Editas Medicine(EDIT) - 2019 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (unaudited) Unaudited condensed consolidated financial statements report a net loss of $63.0 million and total assets of $355.6 million as of June 30, 2019 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Assets | $355,625 | $420,386 | | Cash and cash equivalents | $210,605 | $134,776 | | Total Liabilities | $162,563 | $184,224 | | Deferred revenue, total | $131,947 | $131,326 | | Total Stockholders' Equity | $193,062 | $236,162 | | Accumulated deficit | $(478,510) | $(416,278) | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Collaboration and other revenues | $2,330 | $7,372 | $4,399 | $11,299 | | Research and development | $23,565 | $32,718 | $39,408 | $54,017 | | General and administrative | $14,414 | $14,311 | $31,903 | $28,498 | | Net loss | $(33,786) | $(38,723) | $(63,035) | $(69,661) | | Net loss per share | $(0.69) | $(0.82) | $(1.29) | $(1.50) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | $(54,809) | $(39,193) | | Net cash provided by (used in) investing activities | $126,736 | $(30,861) | | Net cash provided by financing activities | $3,902 | $55,348 | | Net increase (decrease) in cash | $75,829 | $(14,706) | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, financial instruments, collaborations, and commitments, highlighting ASC 842 adoption and a subsequent CEO appointment - The company is a clinical-stage genome editing company with an accumulated deficit of $478.5 million as of June 30, 2019, and management believes existing cash, cash equivalents, and marketable securities will fund operations for at least the next 24 months[23][26] - Effective January 1, 2019, the company adopted the new lease accounting standard ASC 842, resulting in the initial recognition of a $19.5 million right-of-use asset and a $19.7 million lease liability[31][38] - For the six months ended June 30, 2019, the company recognized $4.3 million in revenue from its strategic alliance with Allergan and no revenue from its collaboration with Juno Therapeutics, with deferred revenue related to these agreements being $94.9 million and $32.0 million, respectively, as of June 30, 2019[75][78] - The company is obligated to reimburse Broad Institute and Harvard for patent prosecution expenses, which amounted to $6.9 million for the six months ended June 30, 2019[60] - On August 6, 2019, the Board of Directors appointed Cynthia Collins as President and Chief Executive Officer, effective August 19, 2019[95] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial results, clinical program progress, and operational changes, confirming sufficient capital for the next 24 months - The company's most advanced program, EDIT-101 for Leber congenital amaurosis 10 (LCA10), began patient screening for a Phase 1/2 clinical trial in partnership with Allergan, with patient dosing expected in the second half of 2019[102] Comparison of Results for the Three Months Ended June 30 (in thousands) | Item | 2019 | 2018 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $2,330 | $7,372 | $(5,042) | (68)% | | R&D Expenses | $23,565 | $32,718 | $(9,153) | (28)% | | G&A Expenses | $14,414 | $14,311 | $103 | 1% | | Net Loss | $(33,786) | $(38,723) | $4,937 | (13)% | Comparison of Results for the Six Months Ended June 30 (in thousands) | Item | 2019 | 2018 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $4,399 | $11,299 | $(6,900) | (61)% | | R&D Expenses | $39,408 | $54,017 | $(14,609) | (27)% | | G&A Expenses | $31,903 | $28,498 | $3,405 | 12% | | Net Loss | $(63,035) | $(69,661) | $6,626 | (10)% | - As of June 30, 2019, the company had cash, cash equivalents, and marketable securities of $317.9 million, which is expected to fund operating expenses and capital expenditure requirements for at least the next 24 months[151][164] Quantitative and Qualitative Disclosures About Market Risk Market risk exposure is detailed, primarily interest rate sensitivity on cash and marketable securities, with no material foreign currency risk - The company's primary market risk is interest rate sensitivity on its $210.6 million in cash and cash equivalents and $107.3 million in marketable securities[173] - Due to the short-term maturities and low-risk profiles of its investments, management believes an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of its investments[173] - The company has no material exposure to foreign currency exchange rate risk as substantially all liabilities are denominated in U.S. dollars[174] Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2019, with new internal controls implemented for ASC 842 adoption - Management, including the CEO and interim CFO, concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2019[176] - In Q1 2019, the company implemented internal controls related to its adoption of the new lease accounting standard, ASC 842, with No other material changes to internal control over financial reporting occurring during the quarter[177] PART II. OTHER INFORMATION Legal Proceedings The company is not a party to material litigation, but acknowledges ongoing intellectual property disputes detailed in Risk Factors - The company is not a party to any material litigation or other legal proceedings arising from the ordinary course of business[180] - Certain intellectual property rights licensed to the company are subject to priority and validity disputes, as discussed in the Risk Factors section[180] Risk Factors Numerous risks are outlined, including financial losses, uncertainties of novel genome editing technology, intellectual property disputes, and intense competition - The company has a history of significant operating losses, with an accumulated deficit of $478.5 million as of June 30, 2019, and expects to incur losses for the foreseeable future, requiring substantial additional funding[182][183][187] - The company's focus on novel genome editing technology is high-risk, as no therapeutic product using this technology has been approved in the U.S. or Europe, with risks including potential for off-target edits, unpredictable long-term effects, and an uncertain regulatory pathway[205][206][232] - The company's in-licensed patents are subject to significant and ongoing legal challenges, including a second interference proceeding declared by the PTAB on June 24, 2019, and multiple opposition proceedings in Europe, which could result in the loss of valuable intellectual property rights[375][379][386] - The company faces significant competition from other companies developing CRISPR and other gene-editing technologies, as well as from traditional therapies, with ProQR Therapeutics N.V. is a direct competitor for its LCA10 program with an ongoing clinical trial[257][285][287] Other Information Formal appointment of Cynthia Collins as President and CEO, effective August 19, 2019, detailing her compensation and equity awards - On August 6, 2019, the Board of Directors appointed Cynthia Collins as President and Chief Executive Officer, effective August 19, 2019, after she had been serving as interim CEO since March 2019[531] - Ms. Collins' employment agreement includes a $625,000 base salary, a 60% target bonus, and substantial equity grants, including a time-vesting option for 500,000 shares, a performance-vesting option for 250,000 shares, and a restricted stock unit award for 20,000 shares[532] Exhibits Index of exhibits filed with the Quarterly Report on Form 10-Q, including officer certifications and Inline XBRL financial data - The exhibits filed with the report include Rule 13a-14(a) and Section 1350 certifications by the Principal Executive Officer and Principal Financial Officer, and financial data in Inline XBRL format[537] Signatures - The report was duly authorized and signed on August 7, 2019, by Cynthia Collins, Chief Executive Officer (Principal Executive Officer)[541][543]