EDITAS MEDICINE, INC.
The following discussion and analysis of our financial condition and results of
operations should be read together with our consolidated financial statements
and related notes appearing elsewhere in this Annual Report on Form 10-K.
Some of the information contained in this discussion and analysis or set forth
elsewhere in this Annual Report on Form 10-K contains forward-looking statements
that involve substantial risks and uncertainties. The words "anticipate,"
"believe," "estimate," "expect," "intend," "may," "plan," "predict," "project,"
"would" and similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain these
identifying words. There are a number of important risks and uncertainties that
could cause our actual results to differ materially from those indicated by
forward-looking statements. We may not actually achieve the plans, intentions or
expectations disclosed in our forward-looking statements, and you should not
place undue reliance on our forward-looking statements. Actual results or events
could differ materially from the plans, intentions and expectations disclosed in
the forward-looking statements we make. We have included important factors in
the cautionary statements included in this Annual Report on Form 10-K,
particularly in the section entitled "Risk Factors" in Part I, Item 1A that
could cause actual results or events to differ materially from the
forward-looking statements that we make. Our forward-looking statements do not
reflect the potential impact of any future acquisitions, mergers, dispositions,
joint ventures or investments that we may make.
You should read this Annual Report on Form 10-K and the documents that we have
filed as exhibits to this Annual Report on Form 10-K completely and with the
understanding that our actual future results may be materially different from
what we expect. The forward-looking statements contained in this Annual Report
on Form 10-K are made as of the date of this Annual Report on Form 10-K,and we
do not assume any obligation to update any forward-looking statements, whether
as a result of new information, future events or otherwise, except as required
by applicable law.
Overview
We are a leading, clinical stage genome editing company dedicated to developing
potentially transformative genomic medicines to treat a broad range of serious
diseases. We have developed a proprietary genome editing platform based on
CRISPR technology and we continue to expand its capabilities. Our product
development strategy is to target diseases of high unmet need where we aim to
make differentiated, transformational medicines using our gene editing platform.
We are advancing both in vivo CRISPR medicines, in which the medicine is
injected or infused into the patient to edit the cells inside their body, and
engineered cell medicines, in which cells are edited with our technology and
then administered to the patient. While our discovery efforts have ranged across
several diseases and therapeutic areas, the two areas where our programs are
more mature are ocular diseases and engineered cell medicines to treat
hemoglobinopathies and cancer.
In ocular diseases, our most advanced program is designed to address a specific
genetic form of retinal degeneration called Leber congenital amaurosis 10
("LCA10"), a disease for which we are not aware of any available therapies and
only one other potential treatment in clinical trials in the United States and
Europe . In mid-2019, we initiated a Phase 1/2 clinical trial for EDIT-101 (also
known as AGN-151587), an experimental medicine to treat LCA10, pursuant to an
investigational new drug application ("IND") that we filed in October 2018 and
which was accepted by the United States Food and Drug Administration ("FDA") in
November 2018 . We and our partner Allergan Pharmaceuticals International Limited
(together with its affiliates, "Allergan") have begun patient screening and
expect to announce patient dosing by the end of the first quarter of 2020. We
plan to enroll approximately 18 patients in the United States and Europe .
In May 2015 , we entered into a collaboration with Juno Therapeutics, Inc. , a
wholly-owned subsidiary of Bristol-Myers Squibb Company ("Juno Therapeutics"), a
leader in the emerging field of immuno-oncology, to develop novel engineered
alpha-beta T cell therapies for cancer and autoimmune diseases, which was
amended and restated in each of May 2018 and November 2019 , at which time we
also entered into a related license agreement with Juno Therapeutics , which we
collectively refer to as our collaboration with them. In March 2017 , we entered
into a strategic alliance and option agreement with Allergan a leading global
pharmaceutical company, to discover, develop, and
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commercialize new gene editing medicines for a range of ocular disorders. InJuly 2018 , Allergan exercised its option to develop and commercialize EDIT-101 and paid us$15.0 million in connection with such exercise (the "EDIT-101 Option Exercise Payment"). We and Allergan subsequently entered into a co-development and commercialization agreement under which we will co-develop and equally split profits and losses for EDIT-101 inthe United States . InDecember 2018 , we also received a$25.0 million payment from Allergan in connection with the acceptance of the IND for EDIT-101 (the "EDIT-101 Milestone Payment"). Since our inception inSeptember 2013 , our operations have focused on organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio, assembling our core capabilities in genome editing, seeking to identify potential product candidates, and undertaking preclinical studies. Except for EDIT-101, all of our research programs are still in the preclinical or research stage of development and the risk of failure of all of our research programs is high. We have not generated any revenue from product sales. We have funded our operations primarily through the initial public offering of our common stock, follow-on public offerings of our common stock including through at-the-market offerings, private placements of our preferred stock, payments received under our collaboration withJuno Therapeutics and payments received under our strategic alliance and co-development and commercialization agreements with Allergan. From inception throughDecember 31, 2019 , we raised an aggregate of$870.8 million to fund our operations. Since inception, we have incurred significant operating losses. Our net losses were$133.7 million ,$110.0 million and$120.3 million for the years endedDecember 31, 2019 , 2018 and 2017, respectively. As ofDecember 31, 2019 , we had an accumulated deficit of$549.2 million . We expect to continue to incur significant expenses and operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and from year to year. We anticipate that our expenses will increase substantially as we continue our current research programs and our preclinical development activities; progress the clinical development of EDIT-101 with Allergan; seek to identify additional research programs and additional product candidates; initiate preclinical testing and clinical trials for other product candidates we identify and develop; maintain, expand, and protect our intellectual property portfolio, including reimbursing our licensors for such expenses related to the intellectual property that we in-license from such licensors; further develop our genome editing platform; hire additional clinical, quality control, and scientific personnel; and incur additional costs associated with operating as a public company. We do not expect to be profitable for the year endingDecember 31, 2020 or the foreseeable future.
Financial Operations Overview
Revenue
To date, we have not generated any revenue from product sales and we do not expect to generate any revenue from product sales for the foreseeable future. In connection with entering into our collaboration withJuno Therapeutics inMay 2015 , we received an upfront payment of$25.0 million , and in each ofMay 2016 andJuly 2017 , we received a milestone payment of$2.5 million . InMay 2018 , in connection with the amendment and restatement of our collaboration agreement withJuno Therapeutics to expand our collaboration to add an additional research program, we received$5.0 million for amending the agreement and two$2.5 million milestone payments for technical progress in a research program. InNovember 2019 , we further amended and restated our collaboration withJuno Therapeutics . Pursuant to the amended and restated collaboration, we received a$70.0 million payment fromJuno Therapeutics and will no longer receive research support under such collaboration. ThroughDecember 31, 2019 and prior to amending and restating our collaboration inNovember 2019 , we had recognized an aggregate of$23.9 million of research support fromJuno Therapeutics since entering into the collaboration. During the year endedDecember 31, 2019 , we recognized$6.2 million of research support fromJuno Therapeutics . As ofDecember 31, 2019 , we recorded$96.3 million of deferred revenue, all of which is classified as long-term on our consolidated balance sheet, related to the collaboration. In connection with entering into our strategic alliance with Allergan inMarch 2017 , we received an upfront payment of$90.0 million from Allergan (such payment, the "Allergan Upfront"). In addition, we received$15.0 million related to the EDIT-101 Option Exercise Payment inJuly 2018 and$25.0 million related to the EDIT-101 Milestone Payment inDecember 2018 . ThroughDecember 31, 2019 , we had recognized an aggregate of$44.4 million in revenue related to our strategic alliance with Allergan, which includes all of the EDIT-101 Option
Exercise Payment and a
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portion of the EDIT-101 Milestone Payment. For the year endedDecember 31, 2019 , we recognized$13.6 million in revenue in connection with the Allergan Upfront, which includes a portion of the EDIT-101 Milestone Payment. As ofDecember 31, 2019 , we recorded$85.6 million of deferred revenue, of which$63.8 million is classified as long-term on the consolidated balance sheet. For additional information about our revenue recognition policy related to theJuno Therapeutics collaboration or the Allergan alliance, see "-Critical Accounting Policies and Estimates-Revenue Recognition." For the foreseeable future, we expect substantially all of our revenue will be generated from our collaboration withJuno Therapeutics , our strategic alliance with Allergan, any other collaborations or agreements we may enter into and anticipated interest income.
Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research and development activities, including our drug discovery efforts and preclinical studies under our research programs, which include:
? employee-related expenses including salaries, benefits, and stock-based
compensation expense;
? costs of funding research performed by third parties that conduct research and
development and preclinical activities on our behalf;
? costs of purchasing lab supplies and non-capital equipment used in our
preclinical activities and in manufacturing preclinical study materials;
? consultant fees;
? facility costs including rent, depreciation, and maintenance expenses; and
fees for acquiring and maintaining licenses under our third-party licensing
? agreements, including any sublicensing or success payments made to our
licensors.
Research and development costs are expensed as incurred. At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of any product candidates we may identify and develop. This is due to the numerous risks and uncertainties associated with developing such product candidates, including the uncertainty of:
? successful completion of preclinical studies, IND-enabling studies and natural
history studies;
? successful enrollment in, and completion of, clinical trials;
? receipt of marketing approvals from applicable regulatory authorities;
? establishing commercial manufacturing capabilities or making arrangements with
third-party manufacturers;
? obtaining and maintaining patent and trade secret protection and non-patent
exclusivity;
? launching commercial sales of a product, if and when approved, whether alone or
in collaboration with others;
? acceptance of a product, if and when approved, by patients, the medical
community, and third-party payors;
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? effectively competing with other therapies and treatment options;
? a continued acceptable safety profile following approval;
? enforcing and defending intellectual property and proprietary rights and
claims; and
? achieving desirable medicinal properties for the intended indications.
A change in the outcome of any of these variables with respect to the development of any product candidates we develop would significantly change the costs, timing, and viability associated with the development of that product candidate. As a result of Allergan's exercise of its option to license EDIT-101 and our entry into a profit-sharing arrangement with Allergan inthe United States for EDIT-101, our obligations to fund such program inthe United States will represent 50% of the total costs related to developing and commercializing the program inthe United States .
We do not track research and development costs on a program-by-program basis except for reimbursable amounts that relate to third-party arrangements.
Research and development activities are central to our business model. We expect research and development costs to increase significantly for the foreseeable future as our development programs progress, including as we continue to progress the clinical development of EDIT-101 with Allergan as well as supporting preclinical studies for our other research programs.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation for personnel in executive, finance, investor relations, business development, legal, corporate affairs, information technology, facilities and human resource functions. Other significant costs include corporate facility costs not otherwise included in research and development expenses, legal fees related to intellectual property and corporate matters, and fees for accounting and consulting services. We anticipate that our general and administrative expenses will increase in the future to support continued research and development activities and potential commercialization of any product candidates we identify and develop. These increases will include increased costs related to the hiring of additional personnel and fees to outside consultants. We also anticipate increased expenses related to reimbursement of third-party patent-related expenses and expenses associated with operating as a public company, including costs for audit, legal, regulatory, and tax-related services, director and officer insurance premiums, and investor relations costs. With respect to reimbursement of third-party intellectual property-related expenses specifically, given the ongoing nature of the opposition and interference proceedings involving the patents licensed to us under our license agreement withThe Broad Institute, Inc. ("Broad") and the President and Fellows ofHarvard College ("Harvard"), we anticipate general and administrative expenses will continue to be significant.
Other Income (Expense), Net
For the year ended
For the year endedDecember 31, 2018 , other income (expense), net consisted primarily of interest income, accretion of discounts associated with marketable securities, and rental income from our former subtenant, partially offset by interest expense on our construction financing lease obligation.
For the year ended
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marketable securities, partially offset by rental income from our former subtenant, interest income, and accretion of discounts associated with marketable securities.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance withUnited States generally accepted accounting principles. The preparation of our consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, and experience. The effects of material revisions in estimates, if any, will be reflected in the consolidated financial statements prospectively from the date of change in estimates. While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policy used in the preparation of our consolidated financial statements requires the most significant judgments and estimates.
Revenue Recognition
We recognize revenue in accordance withFinancial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"), Topic 606, Revenue Recognition ("ASC 606"). Accordingly, we recognize revenue following the five step model prescribed under Accounting Standards Updates No. 2014-09, Revenue from Contracts with Customers: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations, and whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. As part of the accounting for these arrangements, we must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. A significant portion of revenue recognized from our strategic alliance with Allergan is related to research services performed for each clinical development program whereby revenue is recognized as the underlying services are performed using a proportional performance model. We measure proportional performance based on full time employee hours incurred relative to projected full time employee hours to complete the research services for each clinical development program. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.
Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in our consolidated balance sheets.
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Results of Operations
Comparison of Years ended
The following table summarizes our results of operations for the years endedDecember 31, 2019 and 2018, together with the changes in those items in dollars (in thousands) and the respective percentages of change: Year Ended December 31, 2019 2018 Dollar Change Percentage Change
Collaboration and other research and $ $ $
%
development revenues 20,531 31,937 (11,406) (36)
Operating expenses:
Research and development 96,898 90,654 6,244 7 %
General and administrative 64,555 55,010 9,545 17 %
Total operating expenses 161,453 145,664 15,789 11 %
Other income (expense), net
Other (expense) income, net (137) 328 (465) n/m
Interest income, net 7,313 3,445 3,868 n/m
Total other income, net 7,176 3,773 3,403 90 %
Net loss $ (133,746) $ (109,954) $ (23,792) (22) %
For our results of operations, we have included the respective percentage of
changes, unless greater than 100% or less than (100)%, in which case we have
denoted such changes as not meaningful (n/m).
Collaboration and other research and development revenues decreased by$11.4 million , to$20.5 million for the year endedDecember 31, 2019 from$31.9 million for the year endedDecember 31, 2018 . This decrease was primarily attributable to a$7.9 million decrease in revenue recognized pursuant to our strategic alliance with Allergan,$3.9 million in revenue recognized during the second quarter of 2018 related to a one time upfront payment in connection with an out-license arrangement and a$0.2 million decrease in revenue recognized pursuant to our collaboration withJuno Therapeutics .
Research and Development Expenses
Research and development expenses increased by$6.2 million , to$96.9 million for the year endedDecember 31, 2019 from$90.7 million for the year endedDecember 31, 2018 . The following table summarizes our research and development expenses for the years endedDecember 31, 2019 andDecember 31, 2018 , together with the changes in those items in dollars (in thousands) and the respective percentages of change: Year Ended December 31, 2019 2018 Dollar Change Percentage Change
Process and platform development expenses$ 33,242 $ 25,466 $ 7,776 31 % Employee related expenses 24,249 19,771 4,478 23 % Stock-based compensation expenses 13,538 14,734 (1,196) (8) % Licensing and sublicensing payment expenses 11,731 8,707
3,024 35 %
Facility expenses 9,131 6,058 3,073 51 %
Other expenses 5,007 3,418 1,589 46 %
Success payment expenses - 12,500 (12,500) n/mTotal research and development expenses$ 96,898 $ 90,654 $
6,244 7 %
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The increase in research and development expenses for the year ended December
31, 2019 compared to the year ended December 31, 2018 was primarily attributable
to:
approximately
? expenses due to increased research activity, mostly relating to external
research and development costs that we expect will increase further as we
continue to progress the clinical development of EDIT-101;
? approximately
increase in the size of our workforce;
? approximately
to increased office and professional service expenses; and
approximately
expenses, primarily due to sublicense expense recorded during the fourth
? quarter of 2019 in connection with receiving
amended and restated collaboration agreement with
offset by sublicense fees owed to certain of our licensors in 2018 in
connection with receiving milestone and other payments from our licensees.
These increases were partially offset by the following decreases in research and development expenses:
approximately
? from notes payable that were issued to Broad and settled during the second
quarter of 2018 in connection with us entering into a sponsored research
agreement with Broad; and
? approximately
mostly due to a decrease in non-employee stock option expense.
General and Administrative Expenses
General and administrative expenses increased by approximately$9.5 million , to$64.6 million for the year endedDecember 31, 2019 from$55.0 million for the year endedDecember 31, 2018 . The following table summarizes our general and administrative expenses for the years endedDecember 31, 2019 andDecember 31, 2018 , together with the changes in those items in dollars (in thousands) and the respective percentages of change: Year Ended December 31, 2019 2018 Dollar Change Percentage Change
Intellectual property and patent related fees$ 18,103 $ 20,442 $ (2,339) (11) % Professional service expenses 14,462 6,875 7,587 n/m Stock-based compensation expenses 13,705 11,864
1,841 16 %
Employee related expenses 12,781 11,502 1,279 11 %
Other expenses 5,504 4,327 1,177 27 %Total general and administrative expenses$ 64,555 $ 55,010 $
9,545 17 %
The increase in general and administrative expenses for the year ended December
31, 2019 compared to the year ended December 31, 2018 was primarily attributable
to:
? approximately
primarily related to an increase in our use of consulting services;
? approximately
to an increase in employee stock option expense and employee headcount;
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? approximately
increase in the size of our workforce; and
? approximately
facility-related expenses.
These increases were partially offset by an approximate
Other Income, Net
For the year ended
For the year endedDecember 31, 2018 , other income, net was$3.8 million , which was primarily attributable to interest income, accretion of discounts associated with marketable securities, and rental income from our former subtenant, partially offset by interest expense on our construction financing lease obligation.
Comparison of Years Ended
The following table summarizes our results of operations for the years endedDecember 31, 2018 and 2017, together with the changes in those items in dollars (in thousands) and the respective percentage of changes: Year Ended December 31, 2018 2017 Dollar Change Percentage Change Collaboration and other research and $ $ $ development revenues 31,937 13,728 18,209 n/m Operating expenses: Research and development 90,654 83,159 7,495 9 % General and administrative 55,010 50,502 4,508 9 % Total operating expenses 145,664 133,661 12,003 9 % Other income (expense), net: Other income, net 328 587 (259) n/m
Interest income (expense), net 3,445 (978) 4,423 n/m Total other income (expense), net 3,773 (391)
4,164 n/m
Net loss $ (109,954) $ (120,324) $ 10,370 9 %
Collaboration and other research and development revenues increased by$18.2 million , to$31.9 million for the year endedDecember 31, 2018 from$13.7 million for the year endedDecember 31, 2017 . This increase was primarily attributable to a$12.7 million increase in revenue recognized pursuant to our strategic alliance with Allergan,$4.0 million in revenue recognized in connection with entering into an out-license agreement and a$1.5 million increase in revenue recognized pursuant to our collaboration withJuno Therapeutics .
Research and Development Expenses
Research and development expenses increased by
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development expenses for the years ended
Year Ended
December 31,
2018 2017 Dollar Change Percentage ChangeProcess and platform development expenses$ 25,466 $ 17,117 $ 8,349 49 % Employee related expenses 19,771 14,406 5,365 37 % Stock-based compensation expenses 14,734 15,131 (397) (3) % Success payment expenses 12,500 14,500 (2,000) (14) % Licensing and sublicensing payment expenses 8,707 14,610
(5,903) (40) % Facility expenses 6,058 4,416 1,642 37 % Other expenses 3,418 2,979 439 15 %
Total research and development expenses$ 90,654 $ 83,159 $
7,495 9 %
The increase in research and development expenses for the year ended December
31, 2018 compared to the year ended December 31, 2017 was primarily attributable
to:
approximately
expenses due to increased research activity, mostly relating to external
? research and development costs, which was partially offset by
reimbursable research and development expenses associated with our
profit-sharing arrangement with Allergan related to EDIT-101;
? approximately
increase in the size of our workforce; and
? approximately
to increased professional service and office expenses.
These increases were partially offset by the following decreases in research and development expenses:
approximately
expenses resulting primarily from
owed to certain of our licensors in connection with receiving the Allergan
? Upfront and a milestone received under our collaboration with
in 2017, partially offset by sublicense fees owed to certain of our licensors
in 2017 in connection with receiving milestone and other payments from our
licensees;
approximately
primarily from
? multiple success payment obligations under licensing agreements in 2017, offset
by the
the second quarter of 2018 in connection with us entering into a sponsored
research agreement with Broad; and
? approximately
General and Administrative Expenses
General and administrative expenses increased by
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administrative expenses for the years endedDecember 31, 2018 andDecember 31, 2017 , together with the changes in those items in dollars (in thousands) and the respective percentages of change: Year Ended December 31, 2018 2017 Dollar Change Percentage Change
Intellectual property and patent related fees$ 20,442 $ 23,921 $ (3,479) (15) % Stock-based compensation expenses 11,864 8,233 3,631 44 % Employee related expenses 11,502 8,915 2,587 29 % Professional service expenses 6,875 6,010 865 14 % Other expenses 4,327 3,423 904 26 % Total general and administrative expenses$ 55,010 $ 50,502 $
4,508 9 %
The increase in general and administrative expenses for the year ended December
31, 2018 compared to the year ended December 31, 2017 was primarily attributable
to:
? approximately
to an increase in employee stock option expense;
? approximately
increase in the size of our workforce;
? approximately
facility-related expenses; and
? approximately
These increases were partially offset by an approximate
Other Income (Expense), Net
For the year endedDecember 31, 2018 , other income, net was$3.8 million , which was primarily attributable to interest income, accretion of discounts associated with marketable securities, and rental income from our former subtenant, partially offset by interest expense on our construction financing lease obligation. For the year endedDecember 31, 2017 , other expense, net was$0.4 million , which was primarily attributable to interest expense on our construction financing lease obligation and certain promissory notes, and amortization of premiums associated with marketable securities, partially offset by rental income from our former subtenant, interest income and accretion of discounts associated with marketable securities.
Liquidity and Capital Resources
Sources of Liquidity
From inception throughDecember 31, 2019 , we funded our operations primarily through proceeds from private placements of our preferred stock of$163.3 million , net proceeds of$444.8 million from public offerings of our common stock, the Allergan Upfront and other milestones paid by Allergan, and payments fromJuno Therapeutics under our collaboration with them. As ofDecember 31, 2019 , we had cash, cash equivalents and marketable securities of$457.1 million . In addition to our existing cash, cash equivalents and marketable securities we are eligible to earn milestone and option exercise payments under our collaboration agreement withJuno Therapeutics . Additionally, under our strategic alliance with Allergan, we are eligible to earn milestone payments, certain cost reimbursement for EDIT-101 costs in the 114
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United States and certain option exercise or extension payments. Our ability to earn the milestone payments and the timing of earning these amounts are dependent upon the timing and outcome of our development, regulatory and commercial activities and, as such, are uncertain at this time. As ofDecember 31, 2019 , our right to contingent payments under our collaboration agreement withJuno Therapeutics and our strategic alliance with Allergan are our only significant committed potential external sources of funds.
2019 At-the-Market Offerings
InMarch 2018 , we entered into a sales agreement with Cowen, under which we are able from time to time to issue and sell shares of our common stock through Cowen for aggregate gross sales proceeds of$150.0 million (the "March 2018 ATM Program"). ThroughDecember 31, 2019 , we sold an aggregate of 5,448,428 shares of our common stock pursuant to theMarch 2018 ATM Program at a weighted-average price of$27.53 per share for gross proceeds of$150.0 million . We paid Cowen a 3% cash commission on the gross sales price per share of our common stock sold under theMarch 2018 ATM Program. No shares of common stock remain available for sale under the sales agreement.
Cash Flows
The following table provides information regarding our cash flows for the years
ended
Year Ended
December 31,
2019 2018 2017
Net cash (used in) provided by:
Operating activities $ (40,669) $ (45,707) $ (9,417)
Investing activities 12,252 (53,087) (183,810)
Financing activities 131,824 86,940 154,534
Net increase (decrease) in cash and cash
equivalents $ 103,407 $ (11,854) $ (38,693)
Net cash used in operating activities was approximately
Net cash used in operating activities was approximately$45.7 million for the year endedDecember 31, 2018 . During the year endedDecember 31, 2018 , we received$25.0 million related to the EDIT-101 Milestone Payment which was partially recognized as revenue during the fourth quarter of 2018 and$15.0 million related to the EDIT-101 Option Exercise Payment which was fully recognized as revenue during the third quarter of 2018, both related to our strategic alliance with Allergan. We received$10.0 million related to our amended and restated collaboration agreement withJuno Therapeutics which was partially recognized during 2018. Additionally, we issued$12.5 million in notes payable to Broad and settled in shares of common stock during the second quarter of 2018 in connection with our entry into a sponsored research agreement with Broad. This amount was offset by operating expenses that related to our on-going preclinical activities, sublicensing and success payments, intellectual property costs and increased employee related expenses due to an increase in the size of our workforce. Net cash used in operating activities was approximately$9.4 million for the year endedDecember 31, 2017 . During the year endedDecember 31, 2017 , we received a$90.0 million up-front payment associated with our strategic alliance with Allergan. This was partially offset by revenue recognized associated with our collaboration arrangement withJuno Therapeutics and our strategic alliance with Allergan. Additionally, we issued$14.5 million in notes payable 115
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due to triggering success payments under licensing agreements. This amount was offset by operating expenses that related to our on-going preclinical activities, sublicensing payments, intellectual property costs and increased employee related expenses due to an increase in the size of our workforce.
Net cash provided by investing activities was approximately$12.3 million for the year endedDecember 31, 2019 , primarily related to proceeds from maturities of marketable securities of$360.5 million , partially offset by costs to acquire marketable securities of$342.2 million and costs to acquire property plant and equipment of$6.2 million . Net cash used in investing activities was approximately$53.1 million for the year endedDecember 31, 2018 , primarily related to costs to acquire marketable securities of$459.4 million and costs to acquire property plant and equipment of$4.8 million , partially offset by proceeds from maturities of marketable securities of$411.0 million . Net cash used in investing activities was approximately$183.8 million for the year endedDecember 31, 2017 , primarily related to costs to acquire marketable securities of$375.3 million and costs to acquire property plant and equipment of$2.1 million , partially offset by proceeds from maturities of marketable securities of$193.5 million .
Net Cash Provided by Financing Activities
Net cash provided by financing activities was approximately$131.8 million for the year endedDecember 31, 2019 , primarily related to$116.3 million in proceeds received from at-the-market offerings of our common stock, net of issuance costs that were paid as ofDecember 31, 2019 ,$14.9 million in proceeds from exercises of options for our common stock and$0.6 million from issuances of our common stock under equity benefit plans. Net cash provided by financing activities was approximately$86.9 million for the year endedDecember 31, 2018 , primarily related to$76.8 million in proceeds received from at-the-market offerings of our common stock, net of issuance costs that were paid as ofDecember 31, 2018 ,$10.3 million in proceeds from exercises of options for our common stock and$0.7 million from issuances of our common stock under equity benefit plans, partially offset by payments on our construction financing lease obligation of$0.9 million . Net cash provided by financing activities was approximately$154.5 million for the year endedDecember 31, 2017 , primarily related to$154.1 million in proceeds received from public offerings of common stock, net of issuance costs that were paid as ofDecember 31, 2017 , and$1.8 million in proceeds from exercises of options for our common stock, partially offset by payments on our construction financing lease obligation of$0.8 million and promissory notes of$0.6 million . Funding Requirements We expect our expenses to increase in connection with our ongoing activities, particularly as we further advance our current research programs and our preclinical development activities; progress the clinical development of EDIT-101 with Allergan; seek to identify product candidates and additional research programs; initiate preclinical testing and clinical trials for other product candidates we identify and develop; maintain, expand, and protect our intellectual property portfolio, including reimbursing our licensors for expenses related to the intellectual property that we in-license from such licensors; hire additional clinical, quality control, and scientific personnel; and incur costs associated with operating as a public company. In addition, if we obtain marketing approval for any product candidate that we identify and develop, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing, and distribution to the extent that such sales, marketing, and distribution are not the responsibility of a collaborator. We do not expect to generate significant recurring revenue unless and until we obtain regulatory approval for and commercialize a product candidate. Furthermore, since 2016 we have incurred, and in future years we expect to continue to incur, significant costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization efforts. 116 Table of Contents We expect that our existing cash, cash equivalents and marketable securities atDecember 31, 2019 and anticipated interest income will enable us to fund our operating expenses and capital expenditure requirements for at least 24 months following the date of this Annual Report on Form 10-K. We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Our future capital requirements will depend on many factors, including:
the scope, progress, results, and costs of drug discovery, preclinical
? development, laboratory testing, and clinical or natural history study trials
for the product candidates we develop;
? the costs of progressing the clinical development with Allergan of EDIT-101 to
treat LCA10;
the costs of preparing, filing, and prosecuting patent applications,
? maintaining and enforcing our intellectual property and proprietary rights, and
defending intellectual property-related claims;
? the costs, timing, and outcome of regulatory review of the product candidates
we develop;
the costs of future activities, including product sales, medical affairs,
? marketing, manufacturing, and distribution, for any product candidates for
which we receive regulatory approval;
? the success of our collaboration with
alliance with Allergan;
whether
? program term and/or to certain of the research programs under our
collaboration;
? whether Allergan exercises any additional options under our strategic alliance;
? our ability to establish and maintain additional collaborations on favorable
terms, if at all;
? the extent to which we acquire or in-license other medicines and technologies;
? the costs of reimbursing our licensors for the prosecution and maintenance of
the patent rights in-licensed by us; and
? the costs of operating as a public company.
Identifying potential product candidates and conducting preclinical studies and
clinical trials is a time-consuming, expensive, and uncertain process that takes
many years to complete, and we may never generate the necessary data or results
required to obtain marketing approval and achieve product sales. In addition,
any product candidate that we identify and develop, if approved, may not achieve
commercial success. Our commercial revenues, if any, will be derived from sales
of genomic medicines that we do not expect to be commercially available for many
years, if at all. Accordingly, we will need to continue to rely on additional
financing to achieve our business objectives. Adequate additional financing may
not be available to us on acceptable terms, or at all.
Until such time, if ever, as we can generate substantial product revenues, we
expect to finance our cash needs through a combination of equity offerings, debt
financings, collaborations, strategic alliances, and licensing arrangements. To
the extent that we raise additional capital through the sale of equity or
convertible debt securities, our stockholders' ownership interests will be
diluted, and the terms of these securities may include liquidation or other
preferences that adversely affect the rights of our stockholders. Debt
financing, if available, may involve agreements that include covenants limiting
or restricting our ability to take specific actions, such as incurring
additional debt, making capital expenditures, or declaring dividends.
If we raise funds through additional collaborations, strategic alliances, or
licensing arrangements with third parties, we may have to relinquish valuable
rights to our technologies, future revenue streams, research programs, or
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product candidates or to grant licenses on terms that may not be favorable to us. 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 product candidates that we would otherwise prefer to develop and market ourselves. Contractual Obligations
The following table summarizes our significant contractual obligations as of
payment due date by period at
Less Than More than
Total 1 Year 1 to 3 Years 3 to 5 Years 5 Years
Operating lease obligations (1) $ 35,092 $ 8,150 $
15,889
Represents future minimum lease payments under our non-cancelable operating (1) leases. The minimum lease payments above exclude our share of the facility
operating expenses and other costs that are reimbursable to the landlord
under the leases.
The table above does not include potential milestone and success fees, sublicense fees, royalty fees, licensing maintenance fees, and reimbursement of patent maintenance costs that we may be required to pay under agreements we have entered into with certain institutions to license intellectual property. Our agreements to license intellectual property include potential milestone payments that are dependent upon the development of products using the intellectual property licensed under the agreements and contingent upon the achievement of development or regulatory approval milestones, as well as commercial milestones. We have not included such potential obligations in the table above because they are contingent upon the occurrence of future events and the timing and likelihood of such potential obligations are not known with certainty. For further information regarding these agreements, please see "Business-Our Collaborations and Licensing Strategy." We enter into contracts in the normal course of business with contract research organizations and other vendors to assist in the performance of our research and development activities and other services and products for operating purposes. These contracts generally provide for termination on notice, and therefore are cancelable contracts and not included in the table of contractual obligations and commitments.
Off-Balance Sheet Arrangements
We did not have, during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined under applicable
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