EDITAS MEDICINE, INC. The following discussion and analysis of our financial condition and results of operations should be read together with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year endedDecember 31, 2019 , which was filed with theSecurities and Exchange Commission ("SEC") onFebruary 26, 2020 (the "Annual Report"). This Quarterly Report on Form 10-Q 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. All statements addressing our future operating performance and clinical development and regulatory timelines that we expect or anticipate will occur in the future, are forward-looking statements. 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 Quarterly Report on Form 10-Q, particularly in the section entitled "Risk Factors" in Part II, 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 Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, 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 inthe United States andEurope . In mid-2019, we initiated a Phase 1/2 clinical trial for EDIT-101, an experimental medicine to treat LCA10. The first patient was dosed in the first quarter of 2020 and we plan to enroll approximately 18 patients inthe United States andEurope in up to five cohorts. We have completed dosing of the adult low-dose cohort. This trial remains active and open for enrollment. We continue to enroll patients, but enrollment has been slowed due to the ongoing impact of the coronavirus disease of 2019 ("COVID-19") pandemic. For our engineered cell medicines, our lead program is EDIT-301, an experimental medicine to treat sickle cell disease and beta-thalassemia. We have initiated IND-enabling studies for EDIT-301 and aim to submit to theU.S. Food and Drug Administration an investigational new drug application ("IND") for EDIT-301 for the treatment of sickle cell disease by the end of 2020. In addition, EDIT-201 is our experimental allogeneic healthy-donor NK cell medicine for the treatment of
solid tumors.
19
Table of Contents
InMay 2015 , we entered into a collaboration withJuno 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 ofMay 2018 andNovember 2019 , at which time we also entered into a related license agreement withJuno Therapeutics , which we collectively refer to as our collaboration with them. InMarch 2017 , we entered into a strategic alliance and option agreement withAllergan Pharmaceuticals International Limited (which is referred to together with its affiliates as "Allergan"), a leading global pharmaceutical company, to discover, develop, and commercialize new gene editing medicines for a range of ocular disorders. InJuly 2018 , Allergan exercised its option to develop and commercialize EDIT-101 and we subsequently entered into a co-development and commercialization agreement with Allergan under which we will co-develop and equally split profits and losses for EDIT-101 inthe United States . Allergan was acquired by AbbVie, Inc. inMay 2020 . OnAugust 5, 2020 , we entered into a termination agreement with Allergan pursuant to which, among other things, we and Allergan terminated the strategic alliance and option agreement and the co-development and commercialization agreement. As a result of the termination of our collaboration with Allergan, we regained full global rights to research, develop, manufacture, and commercialize our ocular product candidates, including EDIT-101 for the treatment of LCA10. Under the termination agreement, Allergan granted us a non-exclusive, royalty-bearing right and license, including the right to grant sublicenses (through multiple tiers), to certain Allergan know-how that is necessary to develop, manufacture and commercialize EDIT-101. In addition, we are obligated to use commercially reasonable efforts to develop and commercialize a product directed to each of four collaboration targets, one of which is LCA10. Under the termination agreement, we agreed to make a one-time aggregate payment of$20.0 million to Allergan, of which$17.5 million had been paid as ofSeptember 30, 2020 . In addition, we will make certain payments on achievements of clinical and regulatory milestones up to$20.0 million for each target program and aggregated sales milestones for all products covered by the termination agreement up to$90.0 million . We are also obligated to pay royalties in a low-single digit percentage, subject to reduction under specified circumstances, on net sales of specified products. Our obligation to pay royalties will expire on a country-by-country and product-by-product basis upon the later of the expiration of regulatory-based exclusivity with respect to such product in such country and the tenth anniversary of the first commercial sale of such product. We and Allergan also entered into a transition services agreement to facilitate the transfer of the LCA10 program from Allergan to us. As a result of the termination of the agreements with Allergan, we now have full responsibility for the Phase 1/2 clinical trial for EDIT-101 and expect that our research and development expenses will increase significantly for the foreseeable future as our development programs progress. 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 and clinical 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 primarily financed our operations through various equity financings and payments received under our research collaboration withJuno Therapeutics and our strategic alliance with Allergan. Since inception, we have incurred significant operating losses. Our net losses were$53.5 million and$96.0 million for the nine months endedSeptember 30, 2020 and 2019, respectively. As ofSeptember 30, 2020 , we had an accumulated deficit of$602.7 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, including those related to EDIT-301 and EDIT-201; progress the clinical development of EDIT-101; 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. 20 Table of Contents Although we did not experience any significant impact on our financial condition, results of operations or liquidity due to the ongoing COVID-19 pandemic during the nine months endedSeptember 30, 2020 , we have recently experienced slowed enrollment in the EDIT-101 clinical trial as a result of the COVID-19 pandemic. The ultimate impact of the COVID-19 pandemic, particularly in light of its current resurgence, is highly uncertain and we do not yet know the full extent of potential delays or impacts on our business, our ability to continue to raise additional capital, the EDIT-101 clinical trial, ongoing preclinical activities, including those related to EDIT-301 and EDIT-201, or the global economy as a whole. In March, we implemented a work from home policy, and restricted on-site activities at our facilities inMassachusetts andColorado to certain manufacturing, laboratory and related support activities in light of the COVID-19 pandemic. Under our return to onsite work plans, we have resumed manufacturing, laboratory and related support activities at our facilities inMassachusetts andColorado using shifts and other capacity-limiting measures to comply with social distancing guidelines. As such, it is uncertain as to the full magnitude that the pandemic will have directly or indirectly on our financial condition, liquidity and future results of operations.
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 our collaboration withJuno Therapeutics , we have received an aggregate of$120.0 million in payments, which have primarily consisted of the initial upfront and amendment payments, development milestone payments and research funding support. We no longer receive research funding support. As ofSeptember 30, 2020 , we recorded$96.3 million of deferred revenue, of which$79.3 million is classified as long-term on our condensed consolidated balance sheet. There was no revenue recognized under the collaboration withJuno Therapeutics during the nine months endedSeptember 30, 2020 . Under this collaboration, we will recognize revenue upon delivery of option packages toJuno Therapeutics . We expect that our revenue will fluctuate from quarter-to-quarter and year-to-year as a result of the timing of when we deliver such option packages. In connection with our strategic alliance with Allergan, we received an aggregate of$130.0 million in payments, which consisted of the initial upfront payment, an option exercise payment and a milestone payment. Prior to the termination of our agreements with Allergan, certain of these payments were deferred and were being recognized over the remaining contract term using the proportional performance method. During the third quarter of 2020, as a result of the termination of our agreements with Allergan, we recognized$63.2 million of previously deferred revenue related to Allergan. For additional information about our revenue recognition policy related to theJuno Therapeutics collaboration or the Allergan strategic alliance, see "-Critical Accounting Policies and Estimates-Revenue Recognition" included in our Annual Report.
For the foreseeable future we expect substantially all of our revenue will be
generated from our collaboration with
Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research and development activities, which include:
? drug discovery efforts and preclinical and clinical studies under our research
programs;
? 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
21
Table of Contents
and clinical 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 clinical, 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;
? 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.
22
Table of Contents
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 the termination of our profit-sharing arrangement with
Allergan in the United States for EDIT-101, we are now obligated to fund all of
the costs related to developing and commercializing the LCA10 program in the
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 as well as supporting preclinical studies for our other research programs, including EDIT-301.
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, interference and re-examination proceedings involving the patents licensed to us under our license agreements 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 (Expense) Income, Net
For the nine months ended
For the nine months endedSeptember 30, 2019 , other (expense) income, net consisted primarily of interest income and accretion of discounts associated with marketable securities, partially offset by loss on disposal of property and equipment.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance withUnited States generally accepted accounting principles. The preparation of our condensed 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 condensed 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 condensed consolidated financial statements prospectively from the date of
change in estimates.
23
Table of Contents
There have been no material changes to our critical accounting policies from
those described in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in our Annual Report.
Results of Operations
Comparison of the Three Months ended
The following table summarizes our results of operations for the three months endedSeptember 30, 2020 and 2019, together with the changes in those items in dollars (in thousands) and the respective percentages of change: Three Months Ended September 30, 2020 2019 Dollar Change Percentage Change Collaboration and other research and development revenues$ 62,841 $ 3,848 $ 58,993 n/m % Operating expenses: Research and development 33,916 22,702 11,214 49 % General and administrative 19,936 15,734 4,202 27 % Total operating expenses 53,852 38,436 15,416 40 % Other (expense) income, net: Other expense, net (1,396) (33) (1,363) n/m % Interest income, net 226 1,680 (1,454) (87) % Total other (expense) income, net (1,170) 1,647
(2,817) n/m % Net income (loss)$ 7,819 $ (32,941) $ 40,760 n/m % 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
Collaboration and other research and development revenues increased by$59.0 million , to$62.8 million for the three months endedSeptember 30, 2020 from$3.8 million for three months endedSeptember 30, 2019 . This increase was primarily attributable to the recognition of$59.9 million of previously deferred revenue as a result of the termination of our strategic alliance with Allergan.
Research and development expenses
Research and development expenses increased by$11.2 million , to$33.9 million for the three months endedSeptember 30, 2020 from$22.7 million for the three months endedSeptember 30, 2019 . The following table summarizes our research and development expenses for the three months endedSeptember 30, 2020 and 2019, together with the changes in those items in dollars (in thousands) and the respective percentages of change: Three Months Ended September 30, 2020 2019 Dollar Change Percentage Change
Process and platform development expenses$ 18,204 $ 9,334 $
8,870 95 %
Employee related expenses 8,072 6,357 1,715 27 %
Facility expenses 3,617 2,468 1,149 47 %Stock-based compensation expenses 2,938 3,619
(681) (19) %
Other expenses 893 721 172 24 %
Sublicense and license fees 192 203 (11) - %Total research and development expenses$ 33,916 $ 22,702 $
11,214 49 %
24
Table of Contents
The increase in research and development expenses for the three months ended
September 30, 2020 compared to the three months ended September 30, 2019 was
primarily attributable to:
approximately
expenses related primarily to the clinical and manufacturing development of
? EDIT-101 and our other programs, including a one-time in-process research and
development expense of
from Allergan;
approximately
? to an increase in the size of our workforce including the expansion of our
research and development organization;
? approximately$1.1 million in increased facility related expenses; and
? approximately
These increases were partially offset by approximately
As a result of the termination of our agreements with Allergan, we expect that our research and development costs will increase as we are now obligated to fund all of the costs related to developing and commercializing the LCA10 program inthe United States . In addition, we anticipate that we will increase headcount in our clinical and development organization as a result of the transfer from Allergan to us of the Phase 1/2 clinical trial of EDIT-101 for the treatment of LCA10 as part of the termination of the arrangement with Allergan.
General and administrative expenses
General and administrative expenses increased by$4.2 million , to$19.9 million for the three months endedSeptember 30, 2020 from$15.7 million for the three months endedSeptember 30 , 2019.The following table summarizes our general and administrative expenses for the three months endedSeptember 30, 2020 and 2019, together with the changes in those items in dollars (in thousands) and the respective percentages of change: Three Months Ended September 30, 2020 2019 Dollar Change Percentage Change
Professional service expenses$ 6,314 $ 3,980 $ 2,334 59 % Intellectual property and patent related fees 4,446 4,227 219 5 % Employee related expenses 4,164 3,311 853 26 % Stock-based compensation expenses 2,908 2,940 (32) (1) % Facility and other expenses 2,104 1,276 828 65 %
Total general and administrative expenses
27 %
The increase in general and administrative expenses for the three months ended
September 30, 2020 compared to the three months ended September 30, 2019 was
primarily attributable to:
? approximately
connection with the termination of the Allergan agreement;
approximately
? to an increase in the size of our workforce and the timing of hiring key
executives;
? approximately
from additional office space leased in 2020; and
25
Table of Contents
? approximately
related fees. Other (expense) income, net
For the three months endedSeptember 30, 2020 , other (expense) income, net was an expense of$1.2 million , which was primarily attributable to the unrealized losses related to corporate equity securities, partially offset by interest income. For the three months endedSeptember 30, 2019 , other (expense) income, net was income of$1.6 million , which was primarily attributable to interest income and accretion of discounts associated with marketable securities.
Comparison of the Nine Months ended
The following table summarizes our results of operations for the nine months endedSeptember 30, 2020 and 2019, together with the changes in those items in dollars (in thousands) and the respective percentages of change: Nine Months Ended September 30, 2020 2019 Dollar Change Percentage Change Collaboration and other research and development revenues$ 79,313 $ 8,247 $ 71,066 n/m % Operating expenses: Research and development 96,492 62,109 34,383 55 % General and administrative 51,789 47,638 4,151 9 % Total operating expenses 148,281 109,747 38,534 35 % Other income, net Other income (expense), net 13,114 (144) 13,258 n/m % Interest income, net 2,377 5,668 (3,291) (58) % Total other income, net 15,491 5,524 9,967 n/m % Net loss$ (53,477) $ (95,976) $ 42,499 (44) % 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
Collaboration and other research and development revenues increased by$71.1 million to$79.3 million for the nine months endedSeptember 30, 2020 from$8.2 million for the nine months endedSeptember 30, 2019 . This increase was primarily attributable to the recognition of$63.0 million of previously deferred revenue as a result of the termination of our strategic alliance with Allergan, as well as an increase of$7.7 million in revenue recognized pursuant to an out-license agreement we entered into during the second quarter of 2020, and a$0.4 million increase in revenue recognized pursuant to other license and collaboration arrangements during the nine months endedSeptember 30, 2020 .
26
Table of Contents
Research and development expenses
Research and development expenses increased by$34.4 million , to$96.5 million for the nine months endedSeptember 30, 2020 from$62.1 million for the nine months endedSeptember 30, 2019 . The following table summarizes our research and development expenses for the nine months endedSeptember 30, 2020 and 2019, together with the changes in those items in dollars (in thousands) and the respective percentages of change: Nine Months Ended September 30, 2020 2019 Dollar Change Percentage Change
Process and platform development expenses$ 46,162 $ 24,351 $
21,811 90 % Employee related expenses 24,589 17,054 7,535 44 % Facility expenses 9,909 6,338 3,571 56 %
Stock-based compensation expenses 8,668 10,854
(2,186) (20) % Sublicense and license fees 4,132 1,036 3,096 n/m % Other expenses 3,032 2,476 556 n/m %
Total research and development expenses$ 96,492 $ 62,109 $
34,383 55 %
The increase in research and development expenses for the nine months ended
approximately
expenses related primarily to the clinical and manufacturing development of
EDIT-101 and our other programs, including a one-time in-process research and
? development expense of
from Allergan and expenses incurred under the profit-sharing arrangement with
Allergan related to EDIT-101 prior to the termination of the agreement and
expenses incurred related to an in-license arrangement entered into during the
first quarter of 2020;
approximately
? to an increase in the size of our workforce including the expansion of our
development organization;
? approximately
additional lab and manufacturing space leased in 2020;
approximately
? related to sublicense fees that were owed to our licensors in connection with
an out-license agreement that we entered into during the second quarter of 2020
and additional license fees that we incurred during the quarter; and
? approximately
increase software license fees.
These increases were partially offset by approximately
As a result of the termination of our agreements with Allergan, we expect that our research and development costs will increase as we are now obligated to fund all of the costs related to developing and commercializing the LCA10 program inthe United States . In addition, we anticipate that we will increase headcount in our clinical and development organization as a result of the transfer from Allergan to us of the Phase 1/2 clinical trial of EDIT 101 for the treatment of LCA10 as part of the termination of the agreement with Allergan. 27 Table of Contents
General and administrative expenses
General and administrative expenses increased by$4.2 million , to$51.8 million for the nine months endedSeptember 30, 2020 from$47.6 million for the nine months endedSeptember 30, 2019 . The following table summarizes our general and administrative expenses for the nine months endedSeptember 30, 2020 and 2019, together with the changes in those items in dollars (in thousands) and the respective percentages of change: Nine Months Ended September 30, 2020 2019 Dollar Change Percentage Change
Intellectual property and patent related fees$ 13,457 $ 13,570 $
(113) (1) %
Employee related expenses 12,616 9,571 3,045 32 %
Professional service expenses 10,803 10,809 (6) (0) %Stock-based compensation expenses 8,815 10,053 (1,238) (12) % Facility and other expenses 6,098 3,635 2,463 68 % Total general and administrative expenses$ 51,789 $ 47,638 $
4,151 9 %
The increase in general and administrative expenses for the nine months ended
approximately
? to an increase in the size of our workforce and the timing of hiring key
executives; and
? approximately
from additional office space leased in 2020. These increases were partially offset by approximately$1.2 million in decreased stock-based compensation expenses resulting from a modification that occurred in 2019 with respect to which there was no similar activity for in 2020 and approximately$0.1 million in decreased intellectual property and patent related expenses. Other (expense) income, net For the nine months endedSeptember 30, 2020 , other (expense) income, net was income of$15.5 million , which was primarily attributable to the unrealized gains related to corporate equity securities, interest income and accretion of discounts associated with marketable securities. For the nine months endedSeptember 30, 2019 , other (expense) income, net was income of$5.5 million , which was primarily attributable to interest income and accretion of discounts associated with marketable securities, partially offset by a loss on disposal of property and equipment. 28 Table of Contents
Liquidity and Capital Resources
Sources of Liquidity
InMay 2020 , we entered into a sales agreement withCowen and Company, LLC ("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 up to$150.0 million (the "ATM Facility"). We have not sold any shares of our common stock under this ATM Facility as of the date of this Quarterly Report on Form 10-Q. InJune 2020 , we completed a public offering whereby we sold 6,900,000 shares of our common stock, inclusive of 900,000 shares of common stock sold by us pursuant to the full exercise of an option granted to the underwriters in connection with the offering and received net process of approximately$203.7 million . As ofSeptember 30, 2020 , we have raised an aggregate of$648.7 million in net proceeds through the sale of shares of our common stock in public offerings and at-the-market offerings. We also have funded our business from payments received under our research collaboration withJuno Therapeutics and our strategic alliance with Allergan, which was terminated inAugust 2020 . As ofSeptember 30, 2020 , we had cash, cash equivalents and marketable securities
of$541.3 million . In addition to our existing cash, cash equivalents and marketable securities we are eligible to earn milestone and other payments under our collaboration agreement withJuno Therapeutics . 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 ofSeptember 30, 2020 , our right to contingent payments under our collaboration agreement withJuno Therapeutics is our only significant committed potential external source of funds.
Cash Flows
The following table provides information regarding our cash flows for the nine
months ended
Nine Months Ended
September 30,
2020 2019
Net cash (used in) provided by:
Operating activities $ (139,742) $ (81,693)
Investing activities (31,628) 4,434
Financing activities 215,022 47,255
Net increase (decrease) in cash, cash equivalents, and
restricted cash $ 43,652 $ (30,004) The use of cash in all periods resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital.
Net cash used in operating activities was approximately$139.7 million for the nine months endedSeptember 30, 2020 , which primarily consisted of operating expenses that relate to our on-going preclinical and clinical activities, patent costs and license fees, and increased costs as a result of staffing needs due to our expanding operations. These expenses were partially offset by cash inflows from license fees received in the period. Net cash used in operating activities was approximately$81.7 million for the nine months endedSeptember 30, 2019 , which primarily consisted of operating expenses that related to our strategic alliance with Allergan which decreased deferred revenue, partially offset by an upfront payment received related to an out-license arrangement. This amount was offset by operating expenses that related to our on-going preclinical and clinical activities, patent costs and license fees, costs related to obtaining additional research facilities and increased costs as a result of staffing needs due to our expanding operations. 29 Table of Contents
Net cash used in investing activities was approximately$31.6 million for the nine months endedSeptember 30, 2020 , primarily related to costs used to acquire marketable securities of$300.4 million and costs to acquire property and equipment of$5.8 million , partially offset by proceeds from maturities of marketable securities of$274.5 million . Net cash provided by investing activities was approximately$4.4 million for the nine months endedSeptember 30, 2019 , primarily related to higher proceeds from maturities of marketable securities than purchases of marketable securities that were partially offset by$4.5 million in equipment purchases.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was approximately$215.0 million for the nine months endedSeptember 30, 2020 , and consisted of$203.8 million in net proceeds received from offering of common stock, of which$0.2 million of expenses related to the offering were unpaid at quarter-end, and$10.8 million in proceeds received from exercises of options for our common stock. Net cash provided by financing activities was approximately$47.2 million for the nine months endedSeptember 30, 2019 , and consisted of$41.2 million in proceeds received from at-the-market offerings of our common stock,$5.8 million in proceeds from exercises of options for our common stock and$0.3 million from the issuance of our common stock under our equity plans. Funding Requirements We expect our expenses to increase in connection with our ongoing activities, particularly as we progress the clinical development of EDIT-101; further advance our current research programs and our preclinical development activities, including those related to EDIT-301 and EDIT-201; 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. We expect that our existing cash, cash equivalents and marketable securities atSeptember 30, 2020 and anticipated interest income will enable us to fund our operating expenses and capital expenditure requirements into 2023. 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 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;
30
Table of Contents
? 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
whether
? program term and/or to certain of the research programs under our
collaboration;
? 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. Further, our ability to continue to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets inthe United States and worldwide resulting from the ongoing COVID-19 pandemic. 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 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. 31 Table of Contents Contractual Obligations During the nine months endedSeptember 30, 2020 , there were no material changes to our contractual obligations and commitments described under Management's Discussion and Analysis of Financial Condition and Results of Operations in
our Annual Report.
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
Effects of Inflation Inflation would generally affect our business by increasing our cost of labor and clinical trial costs. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the nine months endedSeptember 30, 2020 or 2019.
© Edgar Online, source
