What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-12 compared with 2021-05-06 · 140 added, 84 removed, 237 unchanged (49% 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 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.

Our lead clinical program, HMI-102, is a gene therapy for adults with phenylketonuria, or PKU, and additional programs focus on gene editing in PKU, lysosomal storage disorders including mucopolysaccharidosis type II (MPS II), or Hunter syndrome, paroxysmal nocturnal hemoglobinuria, or PNH, and other diseases.

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 through a gene therapy or nuclease-free gene editing modality, as well as to deliver one-time gene therapy to produce antibodies throughout the body through our gene therapy monoclonal antibody platform, GTx-mAb.

Our diverse set of AAVHSCs allows us to precisely target, via a single injection, a wide range of disease-relevant tissues, including the liver, central nervous system, or CNS, peripheral nervous system, or PNS, bone marrow, muscle and eye.

Our genetic medicines platform is designed to provide us the flexibility to choose the method we believe is best suited from either gene therapy or gene editing for each disease we pursue, based on such factors as the targeted disease biology, the biodistribution of our AAVHSCs to key tissues and the rate of cell division the tissues exhibit.

Our product development strategy is to continue to develop in parallel both gene therapy and gene editing, while initially leveraging the experience from our gene therapy product candidates to further advance our gene editing.

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

Our genetic medicines platform is designed to provide us the flexibility to choose the method we believe is best suited for each disease we pursue, based on such factors as the targeted disease biology, the biodistribution of our AAVHSCs to key tissues and the rate of cell division the tissues exhibit.

Our product development strategy is to continue to develop in parallel gene therapy and gene editing, while initially leveraging the experience from our gene therapy product candidates to further advance our gene editing.

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

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.

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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 and we are now producing all of the clinical material for the pheNIX trial in this facility.

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 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.

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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 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.

We have a robust intellectual property portfolio that includes a combination of issued patents and pending patent applications that are owned by us or licensed from third parties.

The portfolio includes issued patents in the United States directed to our family of 15 AAVHSCs, and issued patents in the United States, Europe, Japan, and China specifically directed to gene editing using these AAVHSCs.

As of June 30, 2021, we have an exclusive license or co-exclusive license under 17 United States issued patents, six foreign granted patents and 50 patent applications pending in the United States and internationally.

These licensed patent applications include two United States applications and 15 foreign applications that are co-owned with City of Hope, or COH.

In addition, we own a granted United States patent relating to our HMI-102 composition that is expected to expire in 2039 and may be eligible for patent term extension depending on the regulatory pathway of the product covered by the patent.

We also own eight United States and 54 foreign patent applications that are pending.

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.

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.

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 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;

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;

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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 for the treatment of Hunter syndrome, and HMI-202 for the treatment of metachromatic leukodystrophy, or MLD.

We completed 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.

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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 completed 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.

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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.

In August 2021, we named a clinical development candidate for PNH, HMI-104, from our GTx-mAb platform.

This platform represents an additional way that we are leveraging our AAVHSCs to deliver one-time in vivo gene therapy to produce antibodies in the liver, which we believe may allow us to target diseases with larger patient populations.

In support of this program, we generated and presented preclinical data targeting complement protein 5, demonstrating proof-of-concept in PNH.

Our data showed 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.

License Agreements

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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.

In April 2016, we entered into an exclusive license agreement, or the COH License, with COH, pursuant to which COH granted us an exclusive, sublicensable, worldwide license to certain AAV vector-related patents and know-how owned by COH to develop, manufacture, use and commercialize products and services covered by such patents and know-how in any and all fields.

On August 6, 2021, we received notice from COH that we did not accomplish at least one of the partnering milestones by the applicable deadline, as set forth in the COH License.

This notice does not affect our exclusive license in the field of mammalian therapeutics, including all human therapeutics, associated diagnostics, and target validation, or the Mammalian Therapeutic Field, where we retain exclusive rights.

Instead, the notice served as written notice that the exclusive license granted pursuant to the COH License in all fields except the Mammalian Therapeutic Field will convert from exclusive to non-exclusive effective as of September 20, 2021, which is forty-five days from the receipt of notice.

In connection with the conversion, any royalty obligations and sublicensee fees relating to fields outside of the Mammalian Therapeutic Field shall be reduced by a certain percentage.

This change to our exclusive worldwide license with COH does not impact any of our current therapeutic product development candidates in development, including HMI-102, HMI-103, HMI-203, HMI-202 and HMI-104, as well as any potential future therapeutic product development candidates.

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.

Since our inception in 2015 through June 30, 2021, we have raised approximately $591 million in aggregate net proceeds through our initial public offering, or IPO, in April 2018, follow-on public offerings of common stock in April 2019 and April 2021, 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.

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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 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.

On April 6, 2021, we completed a follow-on public 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 $49.7 million, after deducting 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 underwriters did not exercise this option.

The offering closed on April 9, 2021.

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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.”

For additional information, see “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.

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 through IND-enabling studies and HMI-104 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 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 $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.

We recognized $2.2 million and $31.5 million in collaboration revenue for the three and six months ended June 30, 2021, respectively, and $0.6 million and $1.2 million for the three and six months ended June 30, 2020, respectively.

Collaboration revenue for the six months ended June 30, 2021 includes the recognition of approximately $29.9 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 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.

Our net losses for the three and six months ended June 30, 2021 were $30.5 million and $31.6 million, respectively, and $35.3 million and $70.7 million for three and six months ended June 30, 2020, respectively.

As of June 30, 2021 and December 31, 2020, we had an accumulated deficit of $359.9 million and $328.4 million, respectively.

Our total operating expenses were $32.7 million and $63.2 million for the three and six months ended June 30, 2021, respectively, and $36.3 million and $73.3 million for the three and six months ended June 30, 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.

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 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, HMI-104, our GTx-mAb product candidate for PNH, 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 future capital requirements will depend on many factors, including:

the costs, timing, and results of our ongoing research and development efforts, including clinical trials, for HMI-102;

the costs, timing, and results of our ongoing research and development efforts for HMI-103, HMI-203 and HMI-202, all of which are in IND-enabling studies;

the costs, timing, and results of our ongoing research and development efforts, including clinical trials, for HMI-102, HMI-103, HMI-203, HMI-202 and HMI-104;

the costs, timing, and results of our research and development efforts for current and future product candidates in our gene therapy and gene editing pipeline;

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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 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 believe that cash and cash equivalents and short-term investments as of June 30, 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, into a Phase 1/2 clinical trial, HMI-203, our lead gene therapy product candidate for Hunter syndrome, into a Phase 1/2 clinical trial, HMI-202, a CNS gene therapy product candidate for MLD, through additional preclinical studies as we focus on optimizing the program’s vector, and HMI-104, our GTx-mAb product candidate for PNH, into IND-enabling studies, 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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In response to the spread of COVID-19, we have taken steps to minimize the impact on our operations.

Operations – To protect the health of our employees and the third parties with whom we interact, most office-based employees continue to work from home, while essential staffing levels in our operations remain in place, including key personnel in our laboratories and manufacturing facility.

For those employees on-site, we have developed shift schedules for our laboratories and manufacturing facility and a modified office layout and traffic flow pattern to increase spacing capabilities, reduce inter-office risks and allow for business continuity.

We have increased cleaning protocols throughout our entire facility, limited visitors to only those who are critical to our ongoing operations and have cancelled all business travel.

Operations – At the onset of the COVID-19 pandemic, t o protect the health of our employees and the third parties with whom we interact, most office-based employees were asked to work from home .

We have now implemented a return-to-work policy which provides for a hybrid of remote and in-office work, and we expect to operate on such a semi-virtual basis for at least the rest of 2021.

E ssential staffing levels in our operations remain in place, including key personnel in our laboratories and manufacturing facility.

For those employees on-site, we continue to maintain shift schedules for our laboratories and manufacturing facility and a modified office layout to increase spacing capabilities, reduce inter-office risks and allow for business continuity.

We have increased cleaning protocols throughout our entire facility and have implemented procedures regarding office visitors to better protect our employees .

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

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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 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.

Preclinical studies – We have completed IND-enabling studies in support of our HMI-103 and HMI-203 programs in conjunction with operational changes made 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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In addition, any planned or potential meetings with the FDA or other regulatory authorities about any of our development programs could be delayed as these regulatory bodies respond to the ongoing pandemic.

Manufacturing – We continue to operate our manufacturing facility at or near normal levels.

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

Manufacturing – We continue to operate our manufacturing facility at normal levels.

We have on-hand sufficient drug product to execute the expansion phase of the pheNIX clinical trial.

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.

We continue to accelerate procurement of raw materials to meet all manufacturing needs.

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, 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.

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 spread of variants, 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 $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).

We recorded $31.5 million in collaboration revenue for the six months ended June 30, 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 March 31,

Three months ended June 30,

Six months ended June 30,

(in thousands)

HMI-102 external development costs

Other development-stage programs' external

development costs

Other development-stage programs'

external development costs

Employee-related costs

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Research and development activities are central to our business model.

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 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 into clinical trials and HMI-104 into IND-enabling studies 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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The duration, costs and timing of clinical trials and development of HMI-102, our other product candidates in development and any other future product candidate we may develop will depend on a variety of factors, including:

the scope, rate of progress, expense and results of clinical trials of HMI-102, HMI-103, HMI-203 and HMI-202, as well as of any future clinical trials of other product candidates and other research and development activities that we may conduct;

the scope, rate of progress, expense and results of clinical trials of HMI-102, HMI-103, HMI-203, HMI-202 and HMI-104, as well as of any future clinical trials of other product candidates and other research and development activities that we may conduct;

uncertainties in clinical trial design and patient enrollment rates;

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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-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 three months ended March 31, 2021, as compared to the same period in 2020.

Our interest income has decreased due to lower yields on invested funds as well as lower invested balances during the six months ended June 30, 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.

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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.

There were no material changes to our critical accounting policies during the three months ended June 30, 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 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,

Comparison of Three Months Ended June 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended June 30, 2021 and 2020:

Three months ended June 30,

(in thousands)

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Collaboration Revenue

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.

Collaboration revenue for the three months ended June 30, 2021 was $2.2 million, compared to $0.6 million for the three months ended June 30, 2020.

Collaboration revenue in both periods 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.

In addition, for the three months ended June 30, 2021, we recognized collaboration revenue of $0.8 million related to the Stock Purchase Agreement with Pfizer.

Research and Development Expenses

Three months ended March 31,

Three months ended June 30,

(in thousands)

HMI-102 external development costs

Other development-stage programs' external

development costs

Other development-stage programs'

external development costs

Employee-related costs

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Total research and development expenses

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.

Research and development expenses for the three months ended June 30, 2021 were $23.7 million, compared to $27.5 million for the three months ended June 30, 2020.

The decrease of $3.8 million was primarily due to a decrease of $5.1 million in direct research expenses for HMI-102 due to the completion of manufacturing of drug product in the prior year for the Phase 1/2 pheNIX clinical trial.

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.

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General and Administrative Expenses

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.

General and administrative expenses for the three months ended June 30, 2021 were $9.0 million, compared to $8.8 million for the three months ended June 30, 2020.

The increase of $0.2 million was primarily due to an increase in employee-related expenses of $0.8 million, which included $0.5 million of increased stock-based compensation expense, an increase in recruiting fees of $0.2 million and an increase in insurance expense of $0.1 million, partially offset by a decrease in consulting expense of $0.6 million and a decrease in legal costs of $0.2 million.

Interest Income

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.

Interest income for the three months ended June 30, 2021 was less than $0.1 million, compared to $0.4 million for the three months ended June 30, 2020.

The decrease was the result of lower invested balances in cash, cash equivalents and short-term investments for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, as well as lower yields on invested funds.

Net loss for the three months ended June 30, 2021 was $30.5 million, compared to $35.3 million for the three months ended June 30, 2020.

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

Comparison of Six Months Ended June 30, 2021 and 2020

The following table summarizes our results of operations for the six months ended June 30, 2021 and 2020:

Six months ended June 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 six months ended June 30, 2021 was $31.5 million, compared to $1.2 million for the six months ended June 30, 2020.

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

In addition, for the six months ended June 30, 2021, we recognized collaboration revenue of $1.6 million related to the Stock Purchase Agreement with Pfizer.

Research and Development Expenses

Six months ended June 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 six months ended June 30, 2021 were $45.5 million, compared to $56.8 million for the six months ended June 30, 2020.

The decrease of $11.3 million was primarily due to a decrease of $10.4 million in direct research expenses for HMI-102 due to the completion of manufacturing of drug product in the prior year for the Phase 1/2 pheNIX clinical trial, as well as higher expenses in the prior year related to the accelerated procurement of raw materials and other supplies for manufacturing drug product as part of our risk mitigation efforts in response to the COVID-19 pandemic.

Partially offsetting these decreases was a $2.9 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 six months ended June 30, 2021 were $17.7 million, compared to $16.6 million for the six months ended June 30, 2020.

The increase of $1.1 million was primarily due to an increase in employee-related expenses of $1.8 million, which included $0.9 million of increased stock-based compensation expense, an increase in insurance expense of $0.3 million, an increase in market research costs of $0.2 million and an increase in recruiting fees of $0.2 million, partially offset by a decrease in consulting expense of $1.1 million and a decrease in facilities costs of $0.5 million.

Interest Income

Interest income for the six months ended June 30, 2021 was less than $0.1 million, compared to $1.5 million for the six months ended June 30, 2020.

The decrease was the result of lower invested balances in cash, cash equivalents and short-term investments for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, as well as lower yields on invested funds.

Net loss for the six months ended June 30, 2021 was $31.6 million, compared to $70.7 million for the six months ended June 30, 2020.

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

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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.

Since our inception in 2015 through June 30, 2021, we have raised approximately $591 million in aggregate net proceeds through our IPO in April 2018, follow-on public offerings of common stock in April 2019 and April 2021, 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 through a private placement transaction.

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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.

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.

During the six months ended June 3 0 , 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 June 30, 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 public 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 $49.7 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 underwriters did not exercise this option.

The offering closed on April 9, 2021.

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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.

Our cash, cash equivalents, and short-term investments totaled $213.3 million and $217.4 million as of June 30, 2021 and December 31, 2020, respectively.

We had no indebtedness as of June 30, 2021 and December 31, 2020.

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

Three months ended March 31,

Six months ended June 30,

(in thousands)

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Operating Activities

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.

Net cash used in operating activities for the six months ended June 30, 2021 was $53.9 million.

This was primarily due to our net loss of $31.6 million and a decrease of $35.9 million in operating assets and liabilities, which includes the recognition of approximately $29.4 million of deferred revenue during the six months ended June 30, 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 $13.5 million, which includes $8.4 million of stock-based compensation expense and $4.2 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.

Net cash used in operating activities for the six months ended June 30, 2020 was $53.8 million, driven primarily by our net loss of $70.7 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 and a decrease in operating lease liabilities of $1.1 million.

These items were partially offset by net non-cash expenses of $10.5 million,

which includes $6.3 million of stock-based compensation expense and $3.9 million of depreciation expense, and a decrease in working capital of $7.8 million, which includes $4.9 million in increased accounts payable.

Investing Activities

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.

Net cash used in investing activities for the six months ended June 30, 2021 was $99.0 million, attributable to purchases of short-term investments of $97.4 million and purchases of property and equipment of $1.6 million.

Net cash provided by investing activities for the six months ended June 30, 2020 was $167.0 million, attributable to maturities of short-term investments of $189.6 million, partially offset by purchases of short-term investments of $20.0 million and purchases of property and equipment of $2.6 million.

Financing Activities

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.

Net cash provided by financing activities for the six months ended June 30, 2021 was $51.8 million, primarily due to proceeds from the issuance of common stock pursuant to the follow-on offering of our common stock of $49.7 million in April 2021, as well as issuances of common stock pursuant to the ATM and employee stock purchase plan.

Net cash provided by financing activities for the six months ended June 30, 2020 was $0.7 million, primarily due to proceeds from the issuance of common stock pursuant to the employee stock purchase plan.

Funding Requirements

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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;

pursue the preclinical and clinical development of HMI-102, including the ongoing pheNIX Phase 1/2 clinical trial, HMI-103, HMI-203, HMI-202 and HMI-104;

pursue the preclinical and clinical development of other product candidates based on our gene therapy and gene editing technology;

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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 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 believe that our existing cash and cash equivalents and short-term investments will enable us to fund our current projected operating expenses and capital expenditure requirements into the first quarter of 202 3 , 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, into a Phase 1/2 clinical trial , HMI-203, our lead gene therapy product candidate for Hunter syndrome, into a Phase 1/2 clinical trial, HM I-202, a CNS gene therapy product candidate for MLD , through additional preclinical studies as we focus on optimizing the program’s vector , and HMI-104, our GTx-mAb product candidate for PNH , into IND-enabling studies, 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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Our future funding requirements will depend on many factors, including:

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 preclinical development and initial clinical trials for HMI-102 including the pheNIX Phase 1/2 clinical trial, HMI-103, HMI-203, HMI-202 and HMI-104;

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

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Contractual Obligations

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.

There have been no material changes to our contractual obligations during the six months ended June 30, 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