Editas Medicine(EDIT) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Comprehensive financial overview including statements, management's analysis, market risks, and controls Financial Statements This section presents the unaudited condensed consolidated financial statements for Editas Medicine, Inc. as of June 30, 2021, showing increased net loss and operating expenses alongside a strengthened cash position Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Assets | $755,880 | $572,602 | | Cash and cash equivalents | $337,834 | $139,682 | | Marketable securities | $360,303 | $372,092 | | Total Liabilities | $142,519 | $179,016 | | Deferred revenue | $89,221 | $94,927 | | Total Stockholders' Equity | $613,361 | $393,586 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Collaboration and other revenues | $379 | $10,749 | $6,878 | $16,472 | | Research and development expenses | $33,753 | $28,007 | $75,690 | $62,576 | | General and administrative expenses | $22,027 | $14,081 | $43,471 | $31,852 | | Operating Loss | ($55,401) | ($31,339) | ($112,283) | ($77,956) | | Net Loss | ($55,256) | ($23,572) | ($111,984) | ($61,296) | | Net loss per share, basic and diluted | ($0.81) | ($0.43) | ($1.67) | ($1.12) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($88,436) | ($84,942) | | Net cash provided by investing activities | $8,035 | $120,637 | | Net cash provided by financing activities | $278,553 | $214,200 | | Net increase in cash, cash equivalents, and restricted cash | $198,152 | $249,895 | Notes to Condensed Consolidated Financial Statements The notes detail the company's business, liquidity, accounting policies, and financial statement items, confirming sufficient cash to fund operations into 2023 - The company is a clinical-stage genome editing company that has incurred net operating losses every year since inception and requires substantial additional capital to fund operations[19][24] - In January/February 2021, the company raised approximately $249.5 million in net proceeds from a public offering of common stock[22][23] - In May 2021, it established an At-The-Market (ATM) facility for up to $300.0 million, with no shares sold under it as of June 30, 2021[22][23] - Management expects that existing cash, cash equivalents, and marketable securities as of June 30, 2021, will be sufficient to fund operating expenses and capital expenditures well into 2023[24] Stock-based Compensation Expense (in thousands) | Expense Category | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Research and development | $4,171 | $8,137 | | General and administrative | $9,355 | $17,593 | | Total | $13,526 | $25,730 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's business, financial results, and liquidity, highlighting decreased revenue, increased operating expenses, and a strengthened cash position Overview The company is a clinical-stage genome editing company advancing key programs EDIT-101 for LCA10 and EDIT-301 for sickle cell disease, expecting continued operating losses - The Phase 1/2 BRILLIANCE clinical trial for EDIT-101 (for LCA10) has completed dosing for the adult low-dose and mid-dose cohorts, with enrollment beginning in adult high-dose and pediatric cohorts in Q2 2021[59][61] - The FDA cleared the IND for the EDIT-301 RUBY trial for sickle cell disease in January 2021, with patient screening underway and dosing expected to begin by the end of 2021[62] - The company plans to submit an IND for EDIT-301 for the treatment of beta-thalassemia by the end of 2021[62] - The company has incurred significant operating losses since inception, with a net loss of $112.0 million for the six months ended June 30, 2021, and an accumulated deficit of $777.2 million[66] Results of Operations This section details financial performance, showing significant revenue decrease due to alliance termination and increased R&D and G&A expenses driven by clinical development and stock-based compensation Comparison of Results for the Three Months Ended June 30 (in thousands) | Item | 2021 | 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Collaboration revenues | $379 | $10,749 | ($10,370) | (96)% | | R&D Expenses | $33,753 | $28,007 | $5,746 | 21% | | G&A Expenses | $22,027 | $14,081 | $7,946 | 56% | | Net Loss | ($55,256) | ($23,572) | ($31,684) | n/m | Comparison of Results for the Six Months Ended June 30 (in thousands) | Item | 2021 | 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Collaboration revenues | $6,878 | $16,472 | ($9,594) | (58)% | | R&D Expenses | $75,690 | $62,576 | $13,114 | 21% | | G&A Expenses | $43,471 | $31,852 | $11,619 | 36% | | Net Loss | ($111,984) | ($61,296) | ($50,688) | 83% | - The decrease in collaboration revenue was primarily due to $7.6 million from an out-license agreement in Q2 2020 and revenue from the terminated Allergan strategic alliance in 2020[85][95] - The increase in G&A expenses was mainly driven by a $6.6 million increase in stock-based compensation in Q2 2021, related to performance awards for the CEO, and an $11.7 million increase for the six-month period, also related to the separation of the former CEO[90][100] Liquidity and Capital Resources The company's liquidity is strong, with $698.1 million in cash and investments as of June 30, 2021, expected to fund operations well into 2023 - As of June 30, 2021, the company had cash, cash equivalents, and marketable securities of $698.1 million[106] - In January and February 2021, the company raised net proceeds of approximately $249.5 million from a public offering of common stock[106][115] - In May 2021, the company established an at-the-market (ATM) offering facility to sell up to $300.0 million of common stock, but no shares were sold under this facility as of June 30, 2021[105] - The company expects its existing cash and investments will fund operating expenses and capital expenditure requirements well into 2023[119] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity on its short-term, low-risk investments, with no material foreign currency exchange rate exposure - The company's primary market risk is interest rate sensitivity on its cash and marketable securities, which are mainly invested in U.S. government-backed securities and corporate debt[132] - Due to the short-term maturities and low-risk profiles of its investments, an immediate 100 basis point change in interest rates is not expected to have a material effect on the fair market value of its portfolio[132] - The company believes it does not have any material exposure to foreign currency exchange rate risk as liabilities are substantially denominated in U.S. dollars[133] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting - Based on an evaluation as of June 30, 2021, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[134] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[135] PART II. OTHER INFORMATION This section covers legal proceedings, intellectual property risks, equity sales, and required exhibits Legal Proceedings The company may face litigation in the ordinary course of business, with intellectual property rights subject to ongoing priority and validity disputes - The company may become involved in litigation from the ordinary course of business[138] - Certain intellectual property rights licensed by the company are subject to priority and validity disputes, which are further detailed in the Risk Factors section[138] Risk Factors This section details significant intellectual property risks, particularly ongoing CRISPR/Cas9 patent disputes that could materially harm the business if unfavorable - The company's in-licensed patents are subject to multiple ongoing priority and validity disputes, including interference proceedings at the USPTO[140] - Key proceedings involve patents licensed from the Broad Institute against competing claims from CVC (University of California et al.), ToolGen, and Sigma-Aldrich regarding the invention of CRISPR/Cas9 systems in eukaryotic cells[142][145][146] - In Europe, certain patents licensed from Broad have been revoked or amended by the European Patent Office, with appeals pending, potentially leading to the loss of key European patents[152] - An unsuccessful outcome in these disputes could force the company to license technology from competitors, which may not be available on reasonable terms, or to halt the development and commercialization of product candidates[153] Unregistered Sales of Equity Securities and Use of Proceeds On June 14, 2021, the company issued unregistered stock options and restricted stock units as employment inducements to new executive officers - On June 14, 2021, the company granted stock options and restricted stock units to its new Chief Scientific Officer and Chief Regulatory Officer as inducements to employment[154] - These securities were issued without registration under the Securities Act of 1933, pursuant to Section 4(a)(2) and in accordance with Nasdaq Listing Rule 5635(c)(4)[154] Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including the ATM sales agreement and officer certifications - The report includes the Common Stock Sales Agreement with Cowen and Company, LLC, dated May 14, 2021[158] - Certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act are filed as exhibits[158]