What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-06 compared with 2020-11-09 · 140 added, 193 removed, 181 unchanged (65% of the section changed)

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As a result of many important factors, including those set forth in the ‘‘Risk Factors’’ section of this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in, or implied, by these forward-looking statements.

We are a genetic medicines company dedicated to transforming the lives of patients suffering from rare genetic diseases with significant unmet medical needs by curing the underlying cause of the disease.

We are a clinical-stage genetic medicines company dedicated to transforming the lives of patients suffering from rare genetic diseases with significant unmet medical needs by curing the underlying cause of the disease.

Our proprietary platform is designed to utilize our human hematopoietic stem cell derived adeno-associated virus vectors, or AAVHSCs, to precisely and efficiently deliver single administration genetic medicines in vivo either through gene therapy or nuclease-free gene editing across a broad range of genetic disorders.

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We believe our dual technology platform will allow us to provide transformative cures using either modality.

The unique properties of our proprietary suite of 15 novel AAVHSCs enable us to focus on a method of gene editing called gene integration, through the replacement of an entire diseased gene in the genome with a whole functional copy by harnessing the naturally occurring deoxyribonucleic acid, or DNA, repair process of homologous recombination, or HR.

The unique properties of our proprietary family of 15 AAVHSCs enable us to focus on a method of gene editing called gene integration, through the replacement of an entire diseased gene in the genome with a whole functional copy by harnessing the naturally occurring deoxyribonucleic acid, or DNA, repair process of homologous recombination, or HR.

We believe our HR-driven gene editing approach will allow us to efficiently perform gene editing at therapeutic levels without unwanted on- and off-target modifications, and to directly measure and confirm those modifications in an unbiased manner to ensure only the intended changes are made.

By utilizing the body’s natural mechanism of correcting gene defects, we also avoid the need for exogenous nucleases, or bacteria-derived enzymes used in other gene editing approaches to cut DNA, that are known to significantly increase the risk of unwanted modifications.

HMI-102 for Treatment of PKU in Adult Patients

In June 2019, we commenced enrollment of our Phase 1/2 pheNIX clinical trial with our first and lead product candidate, HMI-102, a gene therapy for the treatment of adults with phenylketonuria, or PKU.

The pheNIX trial is designed to evaluate the safety and efficacy of HMI-102 in a dose-escalation, randomized, concurrently-controlled study in adult patients with PKU.

During the dose-escalation portion of the trial, we evaluated safety and efficacy and sought to determine a dose to bring forward to the expansion phase.

As of the data cutoff date of October 19, 2020, six patients in the dose-escalation phase of the pheNIX trial had received HMI-102 across three dose cohorts (low-dose Cohort 1, n=2;

mid-dose Cohort 2, n=2;

high-dose Cohort 3, n=2).

Cohorts included males and females, with an age range of 21-49 and time in study ranging from 13 weeks to 52 weeks (end of study).

Safety data from these six patients as of the cutoff date showed HMI-102 was generally well-tolerated, and there were no treatment-related serious adverse events.

There was one serious adverse event of Herpes zoster (shingles) assessed by a principal investigator of the pheNIX trial as not related to treatment with HMI-102.

There were no clinically significant changes in electrocardiogram or vital signs and no clinical signs of complement activation.

In Cohorts 2 and 3, Grade 1 and 3 alanine aminotransferases, or ALTs, (ALT Grades based on Common Terminology Criteria for Adverse Events Version 5), which are common in adeno-associated virus-based gene therapy, were observed and managed with increased steroids when necessary.

Each of the two patients who experienced Grade 3 ALTs had pre-existing underlying immune conditions.

An independent data monitoring committee, which provided guidance throughout the pheNIX clinical trial, supported the conclusion that there were no safety concerns related to bilirubin, and that ALT elevations may be associated with reduced therapeutic activity.

Efficacy data from the two patients in Cohort 1 did not show any meaningful reductions in plasma phenylalanine, or Phe, throughout the study, which they have completed.

We be lieve this first and lowest dose in this dose-escalation study was insufficient to impact Phe levels.

Preliminary data from Cohort 1 (low-dose) in the dose-escalation phase of the pheNIX clinical trial as of the data cutoff date of October 19, 2020.

In Cohort 2, one patient experienced a marked Phe reduction from baseline level of 1,010 μmol/L, and recorded five plasma Phe values <360 μmol/L, and many of <600 μmol/L.

The mean percentage change from baseline for this patient are reported in three categories:

tyrosine, or Tyr, and the Phe/Tyr ratio.

For patients with PKU, the goal for a therapy is to lower Phe values, increase Tyr values and lower the overall Phe/Tyr ratio.

As of the cutoff date, this patient’s mean percentage change from baseline showed a 48.6% reduction in plasma Phe, an 81.1% increase in Tyr and a 70.8% decrease in the Phe/Tyr ratio.

We believe these results are consistent with an increase in phenylalanine hydroxylase enzymatic activity and increased Phe metabolism.

These results were observed even while the patient self-liberalized diet, including a mean percent change from baseline of more than a 100% increase in dietary Phe intake.

The other patient in Cohort 2 did not experience a similar reduction in plasma Phe, but this patient had pre-existing immune conditions and experienced Grade 3 ALT elevation, which we believe may have affected the results.

As of the cutoff date, this patient had a mean percentage change from baseline of 13% increase in plasma Phe, with a 131 .1% increase in Tyr and a 45.5% decrease in the Phe/Tyr ratio.

This also occurred while the patient self-liberalized diet with a mean percent change from baseline of 140.5% more dietary intact protein, 289% more dietary Phe intake and 75.6% decreased dieta ry Tyr intake.

We believe the findings in this patient may be suggestive of phenylalanine hydroxylase enzymatic activity sufficient to increase the patient’s tyrosine concentration from its low baseline, but not sufficient to reduce this patient’s Phe.

Interim data from Cohort 2 (mid-dose) in the dose-escalation phase of the pheNIX clinical trial as of the data cutoff date of October 19, 2020.

In Cohort 3, one patient showed a marked reduction in Phe from baseline level of 1,060 μmol/L, and re corded one plasma Phe value <360 μmol/L and several plasma Phe values <600 μ mol/L through the 13 weeks of observation as of the cutoff date.

The mean percentage change from baseline was a 31.4% reduction in plasma Phe, a 40.3% increase in Tyr and a 52.4% d ecrease in the Phe/Tyr ratio.

These results were observed while the patient self-liberalized diet, including a mean percent change from baseline of more than 45.4% increase in dietary intact protein and a 41.8% increase in dietary Phe.

In contrast, the oth er patient in Cohort 3 did not experience a similar reduction in plasma Phe, but similar to the second patient in Cohort 2, had pre-existing underlying immune conditions and experienced Grade 3 ALT elevation, which we believe may have affected the results.

As of the cutoff date, this patient experienced an increase in the mean percentage change from baseline in Tyr of 22.6% and a reduction in the mean percentage change from baseline in the Phe/Tyr ratio of 25.4%.

We believe the findings in this patient may also be suggestive of phenylalanine hydroxylase enzymatic activity, which was enough to improve Tyr, but not enough to reduce Phe.

Interim data from Cohort 3 (high-dose) in the dose-escalation phase of the pheNIX clinical trial as of the data cutoff date of October 19, 2020.

Based on the safety and efficacy results observed in the dose-escalation phase as of the cutoff date, we intend to advance to the randomized, concurrently controlled, expansion phase of the pheNIX trial in early 2021, which has the potential to be converted to a registrational trial.

We have selected two doses for the expansion phase:

the mid-dose from Cohort 2 and a dose between the doses in Cohorts 2 and 3, which we believe has the potential to improve Phe reductions while reducing overall steroid exposure.

Other Product Candidate Updates

We are in later-stage IND-enabling studies with HMI-202, our lead gene therapy CNS product development candidate for the treatment of metachromatic leukodystrophy, or MLD.

This represents our first CNS program and we have generated preclinical data that demonstrates that a single I.V.

administration of HMI-202 crossed the blood-brain-barrier and blood-nerve-barrier and led to durable reduction of sulfatides in all brain regions of the disease model.

HMI-202 was superior to an AAV9-based MLD gene therapy construct in terms of human ARSA enzyme activity, vector genome copies and biodistribution in the peripheral and central nervous systems of the disease model.

In October 2020, we announced a new in vivo gene therapy development program for the treatment of mucopolysaccharidosis type II (MPS II, or Hunter syndrome).

Development candidate HMI-203 is a potential one-time AAVHSC treatment designed to deliver functional copies of the IDS gene to multiple target organs, including the PNS and CNS, following a single I.V.

administration.

We have initiated IND-enabling studies and scaled the new construct up to 500 liters by leveraging our commercial manufacturing platform.

We are in later-stage IND-enabling studies with HMI-103, our lead gene editing product development candidate for the treatment of PKU in pediatric patients.

We have generated in vivo preclinical data, using quantitative molecular methods, that demonstrated achievement of gene integration efficiencies in the liver that corresponded with Phe correction in a PKU murine model, are significantly greater than other adeno-associated virus, or AAV, based approaches and we believe are at a therapeutic level in the preclinical model.

These findings were peer-reviewed and published in PLOS ONE in May 2020.

In November 2017, we entered into a collaboration and license agreement with Novartis, pursuant to which we agreed to collaborate on researching, developing, and commercializing novel genome editing products that modulate certain gene targets.

In May 2020, based on positive preclinical gene editing data in retinal cells, Novartis confirmed an ophthalmic target for a therapeutic editing program.

Together, we are working on advancing this program to development candidate selection.

We also continue to work with Novartis on identifying new targets for the collaboration based on the exploratory research component of the agreement, which was extended for an additional six months pursuant to an amendment to the agreement executed in October 2020, with such obligations now concluding in May 2021.

By utilizing the body’s natural mechanism of correcting gene defects, we also avoid the need for exogenous nucleases, or bacteria-derived enzymes used in other gene editing approaches to cut DNA, which are known to significantly increase the risk of unwanted modifications.

We have fully integrated process development and Good Manufacturing Practice, or GMP, manufacturing capabilities that support the full breadth and flexibility of our AAVHSC capsid library.

Our process development expertise covers all classical gene development functions and incorporates deep characterization and understanding of vector design and their consequences.

Our process development expertise covers all gene therapy and gene editing development functions and incorporates deep characterization and understanding of vector design and their consequences.

Our manufacturing process is a versatile system that rapidly delivers high quality vector at scale.

The manufacturing capacity within our 25,000 square foot GMP manufacturing facility includes multi-suite and multi-product capabilities to support our clinical development programs in both gene therapy and gene editing.

Our platform process is a commercial manufacturing process that has successfully produced several of our product candidates.

The manufacturing capacity within our 25,000-square-foot GMP manufacturing facility includes multi-suite and multi-product capabilities to support our clinical development programs in both gene therapy and gene editing and we are now producing all of the clinical material for the pheNIX trial in this facility.

Our ‘plug and play’ manufacturing process and platform is a commercial manufacturing process that has successfully produced several of our product candidates.

We are currently operating three 500-liter bioreactors in our internal manufacturing facility and have successfully produced GMP material at the 500-liter scale for multiple pipeline candidates.

Additionally, we have executed our manufacturing platform with multiple product candidates at the 2,000-liter bioreactor scale.

Additionally, we have successfully executed our manufacturing platform with multiple product candidates at the 2,000-liter bioreactor scale.

Our management team has a successful track record of discovering, developing and commercializing therapeutics with a particular focus on rare diseases.

We have a robust intellectual property portfolio with issued composition of matter patents in the United States for our suite of 15 AAVHSCs and we believe the breadth and depth of our intellectual property is a strategic asset that has the potential to provide us with a significant competitive advantage.

We have a robust intellectual property portfolio with issued composition of matter patents in the United States for our family of 15 AAVHSCs and we believe the breadth and depth of our intellectual property is a strategic asset that has the potential to provide us with a significant competitive advantage.

We continue to build on our intellectual property estate through our ongoing product and platform development efforts.

Since our inception in 2015 through September 30, 2020, we have raised approximately $444.2 million in aggregate net proceeds through our initial public offering, or IPO, in April 2018, a follow-on public offering of common stock in April 2019, proceeds from the sale of common stock under an “at-the-market” sales agreement and preferred stock financings.

We received $50.0 million from Novartis, our collaboration partner, including an up-front payment of $35.0 million and a $15.0 million equity investment.

HMI-102 for the Treatment of PKU in Adult Patients

We are currently in Phase 2 of the pheNIX clinical trial with our first and lead product candidate, HMI-102, a gene therapy for the treatment of adults with phenylketonuria, or PKU.

In November 2020, we reported positive safety and efficacy clinical data from the dose-escalation phase of the trial.

As of the data cutoff date of October 19, 2020, six patients in the dose-escalation phase of the trial had received HMI-102 across three dose cohorts (low-dose Cohort 1, n=2;

mid-dose Cohort 2, n=2;

high-dose Cohort 3, n=2).

The results showed that HMI-102 was generally well-tolerated, and resulted in marked reductions in phenylalanine, or Phe, and the Phe-to-tyrosine, or Tyr, ratio, or the Phe-to-Tyr ratio, at two doses.

Phe is a registrable endpoint in PKU, and the Phe-to-Tyr ratio is a clinically relevant diagnostic measurement for PKU.

Based on the safety and efficacy results observed in the dose-escalation phase, we have selected and advanced two doses to the randomized, concurrently controlled, dose expansion Phase 2 portion of the pheNIX trial, which has the potential to be converted to a registrational trial.

We expect to report initial clinical data from the dose expansion portion of the trial by the end of 2021.

Other Product Candidates

We are currently progressing two gene therapy product development candidates for the treatment of lysosomal storage diseases:

HMI-203 for the treatment of mucopolysaccharidosis type II (MPS II), or Hunter syndrome, and HMI-202 for the treatment of metachromatic leukodystrophy, or MLD.

We are in later-stage IND-enabling studies with HMI-203, an in vivo gene therapy product development candidate for the treatment of Hunter syndrome.

HMI-203 is a potential one-time AAVHSC treatment designed to deliver functional copies of the IDS gene to multiple target organs, including those in the PNS and CNS, following a single I.V.

administration.

In preclinical studies, a single I.V.

administration of HMI-203 resulted in robust biodistribution and human I2S, or hI2S, enzyme expression, leading to a significant reduction in heparan sulfate glycosaminoglycan, or GAG, levels in the cerebrospinal fluid, brain, liver, heart, spleen, lung and kidney, compared with the vehicle-treated disease model.

HMI-203 also led to significant changes in skeletal deformities compared with vehicle.

We expect to initiate a Phase 1/2 dose-escalation clinical trial with HMI-203 in 2021.

We completed IND-enabling studies with HMI-202, a gene therapy CNS product development candidate for the treatment of MLD.

We have generated preclinical data that demonstrate that a single I.V.

administration of HMI-202 crossed the blood-brain and blood-nerve-barriers and led to sustained reduction of sulfatides in all brain regions of the disease model.

We are applying the learnings from the IND-enabling studies to further optimize an HMI-202 vector that may lead to a better therapeutic profile.

We are in later-stage IND-enabling studies with HMI-103, our lead gene editing development candidate for the treatment of PKU in pediatric patients.

We have generated in vivo preclinical data demonstrating Phe reduction following a single I.V.

administration of the murine surrogate of HMI-103 in the PKU disease model out to 43 weeks (end of study).

In addition, using quantitative molecular methods, we have demonstrated achievement of gene integration efficiencies in a humanized murine liver model that corresponded with Phe correction in the PKU murine model.

These findings were peer-reviewed and published in PLOS ONE in May 2020.

We expect to initiate a Phase 1/2 dose-escalation clinical trial with HMI-103 in adult PKU patients in 2021.

In April 2021, we announced a new gene therapy monoclonal antibody platform, GTx-mAb, which is a new way to leverage our AAVHSCs to deliver one-time in vivo gene therapy to produce antibodies in the liver.

In support of the GTx-mAb platform, we announced preclinical data targeting complement protein 5, demonstrating proof of concept that our AAVHSCs delivered vectors at a high efficiency to the liver and secreted antibodies throughout the body, resulting in sustained expression levels consistent with C5 antibody therapeutics in a humanized murine model.

We plan to name a development candidate in a new therapeutic area from this platform in 2021, demonstrating the broader capability of our AAVHSCs, which we believe may allow us to target diseases with larger patient populations in the future.

License Agreements

On February 26, 2021, we received notice from Novartis Institutes of BioMedical Research, Inc., or Novartis, that they had elected to terminate the collaboration and license agreement with respect to the ophthalmic target, which was the only remaining target under the agreement.

Accordingly, the notice served as notice of Novartis’ termination of the agreement in its entirety, with an effective date of August 26, 2021, which is six months from the date of the notice.

Novartis has agreed to work with us to effect the orderly wind-down of activities in accordance with the agreement.

Novartis acknowledged that the data we generated support gene editing in retinal cells in a rare ophthalmic disease, providing early proof-of-principle for further research using this approach.

See Note 10 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information regarding the Novartis collaboration and license agreement.

Financial Overview

Since our inception in 2015 through March 31, 2021, we have raised approximately $541 million in aggregate net proceeds through our initial public offering, or IPO, in April 2018, a follow-on public offering of common stock in April 2019, proceeds from the sale of common stock under an “at-the-market” sales agreement, equity investments and preferred stock financings.

Included in our net proceeds is $50.0 million from a former collaboration partner, comprised of an up-front payment of $35.0 million and a $15.0 million equity investment, and a $60.0 million equity investment from Pfizer Inc., or Pfizer, through a private placement transaction.

We will require additional capital in order to advance HMI-102 and our other product candidates through clinical development and commercialization.

We believe that our compelling preclinical data, positive clinical data with HMI-102, scientific expertise, product development strategy, manufacturing capabilities and robust intellectual property position us as a leader in the development of genetic medicines.

On November 9, 2020, we entered into a stock purchase agreement, or the Stock Purchase Agreement, with Pfizer Inc., or Pfizer, pursuant to which Pfizer has agreed to purchase 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.

exercise its right of first refusal under the ROFR 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 jo in our Scientific Advisory Board to participate in matters related to the development of these programs.

See “Liquidity and Capital Resources.”

On April 6, 2021, we completed a follow-on offering of our common stock.

We sold 6,596,306 shares of our 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 underwriters’ agreement, we also granted an option exercisable for 30 days to purchase up to an additional 989,445 shares of our common stock at a price of $7.58 per share.

The offering closed on April 9, 2021.

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

On November 9, 2020, we entered into a stock purchase agreement, or the Stock Purchase Agreement, with Pfizer 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.

For additional information, se e “Liquidity and Capital Resources.”

We were incorporated and commenced operations in 2015.

Since our incorporation, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, developing our technology platform, advancing our lead product candidate, HMI-102 for the treatment of PKU, through IND-enabling studies and into a Phase 1/2 clinical trial, advancing HMI-103, HMI-203, and HMI-202 into IND-enabling studies, researching and identifying additional product candidates, developing and implementing manufacturing processes and internal manufacturing capabilities , building out our manufacturing and research and development space, enhancing our intellectual property portfolio and providing general and administrative support for these operations.

To date, we have financed our operations primarily through the sale of common stock, through the sales of preferred stock, and through funding from our collaboration partner.

To date, we have financed our operations primarily through the sale of common stock, through the sale of preferred stock and through funding from our collaboration partner.

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future, if at all.

We recognized $0.6 million and $1.7 million in collaboration revenue for the three and nine months ended September 30, 2020, respectively, and $0.4 million and $1.1 million for the three and nine months ended September 30, 2019, respectively.

We recognized $29.3 million and $0.6 million in collaboration revenue for the three months ended March 31, 2021 and 2020, respectively.

Collaboration revenue for the three months ended March 31, 2021 includes the recognition of approximately $28.5 million of deferred revenue and reimbursements incurred under the collaboration and license agreement with Novartis, for which Novartis gave written notice of termination on February 26, 2021, and is therefore not expected to continue in future quarters.

Since inception, we have incurred significant operating losses.

Our net losses for the three and nine months ended September 30, 2020 were $28.2 million and $98.9 million, respectively.

Our net losses for the three and nine months ended September 30, 2019 were $29.6 million and $79.7 million, respectively.

As of September 30, 2020 and December 31, 2019, we had an accumulated deficit of $298.6 million and $199.7 million, respectively.

Our total operating expenses were $28.8 million and $102.2 million for the three and nine months ended September 30, 2020, respectively, and $31.7 million and $85.5 million for the three and nine months ended September 30, 2019, respectively.

Our operating expenses for the nine months ended September 30, 2020 included substantial advance purchases of raw materials procured for future manufacturing needs to mitigate any possible supply chain interruptions as a result of the COVID-19 pandemic.

We expect our operating expenses to continue to increase in connection with our ongoing development activities related to our product candidates.

Specifically, we anticipate that our expenses will increase substantially due to costs associated with our Phase 1/2 pheNIX clinical trial with HMI-102, development activities including IND-enabling studies associated with our other product candidates, including HMI-202, our gene therapy product candidate for MLD, HMI-203, our gene therapy product candidate for Hunter syndrome, and HMI-103, our gene editing product candidate for PKU, research activities in additional therapeutic areas to expand our pipeline, hiring additional personnel in manufacturing, research, clinical and regulatory, quality and other functional areas, increased expenses incurred with contract manufacturing organizations, or CMOs, to supply us with product for our clinical studies, costs to manufacture product for preclinical and clinical studies in our internal manufacturing facility and other costs including the maintenance and expansion of our intellectual property portfolio.

Our net losses for the three months ended March 31, 2021 and 2020 were $1.1 million and $35.3 million, respectively.

As of March 31, 2021 and December 31, 2020, we had an accumulated deficit of $329.4 million and $328.4 million, respectively.

Our total operating expenses were $30.4 million and $37.1 million for the three months ended March 31, 2021 and 2020, respectively.

We expect our operating expenses to increase in connection with our ongoing development activities related to our product candidates.

Specifically, we anticipate that our expenses will increase due to costs associated with our Phase 1/2 pheNIX clinical trial with HMI-102, development activities including IND-enabling studies and clinical trials associated with our other product candidates, including HMI-103, our gene editing product candidate for PKU, for which we intend to initiate a Phase 1/2 clinical trial this year, HMI-203, our gene therapy product candidate for Hunter syndrome, for which we intend to initiate a Phase 1/2 clinical trial this year, HMI-202, our gene therapy product candidate for MLD, for which we are focusing on optimization of the vector, and research activities in additional therapeutic areas to expand our pipeline, including the addition of our GTx-mAb platform, hiring additional personnel in manufacturing, research, clinical and regulatory, quality and other functional areas, increased expenses incurred with contract manufacturing organizations, or CMOs, to supply us with product for our clinical studies, costs to manufacture product for preclinical and clinical studies in our internal manufacturing facility and other costs including the maintenance and expansion of our intellectual property portfolio.

In addition, we expect to continue to incur additional costs associated with operating as a public company.

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our ability to establish and maintain strategic collaborations, licensing or other agreements and the financial terms of such agreements for our product candidates.

We now believe that our existing cash and cash equivalents, together with the anticipated proceeds of $60.0 million from the Pfizer private placement, will enable us to fund our current projected operating expenses and capital expenditure requirements into the third quarter of 2022 including, subject to the impact of the COVID-19 pandemic on our business, additional development activities related to our Phase 1/2 pheNIX clinical trial with HMI-102, the advancement of HMI-103, our lead gene editing product candidate for PKU, HMI-203, our newly announced gene therapy product candidate for Hunter syndrome, and HMI-202, our lead CNS gene therapy product candidate, the scale-up of our manufacturing processes and the expansion of our intellectual property portfolio.

We believe 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 our common stock in April 2021, will enable us to fund our current projected operating expenses and capital expenditure requirements into the first quarter of 2023 including, subject to the impact of the COVID-19 pandemic on our business, additional development activities related to our Phase 1/2 pheNIX clinical trial with HMI-102, the advancement of HMI-103, our lead gene editing product candidate for PKU, through IND-enabling studies and into a Phase 1/2 clinical trial, HMI-203, our lead CNS/PNS gene therapy product candidate for Hunter syndrome, through IND-enabling studies and into a Phase 1/2 clinical trial, and HMI-202, a CNS gene therapy product candidate for MLD, through additional preclinical studies as we focus on optimizing the program’s vector, the continued scale-up of our manufacturing processes and the expansion of our intellectual property portfolio.

We have based these estimates on assumptions that may prove to be imprecise, and we may use our available capital resources sooner than we currently expect.

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If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

Impact of COVID-19 Pandemic

We are closely monitoring how the spread of the COVID-19 pandemic is affecting our employees, Phase 1/2 pheNIX clinical trial, preclinical studies, manufacturing and overall operations.

Impact of the COVID-19 Pandemic

We are closely monitoring how the spread of the COVID-19 pandemic is affecting our employees, our Phase 1/2 pheNIX clinical trial, preclinical studies, manufacturing and overall operations.

In response to the spread of COVID-19, we have taken steps to minimize the impact on our operations.

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In addition, we have developed our own on-site COVID-19 surveillance testing for employees to help promote health and safety.

Phase 1/2 pheNIX clinical trial – We are currently continuing our Phase 1/2 pheNIX clinical trial and are working with trial sites to mitigate potential COVID-19-related disruptions in order to help ensure the safety of patients and healthcare professionals.

Phase 1/2 pheNIX clinical trial – We are currently in Phase 2 of our Phase 1/2 pheNIX clinical trial and are working with trial sites to mitigate potential COVID-19-related disruptions in order to help ensure the safety of patients and healthcare professionals.

In addition, we have deployed home-health services which include home visits for patient monitoring and reporting, as well as the utilization of a centralized laboratory for testing enrolled patients.

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We will continue to evaluate the impact of the ongoing global pandemic on the pheNIX trial and will make adjustments, as needed.

Preclinical studies – IND-enabling studies are continuing in supp ort of our HMI-103, HMI-202 and HMI-203 programs and we have made operational changes to mitigate the risk of potential disruptions caused by the COVID-19 pandemic.

Preclinical studies – IND-enabling studies are continuing in support of our HMI-103 and HMI-203 programs and we have made operational changes to mitigate the risk of potential disruptions caused by the COVID-19 pandemic.

All of our ongoing and planned preclinical studies at external CROs are progressing and we have accelerated shipments of reagents and supplies to avoid any disruption of activities.

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We have on-hand all of the drug product needed for the expansion phase of the pheNIX clinical trial.

In addition, during the first quarter of 2020, we accelerated the procurement of raw materials for future manufacturing, research and development needs to minimize potential supply chain interruptions.

In addition, during the first quarter of 2020, we began to accelerate the procurement of raw materials for future manufacturing, research and development needs to minimize potential supply chain interruptions.

While we currently do not anticipate any interruptions in our manufacturing process, it is possible that the COVID-19 pandemic and response efforts may have an impact in the future on our and/or our third-party suppliers and CMOs’ ability to manufacture our product candidates or materials needed for our preclinical studies and clinical trials.

At this time, there is significant uncertainty relating to the trajectory of the COVID-19 pandemic and impact of related responses and as a result, we expect that the COVID-19 pandemic may impact our business, revenues, results of operations and financial condition.

The impact of COVID-19 on our future results will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, the ultimate impact of COVID-19 on financial markets and the global economy, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

The impact of COVID-19 on our future results will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, the ultimate impact of COVID-19 on financial markets and the global economy, the effectiveness of vaccines and vaccine distribution efforts and the effectiveness of other actions taken in the United States and other countries to contain and treat the disease.

See “Risk Factors— The COVID-19 pandemic caused by the novel strain of coronavirus could adversely impact our business, including our preclinical studies and clinical trials.” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

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To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future.

We recorded $1.7 million in collaboration revenue for the nine months ended September 30, 2020 (see Note 10 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information regarding Novartis revenue recognition discussion).

We recorded $29.3 million in collaboration revenue for the three months ended March 31, 2021, primarily related to the termination of the Novartis collaboration and license agreement (see Notes 10 and 11 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information regarding revenue recognition discussions).

Operating Expenses

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The following table summarizes our research and development expenses by product candidate or development program:

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

(in thousands)

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Research and development activities are central to our business model.

We expect that our research and development expenses will continue to increase substantially for the foreseeable future as we advance clinical trials of HMI-102 for the treatment of PKU, including our Phase 1/2 pheNIX clinical trial, continue to advance HMI-103, HMI-202 and HMI-203 through IND-enabling studies and into clinical trials and continue to discover and develop additional product candidates.

We expect that our research and development expenses will increase for the foreseeable future as we advance clinical trials of HMI-102 for the treatment of PKU, including our Phase 1/2 pheNIX clinical trial, continue to advance HMI-103, HMI-203 and HMI-202 through IND-enabling studies and into clinical trials and continue to discover and develop additional product candidates.

We cannot determine with certainty the duration and costs of future clinical trials of HMI-102 and IND-enabling studies and future clinical trials of our other product candidates in development or any other future product candidate we may develop or if, when, or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we obtain marketing approval.

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and facility-related expenses, which include direct depreciation costs, rent expense, maintenance of facilities and other operating costs.

We expect that our general and administrative expenses will increase in the future as we increase our personnel headcount to support increased research and development activities relating to HMI-102, HMI-103, HMI-202, HMI-203 and any other product candidate we may develop.

We expect that our general and administrative expenses will increase in the future as we increase our personnel headcount to support increased research and development activities relating to HMI-102, HMI-103, HMI-203, HMI-202 and any other product candidates we may develop.

We also have incurred and expect to continue to incur increased expenses associated with being a public company, including costs of accounting, audit, compliance with the Sarbanes-Oxley Act of 2002, legal, regulatory and tax-related services associated with maintaining compliance with Nasdaq and SEC requirements;

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Interest income consists of interest income earned on our cash, cash equivalents and short-term investments.

Our interest income has decreased due to lower yields on invested funds as well as lower invested balances during the nine months ended September 30, 2020 as compared to the same period in 2019.

Our interest income has decreased due to lower yields on invested funds as well as lower invested balances during the three months ended March 31, 2021, as compared to the same period in 2020.

Market volatility resulting from the COVID-19 pandemic has and may continue to adversely impact our interest income.

Critical Accounting Policies and Use of Estimates

This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States.

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States.

The preparation of our consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgements that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures.

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Our actual results may differ from these estimates under different assumptions or conditions.

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2019 and the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

There were no material changes to our critical accounting policies during the three months ended September 30, 2020 from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2019.

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Critical Accounting Policies and Use of Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2020 and in the notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

There were no material changes to our critical accounting policies during the three months ended March 31, 2021 from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2020.

Results of Operations

Comparison of Three Months Ended September 30, 2020 and 2019

The following table summarizes our results of operations for the periods presented:

Three months ended September 30,

(in thousands)

Collaboration revenue

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income:

Interest income

Collaboration Revenue

Collaboration revenue for the three months ended September 30, 2020 was $0.6 million, compared to $0.4 million for the three months ended September 30, 2019.

The increase of $0.1 million is attributable to increased activities under our collaboration agreement with Novartis.

We recognize revenues consistent with the pattern of performance of our research and development activities under this agreement, taking into consideration all upfront payments and research funding payments under this arrangement together as a single performance obligation.

We expect the level of effort to substantially increase when and if we begin manufacturing during the development term of the collaboration agreement, which is dependent on the success of the research and Novartis’ decision to take a candidate into development.

Collaboration revenue recognized in a given period is based on actual costs incurred during that period as a percentage of total estimated costs to complete the single performance obligation under the arrangement.

We would not expect collaboration revenue to be consistent period to period as it will fluctuate as we perform the research, development and manufacturing services over the term of our collaboration agreement with Novartis.

Research and Development Expenses

Three months ended September 30,

(in thousands)

HMI-102 external development costs

Other development-stage programs' external

development costs

Employee-related costs

Other research and development costs

Total research and development expenses

Research and development expenses for the three months ended September 30, 2020 were $20.4 million, compared to $25.7 million for the three months ended September 30, 2019.

The decrease of $5.3 million was due to a decrease of $4.6 million in direct research expenses for HMI-102 related to the transition of the manufacturing of clinical trial materials for our Phase 1/2 pheNIX trial from a CMO to our internal GMP facility in 2020, which reduced costs with our CMOs compared to the prior year period.

Additionally, there was a $4.2 million decrease in other research and development costs related to laboratory supplies and research materials for our early-stage research programs.

Partially offsetting these decreases was a $2.2 million increase in employee-related costs due to additional employee headcount to support our ongoing development programs, research initiatives, technology platform and manufacturing capabilities resulting in increases in salaries, payroll taxes, stock-based compensation expense and recruiting costs, as well as a $1.3 million increase in direct research expenses related to our newly announced HMI-203 program for Hunters syndrome.

General and Administrative Expenses

General and administrative expenses for the three months ended September 30, 2020 were $8.4 million, compared to $6.0 million for the three months ended September 30, 2019.

The increase of $2.4 million was primarily due to an increase in employee-related expenses of $1.5 million, which included $0.9 million of increased stock-based compensation expense, an increase in audit and legal costs of $0.3 million, an increase in market research costs of $0.3 million, an increase in facility costs of $0.2 million and an increase in taxes of $0.2 million.

Interest Income

Interest income for the three months ended September 30, 2020 was less than $0.1 million, compared to $1.7 million for the three months ended September 30, 2019.

The decrease was the result of lower invested balances in cash, cash equivalents and short-term investments for the three months ended September 30, 2020 compared to the three months ended September 30, 2019, as well as lower yields on invested funds.

Net loss for the three months ended September 30, 2020 was $28.2 million, compared to $29.6 million for the three months ended September 30, 2019.

The decrease in net loss was primarily due to the decreases in research and development expenses discussed above.

Comparison of Nine Months Ended September 30, 2020 and 2019

The following table summarizes our results of operations for the periods presented:

Nine months ended September 30,

Comparison of Three Months Ended March 31, 2021 and 2020

The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020:

Three months ended March 31,

(in thousands)

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Collaboration Revenue

Collaboration revenue for the nine months ended September 30, 2020 was $1.7 million, compared to $1.1 million for the nine months ended September 30, 2019.

The increase of $0.6 million is attributable to increased activities under our collaboration agreement with Novartis.

See “Comparison of Three Months Ended September 30, 2020 and 2019—Collaboration Revenue” for additional information.

Collaboration revenue for the three months ended March 31, 2021 was $29.3 million, compared to $0.6 million for the three months ended March 31, 2020.

Collaboration revenue includes the recognition of deferred revenue and reimbursements incurred under the collaboration and license agreement with Novartis, for which Novartis gave written notice of termination on February 26, 2021.

As a result, we recognized approximately $28.5 million as collaboration revenue upon receipt of the termination notice.

The remaining balance of deferred revenue pursuant to the collaboration and license agreement with Novartis will be recognized as the Company continues to perform the remaining activities under the collaboration and license agreement during the notice period, which ends on August 26, 2021.

In addition, we recognized collaboration revenue of $0.8 million related to the Stock Purchase Agreement with Pfizer.

Research and Development Expenses

Nine months ended September 30,

Three months ended March 31,

(in thousands)

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Total research and development expenses

Research and development expenses for the nine months ended September 30, 2020 were $77.2 million, compared to $69.1 million for the nine months ended September 30, 2019.

The increase of $8.1 million was primarily due to an increase of $1.9 million in direct research expenses, including costs related to manufacturing clinical trial materials, as well as costs incurred with our CRO to conduct and manage our Phase 1/2 pheNIX clinical trial, an $8.4 million increase in direct research expenses related to HMI-202, HMI-203 and HMI-103 external development costs as we advance through IND-enabling studies and an $8.2 million increase in employee-related costs due to additional employee headcount to support our ongoing development programs, research initiatives, technology platform and manufacturing capabilities resulting in increases in salaries, payroll taxes, stock-based compensation expense and recruiting costs.

Partially offsetting these increases was a $10.4 million decrease in other research and development costs related to laboratory supplies, research materials and services for our early-stage research programs.

Research and development expenses for the three months ended March 31, 2021 were $21.8 million, compared to $29.3 million for the three months ended March 31, 2020.

The decrease of $7.6 million was primarily due to a decrease of $5.2 million in direct research expenses for HMI-102 due to higher expenses in the prior year related to the accelerated procurement of raw materials and other supplies for manufacturing drug product for the Phase 1/2 pheNIX clinical trial as part of our risk mitigation efforts in response to the COVID-19 pandemic.

Additionally, the continued optimization of our ‘plug and play’ manufacturing process and platform has created efficiencies across all of our programs that directly reduced spend for clinical trial and other materials and decreased reliance on outside contract manufacturing organizations.

Partially offsetting these decreases was a $1.2 million increase in employee-related costs due to additional employee headcount to support our ongoing development programs, research initiatives, technology platform and manufacturing capabilities resulting in increases in salaries, payroll taxes and stock-based compensation expense.

General and Administrative Expenses

General and administrative expenses for the nine months ended September 30, 2020 were $25.0 million, compared to $16.4 million for the nine months ended September 30, 2019.

The increase of $8.6 million was due to an increase in employee-related expenses of $3.9 million, which included $2.6 million of increased stock-based compensation expense, an increase in consulting expense of $1.4 million, an increase in facility costs of $1.1 million, an increase in market research costs of $0.8 million, an increase in insurance costs of $0.4 million, an increase in recruiting costs of $0.5 million and an increase in software expense of $0.3 million.

General and administrative expenses for the three months ended March 31, 2021 were $8.7 million, compared to $7.8 million for the three months ended March 31, 2020.

The increase of $0.9 million was primarily due to an increase in employee-related expenses of $1.0 million, which included $0.5 million of increased stock-based compensation expense, an increase in audit and legal costs of $0.3 million, an increase in market research costs of $0.2 million and an increase in insurance of $0.2 million, partially offset by a decrease in consulting expense of $0.5 million and a decrease in facilities costs of $0.5 million.

Interest Income

Interest income for the nine months ended September 30, 2020 was $1.6 million, compared to $4.6 million for the nine months ended September 30, 2019.

The decrease was the result of lower invested balances in cash, cash equivalents and short-term investments for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, as well as lower yields on invested funds.

Net loss for the nine months ended September 30, 2020 was $98.9 million, compared to $79.7 million for the nine months ended September 30, 2019.

The increase in net loss was primarily due to the increases in research and development and general and administrative expenses discussed above.

Interest income for the three months ended March 31, 2021 was less than $0.1 million, compared to $1.2 million for the three months ended March 31, 2020.

The decrease was the result of lower invested balances in cash, cash equivalents and short-term investments for the three months ended March 31, 2021 compared to the three months ended March 31, 2020, as well as lower yields on invested funds.

Net loss for the three months ended March 31, 2021 was $1.1 million, compared to $35.3 million for the three months ended March 31, 2020.

The decrease in net loss was primarily due to the increase in collaboration revenue discussed above.

Liquidity and Capital Resources

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We expect to incur significant expenses and operating losses for the foreseeable future as we advance the preclinical and clinical development of our product candidates.

We expect that our research and development and general and administrative costs and our capital expenditures will increase in connection with conducting preclinical studies and clinical trials for our product candidates, contracting with CMOs and producing material in our internal manufacturing facility to support preclinical studies and clinical trials, expanding our research and development laboratories, expanding our intellectual property portfolio, and providing general and administrative support for our operations.

We expect that our research and development and general and administrative costs and our capital expenditures will increase in connection with conducting preclinical studies and clinical trials for our product candidates, contracting with CMOs producing material in our internal manufacturing facility to support preclinical studies and clinical trials, expanding our research and development laboratories and manufacturing facility, expanding our intellectual property portfolio, and providing general and administrative support for our operations.

As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements, or other sources.

We do not currently have any approved products and have never generated any revenue from product sales.

To date, we have financed our operations primarily through the sale of common stock, and the sale of preferred stock and through an up-front payment from a collaboration partner.

Since our inception in 2015 through September 30, 2020, we have raised approximately $444.2 million in aggregate net proceeds through our IPO, a follow-on public offering of common stock in April 2019, proceeds from the sale of common stock under an “at-the-market” sales agreement and preferred stock financings.

We received an up-front payment of $50.0 million from a collaboration partner, comprised of $35.0 million in cash and a $15.0 million equity investment, the latter of which is included in the proceeds from the sale of preferred stock.

As of September 30, 2020, we had $179.3 million in cash, cash equivalents and restricted cash and an accumulated deficit of $298.6 million.

In April 2019, we completed a follow-on public offering of our common stock.

We sold 5,555,556 shares of our 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, in April and May 2019, in connection with the exercise in full of the underwriters’ option to purchase additional shares, we issued an aggregate of 833,333 shares of our 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.

To date, we have financed our operations primarily through the sale of common stock, the sale of preferred stock and through an up-front payment from a collaboration partner.

Since our inception in 2015 through March 31, 2021, we have raised approximately $541 million in aggregate net proceeds through our IPO in April 2018, a follow-on public offering of common stock in April 2019, proceeds from the sale of common stock under an “at-the-market” sales agreement, equity investments and preferred stock financings.

Equity Offerings and ATM Program

In March 2020, we entered into a sales agreement, or the Sales Agreement, with Cowen and Company, LLC, or Cowen, as sales agent, pursuant to which we may, from time to time, issue and sell common stock with an aggregate value of up to $150 million in "at-the-market" offerings, or the ATM, under our Registration Statement on Form S-3 (File No.

333-237131) filed with the SEC on March 12, 2020.

333-237131) filed with the SEC on March 12, 2020 (as amended, the Shelf).

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 us of up to an aggregate $148.4 million of our common stock.

Sales of common stock, if any, pursuant to the Sales Agreement, may be made in sales deemed to be an “at the market offering” as defined in Rule 415(a) of the Securities Act, including sales made directly through the Nasdaq Global Market or on any other existing trading market for our common stock.

No securities were issued pursuant to the Sales Agreement during the nine months ended September 30, 2020.

As of September 30, 2020, there was $150.0 million of common stock remaining available for sale under the ATM.

Simultaneous with the filing of the registration statement in March 2020, our previous Registration Statement on Form S-3 (File No.

333-230664) filed with the SEC on April 1, 2019 and our prior sales agreement with Cowen providing for the offering, issuance and sale of up to an aggregate $100.0 million of our common stock from time to time in “at-the-market” offerings were terminated.

On November 9, 2020, we entered into the Stock Purchase Agreement with Pfizer, pursuant to which Pfizer has agreed to purchase 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.

The closing of the private placement is expected to occur on or about November 10, 2020, subject to the satisfaction of customary closing conditions.

Our cash, cash equivalents and restricted cash totaled $179.3 million and $263.7 million as of September 30, 2020 and December 31, 2019, respectively.

We had no indebtedness as of September 30, 2020 and December 31, 2019.

During the three months ended March 31, 2021, we 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 was $148.4 million of common stock remaining available for sale under the ATM.

On April 6, 2021, we completed a follow-on offering of our common stock.

We sold 6,596,306 shares of our 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, we also granted the underwriter an option exercisable for 30 days to purchase up to an additional 989,445 shares of our common stock at a price of $7.58 per share.

The offering closed on April 9, 2021.

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

Strategic Collaborations and Investments

On November 9, 2020, we entered into the Stock Purchase Agreement with Pfizer, 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.

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.

In addition to the ROFR, the Stock Purchase Agreement provided for an information sharing 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.

Additionally, Pfizer has designated a member to join our Scientific Advisory Board to participate in matters related to the development of these programs.

Our cash, cash equivalents, and short-term investments totaled $188.6 million and $217.4 million as of March 31, 2021 and December 31, 2020, respectively.

We had no indebtedness as of March 31, 2021 and December 31, 2020.

The following table summarizes our sources and uses of cash for each of the periods presented:

Nine months ended September 30,

Three months ended March 31,

(in thousands)

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Net change in cash, cash equivalents and restricted cash

Cash Flows for the Nine Months ended September 30, 2020

Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2020 was $82.7 million, driven primarily by our net loss of $98.9 million as we incurred expenses associated with research and development activities on HMI-102, HMI-103, HMI-202 and HMI-203, including the Phase 1/2 pheNIX trial for our HMI-102 program, and research activities on other applications for our technology and a decrease in operating lease liabilities of $1.7 million.

These items were partially offset by net non-cash expenses of $16.1 million, which includes $9.7 million of stock-based compensation expense and $5.9 million of depreciation expense, and a decrease in working capital of $2.3 million.

Investing Activities

Net cash provided by investing activities for the nine months ended September 30, 2020 was $205.9 million, attributable to maturities of short-term investments of $228.6 million, partially offset by purchases of short-term investments of $20.0 million and purchases of property and equipment of $2.8 million.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2020 was $1.1 million, primarily due to proceeds from the issuance of common stock pursuant to the employee stock purchase plan.

Cash Flows for the Nine Months ended September 30, 2019

Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2019 was $65.0 million, driven primarily by our net loss of $79.7 million as we incurred expenses associated with research and development activities on HMI-102, HMI-103 and HMI-202, including the Phase 1/2 pheNIX trial for our HMI-102 program, and research activities on other applications for our technology.

The funding of our net loss was partially offset by net non-cash expenses of $8.2 million, an increase in deferred rent of $0.7 million and an increase in working capital of $6.2 million.

Net cash used in operating activities for the three months ended March 31, 2021 was $29.8 million.

This was primarily due to a $1.1 million net loss and a decrease of $35.2 million in operating assets and liabilities, which includes the recognition of $28.5 million of deferred revenue during the three months ended March 31, 2021 in connection with Novartis’ decision to terminate the collaboration and license agreement as discussed in Note 10 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

These decreases were partially offset by net non-cash expenses of $6.4 million, which includes $3.9 million of stock-based compensation expense and $2.1 million of depreciation expense.

Net cash used in operating activities for the three months ended March 31, 2020 was $25.8 million, driven primarily by our net loss of $35.3 million as we incurred expenses associated with research and development activities on HMI-102, HMI-103 and HMI-202, including the Phase 1/2 pheNIX trial for our HMI-102 program, and research activities on other applications for our technology.

The funding of our net loss was partially offset by net non-cash expenses of $4.8 million, including $2.9 million of stock-based compensation expense and $1.9 million of depreciation expense and a decrease in working capital of $5.4 million, including $4.8 million in increased accounts payable.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2019 was $31.8 million, attributable to purchases of short-term investments of $257.4 million and purchases of property and equipment of $18.1 million, partially offset by maturities of short-term investments of $243.7 million.

Net cash used in investing activities for the three months ended March 31, 2021 was $85.2 million, attributable to purchases of short-term investments of $84.4 million and purchases of property and equipment of $0.8 million.

Net cash provided by investing activities for the three months ended March 31, 2020 was $115.0 million, attributable to maturities of short-term investments of $117.0 million, partially offset by purchases of property and equipment of $2.0 million.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2019 was $135.6 million, primarily due to the receipt of $134.5 million in net proceeds from the issuance of common stock in a public offering in April 2019.

Net cash provided by financing activities for the three months ended March 31, 2021 was $2.0 million, primarily due to proceeds from the issuance of common stock pursuant to the ATM and employee stock purchase plan.

Net cash provided by financing activities for the three months ended March 31, 2020 was $0.5 million, primarily due to proceeds from the issuance of common stock pursuant to the employee stock purchase plan.

Funding Requirements

Our operating expenses increased substantially in 2019 and during the first nine months of 2020 and are expected to increase for the remainder of 2020 and in future years in connection with our ongoing activities, particularly as we advance our Phase 1/2 pheNIX clinical trial with HMI-102, advance our preclinical activities including IND-enabling studies, scale-up manufacturing processes, engage with CMOs, manufacture materials for preclinical and clinical activities in our internal manufacturing facility and initiate additional human clinical trials.

Our operating expenses increased in 2020 and are expected to increase for the remainder of 2021 and in future years in connection with our ongoing activities, particularly as we advance our Phase 1/2 pheNIX clinical trial with HMI-102, and our preclinical activities including IND-enabling studies and expected Phase 1/2 clinical trials, continue to scale-up our manufacturing processes, engage with CMOs, manufacture materials for preclinical and clinical activities in our internal manufacturing facility and initiate additional human clinical trials.

In addition, we have incurred, and expect to continue to incur additional costs associated with operating as a public company.

We also expect our capital expenditures to increase substantially as we expand our operations.

Specifically, our operating expenses and capital expenditures will increase as we:

We also expect our capital expenditures to increase as we expand our operations.

Specifically, our expenses will increase as we:

pursue the preclinical and clinical development of HMI-102, including the ongoing pheNIX Phase 1/2 clinical trial, HMI-103, HMI-203 and HMI-202;

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expand our operational, financial and management systems and increase personnel, including personnel to support our operations as a public company.

We now believe that our existing cash and cash equivalents, together with the anticipated proceeds of $60.0 million from the Pfizer private placement, will enable us to fund our current projected operating expenses and capital expenditure requirements into the third quarter of 2022, including, subject to the impact of the COVID-19 pandemic on our business, additional development activities related to our Phase 1/2 pheNIX clinical trial with HMI-102, the advancement of our lead gene editing product candidate, HMI-103, our lead CNS gene therapy product candidate, HMI-202 and our newly announced gene therapy product candidate for Hunter syndrome, HMI-203, the scale-up of our manufacturing processes and the expansion of our intellectual property portfolio.

We have based these estimates on assumptions that may prove to be imprecise, and we could utilize our available capital resources sooner than we expect.

We believe that our existing cash and cash equivalents and short-term investments, together with the approximately $49.4 million in net proceeds received from a follow-on offering of our common stock in April 2021, will enable us to fund our current projected operating expenses and capital expenditure requirements into the first quarter of 2023, including, subject to the impact of the COVID-19 pandemic on our business, additional development activities related to our Phase 1/2 pheNIX clinical trial with HMI-102, the advancement of HMI-103 our lead in vivo gene editing product candidate for PKU, through IND-enabling studies and into a Phase 1/2 clinical trial, HMI-203, our lead CNS/PNS gene therapy product candidate for Hunter syndrome, through IND-enabling studies and into a Phase 1/2 clinical trial, and HMI-202, a CNS gene therapy product candidate for MLD, through additional preclinical studies as we focus on optimizing the program’s vector, the continued scale-up of our manufacturing processes and the expansion of our intellectual property portfolio.

We have based these estimates on assumptions that may prove to be imprecise, and we may use our available capital resources sooner than we currently expect.

Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical drugs, it is difficult to estimate with certainty the amount of our working capital requirements.

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the progress, costs and results of our preclinical development and initial clinical trials for HMI-102 including the pheNIX Phase 1/2 clinical trial, HMI-103, HMI-203 and HMI-202;

the progress, costs and results of our additional research and preclinical development programs in gene therapy and g ene editing;

the costs and timing of internal process development and manufacturing scale-up activities, the production of materials in our internal manufacturing facility, and outsourcing activities with CMOs associated with our lead product development programs and other programs we advance through preclinical and clinical development;

the progress, costs and results of our additional research and preclinical development programs in gene therapy and gene editing;

the costs, scope and timing of internal process development and manufacturing scale-up activities, the production of materials in our internal manufacturing facility, and outsourcing activities with CMOs associated with our lead product development programs and other programs we advance through preclinical and clinical development;

our ability to establish and maintain strategic collaborations, licensing or other agreements and the financial terms of such agreements;

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In addition, the magnitude and duration of the COVID-19 pandemic and its impact on our liquidity and future funding requirements is uncertain as of the filing date of this Quarterly Report on Form 10-Q, as the pandemic continues to evolve globally.

See “Impact of COVID-19 Pandemic” above and “Risk Factors— The COVID-19 pandemic caused by the novel strain of coronavirus could adversely impact our business, including our preclinical studies and clinical trials.” in Part II, Item 1A of this Quarterly Report on Form 10-Q for a further discussion of the possible impact of the COVID-19 pandemic on our business.

See “Impact of the COVID-19 Pandemic” above and “Risk Factors— The COVID-19 pandemic caused by the novel strain of coronavirus could adversely impact our business, including our preclinical studies and clinical trials.” in Part II, Item 1A of this Quarterly Report on Form 10-Q for a further discussion of the possible impact of the COVID-19 pandemic on our business.

Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaboration agreements, other third-party funding, strategic alliances, licensing arrangements and marketing and distribution arrangements.

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If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

We currently have no credit facility or committed sources of capital.

Contractual Obligations

There have been no material changes to our contractual obligations during the nine months ended September 30, 2020 from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.

There have been no material changes to our contractual obligations during the three months ended March 31, 2021 from those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

Off-Balance Sheet Arrangements

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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 2. Management’s Discussion and Analysis