procedures and conditions pursuant to which audit and non-audit services proposed to be performed by the independent auditor may be pre-approved. The Pre-Approval Policy generally provides that we will not engage Deloitte & Touche LLP to render any audit, audit-related, tax or permissible non-audit service unless the service is either (i) explicitly approved by the Audit Committee (“specific pre-approval”) or (ii) entered into pursuant to the pre-approval policies and procedures described in the Pre-Approval Policy (“general pre-approval”). Unless a type of service to be provided by Deloitte & Touche LLP has received general pre-approval under the Pre-Approval Policy, it requires specific pre-approval by the Audit Committee or by a designated member of the Audit Committee to whom the committee has delegated the authority to grant pre-approvals. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval. For both types of pre-approval, the Audit Committee will consider whether such services are consistent with the SEC’s rules on auditor independence. The Audit Committee will also consider whether the independent auditor is best positioned to provide the most effective and efficient service, for reasons such as its familiarity with the Company’s business, people, culture, accounting systems, risk profile and other factors, and whether the service might enhance the Company’s ability to manage or control risk or improve audit quality. All such factors will be considered as a whole, and no one factor should necessarily be determinative. On an annual basis, the Audit Committee reviews and generally pre-approves the services (and related fee levels or budgeted amounts) that may be provided by Deloitte & Touche LLP without first obtaining specific pre-approval from the Audit Committee. The Audit Committee may revise the list of general pre-approved services from time to time, based on subsequent determinations. 120 PART IV Item 15. Exhibits and Financial Statement Schedules (a)(1) Financial Statements. The following documents are included on pages F-1 through F-26 attached hereto and are filed as part of this Annual Report on Form 10-K. Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements of Comprehensive Loss F-5 Consolidated Statements of Stockholders’ Equity F-6 Consolidated Statements of Cash Flows F-7 Notes to Consolidated Financial Statements F-8 (a)(2) Financial Statement Schedules. All financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in the financial statements or the notes thereto. (a)(3) Exhibits. The following is a list of exhibits filed as part of this Annual Report on Form 10-K. Incorporated by Reference Exhibit Number Description of Exhibit Form File No. Exhibit Filing date Filed Herewith 3.1 Restated Certificate of Incorporation of Homology Medicines, Inc. 8-K 001-38433 3.1 4/3/18 3.2 Amended and Restated Bylaws of Homology Medicines, Inc. 8-K 001-38433 3.1 12/18/20 4.1 Amended and Restated Investors’ Rights Agreement, dated July 28, 2017, by and among Homology Medicines, Inc. and the investors named therein, as amended 10-Q 001-38433 4.1 11/09/20 4.2 Specimen Stock Certificate evidencing the shares of common stock S-1/A 333-223409 4.2 3/19/18 4.3 Form of Indenture S-3 333-230664 4.3 4/1/19 4.4 Description of Securities * 10.1# 2015 Stock Incentive Plan, as amended, and forms of agreements thereunder S-1/A 333-223409 10.1 3/19/18 10.2# 2018 Incentive Award Plan, and forms of awards thereunder * 10.3# 2018 Employee Stock Purchase Plan S-1/A 333-223409 10.3 3/19/18 10.4# 2018 Employee Stock Purchase Plan – Offering Document 10-Q 001-38433 10.1 11/13/18 10.5# Non-Employee Director Compensation Program 10-K 001-38433 10.5 3/12/20 10.6# Form of Indemnification Agreement for Directors and Officers S-1/A 333-223409 10.5 3/19/18 10.7 Lease Agreement, dated August 31, 2016, between Homology Medicines, Inc. and ARE-MA Region No. 24, LLC S-1 333-223409 10.5 3/2/18 10.8 Lease Agreement, dated December 21, 2017, between Homology Medicines, Inc. and Bedford Patriots Park, LLC S-1 333-223409 10.6 3/2/18 121 10.9# Employment Agreement, November 12, 2019, by and between Homology Medicines, Inc. and Gabriel M. Cohn, M.D. 10-K 001-38433 10.9 3/12/20 10.10# Employment Agreement, dated March 18, 2018, by and between Homology Medicines, Inc. and Albert Seymour S-1/A 333-223409 10.12 3/19/18 10.11# Employment Agreement, dated March 18, 2018, by and between Homology Medicines, Inc. and Bradford Smith S-1/A 333-223409 10.13 3/19/18 10.12# Employment Agreement, dated March 18, 2018, by and between Homology Medicines, Inc. and Arthur Tzianabos, Ph.D. S-1/A 333-223409 10.14 3/19/18 10.13# Employment Agreement, dated April 2, 2018, by and between Homology Medicines, Inc. and Tim Kelly 10-K 001-38433 10.13 3/12/19 10.14.1† Collaboration and License Agreement, dated November 6, 2017, between Homology Medicines, Inc. and Novartis Institutes for BioMedical Research, Inc. S-1/A 333-223409 10.15 3/23/18 10.14.2† Amendment to Collaboration and License Agreement, dated December 17, 2018, between Homology Medicines, Inc. and Novartis Institutes for BioMedical Research, Inc. 10-Q 001-38433 10.1 08/10/20 10.14.3† Second Amendment to C ollaboration and License Agreement, dated October 30, 2020, between Homology Medicines, Inc. and Novartis Institutes for BioMedical Research, Inc. 10-Q 001-38433 10.1 11/09/20 10.15† Exclusive License Agreement, dated April 28, 2016, between Homology Medicines, Inc. and City of Hope S-1/A 333-223409 10.16 3/19/18 10.16.1† License Agreement, dated September 14, 2016, between Homology Medicines, Inc. and California Institute of Technology S-1/A 333-223409 10.17.1 3/19/18 10.16.2† First Amendment to License Agreement, dated May 16, 2017, between Homology Medicines, Inc. and California Institute of Technology S-1 333-223409 10.16.2 3/2/18 10.16.3† Letter Agreement, dated November 14, 2017, between Homology Medicines, Inc. and California Institute of Technology S-1 333-223409 10.16.3 3/2/18 10.17† Stock Purchase Agreement, dated November 9, 2020, by and between Homology Medicines, Inc. and Pfizer Inc. 8-K 001- 38433 10.1 11/09/20 21.1 Subsidiaries of Homology Medicines, Inc. S-1 333-223409 21.1 3/2/18 23.1 Consent of Deloitte & Touche LLP, independent registered public accountant * 31.1 Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 * 31.2 Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 * 32.1 Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ** 32.2 Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ** 101.INS Inline XBRL Instance Document – the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document * 101.SCH Inline XBRL Taxonomy Extension Schema Document * 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document * 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document * 122 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document * 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document * 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * * Filed herewith ** Furnished herewith # Indicates management contract or compensatory plan. † Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment. Item 16. Form 10-K Summary. None. 123 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized . Homology Medicines, Inc. Date: March 11, 2021 By: /s/ Arthur O. Tzianabos, Ph.D. Arthur O. Tzianabos, Ph.D. President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Name Title Date /s/ Arthur O. Tzianabos, Ph.D. President, Chief Executive Officer and Director (principal executive officer) March 11, 2021 Arthur O. Tzianabos, Ph.D. /s/ W. Bradford Smith Chief Financial Officer, Treasurer and Secretary (principal financial and accounting officer) March 11, 2021 W. Bradford Smith /s/ Kush M. Parmar, M.D., Ph.D. Chairman of the Board of Directors March 11, 2021 Kush M. Parmar, M.D., Ph.D. /s/ Steven Gillis, Ph.D. Director March 11, 2021 Steven Gillis, Ph.D. /s/ Richard J. Gregory, Ph.D. Director March 11, 2021 Richard J. Gregory, Ph.D. /s/ Matthew R. Patterson Director March 11, 2021 Matthew R. Patterson /s/ Jeffrey V. Poulton Director March 11, 2021 Jeffrey V. Poulton /s/ Alise S. Reicin, M.D. Director March 11, 2021 Alise S. Reicin, M.D. /s/ Mary Thistle Director March 11, 2021 Mary Thistle 124 HOMOLOGY MEDICINES, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements of Comprehensive Loss F-5 Consolidated Statements of Stockholders’ Equity F-6 Consolidated Statements of Cash Flows F-7 Notes to Consolidated Financial Statements F-8 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Homology Medicines, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Homology Medicines, Inc. and its subsidiary (the "Company") as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows, for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Change in Accounting Principle As discussed in Note 2 to the financial statements, the Company changed its method of accounting for leases in 2020 due to the adoption of Accounting Standards update No. 2016-02, Leases (Topic 842), as amended, using the modified retrospective approach. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Boston, Massachusetts March 11, 2021 We have served as the Company's auditor since 2017. F-2 HOMOLOGY MEDICINES, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) December 31, 2020 2019 Assets Current assets: Cash and cash equivalents $ 217,431 $ 53,774 Short-term investments — 208,614 Prepaid expenses and other current assets 2,133 4,189 Total current assets 219,564 266,577 Property and equipment, net 37,002 42,716 Right-of-use assets 5,897 — Restricted cash 1,274 1,274 Total assets $ 263,737 $ 310,567 Liabilities and stockholders' equity Current liabilities: Accounts payable $ 4,722 $ 2,608 Accrued expenses and other liabilities 9,803 7,644 Operating lease liabilities 2,501 — Deferred rent — 1,313 Deferred revenue 5,632 809 Total current liabilities 22,658 12,374 Non-current liabilities: Operating lease liabilities, net of current portion 12,941 — Deferred rent, net of current portion — 9,544 Deferred revenue, net of current portion 32,143 30,142 Total liabilities 67,742 52,060 Stockholders’ equity: Preferred stock, $ 0.0001 par value, 10,000,000 shares authorized as of December 31, 2020 and 2019, respectively; no shares issued and outstanding at December 31, 2020 and 2019, respectively — — Common stock, $ 0.0001 par value; 200,000,000 shares authorized as of December 31, 2020 and 2019, respectively; 50,268,666 and 45,138,408 shares issued as of December 31, 2020 and 2019, respectively; and 50,265,575 and 45,116,742 shares outstanding as of December 31, 2020 and 2019, respectively 5 4 Additional paid-in capital 524,358 457,994 Accumulated other comprehensive gain — 183 Accumulated deficit ( 328,368 ) ( 199,674 ) Total stockholders’ equity 195,995 258,507 Total liabilities and stockholders' equity $ 263,737 $ 310,567 See notes to consolidated financial statements. F-3 HOMOLOGY MEDICINES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) For the Years Ended December 31, 2020 2019 Collaboration revenue $ 2,702 $ 1,666 Operating expenses: Research and development 100,392 89,398 General and administrative 32,573 22,211 Total operating expenses 132,965 111,609 Loss from operations ( 130,263 ) ( 109,943 ) Other income: Interest income 1,569 6,027 Total other income 1,569 6,027 Net loss $ ( 128,694 ) $ ( 103,916 ) Net loss per share-basic and diluted $ ( 2.80 ) $ ( 2.47 ) Weighted average common shares outstanding-basic and diluted 45,910,787 42,117,690 See notes to consolidated financial statements. F-4 HOMOLOGY MEDICINES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) For the Years Ended December 31, 2020 2019 Net loss $ ( 128,694 ) $ ( 103,916 ) Other comprehensive gain (loss): Change in unrealized gain (loss) on available for sale securities, net ( 183 ) 260 Total other comprehensive gain (loss) ( 183 ) 260 Comprehensive loss $ ( 128,877 ) $ ( 103,656 ) See notes to consolidated financial statements. F-5 HOMOLOGY MEDICINES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, except share and per share amounts) Common Stock $0.0001 Par Value Additional Paid-in Accumulated Other Comprehensive Accumulated Total Stockholders’ Shares Amount Capital Gain (Loss) Deficit Equity Balance at January 1, 2019 37,358,526 $ 3 $ 292,187 $ ( 77 ) $ ( 95,758 ) $ 196,355 Issuance of common stock in follow-on offering, net of discounts and issuance costs 6,388,889 1 134,523 — — 134,524 Issuance of common stock pursuant to ATM financing, net of discounts and issuance costs 1,105,000 — 22,409 — — 22,409 Issuance of common stock pursuant to employee stock purchase plan 55,234 — 829 — — 829 Vesting of common stock from option exercises 94,816 — 60 — — 60 Issuance of common stock from option exercises 114,277 — 351 — — 351 Stock-based compensation — — 7,635 — — 7,635 Other comprehensive gain — — — 260 — 260 Net loss — — — — ( 103,916 ) ( 103,916 ) Balance at December 31, 2019 45,116,742 $ 4 $ 457,994 $ 183 $ ( 199,674 ) $ 258,507 Vesting of common stock from option exercises 18,575 — 24 — — 24 Issuance of common stock from option exercises 46,410 — 176 — — 176 Issuance of common stock pursuant to employee stock purchase plan 83,848 — 938 — — 938 Issuance of common stock pursuant to private placement 5,000,000 1 51,978 — — 51,979 Stock-based compensation — — 13,248 — — 13,248 Other comprehensive loss — — — ( 183 ) — ( 183 ) Net loss — — — — ( 128,694 ) ( 128,694 ) Balance at December 31, 2020 50,265,575 $ 5 $ 524,358 $ — $ ( 328,368 ) $ 195,995 See notes to consolidated financial statements. F-6 HOMOLOGY MEDICINES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the Years Ended December 31, 2020 2019 Cash flows from operating activities: Net loss $ ( 128,694 ) $ ( 103,916 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 7,965 6,318 Noncash lease expense 939 — Stock-based compensation expense 13,248 7,635 Accretion of short-term investments ( 198 ) ( 1,871 ) Loss on disposal of property and equipment 888 13 Changes in operating assets and liabilities: Prepaid expenses and other current assets 2,056 2,759 Accounts payable 2,459 ( 4,452 ) Accrued expenses and other liabilities 2,432 2,315 Deferred revenue 6,824 ( 569 ) Deferred rent — 410 Operating lease liabilities ( 2,251 ) — Net cash used in operating activities ( 94,332 ) ( 91,358 ) Cash flows from investing activities: Purchases of short-term investments ( 19,991 ) ( 286,391 ) Maturities of short-term investments 228,620 256,425 Purchases of property and equipment ( 3,733 ) ( 21,833 ) Net cash provided by (used in) investing activities 204,896 ( 51,799 ) Cash flows from financing activities: Proceeds from issuance of common stock in private placement 51,979 — Proceeds from issuance of common stock in follow-on public offering, net of discounts and issuance costs — 134,524 Proceeds from issuance of common stock pursuant to ATM financing, net of discounts and issuance costs — 22,509 Proceeds from issuance of common stock from option exercises 176 351 Proceeds from issuance of common stock pursuant to employee stock purchase plan 938 829 Net cash provided by financing activities 53,093 158,213 Net change in cash, cash equivalents and restricted cash 163,657 15,056 Cash, cash equivalents and restricted cash, beginning of period 55,048 39,992 Cash, cash equivalents and restricted cash, end of period $ 218,705 $ 55,048 Supplemental disclosures of noncash investing and financing activities: Reclassification of liability for common stock vested $ 24 $ 60 Property and equipment additions included in accounts payable $ 110 $ 455 Property and equipment additions included in accrued expenses and other liabilities $ — $ 249 Unrealized (loss) gain on available for sale securities, net $ ( 183 ) $ 260 Offering costs included in accrued expenses and other liabilities $ — $ 100 See notes to consolidated financial statements. F-7 HOMOLOGY MEDICINES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share amounts) 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION Nature of Business —Homology Medicines, Inc. (the “Company”) is a clinical-stage genetic medicines company dedicated to translating proprietary gene therapy and gene editing technology into novel treatments for patients with rare genetic diseases with significant unmet medical needs by curing the underlying cause of the disease. The Company was founded in March 2015 as a Delaware corporation. Its principal offices are in Bedford, Massachusetts. Since its inception, the Company has devoted substantially all of its resources to recruiting personnel, developing its technology platform and advancing its pipeline of product candidates, developing and implementing manufacturing processes, building out internal manufacturing and research and development space, and maintaining and building its intellectual property portfolio. The Company is subject to a number of risks similar to those of other companies conducting high-risk, early-stage research and development of product candidates. Principal among these risks are dependency on key individuals and intellectual property, competition from other products and companies, and the technical risks associated with the successful research, development and manufacturing of its product candidates. The Company’s success is dependent upon its ability to continue to raise additional capital in order to fund ongoing research and development, conduct clinical trials, obtain regulatory approval of its products, further expand its manufacturing capacity, successfully commercialize its products, generate revenue, meet its obligations, and, ultimately, attain profitable operations. On April 2, 2018, the Company completed its initial public offering (“IPO”) with the sale of 10,350,000 shares of its common stock, including shares issued upon the exercise in full of the underwriters’ over-allotment option, at a public offering price of $ 16.00 per share, resulting in net proceeds of $ 150.8 million, after deducting underwriting discounts and commissions and offering expenses. Upon the closing of the IPO, all of the Company’s outstanding shares of convertible preferred stock automatically converted into 24,168,656 shares of common stock at the applicable conversion ratio then in effect. On April 12, 2019, the Company completed a follow-on public offering of its common stock. The Company sold 5,555,556 shares of its common stock at a public offering price of $ 22.50 per share and received net proceeds of $ 116.9 million, after deducting underwriting discounts and commissions and offering expenses. In addition, on April 26, 2019 and May 7, 2019, in connection with the exercise in full of the underwriters’ option to purchase additional shares, the Company issued an aggregate of 833,333 shares of its common stock at a public offering price of $ 22.50 per share and received net proceeds of $ 17.6 million, after deducting underwriting discounts and commissions. On March 12, 2020, the Company filed a Registration Statement on Form S-3 (File No. 333-237131) (the “Shelf”) with the Securities and Exchange Commission (“SEC”) in relation to the registration of common stock, preferred stock, debt securities, warrants and/or units of any combination thereof for a period up to three years from the date of the filing. The Shelf became effective on March 12, 2020 . The Company also simultaneously entered into a sales agreement with Cowen and Company, LLC (“Cowen”) , as sales agent, providing for the offering, issuance and sale by the Company of up to an aggregate $ 150.0 million of its common stock from time to time in “at-the-market” offerings under the Shelf (the “ATM”). The Company did no t sell any shares of common stock pursuant to the ATM during the year ended December 31, 2020 . At December 31, 2020, there remained $ 150.0 million of common stock available for sale under the ATM. Simultaneous with the filing of the Shelf, the previous Registration Statement on Form S-3 (File No. 333-230664) filed with the SEC on April 1, 2019, and a prior sales agreement with Cowen providing for the offering, issuance and sale by the Company of up to an aggregate $ 100.0 million of its common stock from time to time in “at-the-market” offerings, with $ 76.8 million of remaining capacity, were terminated. On November 9, 2020, the Company entered into a common stock purchase agreement (the “Stock Purchase Agreement”) with Pfizer Inc. (“Pfizer”), pursuant to which the Company agreed to issue and sell to Pfizer 5,000,000 shares of the Company’s common stock through a private placement transaction (the “Private Placement”) at a purchase price of $ 12.00 per share, for an aggregate purchase price of $ 60.0 million (see Note 16). To date, the Company has not generated any revenue from product sales and does not expect to generate any revenue from the sale of product in the foreseeable future. Through December 31, 2020, the Company has financed its operations primarily through public offerings of its common stock, the issuance of convertible preferred stock, and with proceeds from its collaboration and license agreement with Novartis Institutes of BioMedical Research, Inc. (“Novartis”) (see Note 15) and its private placement with Pfizer. During the year ended December 31, 2020, the Company incurred a net loss of $ 128.7 million and as of December 31, 2020, had $ 328.4 million in accumulated deficit. The Company expects to incur additional operating losses and negative operating cash flows for the foreseeable future. F-8 Based on current projections, management believes that existing cash and cash equivalents will enable the Company to continue its operations into the third quarter of 202 2 . In the absence of a significant source of recurring revenue, the continued viability of the Company beyond that point is dependent on its ability to continue to raise additional capital to finance its operations. There can be no assurance that the Company will be able to obtain sufficient capital to cover its costs on acceptable terms, if at all. Basis of Presentation —The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business . 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation —The Company’s consolidated financial statements include the accounts of the Company and its subsidiary, Homology Medicines Securities Corporation, a wholly owned Massachusetts corporation, for the sole purpose of buying, selling, and holding securities on the Company’s behalf. All intercompany balances and transactions have been eliminated in the consolidated financial statements. Use of Estimates —The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and the disclosure of contingent assets and liabilities as of and during the reporting period. The Company bases its estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, revenue recognition, accrued research and development expenses and useful lives assigned to property and equipment. The Company assesses estimates on an ongoing basis; however, actual results could materially differ from those estimates. Comprehensive Income (Loss) — Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The Company’s only element of other comprehensive income (loss) is unrealized gains and losses on available-for-sale investments. Cash and Cash Equivalents and Restricted Cash —Cash and cash equivalents consist of standard checking accounts, money market accounts and certain investments. The Company considers all highly liquid investments with original or remaining maturities at the time of purchase of 90 days or less to be cash equivalents. Restricted cash consists of cash serving as collateral for letters of credit issued for security deposits for the Company’s facility leases in Bedford, Massachusetts. The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts shown in the consolidated statements of cash flows: December 31, 2020 2019 (in thousands) Cash and cash equivalents $ 217,431 $ 53,774 Restricted cash 1,274 1,274 Total cash, cash equivalents and restricted cash $ 218,705 $ 55,048 Short-Term Investments —Short-term investments represent holdings of available-for-sale marketable securities in accordance with the Company’s investment policy and cash management strategy. Short-term investments have maturities of greater than 90 days at the time of purchase and mature within one-year from the balance sheet date. Investments in marketable securities are recorded at fair value, with any unrealized gains and losses, reported within accumulated other comprehensive income as a separate component of stockholders’ equity until realized or until a determination is made that an other-than-temporary decline in market value has occurred. Any premium or discount arising at purchase is amortized and/or accreted to interest income and/or expense over the life of the underlying security. Such amortization and accretion, together with interest on securities, are included in interest income in the Company’s consolidated statements of operations. The cost of marketable securities sold is determined based on the specific identification method and any realized gains or losses on the sale of investments are reflected as a component of other income. F-9 Concentrations of Credit Risk —Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash, cash equivalents and short-term investments. Periodically, the Company may maintain deposits in financial institutions in excess of government insured limits. We believe that we are not exposed to significant credit risk as our deposits are held at financial institutions that management believes to be of high credit quality and the Company has not experienced any losses on these deposits. We regularly invest excess cash with major financial institutions in money market funds, U.S. government and corporate debt securities and commercial paper, all of which can be readily purchased and sold using established markets. As of December 31, 2020 , the Company’s cash and cash equivalents were held with two financial institutions. We believe that the market risk arising from our holdings of these financial instruments is mitigated based on the fact that many of these securities are either government - backed or of high credit rating. Offering Costs —The Company capitalizes incremental legal, professional accounting and other third-party fees that are directly associated with equity financings as other current assets until the transactions are completed. After equity financings are complete, these costs are recorded in stockholders’ equity as a reduction of additional paid-in capital generated as a result of the offering. Leases — In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which eliminated the tests for lease classification under prior U.S. GAAP and requires lessees to recognize right-of-use assets and related lease liabilities on the balance sheet. The FASB subsequently issued the following amendments to ASU 2016-02 that have the same effective date and transition date: ASU No. 2018-01 – Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842 , ASU No. 2018-10 – Codification Improvements to Topic 842 , Leases , ASU No. 2018-11 – Leases (Topic 842): Targeted Improvements , ASU No. 2018-20 – Leases (Topic 842): Narrow-Scope Improvements for Lessors , and ASU No. 2019-01 – Leases (Topic 842): Codification Improvements . The Company adopted these amendments with ASU 2016-02 (collectively, the new leasing standards) effective January 1, 2020. The Company adopted the new leasing standards using the modified retrospective approach, as of January 1, 2020, with no restatement of prior periods or cumulative adjustments to accumulated deficit. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allows the Company to carry forward the historical lease classification. In addition, the Company elected the practical expedient not to apply the recognition requirements in the leasing standards to short-term leases (a lease that at commencement date has a lease term of 12 months or less and does not contain a purchase option that it is reasonably certain to exercise) and the practical expedient that permits lessees to make an accounting policy election (by class of underlying asset) to not separate lease components of a contract from non-lease components. The Company determines if an arrangement is a lease at contract inception. The Company’s contracts are determined to contain a lease when all of the following criteria based on the specific circumstances of the arrangement are met: (1) there is an identified asset for which there are no substantive substitution rights; (2) the Company has the right to obtain substantially all of the economic benefits from the identified asset; and (3) the Company has the right to direct the use of the identified asset. At the commencement date, operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of future lease payments over the expected lease term. The Company’s lease agreements do not provide an implicit rate. As a result, the Company utilizes an estimated incremental borrowing rate to discount lease payments, which is based on the rate of interest the Company would have to pay to borrow a similar amount on a collateralized basis over a similar term. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or lease incentives received. Operating lease cost is recognized over the expected term on a straight-line basis. Variable lease cost is recognized as incurred. The Company acts as sublessor related to a sublease of the Company's former headquarters. Fixed sublease payments received are recognized on a straight-line basis over the sublease term. Right-of-use assets are periodically evaluated for impairment. The expected lease term for those leases commencing prior to January 1, 2020 did not change with the adoption of the new leasing standards. The expected lease term for leases commencing after the adoption of the new leasing standards includes noncancelable lease periods and, when applicable, periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option, as well as periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. F-10 As a result of the adoption of the new leasing standards, on January 1, 2020, the Company recorded non-cash transactions to recognize a right-of-use asset of $ 6.8 million, operating lease liabilities of $ 17.7 million and the derecognition of deferred rent of $ 10.9 million originally accounted for under legacy guidance. The adoption did not have a material impact on the condensed consolidated statement of operations. For additional information on the adoption of the new leasing standards, refer to Note 8. January 1, 2020 (in thousands) Prior to adoption of new leasing standards Adjustment for adoption of new leasing standards As Adjusted Right-of-use assets (1)(2) $ — $ 6,835 $ 6,835 Deferred rent (2) $ 1,313 $ ( 1,313 ) $ — Deferred rent, net of current portion (2) $ 9,544 $ ( 9,544 ) $ — Operating lease liabilities (3) $ — $ 2,251 $ 2,251 Operating lease liabilities, net of current portion (3) $ — $ 15,441 $ 15,441 (1) Represents capitalization of operating right-of-use assets (2) Represents reclassification of deferred rent and incentives as a reduction to operating right-of-use assets (3) Represents recognition of operating lease liabilities Guarantees and Indemnifications —As permitted under Delaware law, the Company indemnifies its officers, directors, consultants and employees for certain events or occurrences that happen by reason of the relationship with, or position held at, the Company. Through December 31, 2020, the Company had not experienced any losses related to these indemnification obligations, and no claims were outstanding. The Company does not expect significant claims related to these indemnification obligations and, consequently, concluded that the fair value of these obligations is negligible, and no related liabilities have been established. Property and Equipment —Property and equipment are recorded at cost. Expenditures for repairs and maintenance are expensed as incurred. When assets are retired or disposed of, the assets and related accumulated depreciation are derecognized from the accounts, and any resulting gain or loss is included in the determination of net loss. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the asset. Computer equipment and software 3 years Laboratory equipment and office furniture 5 years Manufacturing equipment 5 - 7 years Leasehold improvements Shorter of the lease term or estimated useful life Impairment of Long-Lived Assets —The Company evaluates its long-lived assets, which consist primarily of property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. To date, no impairments have been recognized for these assets. Research and Development Costs —Research and development costs are charged to expense as incurred. Research and development expense consists of expenses incurred in performing research and development activities, including salaries and benefits, materials and supplies, preclinical and clinical expenses, stock-based compensation expense, depreciation of equipment, contract services, and other outside expenses. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information provided to the Company by its vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the consolidated financial statements as prepaid expense or accrued research and development expense. F-11 Income Taxes —The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the Company’s consolidated financial statements and tax returns. Deferred tax assets and liabilities are determined based upon the differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and for loss and credit carryforwards, using enacted tax rates expected to be in effect in the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that these assets may not be realized. The Company determines whether it is more likely than not that a tax position will be sustained upon examination. The tax benefit to be recognized for any tax position that meets the more-likely-than-not recognition threshold is calculated as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. If it is not more likely than not that a position will be sustained, none of the benefit attributable to the position is recognized. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes. Since inception, the Company has provided a valuation allowance for the full amount of the net deferred tax assets as the realization of the net deferred tax assets has not been determined to be more likely than not. Segment Information —Operating segments are identified as components of an enterprise about which separate discrete financial information is made available for evaluation by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and assessing performance. The CODM is the Company’s Chief Executive Officer. The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company’s singular focus is dedicated to translating proprietary gene editing and gene therapy technology into novel treatments for patients with rare genetic diseases. All of the Company’s tangible assets are held in the United States. Revenue Recognition— Revenue is recognized in accordance with FASB Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). On January 1, 2019, the Company adopted ASC 606 using the full retrospective transition method. Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, the Company performs the following five steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect consideration it is entitled to in exchange for the goods or services it transfers to the customer. The promised goods or services in the Company’s arrangements would likely consist of a license, rights to the Company’s intellectual property or research, development and manufacturing services. Performance obligations are promised goods or services in a contract to transfer a distinct good or service to the customer and are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources and (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whether promised goods or services are distinct, the Company considers factors such as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the intellectual property on its own or whether the required expertise is readily available and whether the goods or services are integral or dependent to other goods or services in the contract. The Company estimates the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include fixed consideration and variable consideration. At the inception of each arrangement that includes variable consideration, the Company evaluates the amount of consideration to which the Company expects to be entitled to. The Company utilizes either the most likely amount method or expected value method to estimate the amount expected to be received based on which method best predicts the amount expected to be received. The amount of variable consideration that is included in the transaction price may be constrained and is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. The Company’s contracts may include development and regulatory milestone payments that are assessed under the most likely amount method and constrained until it is probable that a significant revenue reversal would not occur. Milestone payments that are not within the Company’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of such development and regulatory milestones and any related constraint, and if necessary, adjust its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenue in the period of adjustment. F-12 For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of ( i ) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from the Company’s collaboration arrangement. The Company allocates the transaction price based on the estimated standalone selling price of each performance obligation. The Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. The Company utilizes key assumptions to determine the stand-alone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs. Variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated are consistent with the amounts the Company would expect to receive for the satisfaction of each performance obligation. The consideration allocated to each performance obligation is recognized as revenue when control is transferred for the related goods or services. For performance obligations which consist of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. The Company evaluates the measure of progress for its over-time arrangements at each reporting period and, if necessary, updates the measure of progress and revenue recognized. Stock-based Compensation —The Company recognizes compensation expense for awards to employees based on the grant date fair value of stock-based awards on a straight-line basis over the period during which an award holder provides service in exchange for the award. The fair value of options on the date of grant is calculated using the Black-Scholes option pricing model based on key assumptions such as stock price, expected volatility and expected term. The Company’s estimates of these assumptions are primarily based on the trading price of the Company’s stock, historical data, peer company data and judgment regarding future trends and factors. Stock-based awards granted to nonemployees are initially recorded at fair value and are re-measured at each reporting period as the awards vest and expense is recognized over the period the services are provided. The purchase price of common stock under the Company’s employee stock purchase plan (“ESPP”) is equal to 85 % of the lesser of (i) the fair market value per share of the common stock on the first business day of an offering period and (ii) the fair market value per share of the common stock on the purchase date. The fair value of the look-back provision under the ESPP is calculated using the Black-Scholes option pricing model. The fair value of the look-back provision plus the 15 % discount is recognized as compensation expense over the 180 -day purchase period. Fair Value Measurements —Certain assets and liabilities are reported on a recurring basis at fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: • Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. • Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. Net Loss per Share —Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted-average number of common shares outstanding during the period and, if dilutive, the weighted-average number of potential shares of common stock. The weighted-average number of common shares included in the computation of diluted net loss gives effect to all potentially dilutive common equivalent shares, including outstanding stock options and unvested shares of common stock. F-13 Common stock equivalent shares are excluded from the computation of diluted net loss per share if their effect is antidilutive. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is generally the same as basic net loss per share attributable to common stockholders since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. Recent Accounting Pronouncements —The Jumpstart Our Business Startups Act of 2012 permits an emerging growth company to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. As an emerging growth company, the Company has elected to take advantage of this extended transition period. In February 2016, the FASB issued new leasing standards to increase transparency and comparability among organization related to their leasing activities. For additional information on the adoption of the new leasing standards, please refer to section titled “Leases” above, and Note 8. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) to improve financial reporting by requiring more timely recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. ASU 2016-13 also requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. ASU 2016-13 is effective for the Company beginning January 1, 2023, with early application permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements. In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”) , which changes certain aspects of the accounting for share-based payments granted to nonemployees. Under ASU 2018-07, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The Company adopted ASU 2018-07 on January 1, 2020. The adoption of ASU 2018-07 did not have a material impact on the Company’s consolidated financial statements and related disclosures. In October 2020, the FASB issued ASU 2020-10, Codification Improvements , which updates various codification topics by clarifying or improving disclosure requirements to align with the SEC’s regulations. The Company will adopt ASU 2020-10 as of the reporting period beginning January 1, 2021. The adoption of this update is not expected to have a material effect on the Company’s consolidated financial statements. 3. CASH AND CASH EQUIVALENTS From time to time, the Company may have cash balances in financial institutions in excess of federal deposit insurance limits. The Company has never experienced any losses related to these balances. The Company considers only those investments that are highly liquid, readily convertible to cash, and that mature within three months from date of purchase to be cash equivalents. The following table summarizes the Company’s cash and cash equivalents: December 31, 2020 2019 (in thousands) Cash $ 250 $ 250 Repurchase agreements — 14,000 Money market funds 217,181 39,524 Total cash and cash equivalents $ 217,431 $ 53,774 4. SHORT-TERM INVESTMENTS The Company may invest its excess cash in fixed income instruments denominated and payable in U.S. dollars including U.S. treasury securities, commercial paper, corporate debt securities and asset-backed securities in accordance with the Company’s investment policy that primarily seeks to maintain adequate liquidity and preserve capital. F-14 The Company has designated all investments as available-for-sale and therefore such investments are reported at fair value and classified as short-term investments on the Company’s consolidated balance sheets . Unrealized gains or losses on investments are recorded in accumulated other comprehensive income or loss, a component of stockholders’ equity, on the Company’s consolidated balance sheets. The Company had no short-term investments as of December 31, 2020. The following table summarizes the Company’s short-term investments as of December 31, 2019: As of December 31, 2019 Amortized Cost Unrealized Gains Unrealized Losses Fair Value (in thousands) Asset-backed securities $ 14,866 $ 10 $ — $ 14,876 Commercial paper 41,259 — — 41,259 U.S. Treasury securities 59,926 45 — 59,971 Corporate debt securities 92,380 128 — 92,508 Total short-term investments $ 208,431 $ 183 $ — $ 208,614 The Company utilizes the specific identification method in computing realized gains and losses. The Company had no realized gains and losses on its short-term investments for the years ended December 31, 2020 and 2019. The contractual maturity dates of all of the Company’s investments are less than one year. 5. FAIR VALUE MEASUREMENTS The Company’s financial instruments consist of cash and cash equivalents, short-term investments, restricted cash and accounts payable. The carrying amount of cash, restricted cash and accounts payable are each considered a reasonable estimate of fair value due to the short-term maturity. Assets measured at fair value on a recurring basis were as follows: Description December 31, 2020 Quoted Prices (Unadjusted) in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in thousands) Cash equivalents: Money market mutual funds $ 217,181 $ 217,181 $ — $ — Total financial assets $ 217,181 $ 217,181 $ — $ — Description December 31, 2019 Quoted Prices (Unadjusted) in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in thousands) Cash equivalents: Money market mutual funds $ 39,524 $ 39,524 $ — $ — Repurchase agreements 14,000 — 14,000 — Total cash equivalents $ 53,524 $ 39,524 $ 14,000 $ — Short-term investments: Asset-backed securities $ 14,876 $ — $ 14,876 $ — Commercial paper 41,259 — 41,259 — U.S. Treasury securities 59,971 — 59,971 — Corporate debt securities 92,508 — 92,508 — Total short-term investments $ 208,614 $ — $ 208,614 $ — Total financial assets $ 262,138 $ 39,524 $ 222,614 $ — Short-term securities are valued using models or other valuation methodologies that use Level 2 inputs. These models are primarily industry-standard models that consider various assumptions, including time value, yield curve, volatility factors, F-15 default rates, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. There were no transfers between fair value measure levels during the years ended December 31, 2020 and 2019. 6. PROPERTY AND EQUIPMENT Property and equipment, net consists of the following: December 31, 2020 2019 (in thousands) Laboratory equipment $ 12,703 $ 10,837 Manufacturing equipment 7,754 4,911 Computers and purchased software 1,596 640 Furniture and fixtures 1,363 1,363 Leasehold improvements 29,961 30,862 Assets not yet in service — 2,513 Property and equipment, at cost 53,377 51,126 Less accumulated depreciation and amortization ( 16,375 ) ( 8,410 ) Property and equipment, net $ 37,002 $ 42,716 Depreciation expense for the years ended December 31, 2020 and 2019 was approximately $ 8.0 million and $ 6.3 million, respectively. The Company disposed of $ 0.9 million and less than $ 0.1 million of property and equipment, net during the years ended December 31, 2020 and 2019, respectively. 7. ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities consist of the following: December 31, 2020 2019 (in thousands) Accrued compensation and benefits $ 6,902 $ 4,551 Accrued research and development expenses 2,393 2,258 Accrued professional fees 291 542 Accrued unvested common stock subject to repurchase 13 37 Accrued other 204 256 Total accrued expenses and other liabilities $ 9,803 $ 7,644 8. COMMITMENTS AND CONTINGENCIES Operating Leases —In September 2016, the Company entered into a noncancelable operating lease beginning in November 2016 for office, laboratory and manufacturing space in Bedford, Massachusetts, that expires in October 2021 , with an option for an additional three-year term. In 2018, the Company entered into a sublease agreement for the entire leased premises. The rent commencement date of the sublease was December 2018, and the sublease will terminate on the scheduled termination date of the original lease. Under the terms of the sublease, the subtenant is obligated to pay the Company aggregate base rent of approximately $ 2.7 million over the term of the sublease, based on the same level of rent the Company is obligated to pay the landlord, in addition to a passthrough of operating expenses and real estate taxes charged by the landlord. In December 2017, the Company entered into a noncancelable operating lease for approximately 67,000 square feet of research and development, manufacturing and general office space in Bedford, Massachusetts. The lease expires in February 2027 with an option for an additional five-year term. Rent became due under the lease in two phases; rent on the first 46,000 square feet started in September 2018 and rent on the remaining 21,000 square feet started in March 2019 . The initial annual base rent was $ 39.50 per square foot and increases by three percent annually. The Company is obligated to pay, on a pro-rata F-16 basis, real estate taxes and operating costs related to the premises. The lease agreement entered into in December 2017 allowed for a tenant improvement allowance not to exceed $ 10.9 million, which the Company received in full, to be applied to the total cost of tenant improvements to the leased premises. The unamortized balance of the tenant improvement allowance was included in deferred rent incentives and has been recorded as a reduction to operating right-of-use asset upon adoption of the new leasing standards. The Company maintains letters of credit, secured by restricted cash, for security deposits totaling $ 1.3 million as of December 31, 2020 and 2019, respectively, in conjunction with its current leases. The following table summarizes operating lease costs and variable lease costs, as well as sublease income for the year ended December 31, 2020: Year ended December 31, 2020 Amount (in thousands) Operating lease costs $ 2,492 Variable lease costs 2,355 Sublease income ( 913 ) Net lease cost $ 3,934 Rent expense for the year ended December 31, 2019 was $ 1.4 million. The maturities of our operating lease liabilities as of December 31, 2020 were as follows: Amount For the Years Ending December 31, (in thousands) 2021 $ 3,834 2022 2,987 2023 3,077 2024 3,169 Thereafter 7,197 Total undiscounted lease payments $ 20,264 Less: imputed interest ( 4,822 ) Present value of operating lease liabilities $ 15,442 The following table summarizes the lease term and discount rate as of December 31, 2020: As of December 31, 2020 Weighted-average remaining lease term (years) Operating leases 5.9 Weighted-average discount rate Operating leases 9.9 % The following table summarizes the supplemental cash flow information related to the Company's operating leases for the year ended December 31, 2020. Year ended December 31, 2020 (in thousands) Cash paid for amounts included in the measurement of lease liabilities $ 3,804 F-17 9. LICENSE AGREEMENTS City of Hope In April 2016, the Company entered into a license agreement with City of Hope (“COH”), an academic research and medical center. The license term extends until the last to expire patent, unless terminated earlier by either party under certain provisions. The Company is required to pay an annual license fee of $ 25,000 , reimburse COH for patent costs incurred, pay amounts up to $ 3.2 million upon the achievement of certain development and commercialization milestones for each product under the license, pay royalties on future sales in the low single-digits and royalties on sublicense revenue in the low double-digits, if any. During the year ended December 31, 2019, the Company paid $ 50,000 to COH upon dosing the first patient in the pheNIX Phase 1/2 clinical trial. During the year ended December 31, 2020, the Company paid $ 75,000 plus interest to COH in connection with achievement of a milestone event. As a result of the execution of the Collaboration Agreement with Novartis (see Note 15), the Company paid $ 4.5 million to COH in December 2017, under the terms of the license agreement. In May 2015, the Company entered into a sponsored research agreement with COH with a goal to identify potential treatments for diseases in humans. Under this agreement, the Company recorded $ 0.1 million in research and development expense for the year ended December 31, 2019. The agreement terminated in September 2019 in accordance with its terms. California Institute of Technology In September 2016, the Company entered into a co-exclusive license agreement with the California Institute of Technology (“Caltech”), an academic research institute. The license term extends until the expiration, revocation, invalidation or unenforceability of the licensed patent rights. The Company is required to pay an annual minimal royalty fee of $ 20,000 , reimburse for patent costs incurred, pay an amount up to $ 7.2 million upon the achievement of certain development and regulatory milestones and pay royalties on future sales in the low single-digits and royalties on sublicense revenue in the mid to high single-digits, if any. 10. INCOME TAXES A reconciliation between the U.S. federal statutory tax rate and the Company’s effective tax rate is summarized as follows: For the Years Ended December 31, 2020 2019 Federal statutory rate 21.0 % 21.0 % Tax credits 10.6 % 13.4 % State taxes, net of federal tax benefit 8.0 % 6.1 % Non-deductible expenses ( 1.8 %) ( 1.0 %) Change in valuation allowance ( 37.8 %) ( 39.5 %) Effective income tax rate — % — % F-18 The principal components of the Company’s deferred tax assets and liabilities consist of the following: December 31, 2020 2019 (in thousands) Deferred tax assets: Net operating losses $ 72,838 $ 41,589 R&D credits 39,888 25,328 Deferred revenue 8,251 8,456 Deferred rent 4,219 2,966 Capitalized R&D costs 1,039 1,207 Equity compensation 1,368 883 Accrued expense and other 1,914 108 Total deferred tax assets 129,517 80,537 Deferred tax liabilities: Depreciation ( 3,726 ) ( 2,744 ) Other ( 757 ) — Total deferred tax liabilities ( 4,483 ) ( 2,744 ) Valuation allowance ( 125,034 ) ( 77,793 ) Net deferred taxes $ — $ — The Company has no income tax expense due to the operating loss incurred for the years ended December 31, 2020 and 2019. The Company has provided a valuation allowance for the full amount of the net deferred tax assets as the realization of the net deferred tax assets is not determined to be more likely than not. At December 31, 2020, the Company had $ 265.1 million and $ 271.5 million of federal and state net operating loss carryforwards, respectively, that expire at various dates through 2040 . Included in the federal net operating loss carryforwards of $265.1 million is $ 233.6 million that can be carried forward indefinitely. At December 31, 2020, the Company had $ 34.2 million and $ 7.2 million of federal and state research and development credit carryforwards, respectively, that expire at various dates through 2040 . Included in the $34.2 million of federal research and development credit carryforwards is $ 29.0 million of orphan drug credit carryforwards. The valuation allowance increased in 2020 and 2019 by $ 47.2 million and $ 40.2 million, respectively, due to the increase in the deferred tax assets by the same amounts, primarily due to the net operating loss carryforwards and research and development tax credits not utilized. For all years through December 31, 2020, the Company generated research credits but has not conducted a study to document the qualified activities. This study may result in an adjustment to the Company’s research and development credit carryforwards. Since a full valuation allowance has been provided against the Company’s research and development credits, any reduction in the gross deferred tax asset established for the research and development credit carryforwards would not result in any net impact to the Company’s consolidated financial statements. Realization of the future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carryforward period. Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership, including a sale of the Company or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of net operating loss carryforwards that could be used annually to offset future taxable income. The Company has not completed a study to assess whether a change of control has occurred or whether there have been multiple changes of control since the Company’s formation due to the significant complexity and cost associated with such study and because there could be additional changes in control in the future. As a result, the Company is not able to estimate the effect a change in control would have, if any, on the Company’s ability to utilize its net operating loss and research and development credit carryforwards in the future. The Company files tax returns in the United States and Massachusetts. All tax years since inception remain open to examination by the major taxing jurisdictions to which the Company is subject, as carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service (“IRS”) or other authorities if they have or will be used in a future period. The Company is not currently under examination by the IRS or any other jurisdictions for any tax years. F-19 As of December 31, 2020 , the Company had no uncertain tax positions. The Company has elected to recognize interest and penalties related to income tax matters as a component of income tax expense, of which no interest or penalties were recorded for the years ended December 31, 2020 and 2019 . 11. STOCKHOLDERS’ EQUITY Common Stock —Voting, dividend and liquidation rights of the holders of the common stock are subject to and qualified by the rights, powers and preferences of the holders of the preferred stock. Voting — Each holder of outstanding shares of common stock are entitled to one vote in respect of each share. The holders of outstanding shares of common stock, voting together as a single class, shall be entitled to elect one director. The number of authorized shares of common stock may be increased or decreased by the affirmative vote of a majority of the outstanding shares of common stock and preferred stock voting together as a single class. Dividends —Subject to the payment in full of any preferential dividends to which the holders of preferred stock are entitled, the holders of common stock shall be entitled to receive dividends out of funds legally available therefore at such times and in such amounts as the Board of Directors may determine in its sole discretion. Liquidation Rights —In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company, after the payment or provision for payment of all debts and liabilities of the Company and any preferential amounts to which the holders of preferred stock are entitled with respect to the distribution of assets in liquidation, the holders of common stock shall be entitled to share ratably in the remaining assets of the Company available for distribution. There were 50,265,575 and 45,116,742 shares of common stock outstanding at December 31, 2020 and 2019, respectively. Preferred Stock —As of December 31, 2020 and 2019, there were no shares of preferred stock issued and outstanding. 12. STOCK INCENTIVE PLANS 2015 Stock Incentive Plan In December 2015, the Company’s Board of Directors adopted the 2015 Stock Incentive Plan (the “2015 Plan”), which provided for the grant of qualified incentive and nonqualified stock options or restricted stock awards to the Company’s employees, officers, directors, advisors, and outside consultants. Stock options generally vest over a four-year period and expire ten years from the date of grant. Certain options provide for accelerated vesting if there is a change in control, as defined in the 2015 Plan. At December 31, 2020, there were no additional shares available for future grant under the 2015 Plan. 2018 Incentive Award Plan In March 2018, the Company’s Board of Directors adopted and the Company’s stockholders approved the Homology Medicines, Inc. 2018 Incentive Award Plan (the “2018 Plan” and, together with the 2015 Plan, the “Plans”), which became effective on the day prior to the first public trading date of the Company’s common stock. Upon effectiveness of the 2018 Plan, the Company ceased granting new awards under the 2015 Plan. The 2018 Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock awards, restricted stock units, stock appreciation rights and other stock or cash-based awards to employees and consultants of the Company and certain affiliates and directors of the Company. The number of shares of common stock initially available for issuance under the 2018 Plan was 3,186,205 shares of common stock plus the number of shares subject to awards outstanding under the 2015 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company on or after the effective date of the 2018 Plan. In addition, the number of shares of common stock available for issuance under the 2018 Plan is subject to an annual increase on the first day of each calendar year beginning on January 1, 2019 and ending on and including January 1, 2028 equal to the lesser of (i) 4 % of the Company’s outstanding shares of common stock on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of common stock as determined by the Company’s Board of Directors, provided that not more than 20,887,347 shares of common stock may be issued under the 2018 Plan upon the exercise of incentive stock options (the “Evergreen Provision”). As of December 31, 2020, there were 2,397,547 shares available for future grant under the 2018 Plan. On January 1, 2021, pursuant to the Evergreen Provision, an additional 2,010,623 shares were added to the 2018 Plan, representing 4 % of total common shares outstanding at December 31, 2020. F-20 2018 Employee Stock Purchase Plan In March 2018, the Company’s Board of Directors adopted, and the Company’s stockholders approved, the Homology Medicines, Inc. 2018 Employee Stock Purchase Plan (the “2018 ESPP”). The 2018 ESPP allows employees to buy Company stock through after-tax payroll deductions at a discount from market value. The 2018 ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. The number of shares of common stock initially available for issuance under the 2018 ESPP was 353,980 shares of common stock plus an annual increase on the first day of each calendar year beginning on January 1, 2019 and ending on and including January 1, 2028 equal to the lesser of (i) 1 % of the Company’s outstanding shares of common stock on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of common stock as determined by the Company’s Board of Directors, provided that not more than 4,778,738 shares of common stock may be issued under the 2018 ESPP (the “ESPP Evergreen Provision”). At December 31, 2020, there were 1,039,650 shares available for future issuance under the 2018 ESPP. On January 1, 2021, pursuant to the ESPP Evergreen Provision, an additional 502,655 shares were added to the 2018 ESPP, representing 1 % of total common shares outstanding at December 31, 2020. Under the 2018 ESPP, employees may purchase common stock through after-tax payroll deductions at a price equal to 85 % of the lower of the fair market value on the first trading day of an offering period or the last trading day of an offering period. The 2018 ESPP generally provides for offering periods of six months in duration that end on the final trading day of each February and August. In accordance with the Internal Revenue Code, no employee will be permitted to accrue the right to purchase stock under the 2018 ESPP at a rate in excess of $25,000 worth of shares during any calendar year during which such a purchase right is outstanding (based on the fair market value per share of the Company’s common stock as of the first day of the offering period). During the year ended December 31, 2020, 83,848 shares were issued under the 2018 ESPP for aggregate proceeds to the Company of $ 0.9 million. During the year ended December 31, 2019, 55,234 shares were issued under the 2018 ESPP for aggregate proceeds to the Company of $ 0.8 million. Pursuant to the 2018 ESPP, the Company recorded stock-based compensation of $ 0.2 million and $ 0.2 million for the years ended December 31, 2020 and 2019, respectively. Stock-based compensation expense The Company recognizes compensation expense for awards to employees based on the grant date fair value of stock-based awards on a straight-line basis over the period during which an award holder provides service in exchange for the award, which is generally the vesting period. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model, with the assumptions noted in the table below. Expected volatility for the Company’s common stock was determined based on an average of the historical volatility of a peer group of publicly traded companies that are similar to the Company. The expected term of options granted to employees was calculated using the simplified method, which represents the average of the contractual term of the option and the weighted-average vesting period of the option. The Company uses the simplified method because it does not have sufficient historical option exercise data to provide a reasonable basis upon which to estimate expected term. The contractual life of the options was used for the expected term of options granted to non-employees. The assumed dividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable future. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods commensurate with the expected term of the award. The Company recognizes forfeitures as they occur. The assumptions used in the Black-Scholes option pricing model are as follows: For the Years Ended December 31, 2020 2019 Expected volatility 63.2% — 66.3% 62.4% — 64.7% Weighted-average risk-free interest rate 0.31% — 1.73% 1.36% — 2.60% Expected dividend yield — % — % Expected term (in years) 5.5 - 6.25 6.25 Underlying common stock fair value $9.82 - $21.75 $12.73 — $30.34 F-21 The Company recorded stock-based compensation expense related to stock options and shares purchased under the 2018 ESPP as follows: For the Years Ended December 31, 2020 2019 (in thousands) Research and development $ 6,390 $ 4,164 General and administrative 6,858 3,471 $ 13,248 $ 7,635 As of December 31, 2020, there was $ 29.2 million of unrecognized compensation expense related to unvested employee and non-employee share-based compensation arrangements granted under the Plans. The unrecognized compensation expense is estimated to be recognized over a period of 2.4 years at December 31, 2020. A summary of option activity under the Plans during the year ended December 31, 2020 is as follows: Number of Options Weighted- Average Exercise Price per Share Weighted- Average Remaining Contractual Term (in Years) Aggregate Intrinsic Value (in thousands) Outstanding at January 1, 2020 4,843,018 $ 14.78 8.5 $ 33,809 Granted 1,311,200 $ 17.82 Exercised ( 46,410 ) $ 3.79 Cancelled/Forfeited ( 266,984 ) $ 22.75 Outstanding at December 31, 2020 5,840,824 $ 15.18 7.8 $ 12,278 Vested and expected to vest at December 31, 2020 5,840,824 $ 15.18 7.8 $ 12,278 Exercisable at December 31, 2020 2,869,589 $ 12.18 7.0 $ 10,803 The total intrinsic value of options exercised during the year ended December 31, 2020 and 2019 was $ 0.6 million and $ 1.9 million, respectively. The weighted-average grant date fair value of options granted during the years ended December 31, 2020 and 2019 was $ 10.39 and $ 12.90 , respectively. Stock options granted pursuant to the 2015 Plan permit option holders to elect to exercise unvested options in exchange for unvested common stock. Options granted under the 2015 Plan that are exercised prior to vesting will continue to vest according to the respective option agreement, and such unvested shares are subject to repurchase by the Company at the optionee’s original exercise price in the event the optionee’s service with the Company voluntarily or involuntarily terminates. A summary of the Company’s unvested common stock from early exercises that is subject to repurchase by the Company is as follows: Shares Unvested shares—January 1, 2020 21,666 Vested ( 18,575 ) Issued — Repurchased — Unvested shares—December 31, 2020 3,091 As of December 31, 2020 and 2019, 3,091 shares and 21,666 shares, respectively, remained subject to a repurchase right by the Company, with a related liability included in accrued expenses and other liabilities in the consolidated balance sheets of less than $ 0.1 million as of each date. 13. NET LOSS PER SHARE The Company’s potential dilutive securities, which include unvested common stock from the early-exercise of stock options and outstanding common stock options, have been excluded from the computation of diluted net loss per share as the F-22 effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at December 31, 2020 and 2019 , from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutive effect: As of December 31, 2020 2019 Unvested common stock from early exercise of options 3,091 21,666 Stock options to purchase common stock 5,840,824 4,843,018 Total 5,843,915 4,864,684 14. DEFINED CONTRIBUTION PLAN The Company has a 401(k) defined contribution plan (the “401(k) Plan”) for all of its employees. Eligible employees may make pretax contributions to the 401(k) Plan up to statutory limits, while the Company contributes to the plan at the discretion of the Board of Directors. The Company’s discretionary match made under the 401(k) Plan for the years ended December 31, 2020 and 2019 was $ 0.7 million and $ 0.5 million, respectively. 15. COLLABORATION AND LICENSE AGREEMENT Summary of Agreement In November 2017, the Company entered into a collaboration and license agreement with Novartis (as amended, the “Collaboration Agreement”) for the research, development, manufacturing and commercialization of products using the Company’s gene-editing technology for the treatment of certain ophthalmic targets and sickle cell disease. In February 2019, Novartis elected to discontinue the sickle cell disease program under the Collaboration Agreement effective in August 2019. In May 2020, Novartis confirmed an ophthalmic target for a therapeutic editing program. Additionally, in accordance with the terms of the Collaboration Agreement, Novartis’ right to substitute other ophthalmic targets expired. For additional information on the Collaboration Agreement, please refer to Note 17. Under the terms of the Collaboration Agreement, the Company granted Novartis a research license, a development and commercialization license, and a manufacturing license, under certain of its intellectual property rights to research, develop, manufacture and commercialize ophthalmic targets. Upon entering into the Collaboration Agreement in November 2017, the Company received an upfront, nonrefundable payment of $ 35.0 million and issued additional shares of its Series B preferred stock to Novartis for consideration of $ 10.0 million, in addition to the $ 5.0 million of Series B preferred stock Novartis had purchased in July 2017. The Company recorded the November 2017 issuance of Series B preferred stock at its estimated fair value of $ 11.7 million, including $ 1.7 million of the upfront payment, and allocated the remaining $ 33.3 million of the upfront payment to the Collaboration Agreement. The Collaboration Agreement consists of a research term, where the Company and Novartis were collaborating to perform research and conduct preclinical development to identify candidates that modulate ophthalmic targets. The Collaboration Agreement also includes exploratory work on the applicability of the gene editing technology with respect to other gene targets. The Company’s obligation to perform such exploratory research was extended pursuant an amendment to the Collaboration Agreement was set to conclude in May 2021. The Company was responsible for the manufacturing of proprietary research grade human hematopoietic stem cell derived adeno-associated virus vectors (“AAVHSCs”) during the research term. Novartis agreed to reimburse research activities performed by the Company at a full-time equivalent rate (“FTE”) and manufacturing activities at cost, up to a maximum of $ 17.0 million during the research term, as specified and defined in the Collaboration Agreement. Novartis agreed to pay the Company a target fee of $ 5.0 million if the target meets certain success criteria during the research term (the “target fee trigger date”). The research term was to continue for five years from the effective date of the Collaboration Agreement. Pursuant to the Collaboration Agreement, the Company also agreed to participate on a joint steering committee and a joint manufacturing subcommittee, with equal representation from both the Company and Novartis. F-23 Novartis had the exclusive right to develop and commercialize one ophthalmic candidate or product arising from the research activities. Subject to certain limitations pursuant to the terms of the Collaboration Agreement, Novartis agreed to fund all development and commercialization costs. The Company was responsible for manufacturing candidates and products for Novartis during the development and commercialization terms. The Company’s manufacturing activities were to be reimbursed at cost during the development term and at cost plus a margin during the commercialization term, as defined in the Collaboration Agreement. If the Company was not able to manufacture candidates or products that met the quality or quantity requirements of Novartis, then Novartis would have had the right to designate a third-party contract manufacturer or manufacture such candidates or products itself. In accordance with the Collaboration Agreement, taking into consideration Novartis’ election to discontinue the sickle cell disease program, and the expiration of Novartis’ rights to make substitutions of an ophthalmic target, the Company was also eligible to receive up to a total of $ 265.0 million in milestone payments, including up to $ 90.0 million in development milestone payments, up to $ 85.0 million in regulatory milestone payments and up to $ 90.0 million in commercial milestone payments, with respect to the licensed products. The Company was also eligible to earn tiered royalties on net sales of licensed products by Novartis, its affiliates or sublicensees, ranging from mid-single-digit, to sub-teen double-digit percentages, and such royalties were potentially subject to various reductions and offsets. If any of the exploratory research efforts were advanced into formal research and development programs, the parties agreed to negotiate the economics including potential milestone payments for such programs at that time. Revenue Recognition The Company determined that the (1) research, development and commercialization and manufacturing licenses, (2) the research activities performed by the Company (3) service on the joint committees and (4) manufacturing during the research and development terms represented a single performance obligation under the Collaboration Agreement. Since the option for Novartis to obtain manufacturing during the commercialization term from the Company is at a price that would reflect the standalone selling price, the option does not provide Novartis with a material right and is therefore not a performance obligation under the contract. The Company has concluded that the research, development and commercialization and manufacturing licenses are not distinct from the research activities and manufacturing during the research and development term as Novartis cannot benefit from the licenses without the Company performing the research and manufacturing services. These services are so specialized and rely on the Company’s expertise in gene editing technologies not available in the marketplace. As a result, these licenses have been combined with the research activities, service on the joint committees and the manufacturing during the research and development terms as a single performance obligation. The transaction price consists of the $ 33.3 million non-refundable upfront payment, net of amounts classified as equity, and projected reimbursable research and manufacturing activities, which have been estimated using the expected value method. None of the target fees or development and regulatory milestone payments have been included in the transaction price, as all are fully constrained. As part of the evaluation of the constraint, the Company considered numerous factors, including the fact that achievement of the milestones is outside of the Company’s control and is contingent upon the success of the Company’s preclinical studies, clinical trials, Novartis’ efforts and the receipt of regulatory approval. In addition, the Company has determined that the commercial milestones and sales-based royalties will be recognized when the related sales occur as they were determined to relate predominately to the licenses transferred to Novartis, and therefore have also been excluded from the transaction price. The Company will re-evaluate the transaction price, including estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period and as uncertain events are resolved or other changes in circumstances occur. The Company identified only one performance obligation in the Collaboration Agreement. Therefore, the Company allocated the transaction price at the onset of the contract to the single performance obligation. The Company recognizes revenue over time using a cost-to-cost method, which it believes best depicts the transfer of control to the customer. Under the cost-to-cost method, the extent of progress towards completion is measured based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation. Under this method, revenue is recorded over the performance period as a percentage of the estimated transaction price based on the extent of progress towards completion. As of December 31, 2020, the aggregate amount of the transaction price related to the unsatisfied portion of the performance obligation is $ 30.2 million, and the Company will recognize this revenue as the research and manufacturing activities are performed, which was expected to occur over a period of time that was estimated to conclude in 2027. F-24 In estimating the total costs to satisfy its single performance obligation pursuant to the Novartis agreement, the Company is required to make significant estimates including the expected time it will take to fulfill the performance obligation, which, as of December 31, 2020, was expected to be approximately ten years from the date the Collaboration Agreement was entered into, and the expected costs associated with manufacturing during the research and development terms for a novel manufacturing process as well as the probability of success of a target to move into the development phase. The Company has made estimates of such costs utilizing its experience with similar product candidates, however not identical to those in the Collaboration Agreement. In making such estimates, significant judgment is required to evaluate those key assumptions related to cost estimates. The cumulative effect of revisions to the total estimated costs to complete the Company’s single performance obligation will be recorded in the period in which the changes are identified and amounts can be reasonably estimated. While such revisions will have no impact on the Company’s reported cash flows, a significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods. During the years ended December 31, 2020 and 2019, the Company recognized revenue under the Collaboration Agreement of $ 2.3 million and $ 1.7 million, respectively, of which $ 0.8 million and $ 0.6 million was included in deferred revenue at the beginning of each such period. As of December 31, 2020 and 2019, there was approximately $ 30.2 million and $ 31.0 million of deferred revenue related to the Collaboration Agreement, respectively. In addition, as of December 31, 2020 and 2019, the Company has recorded accounts receivable of $ 0.4 million, related to reimbursable research and development costs under the Collaboration Agreement, which are included in prepaid expenses and other current assets on the consolidated balance sheets. 16. PFIZER STOCK PURCHASE AGREEMENT On November 9, 2020, the Company entered into a common stock purchase agreement (the “Stock Purchase Agreement”) with Pfizer Inc. (“Pfizer”), pursuant to which the Company agreed to issue and sell to Pfizer 5,000,000 shares of the Company’s common stock through a private placement transaction (the “Private Placement”) at a purchase price of $ 12.00 per share, for an aggregate purchase price of $ 60.0 million. The shares of common stock sold to Pfizer are subject to a one-year lock-up from closing, during which time Pfizer is prohibited from selling or otherwise disposing of such shares. Under the Stock Purchase Agreement, Pfizer was granted an exclusive right of first refusal (the “ROFR”) for a 30-month period (the “ROFR Period”) beginning on the date of the closing of the Private Placement (collectively, the “ROFR Provision”), to negotiate a potential collaboration on the development and commercialization of HMI-102 and HMI-103. Pfizer may exercise its right of first refusal under the ROFR Provision one time for each of HMI-102 and HMI-103 during the ROFR period. In addition to the ROFR, the Stock Purchase Agreement provides for an information sharing committee (the “Information Committee”), comprised of representatives of each company which will serve as a forum for sharing information regarding the development of HMI-102 and HMI-103 during the ROFR Period. The Company recorded the issuance of common stock at its estimated fair value of $ 52.0 million, which reflects a discount for the lack of marketability of the shares. The remaining $ 8.0 million of aggregate purchase price was allocated to the other elements of the Stock Purchase Agreement, which represent a contract with a customer. The Company concluded that the Information Committee represents the only performance obligation under the contract. The ROFR does not provide Pfizer with a material right and is therefore not a performance obligation. As such, the Company allocated the $ 8.0 million to the Information Committee obligation. The Company will recognize revenue over time as the measure of progress which it believes best depicts the transfer of control to Pfizer. The Information Committee will meet regularly over the ROFR Period to share information which results in recognition of the transaction price over the 30-month ROFR Period. During the year ended December 31, 2020, the Company recognized collaboration of $ 0.4 million, and as of December 31, 2020, there was approximately $ 7.6 million of deferred revenue related to the Company’s obligation to Pfizer. 17. SUBSEQUENT EVENT On February 26, 2021, Homology received notice from Novartis that they had elected to terminate the Collaboration Agreement with the Company, with respect to the remaining ophthalmic target under the Collaboration Agreement. Accordingly, the notice served as notice of Novartis’ termination of the Collaboration Agreement in its entirety, which will be effective on August 26, 2021. As a result of the termination of the Collaboration Agreement, Homology regained worldwide exclusive rights from Novartis to research, develop, manufacture and commercialize Homology’s proprietary nuclease-free gene editing technology platform for an ophthalmic target (see Note 15). Homology announced its plans to continue to advance the program toward naming a development candidate. The Company and Novartis believe that results of studies conducted F-25 under the C ollaboration Agreement provide early proof-of-principle and support a nuclease-independent approach to editing of relevant cell types in the eye after sub-retinal injection, and are the subject of a planned presentation at an upcoming scientific meeting . * * * * * F-26