What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-06 compared with 2020-11-09 · 157 added, 263 removed, 371 unchanged (53% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

September 30, 2020

March 31, 2021

December 31, 2020

12 unchanged sentences

Operating lease liabilities

Deferred rent

Deferred revenue

2 unchanged sentences

Operating lease liabilities, net of current portion

Deferred rent, net of current portion

Deferred revenue, net of current portion

3 unchanged sentences

Preferred stock, $ 0.0001 par value, 10,000,000 shares authorized;

no shares issued and outstanding

no shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Common stock, $ 0.0001 par value;

200,000,000 shares authorized;

45,263,849 and 45,138,408 shares issued as of September 30, 2020 and

50,487,649 and 50,268,666 shares issued as of March 31, 2021 and

December 31, 2020, respectively;

and 50,485,569 an d 50,265,575 shares

outstanding as of September 30, 2020 and December 31, 2019, respectively

outstanding as of March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital

Accumulated other comprehensive gain

Accumulated other comprehensive loss

Accumulated deficit

5 unchanged sentences

(in thousands, except share and per share amounts)

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Collaboration revenue

13 unchanged sentences

(in thousands)

Three months ended September 30,

Nine months ended September 30,

Other comprehensive gain (loss):

Three months ended March 31,

Other comprehensive (loss):

Change in unrealized gain (loss) on available for

sale securities, net

Total other comprehensive gain (loss)

Total other comprehensive loss

Comprehensive loss

14 unchanged sentences

Stock-based compensation

Other comprehensive gain

Other comprehensive loss

Balance at March 31, 2020

Issuance of common stock in follow-on offering,

net of discounts and issuance costs

Vesting of common stock from

option exercises

Issuance of common stock from

option exercises

Stock-based compensation

Other comprehensive gain

Balance at June 30, 2019

Vesting of common stock from

option exercises

Issuance of common stock from

option exercises

Issuance of common stock pursuant to

employee stock purchase plan

Stock-based compensation

Other comprehensive gain

Balance at September 30, 2019

$0.0001 Par Value

8 unchanged sentences

employee stock purchase plan

Issuance of common stock pursuant to

ATM, net of discounts and issuance costs

Stock-based compensation

1 unchanged sentence

Balance at March 31, 2021

Vesting of common stock from

option exercises

Issuance of common stock from

option exercises

Stock-based compensation

Other comprehensive gain

Balance at June 30, 2020

Vesting of common stock from

option exercises

Issuance of common stock from

option exercises

Issuance of common stock pursuant to

employee stock purchase plan

Stock-based compensation

Other comprehensive gain

Balance at September 30, 2020

See notes to condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Nine months ended September 30,

Three months ended March 31,

Cash flows from operating activities:

2 unchanged sentences

Stock-based compensation expense

Amortization of premium on short-term investments

Accretion of discount (amortization of premium) on short-term investments

Loss on disposal of property and equipment

Changes in operating assets and liabilities:

3 unchanged sentences

Deferred revenue

Deferred rent

Operating lease liabilities

4 unchanged sentences

Purchases of property and equipment

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities:

Proceeds from issuance of common stock in follow-on public offering,

Proceeds from issuance of common stock pursuant to ATM,

net of discounts and issuance costs

1 unchanged sentence

Proceeds from issuance of common stock from option exercises

Payment of deferred offering costs

Net cash provided by financing activities

6 unchanged sentences

Property and equipment additions included in accrued expenses and other liabilities

Unrealized (loss) gain on available for sale securities, net

Unrealized loss on available for sale securities, net

Deferred offering costs included in accounts payable and accrued expenses

See notes to condensed consolidated financial statements.

4 unchanged sentences

Nature of Business —Homology Medicines, Inc.

(the “Company”) is a clinical stage biopharmaceutical company dedicated to translating proprietary gene editing and gene therapy 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”) 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 manufacturing and research and development space, and maintaining and building its intellectual property portfolio.

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, obtain regulatory approval of its products, successfully commercialize its products, generate revenue, meet its obligations, and, ultimately, attain profitable operations.

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.

3 unchanged sentences

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 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 sold 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 11).

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.

333-237131) (as amended, 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 nine months ended September 30, 2020.

At September 30, 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.

In connection with the filing of certain post-effective amendments to the Shelf, the sales agreement prospectus supplement now covers the offering, issuance and sale by the Company of up to an aggregate $ 148.4 million of its common stock.

During the three months ended March 31, 2021, the Company sold 114,914 shares of common stock under the Sales Agreement, at an average price of approximately $ 14.00 per share, raising aggregate net proceeds of approximately $ 1.5 million after deducting an aggregate commission of 3 % and issuance costs.

As of March 31, 2021, there remained $ 148.4 million of common stock available for sale under the ATM.

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 September 30, 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 10).

During the nine months ended September 30, 2020, the Company incurred a net loss of $ 98.9 million and as of September 30, 2020, had $ 298.6 million in accumulated deficit.

Through March 31, 2021, 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 10) and its private placement with Pfizer.

During the three months ended March 31, 2021, the Company incurred a net loss of $ 1.1 million and as of March 31, 2021, had $ 329.4 million in accumulated deficit.

The Company expects to incur additional operating losses and negative operating cash flows for the foreseeable future.

Based on current projections, management now believes that existing cash and cash equivalents, together with the anticipated proceeds of $ 60.0 million from the Pfizer Inc.

private placement (see Note 11), will enable the Company to continue its operations into the third quarter of 2022.

Based on current projections, management believes that cash and cash equivalents and short-term investments as of March 31, 2021, together with the approximately $ 49.4 million in net proceeds received from a follow-on offering of the Company’s common stock in April 2021 (see Note 12), will enable the Company to continue its operations into the first quarter of 2023.

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.

7 unchanged sentences

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements.

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments which are necessary for a fair statement of the Company’s financial position as of September 30, 2020, and consolidated results of operations for the three and nine months ended September 30, 2020 and 2019, and cash flows for the nine months ended September 30, 2020 and 2019.

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments which are necessary for a fair statement of the Company’s financial position as of March 31, 2021, and consolidated results of operations for the three months ended March 31, 2021 and 2020, and cash flows for the three months ended March 31, 2021 and 2020.

Such adjustments are of a normal and recurring nature.

The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2020.

The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2021.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

13 unchanged sentences

The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts shown in the condensed consolidated statements of cash flows:

September 30,

(in thousands)

3 unchanged sentences

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 mature within one-year from the balance sheet date.

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 of the underlying security.

Such amortization and accretion, together with interest on securities, are included in interest income on the Company’s condensed consolidated statements of operations.

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 condensed 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.

Deferred 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.

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:

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 retained earnings.

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.

Leases —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:

7 unchanged sentences

Operating lease cost is recognized over the expected term on a straight-line basis.

The expected lease term 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.

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.

Fixed sublease payments received are recognized on a straight-line basis over the sublease term and recorded as a reduction to lease cost.

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.

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 7.

January 1, 2020

(in thousands)

Prior to adoption

of new leasing

Adjustment for

of new leasing

Right-of-use assets (1)(2)

Deferred rent (2)

Deferred rent, net of current portion (2)

Operating lease liabilities (3)

Operating lease liabilities, net of current portion (3)

Represents capitalization of operating right-of-use assets

Represents reclassification of deferred rent and incentives as a reduction to operating right-of-use assets

Represents recognition of operating lease liabilities

Research and Development Costs —Research and development costs are charged to expense as incurred.

17 unchanged sentences

The consideration may include fixed consideration and variable consideration.

At the inception of each arrangement that includes variable consideration, the Company e valuates 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 a mount 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 th e cumulative revenue recognized will not occur in a future period.

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 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.

13 unchanged sentences

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.

Common stock equivalent shares are excluded from the computation of diluted net loss per share if their effect is antidilutive.

2 unchanged sentences

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 7.

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 requir ing 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 b ased 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 e stimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio.

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 condensed 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.

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 adopted ASU 2020-10 on January 1, 2021.

1 unchanged sentence

SHORT-TERM INVESTMENTS

The Company invests its excess cash in fixed income instruments denominated and payable in U.S.

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.

The Company has designated all investments as available-for-sale and therefore such investments are reported at fair value.

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 condensed 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 condensed consolidated balance sheets.

The following table summarizes the Company’s investments, which are included in cash equivalents and short-term investments:

As of September 30, 2020

(in thousands)

Money market mutual funds

As of December 31, 2019

The following table summarizes the Company’s short-term investments as of March 31, 2021:

As of March 31, 2021

(in thousands)

Repurchase agreements

Asset-backed securities

Money market mutual funds

Commercial paper

Treasury securities

Corporate debt securities

The Company had no short-term investments as of December 31, 2020.

The Company utilizes the specific identification method in computing realized gains and losses.

The Company had no realized gains and losses on its available-for-sale securities for the three and nine months ended September 30, 2020 and 2019.

The Company had no realized gains and losses on its available-for-sale securities for the three months ended March 31, 2021 and 2020.

The contractual maturity dates of all of the Company’s investments are less than one year .

3 unchanged sentences

Assets measured at fair value on a recurring basis were as follows:

September 30,

Quoted Prices

7 unchanged sentences

Total cash equivalents

Short-term investments:

Commercial paper

Corporate debt securities

Total short-term investments

Total financial assets

Quoted Prices

6 unchanged sentences

Money market mutual funds

Repurchase agreements

Total cash equivalents

Short-term investments:

Asset-backed securities

Commercial paper

Treasury securities

Corporate debt securities

Total short-term investments

Total financial assets

2 unchanged sentences

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 three and nine months ended September 30, 2020 and 2019.

There were no transfers between fair value measure levels during the three months ended March 31, 2021 and 2020.

PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following:

September 30, 2020

March 31, 2021

December 31, 2020

9 unchanged sentences

Property and equipment, net

Depreciation expense for the three and nine months ended September 30, 2020 was approximately $ 2.0 million and $ 5.9 million, respectively, compared to $ 1.7 million and $ 4.6 million, respectively for the three and nine months ended September 30, 2019.

There were no disposals of property and equipment during the three and nine months ended September 30, 2020 and 2019.

Leasehold improvements consist primarily of costs associated with the buildout of the Company’s research and development, manufacturing and general office space in Bedford, Massachusetts.

Depreciation expense for the three months ended March 31, 2021 was approximately $ 2.1 million, compared to $ 1.9 million for the three months ended March 31, 2020.

The Company disposed of less than $ 0.1 million of property and equipment during the three months ended March 31, 2021.

There were no disposals of property and equipment during the three months ended March 31, 2020.

ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following:

September 30, 2020

March 31, 2021

December 31, 2020

3 unchanged sentences

Accrued professional fees

Accrued unvested common stock subject to repurchase

Accrued other

2 unchanged sentences

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.

On August 13, 2018, the Company entered into a sublease agreement for the entire leased premises.

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 in addition to passthrough of operating expenses and real estate taxes charged by the landlord.

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.

2 unchanged sentences

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 is $ 39.50 per square foot and will increase by three percent annually.

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 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 and has been recorded as a reduction to the operating right-of-use asset upon the 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 September 30, 2020 and December 31, 2019, respectively, in conjunction with its current leases.

The following table summarizes operating lease costs as well as sublease income for the nine months ended September 30, 2020:

Nine months ended September 30, 2020

The unamortized balance of the tenant improvement allowance was included in deferred rent incentives and has been recorded as a reduction to the 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 March 31, 2021 and December 31, 2020, respectively, in conjunction with its current leases.

The following table summarizes operating lease costs, variable lease costs and sublease income:

Three months ended March 31,

(in thousands)

Operating lease costs

Variable lease costs

Sublease income

Net lease cost

Rent expense, net of amortization of the deferred rent incentives was $ 0.4 million and $ 1.0 million, respectively, for the three and nine months ended September 30, 2019.

The maturities of our operating lease liabilities and minimum lease payments as of September 30, 2020 were as follows:

The maturities of our operating lease liabilities and minimum lease payments as of March 31, 2021 were as follows:

For the Years Ending December 31,

3 unchanged sentences

Present value of operating lease liabilities

The following table summarizes the lease term and discount rate as of September 30, 2020:

As of September 30, 2020

The following table summarizes the lease term and discount rate as of March 31, 2021:

As of March 31, 2021

Weighted-average remaining lease term (years)

2 unchanged sentences

Operating leases

The following table summarizes cash paid for amounts included in the measurement of the Company’s operating lease liabilities for the nine months ended September 30, 2020.

Nine months ended September 30, 2020

The following table summarizes cash paid for amounts included in the measurement of the Company’s operating lease liabilities.

Three months ended March 31,

(in thousands)

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows from operating leases

STOCK INCENTIVE PLANS

3 unchanged sentences

Certain options provide for accelerated vesting if there is a change in control, as defined in the 2015 Plan.

At September 30, 2020, there were no additional shares available for future grant under the 2015 Plan.

At March 31, 2021, there were no additional shares available for future grant under the 2015 Plan.

2018 Incentive Award Plan

2 unchanged sentences

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 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.

1 unchanged sentence

Therefore, on January 1, 2021, an additional 2,010,623 shares were added to the 2018 Plan, representing 4 % of total common shares outstanding at December 31, 2020.

At September 30, 2020, there were 2,430,357 shares available for future grant under the 2018 Plan.

As of March 31, 2021, there were 2,574,959 shares available for future grant under the 2018 Plan.

2018 Employee Stock Purchase Plan

5 unchanged sentences

Therefore, on January 1, 2021, an additional 502,655 shares were added to the 2018 ESPP, representing 1 % of total common shares outstanding at December 31, 2020.

At September 30, 2020, there were 1,039,651 shares available for future issuance under the 2018 ESPP.

As of March 31, 2021, there were 1,493,513 shares available for future issuance under the 2018 ESPP.

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.

1 unchanged sentence

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 nine months ended September 30, 2020, 83,848 shares were issued under the 2018 ESPP for aggregate proceeds to the Company of $ 0.9 million.

During the nine months ended September 30, 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 $ 0.1 million during the three and nine months ended September 30, 2020, and $ 0.1 million during the three and nine months ended September 30, 2019.

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.

During the three months ended March 31, 2021, 48,792 shares were issued under the 2018 ESPP for aggregate proceeds to the Company of $ 0.4 million.

During the three months ended March 31, 2020, 39,471 shares were issued under the 2018 ESPP for aggregate proceeds to the Company of $ 0.5 million.

Stock-based compensation expense pursuant to the 2018 ESPP during the three months ended March 31, 2021 and 2020 was insignificant in each period.

Stock Options

The fair values of stock options granted during the periods presented are measured 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.

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The assumptions used in the Black-Scholes option pricing model are as follows:

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Expected volatility

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63.2% — 63.5%

63.2% — 65.4%

62.4% — 64.7%

Weighted-average risk-free interest rate

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0.74% — 1.73%

0.31% — 1.73%

1.36% — 2.60%

Expected dividend yield

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$17.00 — $21.75

$10.10 — $21.75

$15.92 — $30.34

The Company recorded stock-based compensation expense related to stock options and shares purchased under the 2018 ESPP as follows:

Three months ended September 30,

Nine months ended September 30,

(in thousands)

Research and development

General and administrative

As of September 30, 2020, there was $ 32.6 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 2.6 years at September 30, 2020.

A summary of option activity under the Plans during the nine months ended September 30, 2020 is as follows:

The following table summarizes the Company’s stock option activity for the three months ended March 31, 2021:

Average Exercise

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Cancelled/Forfeited

Outstanding at September 30, 2020

Outstanding at March 31, 2021

Vested and expected to vest at

September 30, 2020

Exercisable at September 30, 2020

The total intrinsic value of options exercised during the nine months ended September 30, 2020 and 2019 was $ 0.5 million and $ 1.4 million, respectively.

The weighted-average grant date fair value per share of options granted during the nine months ended September 30, 2020 and 2019 was $ 10.73 and $ 14.70 , respectively.

March 31, 2021

Exercisable at March 31, 2021

The total intrinsic value of options exercised during the three months ended March 31, 2021 and 2020 was $ 0.6 million and $ 0.5 million, respectively.

The weighted-average grant date fair value per share of options granted during the three months ended March 31, 2021 and 2020 was $ 8.37 and $ 12.47 , respectively.

Stock options granted pursuant to the 2015 Plan permit option holders to elect to exercise unvested options in exchange for unvested common stock.

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Unvested shares - January 1, 2021

Unvested shares - September 30, 2020

As of September 30, 2020 and December 31, 2019, 4,102 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 condensed consolidated balance sheets of less than $ 0.1 million as of September 30, 2020 and December 31, 2019.

Unvested shares - March 31, 2021

As of March 31, 2021 and December 31, 2020, 2,080 shares and 3,091 shares, respectively, remained subject to a repurchase right by the Company, with a related liability included in accrued expenses and other liabilities in the condensed consolidated balance sheets of less than $0.1 million as of March 31, 2021 and December 31, 2020.

Restricted Stock Units

The fair values of restricted stock units (“RSUs”) are based on the fair market value of the Company’s common stock on the date of grant.

Each RSU represents a contingent right to receive one share of the Company’s common stock upon vesting.

In general, RSUs vest annually in three equal installments on January 1 st of each year.

The following table summarizes the Company’s RSU activity for the three months ended March 31, 2021:

Average Grant

Date Fair Value

Outstanding at January 1, 2021

Outstanding at March 31, 2021

Stock-based Compensation Expense

The Company recorded stock-based compensation expense related to stock options and restricted stock units as follows:

Three months ended March 31,

(in thousands)

Research and development

General and administrative

As of March 31, 2021, there was $ 42.3 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 2.8 years at March 31, 2021.

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 effect would be to reduce the net loss per share.

The Company’s potential dilutive securities, which include unvested common stock from the early-exercise of stock options, outstanding common stock options and outstanding RSUs, have been excluded from the computation of diluted net loss per share as the 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 September 30, 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 September 30,

The Company excluded the following potential common shares, presented based on amounts outstanding at March 31, 2021 and 2020, 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 March 31,

Unvested common stock from early exercise of options

Stock options to purchase common stock

Restricted Stock Units

COLLABORATION AND LICENSE AGREEMENT

Summary of Agreement

Termination of the Novartis Collaboration 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.

Together, the companies are focusing their resources on advancing this program to development candidate selection.

Additionally, in accordance with the terms of the Collaboration Agreement, Novartis’ right to substitute other ophthalmic targets expired.

The Company also continues to work with Novartis on identifying new targets for the collaboration based on the existing exploratory research component of the agreement, which was extended for an additional six months through an amendment to the Collaboration Agreement executed in October 2020.

Under the terms of the Collaboration Agreement, the Company grante d 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 Collab oration Agreement, 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.

The Company recorded the 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 are 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 has been extended pursuant to the October 2020 amendment to the Collaboration Agreement and now concludes in May 2021.

Taking into account the expiration of Novartis’ rights to substitute other ophthalmic targets, the Company and Novartis will focus resources on the confirmed ophthalmic target.

The Company is responsible for the manufacturing of proprietary research grade human hematopoietic stem cell derived adeno-associated virus vectors (“AAVHSCs”) during the research term.

Research activities performed by the Company are being reimbursed at a full-time equivalent rate (“FTE”) and manufacturing activities will be reimbursed at cost, up to a maximum of $ 17.0 million during the research term, as specified and defined in the Collaboration Agreement.

Novartis is required 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 will continue for five years from the effective date of the Collaboration Agreement.

Pursuant to the Collaboration Agreement, the Company will also participate on a joint steering committee and a joint manufacturing subcommittee, with equal representation from both the Company and Novartis.

Novartis has 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 will fund all development and commercialization costs.

The Company will be responsible for manufacturing candidates and products for Novartis during the development and commercialization terms.

The Company’s manufacturing activities will 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 is not able to manufacture candidates or products that meet the quality or quantity requirements of Novartis, then Novartis shall have 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 is 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 is 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 are potentially subject to various reductions and offsets.

If any of the exploratory research efforts are advanced into formal research and development programs, the parties will negotiate the economics including potential milestone payments for such programs at that time.

Unless earlier terminated, the Collaboration Agreement will continue on a target-by-target basis until the expiration of all applicable royalty terms with respect to all products that modulate such target on a country-by-country-basis.

Either party may terminate the agreement on a target-by-target basis for the other party’s material breach with respect to such target, or in the event of the other party’s bankruptcy.

Novartis may terminate the agreement for convenience on a target-by-target basis.

The Company may terminate the agreement if Novartis files, or joins a third party in filing or maintaining, a patent challenge against certain of the patent rights licensed to Novartis under the terms of the agreement.

There are no performance, cancellation, termination or refund provisions in the arrangement that contain material financial consequences to the Company.

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.

The Collaboration Agreement included a research term, during which the Company and Novartis were collaborating to perform research and preclinical development work, as well development and commercialization terms, during which the Company would be responsible for manufacturing all product candidates and products.

The Company and Novartis were also participating on a joint steering committee and a joint manufacturing subcommittee.

The Company had 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.

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 and as a result, the Company regained worldwide exclusive rights to this target.

Accordingly, the notice served as notice of Novartis’ termination of the Collaboration Agreement in its entirety, which will be effective on August 26, 2021.

Under the terms of the Collaboration Agreement, Novartis is obligated to continue to reimburse the Company for certain research and development costs through August 26, 2021.

Upon effectiveness of the termination, such reimbursements will cease.

The delivery of the termination notice caused a change in the estimate of total costs to satisfy the single performance obligation under the Collaboration Agreement .

The cumulative effect of revisions to the total estimated costs to complete the Company’s single performance obligation was recorded in the current period when the changes were identified and amounts could be reasonably estimated.

As such, the Company recognized a cumulative effect adjustment of approximately $ 26.9 million in collaboration revenue in the period.

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 will allocate 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.

The Company recognizes revenue pursuant to the Collaboration Agreement 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 September 30, 2020, the aggregate amount of the transaction price related to the unsatisfied portion of the performance obligation is $ 30.4 million, and the Company will recognize this revenue as the research and manufacturing activities are performed, which is expected to occur over a period of time that is estimated will conclude in 2027.

The Company does not expect collaboration revenue to be recognized evenly over this period as it will be recognized on a percentage of completion basis as the Company performs the research, development and manufacturing services, which will likely vary from period to period.

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 currently is 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 three and nine months ended September 30, 2020, the Company recognized revenue under the Collaboration Agreement of $ 0.6 million and $ 1.7 million, respectively, of which $ 0.2 million and $ 0.6 million was included in deferred revenue at the beginning of each period.

During the three and nine months ended September 30, 2019, the Company recognized revenue under the Collaboration Agreement of $ 0.4 million and $ 1.1 million, respectively, of which $ 0.2 million and $ 0.4 million, respectively, was included in deferred revenue at the beginning of each period.

As of September 30, 2020 and December 31, 2019, there was approximately $ 30.4 million and $ 31.0 million of deferred revenue related to the Collaboration Agreement, respectively.

In addition, as of September 30, 2020 and December 31, 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 condensed consolidated balance sheets as of each such date.

SUBSEQUENT EVENTS

On November 9, 2020, the Company entered into a stock purchase agreement (the “Stock Purchase Agreement”) with Pfizer Inc.

(“Pfizer”), pursuant to which Pfizer has agreed to purchase 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.

Under the Stock Purchase Agreement, Pfizer was granted an exclusive right of first refusal (“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.

As of March 31, 2021, the aggregate amount of the transaction price related to the unsatisfied portion of the performance obligation is $ 2.0 million, and the Company will recognize this revenue as the remaining research activities are performed, which will conclude on August 26, 2021.

During the three months ended March 31, 2021 and 2020, the Company recognized revenue under the Collaboration Agreement of $ 28.5 million and $ 0.6 million, respectively, of which $ 28.2 million and $ 0.2 million was included in deferred revenue at the beginning of each such period.

As of March 31, 2021 and December 31, 2020, there was approximately $ 2.0 million and $ 30.2 million of deferred revenue related to the Collaboration Agreement, respectively.

In addition, as of March 31, 2021 and December 31, 2020, the Company has recorded accounts receivable of $ 0.3 million and $ 0.4 million, respectively, related to reimbursable research and development costs under the Collaboration Agreement, which are included in prepaid expenses and other current assets on the condensed consolidated balance sheets as of each such date.

PFIZER STOCK PURCHASE AGREEMENT

On November 9, 2020, the Company entered into a common stock purchase agreement (the “Stock Purchase Agreement”) with Pfizer Inc.

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.

Additionally during the ROFR period, Pfizer has the right to designate a member to join the Company’s Scientific Advisory Board to participate in matters related to the development of these programs.

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 recognizes 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 three months ended March 31, 2021, the Company recognized collaboration revenue of $ 0.8 million, and as of March 31, 2021, there was approximately $ 6.8 million of deferred revenue related to the Company’s obligation to Pfizer.

SUBSEQUENT EVENTS

On April 6, 2021, the Company completed a follow-on offering of its common stock.

The Company sold 6,596,306 shares of its common stock at a price of $ 7.58 per share and received net proceeds of approximately $ 49.4 million, after deducting estimated offering expenses.

Under the terms of the underwriting agreement, the Company also granted the underwriter an option exercisable for 30 days to purchase up to an additional 989,445 shares of its common stock at a price of $ 7.58 per share.

The offering closed on April 9, 2021 .

The shares were sold pursuant to the Company’s effective shelf registration statement on Form S-3, as amended, and a related prospectus supplement filed with the SEC on April 8, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements