The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our condensed consolidated
financial statements and the related notes to those statements included
elsewhere in this Quarterly Report on Form 10-Q and our final prospectus for our
initial public offering filed pursuant to Rule 424(b)(4) under the Securities
Act of 1933, as amended, or the Securities Act, with the
Overview
We are a genetic medicines company pioneering a new approach to the care of cardiovascular disease, or CVD, transforming treatment from chronic management to single-course gene editing medicines. Despite advances in treatment over the last 50 years, CVD remains the leading cause of death worldwide. The current paradigm of chronic care is fragile-requiring rigorous patient adherence, extensive healthcare infrastructure and regular healthcare access-and leaves many patients without adequate care. Our goal is to disrupt the chronic care model for CVD by providing a new therapeutic approach with single-course in vivo gene editing treatments focused on addressing the root causes of this highly prevalent and life-threatening disease. Our initial two programs target PCSK9 and ANGPTL3, respectively, genes that have been extensively validated as targets for lowering blood lipids, such as low-density lipoprotein cholesterol, or LDL-C. We believe that single-course treatments could provide substantial health benefits that are sustained throughout the lifetimes of patients with or at risk for atherosclerotic cardiovascular disease, or ASCVD, the most common form of CVD.
We were incorporated in
On
We are a development-stage company, and all of our programs are at a preclinical
stage of development. To date, we have not generated any revenue and do not
expect to generate revenue from the sale of products for the foreseeable future.
Since our inception, we have incurred significant operating losses. Our net
losses for the three and six months ended
Since our inception, we have incurred significant operating losses. We expect to continue to incur significant expenses and increasing operating losses in connection with ongoing development activities related to our portfolio of programs as we continue our preclinical development of product candidates; advance these product candidates toward clinical development; further develop our base editing technology and manufacturing capabilities; seek to discover and develop additional product candidates; maintain, expand enforcement, defend, and protect our intellectual property portfolio; hire research and development and clinical personnel; ultimately establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval; establish a commercial manufacturing source and secure supply chain capacity sufficient to provide commercial quantities of any product candidates for which we may obtain regulatory approval; and add operational, legal, compliance, financial and management information systems and personnel to support our research, product development, future commercialization efforts and operations as a public company.
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As a result, we will need substantial additional funding to support our continuing operations and pursue our strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of equity offerings, debt financings and other sources of capital, which may include collaborations or licensing arrangements with other companies or other strategic transactions. If we are unable to raise capital or obtain adequate funds when needed or on acceptable terms, we may be required to delay, limit, reduce or terminate our research and development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
As of
Impact of COVID-19 on our business
In
We also plan to continue to closely monitor the ongoing impact of the COVID-19 pandemic on our employees and our other business operations. In an effort to provide a safe work environment for our employees, we have, among other things, increased the cadence of sanitization of our office and lab facilities, implemented various social distancing measures in our offices and labs including replacing all in-person meetings with virtual interactions, and are providing personal protective equipment for our employees present in our office and lab facilities. We are continuing to monitor the impact and effects of the COVID-19 pandemic and our response to it, and we expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees and other business partners in light of the pandemic.
While the COVID-19 pandemic did not significantly impact our business or results
for the three and six months ended
License and collaboration agreements
We have obligations under various license and collaboration agreements to make potentially significant milestone and success payments in the future and to pay royalties on sales of any product candidates covered by those agreements that eventually achieve regulatory approval and commercialization. For information regarding these agreements, see Note 8, License agreements to our condensed consolidated financial statements included in this Quarterly Report.
Components of our results of operations
Revenue
To date, we have not generated any revenue. We do not expect to generate any revenue from the sale of products in the near future and unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates. If our development efforts for our product candidates are successful and result in regulatory approval or we successfully enter into license or collaboration agreements with third parties, we may generate revenue in the future from product sales, payments from third-party collaboration or license agreements, or any combination thereof.
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Operating expenses
Research and development expenses
Research and development expenses consist of costs incurred in performing research and development activities, which include:
? the cost to obtain and maintain licenses to intellectual property, such as those with the President and Fellows ofHarvard College , or Harvard,The Broad Institute, Inc. , or Broad, Beam Therapeutics Inc., or Beam,Acuitas Therapeutics, Inc. , or Acuitas, and formerlyVerily Life Sciences LLC (which agreement was terminated effectiveJune 26, 2020 ), and related future payments should certain development and regulatory milestones be achieved; ? personnel-related expenses, including salaries, bonuses, benefits and stock-based compensation for employees engaged in research and development functions; ? expenses incurred in connection with the discovery and preclinical development of our research programs, including under agreements with third parties, such as consultants, contractors and CROs; ? the cost of developing and validating our manufacturing process for use in our preclinical studies and future clinical trials, including the cost of raw materials used in our research and development activities; ? the cost of laboratory supplies and research materials; and ? facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities and insurance.
We expense research and development costs as incurred. Nonrefundable advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the benefits are consumed.
In the early phases of development, our research and development costs are often devoted to proof-of-concept studies that are not necessarily allocable to a specific target; therefore, we have not yet begun tracking our expenses on a program-by-program basis.
Research and development activities are central to our business model. We expect that our research and development expenses will continue to increase for the foreseeable future as we advance our programs and product candidates into and through clinical development, and as we continue to develop additional product candidates. We also expect our discovery research efforts and our related personnel costs will increase and, as a result, we expect our research and development expenses, including costs associated with stock-based compensation, will increase above historical levels. In addition, we may incur additional expenses related to milestone and royalty payments payable to third parties with whom we may enter into license, acquisition and option agreements to acquire the rights to future product candidates.
At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of, and obtain regulatory approval for, any of our product candidates or programs. The successful development of our product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development, including the following:
? the timing and progress of preclinical and clinical development activities; ? the number and scope of preclinical and clinical programs we decide to pursue; ? raising additional funds necessary to complete preclinical and clinical development of our product candidates; ? the timing of filing and acceptance of investigational new drug applications, or INDs, or comparable foreign applications that allow commencement of future clinical trials for our product candidates; ? the successful initiation, enrollment and completion of clinical trials; ? our ability to achieve positive results from our future clinical programs that support a finding of safety and effectiveness and an acceptable risk-benefit profile in the intended patient populations of any product candidates we may develop; ? our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize, our product candidates for the expected indications and patient populations; ? our ability to hire and retain key research and development personnel; ? the costs associated with the development of any additional product candidates we develop or acquire through collaborations; 17
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? our ability to establish and maintain agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if our product candidates are approved; ? the terms and timing of any existing or future collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder; ? our ability to establish and obtain intellectual property protection and regulatory exclusivity for our product candidates and enforce and defend our intellectual property rights and claims; ? our ability to commercialize products, if and when approved, whether alone or in collaboration with others; ? our ability to maintain a continued acceptable safety, tolerability and efficacy profile of our product candidates following approval; and ? the effects of the COVID-19 pandemic.
A change in any of these variables with respect to any of our current or future product candidates could significantly change the costs, timing and viability associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any product candidate we may develop.
General and administrative expenses
General and administrative expenses consist primarily of personnel-related costs, including salaries, benefits and stock-based compensation, for personnel in our executive, intellectual property, business development, and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters, professional fees for accounting, auditing, tax and consulting services, insurance costs, travel, and direct and allocated facility-related expenses and other operating costs.
We anticipate that our general and administrative expenses will increase in the
future to support increased research and development activities. We also expect
to incur increased costs associated with being a public company, including costs
of accounting, audit, legal, regulatory and tax-related services associated with
maintaining compliance with Nasdaq and
Other income (expense)
Change in fair value of preferred stock tranche liability
Change in fair value of preferred stock tranche liability consists primarily of
remeasurement gains or losses associated with changes in the fair value of the
tranche rights associated with our Series A Preferred Stock. The preferred stock
tranche liability was settled as of
Change in fair value of antidilution rights liability
Change in fair value of antidilution rights liability consists of remeasurement gains or losses associated with changes in the antidilution rights liability associated with our license agreements with Harvard and Broad, or the Harvard/Broad License Agreement, and Broad, or the Broad License Agreement.
The antidilution rights represent the obligation to issue additional shares of common stock to Harvard and Broad following the completion of preferred stock financings and other equity financings, which was fully satisfied upon the closing of our IPO. At the inception of the agreements, the liability for the antidilution rights was recorded at fair value with the cost recorded as research and development expense and will be remeasured at each reporting period with changes recorded in other income (expense) while the instruments are outstanding.
The antidilution rights liability was partially satisfied in 2019 and 2020 and
was fully satisfied during the three months ended
Change in fair value of success payment liability
We are also obligated to pay to Harvard and Broad tiered success payments in the
event our average market capitalization exceeds specified thresholds ascending
from a high nine-digit dollar amount to
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at fair value with the cost recorded as research and development expense and will be remeasured at each reporting period with charges recorded in other income (expense) while the instrument is outstanding.
Depending on our valuation, the fair value of the antidilution rights and success payment liabilities, and the corresponding changes in fair value that we record in our statements of operations, could fluctuate significantly from period to period.
Interest and other income (expense), net
Interest and other income primarily consisted of interest earned on our marketable securities and other miscellaneous income and expenses unrelated to our core operations.
Income tax
During the three and six months ended
Results of operations
Comparison of three months ended
The following table summarizes our results of operations for the three months
ended
Three months ended June 30, (in thousands) 2021 2020 Change Operating expenses: Research and development$ 13,423 $ 5,654 $ 7,769 General and administrative 3,541 1,032 2,509 Total operating expenses$ 16,964 $ 6,686 $ 10,278 Other income (expense): Change in fair value of antidilution rights liability (25,970 ) (863 ) (25,107 ) Change in fair value of success payment liability (10,036 ) (81 ) (9,955 ) Interest income and other income (expense), net 5 50 (45 ) Total other income (expense)$ (36,001 ) $ (894 ) $ (35,107 ) Net loss$ (52,965 ) $ (7,580 ) $ (45,385 )
Research and development expenses
The following table summarizes our research and development expenses for the
three months ended
Three months ended June 30, (in thousands) 2021 2020 Employee-related expenses$ 4,113 1,520
Raw material costs and external expenses associated with manufacturing
activities, including third-party contract manufacturing organizations, or CMOs 2,990 -
External expenses associated with preclinical studies performed by outside
consulting services, including third-party contract research organizations, or CROs
3,681 2,452 Lab supplies used in research and development activities 1,138 563 Facility-related costs (including depreciation) 821 474 License and milestone payments 25 292 Other research and development costs 655 353 Total research and development expenses$ 13,423 $ 5,654
Research and development expenses were
?
an increase in raw material costs and external expenses associated with
developing and validating our manufacturing activities, including third-party
CMOs, for use in our preclinical studies and future clinical trials of
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? an increase in external expenses associated with preclinical studies (primarily animal-study costs) performed by outside consulting services, including third-party CROs, of$1.2 million ; ? an increase in personnel-related costs of$2.6 million driven by an increase in headcount of employees involved in research and development activities; ? an increase in lab supplies of$0.6 million due to increased headcount and company growth; ? an increase in facility-related costs (including depreciation) and other allocated miscellaneous expenses of$0.4 million due to increased investment in research and development; ? an increase in other research and development costs of$0.3 million , primarily due to an increase in professional fees and consulting fees in support of increased investment in research and development activities; and ? a decrease in research and development expense attributed to license and milestone payments of$0.3 million .
We expect our research and development expenses will continue to increase as we continue our current research programs, initiate new research programs, continue our preclinical development of product candidates and conduct future clinical trials for any of our product candidates.
General and administrative expenses
General and administrative expenses were
? an increase of$1.7 million in personnel, facility and other expenses stemming from an increase in headcount to support our growth; ? an increase of$0.3 million in legal and professional service fees, primarily due to increased professional fees for audit, tax and consulting services; and ? an increase in other miscellaneous expenses of$0.5 million .
Other income (expense)
Change in fair value of antidilution rights liability
The change in fair value for the antidilution rights liability was primarily due
to the settlement of the liability during the three months ended
Change in fair value of success payments liability
The change in fair value for the success payments liability was primarily due to
the increase in the fair value of our common stock, which resulted in a fair
value adjustment of
Interest and other income (expense), net
The decrease of less than
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Comparison of six months ended
The following table summarizes our results of operations for the six months
ended
Six months ended June 30, (in thousands) 2021 2020 Change Operating expenses: Research and development$ 24,768 $ 12,177 $ 12,591 General and administrative 6,257 1,878 4,379 Total operating expenses$ 31,025 $ 14,055 $ 16,970 Other income (expense): Change in fair value of preferred stock tranche liability - 2,507 (2,507 ) Change in fair value of antidilution rights liability (25,574 ) (1,745 ) (23,829 ) Change in fair value of success payment liability (9,654 ) (17 ) (9,637 ) Interest income and other income (expense), net 25 127 (102 ) Total other income (expense)$ (35,203 ) $ 872 $ (36,075 ) Net loss$ (66,228 ) $ (13,183 ) $ (53,045 )
Research and development expenses
The following table summarizes our research and development expenses for the six
months ended
Six months ended June 30, (in thousands) 2021 2020 Employee-related expenses$ 6,806 $ 2,894
Raw material costs and external expenses associated with manufacturing
activities, including third-party CMOs 5,385 -
External expenses associated with preclinical studies performed by outside
consulting services, including third-party CROs 7,691 5,243 Lab supplies used in research and development activities 1,869 958 Facility-related costs (including depreciation) 1,600 831 License and milestone payments 80 1,622 Other research and development costs 1,337 629 Total research and development expenses$ 24,768 $ 12,177
Research and development expenses were
? an increase in raw material costs and external expenses associated with developing and validating our manufacturing activities, including third-party CMOs, for use in our preclinical studies and future clinical trials of$5.4 million ; ? an increase in external expenses associated with preclinical studies (primarily animal-study costs) performed by outside consulting services, including third-party CROs, of$2.4 million ; ? an increase in personnel-related costs of$3.9 million driven by an increase in headcount of employees involved in research and development activities; ? an increase in facility-related costs (including depreciation) and other allocated miscellaneous expenses of$0.8 million due to increased investment in research and development; ? an increase in lab supplies of$0.9 million due to the increased headcount and company growth; ? an increase in other research and development costs of$0.7 million , primarily due to an increase in professional fees and consulting fees in support of increased investment in research and development activities; and ? a decrease in research and development expense attributed to license and milestone payments of$1.5 million , primarily due to a$1.0 million milestone payment and$0.5 million payment relating to a collaboration agreement both incurred during the six months endedJune 30, 2020 . 21
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We expect our research and development expenses will continue to increase as we continue our current research programs, initiate new research programs, continue our preclinical development of product candidates and conduct future clinical trials for any of our product candidates.
General and administrative expenses
General and administrative expenses were
? an increase of$2.9 million in personnel, facility and other expenses stemming from an increase in headcount to support our growth; ? an increase of$0.8 million in legal and professional service fees, primarily due to increased professional fees for audit, tax and consulting services; ? an increase in facility related costs of$0.2 million ; and ? an increase in other miscellaneous expenses of$0.5 million .
Other income (expense)
Change in fair value of preferred stock tranche liability
The change in fair value of the preferred stock tranche liability was due to the
modification of the remaining milestones and subsequent settlement of the
preferred stock tranche liability in
Change in fair value of antidilution rights liability
The change in fair value for the antidilution rights liability was primarily due
to the settlement of the liability during the six months ended
Change in fair value of success payments liability
The change in fair value for the success payments liability was primarily due to
the increase in the fair value of our common stock which resulted in a fair
value adjustment of
Interest and other income (expense), net
The decrease of
Liquidity and capital resources
Sources of liquidity and capital
Since our inception in 2018, we have incurred significant operating losses. We
expect to incur significant expenses and operating losses for the foreseeable
future as we advance the preclinical and, if successful, clinical development of
our programs. To date, we have funded our operations primarily through equity
offerings. Through
In
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Cash flows
The following table summarizes our sources and uses of cash for each period presented: Six months ended June 30, (in thousands) 2021 2020 Cash used in operating activities$ (28,482 ) $ (13,966 ) Cash provided by (used in) investing activities 30,203 (60,296 ) Cash provided by financing activities 376,732 92,619
Net increase in cash, cash equivalents and restricted cash
Operating activities
For the six months ended
For the six months ended
Investing activities
For the six months ended
For the six months ended
Financing activities
For the six months ended
For the six months ended
Funding requirements
Our operating expenses and future funding requirements are expected to increase substantially as we continue to advance our portfolio of programs.
Specifically, our expenses will increase if and as we:
? continue our current research programs and our preclinical development of product candidates from our current research programs; ? seek to identify additional research programs and additional product candidates; ? advance our existing and future product candidates into clinical development; ? initiate preclinical studies and clinical trials for any additional product candidates we identify and develop or expand development of existing programs into additional patient populations; ? maintain, expand, enforce, defend and protect our intellectual property portfolio and provide reimbursement of third-party expenses related to our patent portfolio; 23
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? seek regulatory and marketing approvals for any of our product candidates that we develop; ? seek to identify, establish and maintain additional collaborations and license agreements, and the success of those collaborations and license agreements; ? make milestone payments to Beam under our collaboration and license agreement with Beam, to Acuitas under our non-exclusive license agreement with Acuitas, under the Harvard/ Broad License Agreements, and under any additional future collaboration or license agreements that we obtain; ? ultimately establish a sales, marketing, and distribution infrastructure to commercialize any drug products for which we may obtain marketing approval, either by ourselves or in collaboration with others; ? generate revenue from commercial sales of product candidates we may develop for which we receive marketing approval; ? further develop our base editing technology; ? hire additional personnel including research and development, clinical and commercial personnel; ? add operational, financial and management information systems and personnel, including personnel to support our product development; ? acquire or in-license products, intellectual property, medicines and technologies; ? satisfy any post-marketing requirements, such as a cardiovascular outcomes trial; ? establish commercial-scale current good manufacturing practices, or cGMP, capabilities through a third-party or our own manufacturing facility; and ? operate as a public company.
As of
Identifying potential product candidates and conducting preclinical testing and clinical trials is a time consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for several years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.
Our expectation with respect to our ability to fund current planned operations is based on estimates that are subject to risks and uncertainties. Our operating plan may change as a result of many factors currently unknown to management and there can be no assurance that the current operating plan will be achieved in the time frame anticipated by us, and we may need to seek additional funds sooner than planned.
Adequate additional funds may not be available to us on acceptable terms, or at all. We do not have any source of committed external funds. Market volatility resulting from the COVID-19 pandemic or other factors could also adversely impact our ability to access capital as and when needed. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders 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 and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, selling or licensing our assets, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially dilute the ownership interest of our stockholders.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution 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 grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed or on terms acceptable to us, 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 24
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During the three months ended
Emerging growth company and smaller reporting company status
As an emerging growth company, or EGC, under the Jumpstart Our Business Startups
Act of 2012, or JOBS Act, we may delay the adoption of certain accounting
standards until such time as those standards apply to private companies. Other
exemptions and reduced reporting requirements under the JOBS Act for EGCs
include presentation of only two years of audited financial statements in a
registration statement for an initial public offering, or IPO, an exemption from
the requirement to provide an auditor's report on internal controls over
financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of
2002, an exemption from any requirement that may be adopted by the
In addition, the JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an EGC to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
We may remain classified as an EGC until
We are also a "smaller reporting company" as defined in Rule 12b-2 under the
Exchange Act. We may continue to be a smaller reporting company if either (i)
the market value of our shares held by non-affiliates is less than
Critical accounting policies and significant judgments
This management's discussion and analysis of our financial condition and results
of operations is based on our consolidated financial statements, which we have
prepared in accordance with
During the three months ended
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 in the rules and regulations of the
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Recently issued accounting pronouncements
See Note 2, "Summary of significant accounting policies - Recently issued
accounting pronouncements" to our consolidated financial statements included in
the final prospectus for our IPO filed pursuant to Rule 424(b)(4) under the
Securities Act with the
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