Q32 Bio Inc.(QTTB) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The unaudited financial statements show decreased assets and a significantly reduced net loss for the nine-month period Condensed Consolidated Balance Sheet Data (in thousands) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $95,829 | $217,431 | | Total Assets | $230,816 | $263,737 | | Total Liabilities | $32,245 | $67,742 | | Total Stockholders' Equity | $198,571 | $195,995 | Condensed Consolidated Statements of Operations Data (in thousands) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Collaboration Revenue | $1,677 | $567 | $33,169 | $1,722 | | Research and Development | $23,987 | $20,417 | $69,439 | $77,197 | | General and Administrative | $8,351 | $8,423 | $26,054 | $24,986 | | Net Loss | $(30,608) | $(28,232) | $(62,181) | $(98,903) | | Net Loss per Share | $(0.54) | $(0.62) | $(1.14) | $(2.19) | - For the nine months ended September 30, 2021, net cash used in operating activities was $79.3 million, while net cash provided by financing activities was $52.2 million[29] - The company's collaboration agreement with Novartis was terminated, resulting in the recognition of approximately $26.9 million in collaboration revenue[102][103] Management's Discussion and Analysis of Financial Condition and Results of Operations This analysis covers financial results, clinical program progress, the impact of the Novartis collaboration, and the company's liquidity position Overview - Homology Medicines is a clinical-stage company using its proprietary AAVHSC platform for in vivo gene therapy and nuclease-free gene editing[114] - Key clinical programs include HMI-102 for PKU gene therapy, HMI-103 for PKU gene editing, and HMI-203 for Hunter syndrome gene therapy[114][121][122] - The company operates a 25,000-square-foot GMP manufacturing facility and has produced GMP material at the 500-liter scale[116] - The collaboration and license agreement with Novartis was terminated, with Homology regaining worldwide exclusive rights to the remaining ophthalmic target[127] Results of Operations Comparison of Nine Months Ended September 30, 2021 and 2020 (in thousands) | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Collaboration Revenue | $33,169 | $1,722 | $31,447 | | Research and Development Expenses | $69,439 | $77,197 | $(7,758) | | General and Administrative Expenses | $26,054 | $24,986 | $1,068 | | Net Loss | $(62,181) | $(98,903) | $36,722 | - Collaboration revenue for the nine months ended Sep 30, 2021, increased to $33.2 million, primarily due to recognizing $28.5 million upon Novartis's termination notice[168] - Research and development expenses for the nine months ended Sep 30, 2021, decreased by $7.8 million, mainly due to a $12.7 million reduction in HMI-102 external costs[169] Liquidity and Capital Resources - As of September 30, 2021, the company had $187.6 million in cash, cash equivalents, and short-term investments[179] - Management believes existing cash will fund operations and capital expenditures into the first quarter of 2023[189] - In April 2021, the company completed a follow-on public offering, raising net proceeds of approximately $49.7 million[177] - Net cash used in operating activities for the nine months ended September 30, 2021, was $79.3 million, driven by the net loss and a decrease in deferred revenue[181] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity on its cash and investments, with no outstanding debt as of September 30, 2021 - The company's primary market risk is interest rate sensitivity related to its $187.6 million in cash, cash equivalents, and short-term investments[196] - The company had no debt outstanding as of September 30, 2021[196] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - Based on an evaluation as of the end of the period, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[198] - There were no material changes in internal control over financial reporting during the quarter[199] PART II. OTHER INFORMATION Legal Proceedings The company is not currently a party to any material legal proceedings - The company is not party to any material legal proceedings[201] Risk Factors The company faces risks related to its history of losses, capital needs, dependence on lead candidates, and uncertainties in development and regulation Financial and Capital Risks - The company has a history of significant losses, with an accumulated deficit of approximately $390.5 million as of September 30, 2021[203] - Additional capital is required to fund operations, and failure to obtain financing could prevent the development and commercialization of product candidates[207] - The business is heavily dependent on the success of HMI-102, its most advanced product candidate[217] Discovery, Development, and Regulatory Risks - The company's novel genetic medicines platform makes it difficult to predict development timelines and costs[225] - The regulatory landscape for gene therapy and gene editing is uncertain and evolving, which could delay or prevent approval[227] - Clinical trials are expensive and time-consuming, and delays in patient enrollment for rare diseases could adversely affect development[233][259] - Product candidates may cause serious adverse events, which could lead to trial halts or denial of regulatory approval[262] Commercialization Risks - The company faces significant competition from major pharmaceutical and biotechnology companies with greater financial resources[305][309] - Successful commercialization depends on obtaining adequate coverage and reimbursement from payors, which is uncertain[311][312] - The company lacks infrastructure for sales, marketing, and distribution and must build these capabilities or collaborate with third parties[321] Intellectual Property Risks - Success depends on obtaining and maintaining patent protection for its technology, but the patent position of biotech companies is highly uncertain[352][355] - The company may face third-party claims of patent infringement, which could result in substantial costs or delay development[357] - Changes in U.S. patent laws, such as the transition to a "first-to-file" system, could diminish the value of patents[365][366] General Business and Employee Risks - The COVID-19 pandemic could adversely impact business operations, including clinical trial enrollment and supply chain[386][387] - Future success is highly dependent on the ability to attract and retain key executive, scientific, and clinical personnel[390][391] - As an "emerging growth company," the company is subject to reduced disclosure requirements, which may make its stock less attractive to investors[396] Other Information The company amended its lease to expand its corporate headquarters and extend the lease term to June 30, 2030 - On November 9, 2021, the company amended its lease for its corporate headquarters, expanding the premises by approximately 23,011 square feet[416][417] - The amendment extends the lease term for the existing premises from February 28, 2027, to June 30, 2030[417] Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate documents and officer certifications - Lists exhibits filed with the report, including corporate governance documents, the amended lease agreement, and officer certifications[421]