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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2020

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________________ to ___________________

Commission File Number: 001-38433

 

Homology Medicines, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-3468154

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

One Patriots Park

Bedford, MA

01730

(Address of principal executive offices)

(Zip Code)

 

(781) 301-7277

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address, and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

FIXX

Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No   

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of November 2, 2020, the registrant had 45,264,419 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, the anticipated impact of the novel coronavirus (“COVID-19”) pandemic on our business, business strategy, prospective products, product approvals, research and development costs, anticipated timing and likelihood of success of clinical trials, expected timing of the release of clinical trial data, the plans and objectives of management for future operations, future results of anticipated products, the closing of the Pfizer private placement, and the sufficiency of our cash and cash equivalents to fund our operations are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential”, or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including the factors described under the sections in this Quarterly Report titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.

You should read this Quarterly Report and the documents that we reference in this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.


2


 

Summary Risk Factors

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our ordinary shares. The principal risks and uncertainties affecting our business include the following:

 

we have incurred significant losses since inception and anticipate that we will incur continued losses for the foreseeable future. We are not currently profitable, and we may never achieve or sustain profitability;

 

we will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the development and commercialization of our product candidates;

 

we have a limited operating history and no history of commercializing genetic medicine products, which may make it difficult to evaluate the prospects for our future viability;

 

we are heavily dependent on the success of HMI-102, our most advanced product candidate, and if HMI-102 does not receive regulatory approval or is not successfully commercialized, our business may be harmed;

 

we intend to identify and develop product candidates based on our novel genetic medicines platform, which makes it difficult to predict the time and cost of product candidate development. No products that utilize gene editing technology have been approved in the United States or in Europe, and there have only been a limited number of human clinical trials involving a gene editing product candidate;

 

the clinical trial and regulatory approval processes are lengthy, time consuming and inherently unpredictable, and we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product candidates;

 

the COVID-19 pandemic could adversely impact our business, including our preclinical studies and clinical trials.

 

our product candidates may cause serious adverse events, side effects, toxicities or have other properties which may delay or prevent their regulatory approval, limit the commercial profile of an approved label or result in significant negative consequences following marketing approval, if any;

 

adverse public perception of genetic medicine, and gene editing in particular, may negatively impact regulatory approval of, or demand for, our potential products;

 

we and our contract manufacturers are subject to significant regulation with respect to manufacturing our products, and the manufacturing facilities on which we rely may not continue to meet regulatory requirements and have limited capacity;

 

even if we obtain FDA approval for our product candidates in the United States, we may never obtain approval for or commercialize it in any other jurisdiction, which would limit our ability to realize its full market potential;

 

our existing collaborations are important to our business and future licenses may also be important to us, and if we are unable to maintain any of these collaborations, or if these arrangements are not successful, our business could be adversely affected; and

 

if we are unable to adequately protect our proprietary technology, or obtain and maintain issued patents which are sufficient to protect our product candidates, others could compete against us more directly, which would negatively impact our business.

 

3


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

5

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

5

 

Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 (Unaudited)

5

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (Unaudited)

6

 

Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2020 and 2019 (Unaudited)

7

 

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2020 and 2019 (Unaudited)

8

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (Unaudited)

9

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

39

Item 4.

Controls and Procedures

40

 

PART II.

 

OTHER INFORMATION

41

Item 1.

Legal Proceedings

41

Item 1A.

Risk Factors

41

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

86

Item 3.

Defaults Upon Senior Securities

86

Item 4.

Mine Safety Disclosures

86

Item 5.

Other Information

86

Item 6.

Exhibits

87

Signatures

89

 

 

 

 

 

4


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

HOMOLOGY MEDICINES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(UNAUDITED)

 

 

 

As of

 

 

 

September 30, 2020

 

 

December 31, 2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

178,003

 

 

$

53,774

 

Short-term investments

 

 

 

 

 

208,614

 

Prepaid expenses and other current assets

 

 

3,252

 

 

 

4,189

 

Total current assets

 

 

181,255

 

 

 

266,577

 

Property and equipment, net

 

 

39,684

 

 

 

42,716

 

Right-of-use assets

 

 

6,149

 

 

 

 

Restricted cash

 

 

1,274

 

 

 

1,274

 

Total assets

 

$

228,362

 

 

$

310,567

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,316

 

 

$

2,608

 

Accrued expenses and other liabilities

 

 

8,426

 

 

 

7,644

 

Operating lease liabilities

 

 

2,497

 

 

 

 

Deferred rent

 

 

 

 

 

1,313

 

Deferred revenue

 

 

2,939

 

 

 

809

 

Total current liabilities

 

 

17,178

 

 

 

12,374

 

Non-current liabilities:

 

 

 

 

 

 

 

 

Operating lease liabilities, net of current portion

 

 

13,540

 

 

 

 

Deferred rent, net of current portion

 

 

 

 

 

9,544

 

Deferred revenue, net of current portion

 

 

27,422

 

 

 

30,142

 

Total liabilities

 

 

58,140

 

 

 

52,060

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 10,000,000 shares authorized;

   no shares issued and outstanding

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000,000 shares authorized;

   45,263,849 and 45,138,408 shares issued as of September 30, 2020 and

   December 31, 2019, respectively; and 45,259,747 and 45,116,742 shares

   outstanding as of September 30, 2020 and December 31, 2019, respectively

 

 

4

 

 

 

4

 

Additional paid-in capital

 

 

468,795

 

 

 

457,994

 

Accumulated other comprehensive gain

 

 

 

 

 

183

 

Accumulated deficit

 

 

(298,577

)

 

 

(199,674

)

Total stockholders’ equity

 

 

170,222

 

 

 

258,507

 

Total liabilities and stockholders' equity

 

$

228,362

 

 

$

310,567

 

 

See notes to condensed consolidated financial statements.

 

5


 

HOMOLOGY MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(UNAUDITED)

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Collaboration revenue

 

$

567

 

 

$

441

 

 

$

1,722

 

 

$

1,103

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

20,417

 

 

 

25,691

 

 

 

77,197

 

 

 

69,056

 

General and administrative

 

 

8,423

 

 

 

6,038

 

 

 

24,986

 

 

 

16,431

 

Total operating expenses

 

 

28,840

 

 

 

31,729

 

 

 

102,183

 

 

 

85,487

 

Loss from operations

 

 

(28,273

)

 

 

(31,288

)

 

 

(100,461

)

 

 

(84,384

)

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

41

 

 

 

1,661

 

 

 

1,558

 

 

 

4,635

 

Total other income

 

 

41

 

 

 

1,661

 

 

 

1,558

 

 

 

4,635

 

Net loss

 

$

(28,232

)

 

$

(29,627

)

 

$

(98,903

)

 

$

(79,749

)

Net loss per share-basic and diluted

 

$

(0.62

)

 

$

(0.67

)

 

$

(2.19

)

 

$

(1.92

)

Weighted-average common shares outstanding-basic and diluted

 

 

45,227,231

 

 

 

43,904,812

 

 

 

45,196,459

 

 

 

41,503,545

 

 

See notes to condensed consolidated financial statements.

 

6


 

HOMOLOGY MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(UNAUDITED)

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss

 

$

(28,232

)

 

$

(29,627

)

 

$

(98,903

)

 

$

(79,749

)

Other comprehensive gain (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gain (loss) on available for

  sale securities, net

 

 

(11

)

 

 

68

 

 

 

(183

)

 

 

331

 

Total other comprehensive gain (loss)

 

 

(11

)

 

 

68

 

 

 

(183

)

 

 

331

 

Comprehensive loss

 

$

(28,243

)

 

$

(29,559

)

 

$

(99,086

)

 

$

(79,418

)

 

See notes to condensed consolidated financial statements.

 


 

7


 

HOMOLOGY MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share and per share amounts)

(UNAUDITED)

 

 

 

 

 

Common Stock

$0.0001 Par Value

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

Balance at January 1, 2019

 

 

37,358,526

 

 

$

3

 

 

$

292,187

 

 

$

(77

)

 

$

(95,758

)

 

$

196,355

 

Vesting of common stock from

   option exercises

 

 

31,584

 

 

 

 

 

 

18

 

 

 

 

 

 

 

 

 

18

 

Issuance of common stock from

   option exercises

 

 

18,876

 

 

 

 

 

 

21

 

 

 

 

 

 

 

 

 

21

 

Issuance of common stock pursuant to

   employee stock purchase plan

 

 

28,311

 

 

 

 

 

 

396

 

 

 

 

 

 

 

 

 

396

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,243

 

 

 

 

 

 

 

 

 

1,243

 

Other comprehensive gain

 

 

 

 

 

 

 

 

 

 

 

83

 

 

 

 

 

 

83

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23,852

)

 

 

(23,852

)

Balance at March 31, 2019

 

 

37,437,297

 

 

$

3

 

 

$

293,865

 

 

$

6

 

 

$

(119,610

)

 

$

174,264

 

Issuance of common stock in follow-on offering,

   net of discounts and issuance costs

 

 

6,388,889

 

 

 

1

 

 

 

134,524

 

 

 

 

 

 

 

 

 

134,525

 

Vesting of common stock from

   option exercises

 

 

31,024

 

 

 

 

 

 

18

 

 

 

 

 

 

 

 

 

18

 

Issuance of common stock from

   option exercises

 

 

12,404

 

 

 

 

 

 

55

 

 

 

 

 

 

 

 

 

55

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,970

 

 

 

 

 

 

 

 

 

1,970

 

Other comprehensive gain

 

 

 

 

 

 

 

 

 

 

 

180

 

 

 

 

 

 

180

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,270

)

 

 

(26,270

)

Balance at June 30, 2019

 

 

43,869,614

 

 

$

4

 

 

$

430,432

 

 

$

186

 

 

$

(145,880

)

 

$

284,742

 

Vesting of common stock from

   option exercises

 

 

16,104

 

 

 

 

 

 

11

 

 

 

 

 

 

 

 

 

11

 

Issuance of common stock from

   option exercises

 

 

43,429

 

 

 

 

 

 

209

 

 

 

 

 

 

 

 

 

209

 

Issuance of common stock pursuant to

   employee stock purchase plan

 

 

26,923

 

 

 

 

 

 

433

 

 

 

 

 

 

 

 

 

433

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,986

 

 

 

 

 

 

 

 

 

1,986

 

Other comprehensive gain

 

 

 

 

 

 

 

 

 

 

 

68

 

 

 

 

 

 

68

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29,627

)

 

 

(29,627

)

Balance at September 30, 2019

 

 

43,956,070

 

 

$

4

 

 

$

433,071

 

 

$

254

 

 

$

(175,507

)

 

$

257,822

 

 

 

 

 

 

Common Stock

$0.0001 Par Value

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Gain (Loss)

 

 

Deficit

 

 

Equity

 

Balance at January 1, 2020

 

 

45,116,742

 

 

$

4

 

 

$

457,994

 

 

$

183

 

 

$

(199,674

)

 

$

258,507

 

Vesting of common stock from

   option exercises

 

 

15,542

 

 

 

 

 

 

12

 

 

 

 

 

 

 

 

 

12

 

Issuance of common stock from

   option exercises

 

 

34,311

 

 

 

 

 

 

135

 

 

 

 

 

 

 

 

 

135

 

Issuance of common stock pursuant to

   employee stock purchase plan

 

 

39,471

 

 

 

 

 

 

537

 

 

 

 

 

 

 

 

 

537

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,883

 

 

 

 

 

 

 

 

 

2,883

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(202

)

 

 

 

 

 

(202

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35,331

)

 

 

(35,331

)

Balance at March 31, 2020

 

 

45,206,066

 

 

$

4

 

 

$

461,561

 

 

$

(19

)

 

$

(235,005

)

 

$

226,541

 

Vesting of common stock from

   option exercises

 

 

1,011

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

4

 

Issuance of common stock from

   option exercises

 

 

3,576

 

 

 

 

 

 

16

 

 

 

 

 

 

 

 

 

16

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,453

 

 

 

 

 

 

 

 

 

3,453

 

Other comprehensive gain

 

 

 

 

 

 

 

 

 

 

 

30

 

 

 

 

 

 

30

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35,340

)

 

 

(35,340

)

Balance at June 30, 2020

 

 

45,210,653

 

 

$

4

 

 

$

465,034

 

 

$

11

 

 

$

(270,345

)

 

$

194,704

 

Vesting of common stock from

   option exercises

 

 

1,011

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

5

 

Issuance of common stock from

   option exercises

 

 

3,706

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

9

 

Issuance of common stock pursuant to

   employee stock purchase plan

 

 

44,377

 

 

 

 

 

 

401

 

 

 

 

 

 

 

 

 

401

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,346

 

 

 

 

 

 

 

 

 

3,346

 

Other comprehensive gain

 

 

 

 

 

 

 

 

 

 

 

(11

)

 

 

 

 

 

(11

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28,232

)

 

 

(28,232

)

Balance at September 30, 2020

 

 

45,259,747

 

 

$

4

 

 

$

468,795

 

 

$

 

 

$

(298,577

)

 

$

170,222

 

 

 

See notes to condensed consolidated financial statements.

 

8


 

HOMOLOGY MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(UNAUDITED)

 

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(98,903

)

 

$

(79,749

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

5,909

 

 

 

4,599

 

Noncash lease expense

 

 

686

 

 

 

 

Stock-based compensation expense

 

 

9,682

 

 

 

5,199

 

Amortization of premium on short-term investments

 

 

(197

)

 

 

(1,601

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

938

 

 

 

2,541

 

Accounts payable

 

 

486

 

 

 

1,511

 

Accrued expenses and other liabilities

 

 

924

 

 

 

2,121

 

Deferred revenue

 

 

(590

)