Beam Therapeutics Inc 10-Q for FY2021 Q2
Beam Therapeutics Inc. (BEAM)
About this 10-Q
Beam Therapeutics Inc filed this 10-Q on August 10, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).
Headline figures
Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $6000
- unchanged from $6000 a year earlier
- Net loss
- $76.25M
- compared with a net loss of $34.22M a year earlier
- Diluted EPS
- -$1.23
- compared with -$0.69 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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
(Exact name of Registrant as specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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.
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).
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 |
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Accelerated filer |
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Smaller reporting company |
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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
The number of shares of registrant’s common stock outstanding as of August 3, 2021 was
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Such forward-looking statements reflect, among other things:
All of these statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, market trends, or industry results to differ materially from those expressed or implied by such forward-looking statements. Therefore, any statements contained herein that are not statements of historical fact may be forward-looking statements and should be evaluated as such. Without limiting the foregoing, the words “anticipate,” “expect,” “suggest,” “plan,” “believe,” “intend,” “project,” “forecast,” “estimates,” “targets,” “projections,” “should,” “could,” “would,” “may,” “might,” “will,” and the negative thereof and similar words and expressions are intended to identify forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors” in Part II, Item 1A of this report and “Risk Factor Summary” and “Risk Factors” in Part I, Item 1A. of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, or the 2020 Form 10-K. Unless legally required, we assume no obligation to update any such forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information.
When we use the terms “Beam,” the “Company,” “we,” “us” or “our” in this Quarterly Report on Form 10-Q, we mean Beam Therapeutics Inc. and its subsidiaries on a consolidated basis, unless the context indicates otherwise.
Table of Contents
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PART I |
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Item 1. |
1 |
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1 |
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Condensed Consolidated Statements of Operations and Other Comprehensive Loss |
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3 |
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5 |
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7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
Item 3. |
35 |
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Item 4. |
35 |
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PART II |
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Item 1. |
36 |
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Item 1A. |
36 |
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Item 2. |
39 |
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Item 6. |
40 |
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41 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Beam Therapeutics Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except share and per share amounts)
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June 30, |
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December 31, |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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Collaboration receivable |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Restricted cash |
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Operating lease right-of-use assets |
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Long-term investments |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Derivative liabilities |
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Current portion of deferred revenue |
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Current portion of lease liability |
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Current portion of equipment financing liability |
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Total current liabilities |
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Long-term lease liability |
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Long-term equipment financing liability |
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Contingent consideration liabilities |
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Long-term portion of deferred revenue |
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Other liabilities |
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Total liabilities |
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and contingencies (See Note 7, Leases, Note 9, License agreements and Note 10, Collaboration and license agreements) |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income (loss) |
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( |
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Accumulated deficit |
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( |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
1
Beam Therapeutics Inc.
Condensed Consolidated Statements of Operations and Other Comprehensive Loss
(Unaudited)
(in thousands, except share and per share amounts)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2021 |
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2020 |
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2021 |
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2020 |
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$ |
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$ |
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$ |
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$ |
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Operating expenses: |
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Research and development |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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( |
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Other income (expense): |
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Change in fair value of derivative liabilities |
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( |
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( |
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( |
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Change in fair value of long-term investments |
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Change in fair value of contingent consideration liabilities |
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( |
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— |
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( |
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— |
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Interest and other income (expense), net |
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( |
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( |
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Total other income (expense) |
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( |
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( |
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( |
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( |
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Net loss |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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$ |
( |
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Unrealized gain (loss) on marketable securities |
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Comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Reconciliation of net loss to net loss attributable to common stockholders: |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Accretion of redeemable convertible preferred stock to redemption value, including dividends on preferred stock |
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— |
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— |
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— |
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( |
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Net loss attributable to common stockholders |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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Net loss per common share attributable to common stockholders, basic and diluted |
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$ |
( |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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Weighted-average common shares used in net loss per share attributable to common stockholders, basic and diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
Beam Therapeutics Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ (Deficit) Equity
(Unaudited)
(in thousands, except share amounts)
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Redeemable Convertible |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Income (Loss) |
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Deficit |
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Equity |
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Balance at December 31, 2019 |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Accretion of redeemable convertible preferred stock to redemption value |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Conversion of redeemable convertible preferred stock to common stock upon closing of initial public offering |
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( |
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( |
) |
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— |
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— |
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Issuance of common stock from initial public offering, net of issuance costs of $ |
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— |
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— |
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— |
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— |
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Vesting of restricted common stock |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of common stock options |
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— |
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— |
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— |
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— |
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Other comprehensive income (loss) |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance at March 31, 2020 |
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— |
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$ |
— |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Vesting of restricted common stock |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of common stock options |
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— |
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— |
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— |
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— |
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Other comprehensive income (loss) |
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— |
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— |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance at June 30, 2020 |
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— |
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$ |
— |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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3
Beam Therapeutics Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ (Deficit) Equity - Continued
(Unaudited)
(in thousands, except share amounts)
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Income (Loss) |
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Deficit |
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Equity |
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Balance at December 31, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Issuance of common stock from private placement, net of issuance costs of $ |
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— |
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— |
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Issuance of common stock to acquire Guide |
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— |
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— |
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Vesting of restricted common stock |
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( |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Exercise of common stock options |
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— |
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— |
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Other comprehensive income (loss) |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance at March 31, 2021 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Issuance of common stock from At-the-Market offering, net of issuance costs of $ |
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$ |
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$ |
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$ |
— |
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$ |
— |
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Vesting of restricted common stock |
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( |
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— |
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— |
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— |
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Issuance of common stock for success payment liability |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Exercise of common stock options |
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— |
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— |
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Other comprehensive income (loss) |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance at June 30, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Beam Therapeutics Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
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Six Months Ended June 30, |
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2021 |
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2020 |
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Operating activities |
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Net loss |
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$ |
( |
) |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Amortization of investment discount (premiums) |
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( |
) |
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( |
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In-process research and development charge |
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— |
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Stock-based compensation expense |
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Change in operating lease right-of-use assets |
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Non-cash research and development license expense, net |
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Change in fair value of derivative liabilities |
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Change in fair value of contingent consideration liabilities |
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|
— |
|
|
Change in fair value of non-controlling equity investments |
|
|
( |
) |
|
|
( |
) |
Other |
|
|
|
|
|
— |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
( |
) |
Collaboration receivable |
|
|
( |
) |
|
|
— |
|
Other long-term assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
|
|
|
( |
) |
|
Accrued expenses and other liabilities |
|
|
|
|
|
( |
) |
|
Operating lease liabilities |
|
|
|
|
|
( |
) |
|
Deferred revenue |
|
|
|
|
|
( |
) |
|
Other long-term liabilities |
|
|
( |
) |
|
|
— |
|
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Investing activities |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Purchases of marketable securities |
|
|
( |
) |
|
|
( |
) |
Maturities of marketable securities |
|
|
|
|
|
|
||
Net cash acquired from Guide |
|
|
|
|
|
— |
|
|
Purchase of long-term investment |
|
|
|
|
|
( |
) |
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Financing activities |
|
|
|
|
|
|
||
Proceeds from initial public offering, net of underwriting discount |
|
|
|
|
|
|
||
Proceeds from issuance of common shares, net of commissions |
|
|
|
|
|
— |
|
|
Payment of equity offering costs |
|
|
( |
) |
|
|
( |
) |
Proceeds from equipment financings |
|
|
— |
|
|
|
|
|
Repayment of equipment financings |
|
|
( |
) |
|
|
( |
) |
Proceeds from exercise of stock options |
|
|
|
|
|
|
||
Net cash provided by financing activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Net change in cash, cash equivalents and restricted cash |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash—beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash—end of period |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Beam Therapeutics Inc.
Condensed Consolidated Statements of Cash Flows - Continued
(Unaudited)
(in thousands)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental disclosure of noncash investing and financing activities: |
|
|
|
|
|
|
||
Conversion of redeemable convertible preferred stock to common stock upon closing of the initial public offering |
|
$ |
— |
|
|
$ |
|
|
Property and equipment additions in accounts payable and accrued expenses |
|
$ |
|
|
$ |
|
||
Operating lease liabilities arising from obtaining right-of-use assets |
|
$ |
|
|
$ |
|
||
Fair value of common shares issued to settle success payment liability |
|
$ |
|
|
$ |
— |
|
|
Contingent consideration liabilities assumed in asset acquisition |
|
$ |
|
|
$ |
— |
|
|
Fair value of equity instruments issued in connection with asset acquisition |
|
$ |
|
|
$ |
— |
|
|
Accretion of redeemable convertible preferred stock to redemption value, including dividends on preferred stock |
|
$ |
— |
|
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements
6
Beam Therapeutics Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. Nature of the business and basis of presentation
Organization
Beam Therapeutics Inc., which we refer to herein as the “Company” or “Beam,” is a biotechnology company committed to establishing the leading, fully integrated platform for precision genetic medicines. Beam’s vision is to provide life-long cures to patients suffering from genetic diseases. The Company was incorporated on January 25, 2017 as a Delaware corporation and began operations in July 2017. Its principal offices are in Cambridge, Massachusetts.
In February 2021, the Company entered into an Agreement and Plan of Merger, or the Guide Merger Agreement, to acquire Guide Therapeutics, Inc. or Guide. Pursuant to the Guide Merger Agreement,
Liquidity and capital resources
Since its inception, the Company has devoted substantially all of its resources to building its base editing platform and advancing development of its portfolio of programs, establishing and protecting its intellectual property, conducting research and development activities, organizing and staffing the Company, business planning, raising capital and providing general and administrative support for these operations. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry including, but not limited to, technical risks associated with the successful research, development and manufacturing of product candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Current and future programs will require significant research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.
In February 2020, the Company completed its initial public offering, or IPO, in which the Company issued and sold
In October 2020, the Company issued and sold
On January 16, 2021, the Company entered into a Securities Purchase Agreement with certain purchasers, pursuant to which the Company agreed to sell and issue to the purchasers, in a private placement, shares of common stock of the Company. The closing of the private placement occurred on January 21, 2021. The Company issued and sold
In April 2021, the Company entered into an at the market, or ATM, sales agreement, or the Sales Agreement, with Jefferies LLC, or Jefferies, pursuant to which the Company was entitled to offer and sell, from time to time at prevailing market prices, shares of the Company’s common stock having aggregate gross proceeds of up to $
In July 2021, the Company and Jefferies entered into an amendment to the Sales Agreement, or the Amended Sales Agreement, to provide for an increase in the aggregate offering amount under the Sales Agreement, such that as of July 7, 2021, the Company may offer and sell shares of common stock having an aggregate offering price of an additional $
7
The Company sold
Since its inception, the Company has incurred substantial losses and had an accumulated deficit of $
The Company expects that its cash, cash equivalents, and marketable securities as of June 30, 2021 of $
COVID-19-related significant risks and uncertainties
With the ongoing concern related to the COVID-19 pandemic during 2020 and in the first six months of 2021, the Company has maintained and expanded its business continuity plans to address and mitigate the impact of the COVID-19 pandemic on its business. In March 2020, to protect the health of its employees, and their families and communities, the Company restricted access to its offices to personnel who performed critical activities that must be completed on-site, limited the number of such personnel that could be present at its facilities at any one time, and requested that most of its employees work remotely. In May 2020, as certain states eased restrictions, the Company established new protocols to better allow its full laboratory staff access to the Company’s facilities. In June 2021, as states continued to ease restrictions, the Company started to allow for all of its employees to work on-site at the Company’s facilities, with fewer restrictions, particularly for vaccinated employees. These protocols included several shifts working over a seven-day-week protocol. The Company expects to continue incurring additional costs to ensure it adheres to the COVID-19 guidelines instituted by the Centers for Disease Control and Prevention, or CDC, and to provide a safe working environment to its onsite employees.
The extent to which the COVID-19 pandemic impacts the Company’s business, its corporate development objectives, and its results of operations and financial condition, including the value of and market for its common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the duration, scope and severity of the pandemic, the duration and extent of travel restrictions and social distancing in the United States and other countries, business closures and business disruptions, the effectiveness of actions taken in the United States and other countries to contain and treat the disease, periodic spikes in infection rates, new strains of the virus that cause outbreaks of COVID-19, and the broad availability of effective vaccines. Disruptions to the global economy, disruption of global healthcare systems, and other significant impacts of the COVID-19 pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.
While the COVID-19 pandemic did not significantly impact the Company’s business or results of operations during the six months ended June 30, 2021, the length and extent of the pandemic, its consequences, and containment efforts will determine the future impact on the Company’s operations and financial condition.
2. Summary of significant accounting policies
The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2020, and notes thereto, which are included in the Company’s Annual Report on Form 10-K that was filed with the Securities and Exchange Commission on March 15, 2021, or the 2020 Form 10-K. Since the date of those financial statements, there have been no material changes to Beam’s significant accounting policies except as noted below.
Basis of presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, or GAAP. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification, or ASC, and Accounting Standards Update, or ASU, of the Financial Accounting Standards Board, or FASB.
Principles of consolidation
The accompanying condensed consolidated financial statements include the results of operations of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses, the determination of the fair value equity instruments and intangible assets acquired in an asset acquisition, and the disclosure of contingent assets and liabilities as of and during the reporting period. The Company bases its estimates and assumptions on historical experience, when available, and on various factors that it believes to be
8
reasonable under the circumstances. The Company evaluates its estimates and assumptions on an ongoing basis. Actual results could differ from these estimates.
Cash, cash equivalents, and restricted cash
Cash and cash equivalents consist of standard checking accounts, money market accounts, and all highly liquid investments with a remaining maturity of three months or less at the date of purchase. Restricted cash represents collateral provided for letters of credit issued as security deposits in connection with the Company’s leases of its corporate and manufacturing facilities.
The following table reconciles cash, cash equivalents, and restricted cash reported within the Company’s condensed consolidated balance sheets to the total of the amounts shown in the condensed consolidated statements of cash flows (in thousands):
|
|
June 30, |
|
|
June 30, |
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Total cash, cash equivalents, and restricted cash |
|
$ |
|
|
$ |
|
||
Asset acquisitions
In 2018, the Company
At the time of acquisition, the Company determines if a transaction should be accounted for as a business combination or acquisition of assets.
Contingent consideration liabilities
The estimated fair value of contingent consideration liabilities, initially measured and recorded on the acquisition date, are considered to be a Level 3 measurement and are reviewed quarterly, or whenever events or circumstances occur that indicate a change in fair value. The contingent consideration liabilities are recorded at fair value at the end of each reporting period with changes in estimated fair values recorded in other income (expense) in the condensed consolidated statements of operations.
The estimated fair value is determined based on probability adjusted discounted cash flow models that include significant estimates and assumptions pertaining to technology and product development. Significant changes in any of the probabilities of success would result in a significantly higher or lower fair value measurement. Significant changes in the probabilities as to the periods in which milestones will be achieved would result in a significantly lower or higher fair value measurement.
3. Property and equipment, net
Property and equipment consist of the following (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
Lab equipment |
|
$ |
|
|
$ |
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Computer equipment |
|
|
|
|
|
|
||
Construction in process |
|
|
|
|
|
|
||
Total property and equipment |
|
|
|
|
|
|
||
Less accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
The following table summarizes depreciation expense incurred (in thousands):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Depreciation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
4. fair value of financial instruments
The Company’s financial instruments that are measured at fair value on a recurring basis consist of cash equivalents, marketable securities, contingent consideration liabilities related to the Guide Merger Agreement, equity securities of Verve Therapeutics, Inc., or Verve, and success payment derivative liabilities pursuant to the license agreement, or the Harvard License Agreement, between
9
President and Fellows of Harvard University, or Harvard, and the Company, and the license agreement, or the Broad License Agreement, between The Broad Institute, Inc., or Broad Institute, and Blink Therapeutics, Inc., or Blink.
The Company also holds investments in privately issued corporate equity securities, which are accounted for as investments in equity securities. These investments do not have readily determinable fair values and the Company values such investments based on the cost of the equity securities adjusted for observable market transactions or impairments, if any, and records any changes in value through earnings.
The following table sets forth the fair value of the Company’s financial assets and liabilities by level within the fair value hierarchy at June 30, 2021 (in thousands):
|
|
Carrying |
|
|
Fair |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|||
Commercial paper |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Commercial paper |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Corporate notes |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Equity securities included in other long-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Corporate equity securities |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Success payment liability – Harvard |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|||
Success payment liability – Broad Institute |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Contingent consideration liability - Technology |
|
|
|
|
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|||
Contingent consideration liability - Product |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Total liabilities |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|||
The following table sets forth the fair value of the Company’s financial assets and liabilities by level within the fair value hierarchy at December 31, 2020 (in thousands):
|
|
Carrying |
|
|
Fair |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|||
Commercial paper |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Corporate notes |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Commercial paper |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Corporate notes |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
U.S. Treasury securities |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Government securities |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Success payment liability – Harvard |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|||
Success payment liability – Broad Institute |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Total liabilities |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|||
10
Cash equivalents – Money market funds included within cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets. Commercial paper and corporate notes are classified within Level 2 of the fair value hierarchy because pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies.
Marketable securities – The Company measures its marketable securities at fair value on a recurring basis and classifies those instruments within Level 2 of the fair value hierarchy. Marketable securities are classified within Level 2 of the fair value hierarchy because pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined using models or other valuation methodologies.
During the six months ended June 30, 2021, the Company held an investment in Verve consisting of shares of Verve’s common and preferred stock. Prior to Verve's initial public offering in June 2021, the Company valued such investment based on the cost of the equity securities adjusted for any observable market transactions. Following the initial public offering, the equity securities have a readily determinable fair value; however, they are subject to transfer restrictions. Following the initial public offering the Company owned
Success payment liabilities – As discussed further in Note 9, License agreements, the Company is required to make payments determined based upon the achievement of specified multiples of the initial weighted average value of the Company’s redeemable convertible Series A-1 Preferred Stock and the Company's redeemable convertible Series A-2 Preferred Stock, or collectively the Series A Preferred Stock, or, subsequent to the IPO, the market value of Beam’s common stock, at specified valuation dates. The Company’s liability for success payments under the Harvard License Agreement and Broad License Agreement are carried at fair value. To determine the estimated fair value of the success payment liability, the Company uses a Monte Carlo simulation methodology, which models the future movement of stock prices based on several key variables.
The following variables were incorporated in the calculation of the estimated fair value of the Harvard and Broad Institute success payment liabilities:
|
|
Harvard |
|
|
Broad Institute |
|
||||||||||
|
|
June 30, |
|
|
December 31, |
|
|
June 30, |
|
|
December 31, |
|
||||
Fair value of common stock (per share) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Expected volatility |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Expected term (years) |
|
|
|
|
|
|
|
|
|
|
|
|||||
The computation of expected volatility was estimated using available information about the historical volatility of stocks of similar publicly traded companies for a period matching the expected term assumption. In addition, the Company incorporated the estimated number, timing, and probability of valuation measurement dates in the calculation of the success payment liability.
The following table reconciles the change in the fair value of success payment liabilities based on Level 3 inputs (in thousands):
|
|
Six Months Ended June 30, 2021 |
|
|||||||||
|
|
Harvard |
|
|
Broad Institute |
|
|
Total |
|
|||
Balance at December 31, 2020 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Change in fair value |
|
|
|
|
|
|
|
|
|
|||
Balance at June 30, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
11
Contingent consideration liabilities – As discussed further in Note 8, Guide Acquisition, under the Guide Merger Agreement, Guide’s former stockholders and optionholders are eligible to receive up to an additional $
The following table reconciles the change in fair value of the contingent consideration liabilities based on level 3 inputs (in thousands):
|
|
Six Months Ended June 30, 2021 |
|
|||||||||
|
|
Technology Milestones |
|
|
Product Milestones |
|
|
Total |
|
|||
Balance at February 23, 2021 (inception) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Change in fair value |
|
|
|
|
|
|
|
|
|
|||
Balance at June 30, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The following variables were incorporated in the calculation of the estimated fair value of the Guide technology and product contingent consideration liabilities:
|
|
Technology Milestones |
|
|
Product Milestones |
|
||
|
|
June 30, |
|
|
June 30, |
|
||
Discount Rate |
|
|
% |
|
|
% |
||
Probability of Payment |
|
|
|
|
||||
Projected Year of Payment |
|
|
|
|
||||
5. Marketable securities and long-term investments
The following table summarizes the Company’s marketable securities and long-term investments held at June 30, 2021 (in thousands):
|
|
Amortized Cost |
|
|
Gross |
|
|
Gross |
|
|
Fair Value |
|
||||
Commercial paper |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Corporate notes |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
The following table summarizes the Company’s marketable securities held at December 31, 2020 (in thousands):
|
|
Amortized Cost |
|
|
Gross |
|
|
Gross |
|
|
Fair Value |
|
||||
Commercial paper |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Corporate notes |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
U.S Treasury securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Government securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
The amortized cost of marketable securities is adjusted for amortization of premiums and accretion of discounts to maturity. At June 30, 2021, the balance in accumulated other comprehensive loss was comprised solely of activity related to marketable securities. There were
12
The Company holds debt securities of companies with high credit quality and has determined that there was no material change in the credit risk of any of its debt securities. The contractual maturity dates of all the investments are
6. Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consist of the following (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
Employee compensation and related benefits |
|
$ |
|
|
$ |
|
||
Research costs |
|
|
|
|
|
|
||
Process development and manufacturing costs |
|
|
|
|
|
|
||
Professional fees |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
7. Leases
Operating leases
The Company’s operating leases are as follows:
The following table summarizes operating lease costs as well as sublease income (in thousands):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Operating lease costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Variable lease costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Short-term lease costs |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
13
The following table summarizes the lease term and discount rate for operating leases:
|
|
June 30, |
|
|
December 31, |
|
||
Weighted-average remaining lease term (years) |
|
|
|
|
||||
Weighted-average discount rate |
|
|
% |
|
|
% |
||
The following table summarizes the lease costs for amounts included in the measurement of lease liabilities (in thousands):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Operating cash flows used for operating leases |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating lease liabilities arising from obtaining ROU assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
At June 30, 2021, the future minimum lease payments for the Company’s operating leases for each of the years ending December 31 were as follows (in thousands):
Remainder of 2021 |
|
$ |
|
|
2022 |
|
|
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
Thereafter |
|
|
|
|
Undiscounted lease payments |
|
|
|
|
Less: imputed interest |
|
|
( |
) |
Total operating lease liabilities |
|
$ |
|
8. Guide acquisition
On
14
In addition, Guide’s former stockholders and optionholders are eligible to receive up to an additional $
The Company determined that all future technology and product milestone payments are classified as contingent consideration liabilities under ASC 480 and therefore the Company recorded a liability for these milestones as of the Guide Merger Agreement Date at fair value of $
The transaction price was determined and allocated as follows (in thousands):
Transaction price |
|
|
|
|
|
Fair value of equity instruments issued |
|
$ |
|
|
|
Technology and product contingent consideration liabilities |
|
|
|
|
|
Transaction costs |
|
|
|
|
|
Total transaction price |
|
$ |
|
|
|
Transaction price allocated |
|
|
|
|
|
In-process research and development |
|
$ |
|
|
|
Cash acquired |
|
|
|
|
|
Prepaid expenses and other assets |
|
|
|
|
|
Property and equipment |
|
|
|
|
|
Assembled workforce |
|
|
|
|
|
Other liabilities assumed |
|
|
( |
) |
|
Total transaction price |
|
$ |
|
|
|
9. License agreements
Harvard license agreement
Under the terms of the Harvard License Agreement, Harvard is entitled to receive success payments determined based upon the achievement of specified multiples of the initial weighted average value of the Company’s Series A Preferred Stock at specified valuation dates. The success payments range from $
The following table summarizes the Company’s success payment liability for Harvard (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
Harvard success payment liability |
|
$ |
|
|
$ |
|
||
The following table summarizes the expense resulting from the change in the fair value of the success payment liability for Harvard (in thousands):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Change in fair value of Harvard success payment liability |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
15
In May 2021, the first success payment measurement occurred and amounts due to Harvard were calculated to be $
The annual maintenance fee under the Harvard License Agreement is recorded as research and development expense. Patent prosecution costs are recognized as expense in the period incurred. As of June 30, 2021, the Company determined that product development and regulatory approval milestones and royalties under the Harvard License Agreement were not probable and, as such,
Broad license agreement
Under the terms of the Broad License Agreement, Broad Institute is entitled to receive success payments, determined based upon the achievement of specified multiples of the initial weighted average value of Series A Preferred Stock at specified valuation dates. The success payments range from $
The following table summarizes the Company’s success payment liability for Broad Institute (in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
Broad Institute success payment liability |
|
$ |
|
|
$ |
|
||
The following table summarizes the expense resulting from the change in the fair value of the success payment liability for Broad Institute (in thousands):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Change in fair value of Broad Institute success payment liability |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
In May 2021, the first success payment measurement occurred and amounts due to Broad Institute were calculated to be $
The annual maintenance fee under the Broad License Agreement is recorded as research and development expense. Patent prosecution costs are recognized as expense in the period incurred. As of June 30, 2021, the Company determined that product development and regulatory approval milestones and royalties under the Broad License Agreement were not probable and, as such,
Editas license agreement
In May 2018, the Company entered into a license agreement, or the Editas License Agreement, with Editas Medicine, Inc., or Editas. Pursuant to the Editas License Agreement, Editas granted to the Company licenses and options to acquire licenses to certain intellectual property rights owned or controlled by Editas, for specified uses.
The annual maintenance fees under the Editas License Agreement are recorded as research and development expense. Annual patent costs are expensed as incurred. In addition, the Company is required to make certain development, regulatory and commercial milestone payments to Editas upon the achievement of specified milestones. As of June 30, 2021, the triggering of these milestone payments was not probable and, as such,
Bio Palette license agreement
In March 2019, the Company entered into a license agreement, or the Bio Palette License Agreement, with Bio Palette Co., Ltd., or Bio Palette, pursuant to which the Company received an exclusive (even as to Bio Palette), sublicensable license under certain patent rights related to base editing owned or controlled by Bio Palette to exploit products for the treatment of human disease throughout the world, but excluding products in the microbiome field in Asia. In addition, the Company granted Bio Palette an exclusive (even as to the Company) license under certain patent rights related to base editing and gene editing owned or controlled by the Company to exploit products in the microbiome field in Asia. Each party to the agreement retains non-exclusive rights to develop and manufacture products in the microbiome field worldwide for the sole purpose of exploiting those products in its own territory. Each party agrees to certain coordination obligations in the microbiome field if either party determines not to exploit their rights in such field.
16
Unless earlier terminated, the Bio Palette License Agreement will expire on a licensed product-by-licensed product and country-by-country basis upon the expiration of the applicable royalty term for each such licensed product and country.
Upon the issuance of a certain Bio Palette patent in the United States in June 2020, the Company made a milestone payment of $
Management concluded that the licenses acquired from each transaction above did not meet the accounting definition of a business as inputs, but no processes or outputs were acquired with the licenses, and the licensed technology had not achieved technological feasibility. As the inputs that were acquired along with the licenses do not constitute a “business,” the transactions have been accounted as asset acquisitions. As of the date of each license agreement, the assets acquired had no alternative future use and the assets had not reached a stage of technological feasibility. As a result, all share-based and cash payment obligations have been recorded as research and development expense in the accompanying condensed consolidated statements of operations and other comprehensive loss.
10. Collaboration and license agreements
Apellis Pharmaceuticals
As part of the collaboration, the Company will receive a total of $
As the $
The Company will account for the Apellis Agreement under ASC 606, Revenue from Contracts with Customers, or ASC 606, as it includes a customer-vendor relationship as defined under ASC 606 and meets the criteria to be considered a contract.
The overall transaction price as of the inception of the contract was determined to be $
The Company has concluded that the licenses to the base editing technology are not capable of being distinct from the other performance obligations, and as such the Company has determined that the licenses combined with the other research and development services represent performance obligations and no up-front revenue was recognized for the licenses. The Company plans to recognize revenue for each performance obligation as it is satisfied over time using an input method. As no activities under the Apellis Agreement had commenced as of June 30, 2021, the entire $
Prime Medicine
In September 2019, the Company entered into a collaboration and license agreement, or the Prime Agreement, with Prime Medicine Inc., or Prime Medicine, to research and develop a novel gene editing technology developed by one of the Company’s founders.
17
Under the terms of the agreement, the Company granted Prime Medicine a non-exclusive license to certain of its clustered regulatory interspaced short palindromic repeats, or CRISPR, technology (including Cas12b), delivery technology and certain other technology controlled by the Company to develop and commercialize gene editing products for the treatment of human diseases. The Company is not currently using the intellectual property licensed from Prime Medicine in any of its current programs, but it is required to use commercially reasonable efforts to develop new product candidates using the intellectual property licensed from Prime Medicine. Additionally, each party granted to the other party certain exclusive and non-exclusive licenses to certain technology developed after the effective date of the agreement and controlled by the granting party or jointly owned by the parties. Each party has an obligation to assign rights in certain technology developed under the collaboration to the other party.
Additionally, the Company provided immaterial interim management and startup services to Prime Medicine through March 2021.
As of June 30, 2021, the Company determined that future milestones and royalties under the Prime Agreement were not probable of recognition.
Verve
In April 2019, the Company entered into a collaboration and license agreement with Verve, or the Verve Agreement, to investigate gene editing strategies to modify genes associated with an increased risk of coronary diseases. Under the terms of the Verve Agreement, the Company granted Verve an exclusive license to certain base editor technology and certain delivery technology, and improvements and Verve granted Beam a non-exclusive license under certain know-how and patents controlled by Verve, an interest in joint collaboration technology and an exclusive license (except as to Verve) under certain delivery technology.
As of June 30, 2021, the Company determined that milestones and royalties under the Verve Agreement were not probable of recognition.
11. Preferred and common stock
In January 2020, the Company authorized the designation of
In February 2020, the Company completed its IPO in which the Company issued and sold
In October 2020, the Company issued and sold
In October 2020, due to its election to continue the Prime Agreement, the Company issued
In January 2021, the Company issued and sold
In April 2021, the Company entered into the Sales Agreement with Jefferies, pursuant to which the Company was entitled to offer and sell, from time to time at prevailing market prices, shares of the Company’s common stock having aggregate gross proceeds of up to $
18
Through July 2021, the Company received approximately $
In July 2021, the Company and Jefferies entered into an amendment to the Sales Agreement, or the Amended Sales Agreement, to provide for an increase in the aggregate offering amount under the Sales Agreement, such that as of July 7, 2021, the Company may offer and sell shares of common stock having an aggregate offering price of an additional $
In May 2021, the first success payment measurements under each of the Harvard License Agreement and Broad Institute License Agreement occurred and success payments to Harvard and Broad Institute were calculated to be $
12. Stock option and grant plan
Stock option and grant plan
The Beam Therapeutics Inc. 2017 Stock Option and Grant Plan adopted by the Company’s board of directors in June 2017 and amended in each of February 2019 and May 2019 provided for the grant of qualified incentive stock options and nonqualified stock options, restricted stock awards, restricted stock units, or other awards to the Company’s employees, officers, directors, advisors, and outside consultants for the issuance or purchase of shares of the Company’s common stock.
In October 2019, the Company’s board of directors adopted the Beam Therapeutics Inc. 2019 Equity Incentive Plan, or the 2019 Plan, and, subsequent to the IPO, all equity-based awards are granted under the 2019 Plan. The 2019 Plan provides for the grant of qualified and nonqualified stock options, stock appreciation rights, restricted and unrestricted stock and stock units, performance awards, and other share-based awards to the Company’s employees, officers, directors, advisors, and outside consultants. As of June 30, 2021, the Company had
Stock-based compensation expense recorded as research and development and general and administrative expenses in the condensed consolidated statements of operations and other comprehensive loss is as follows (in thousands):
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total stock-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Stock options
The following table provides a
|
|
Number |
|
|
Weighted |
|
||
Outstanding at December 31, 2020 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Exercised |
|
|
( |
) |
|
|
|
|
Forfeitures |
|
|
( |
) |
|
|
|
|
Outstanding at June 30, 2021 |
|
|
|
|
|
|
||
Exercisable as of June 30, 2021 |
|
|
|
|
$ |
|
||
The weighted-average grant date fair value per share of options granted in the six months ended June 30, 2021 was $
19
Restricted stock
The Company issues shares of restricted common stock, including both restricted stock units and restricted stock awards. Restricted common stock issued generally vests over a period of to
The following table summarizes the Company’s restricted stock activity:
|
|
Shares |
|
|
Weighted- |
|
||
Unvested as of December 31, 2020 |
|
|
|
|
$ |
|
||
Issued |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Cancelled |
|
|
( |
) |
|
|
|
|
Unvested as of June 30, 2021 |
|
|
|
|
$ |
|
||
At June 30, 2021, there was approximately $
13. Net loss per share attributable to common stockholders
As noted above, for periods in which the Company reports a net loss attributable to common stockholders, potentially dilutive securities have been excluded from the computation of diluted net loss per share as their effects would be anti-dilutive. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.
|
|
As of June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Unvested restricted stock |
|
|
|
|
|
|
||
Outstanding options to purchase common stock |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
The following table summarizes the computation of basic and diluted net loss per share attributable to common stockholders of the Company (in thousands except share and per share amounts):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss attributable to common stockholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average number of common shares, basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per common share attributable to common stockholders, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
20
14. Income taxes
During the three and six months ended June 30, 2021 and 2020, the Company recorded a full valuation allowance on federal and state deferred tax assets since management does not forecast the Company to be in a taxable position in the near future.
15. Related party transactions
Founders
For the six months ended June 30, 2021 and 2020, the Company made payments of $
Verve
The Company and Verve are parties to the Verve Agreement and have a common board member. During the six months ended June 30, 2020, the Company purchased shares of Verve's series A preferred stock valued at $
The Company purchased certain materials from Verve amounting to $
Prime Medicine
The Company and Prime Medicine are parties to the Prime Agreement and have a common founder and a common board member.
Additionally, in September 2019, in connection with the Prime Agreement, the Company executed a letter agreement, as amended, to provide certain interim management and startup services to Prime Medicine through March 2021. Prime Medicine was obligated to reimburse the Company’s out-of-pocket costs incurred in connection with performing these services and, beginning in October 2020, paid the Company a $
16. Subsequent Events
At-the-Market Offering
In July 2021, the Company and Jefferies entered into the Amended Sales Agreement to provide for an increase in the aggregate offering amount under the Sales Agreement, such that as of July 7, 2021, the Company may offer and sell additional shares of common stock having an aggregate offering price of an additional $
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Some of the numbers included herein have been rounded for the convenience of presentation. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed in “Risk Factors” in Part II, Item 1A. and elsewhere in this Quarterly Report on Form 10-Q and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, and in the “Summary Risk Factors” and “Item 1A. Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, or the 2020 Form 10-K.
Overview
We are a biotechnology company committed to establishing the leading, fully integrated platform for precision genetic medicines. Our vision is to provide life-long cures to patients suffering from serious diseases. To achieve this vision, we have assembled a platform that includes a suite of gene editing and delivery technologies and are in the process of developing internal manufacturing capabilities. Our suite of gene editing technologies is anchored by our proprietary base editing technology, which potentially enables an entirely new class of precision genetic medicines that target a single base in the genome without making a double-stranded break in the DNA. This approach uses a chemical reaction designed to create precise, predictable and efficient genetic outcomes at the targeted sequence. Our novel base editors have two principal components: (i) a clustered regulatory interspaced short palindromic repeats, or CRISPR protein, bound to a guide RNA, that leverages the established DNA-targeting ability of CRISPR, but modified to not cause a double-stranded break, and (ii) a base editing enzyme, such as a deaminase, which carries out the desired chemical modification of the target DNA base. We believe this design contributes to a more precise and efficient edit compared to traditional gene editing methods, which operate by creating targeted double-stranded breaks in the DNA; these breaks can result in unwanted DNA modifications. We believe that the precision of our editors will dramatically increase the impact of gene editing for a broad range of therapeutic applications.
To unlock the full potential of our base editing technology across a wide range of therapeutic applications, we are pursuing a broad suite of both clinically validated and novel delivery modalities. For a given tissue type, we use the delivery modality with the most compelling biodistribution. Our current programs are organized by delivery modality into three distinct pipelines: (1) electroporation for efficient delivery to blood cells and immune cells ex vivo; (2) lipid nanoparticles, or LNPs, for non-viral in vivo delivery to the liver and potentially other organs in the future; and (3) adeno-associated viral vectors, or AAV, for in vivo viral delivery to the eye and central nervous system, or CNS.
The elegance of the base editing approach combined with a tissue specific delivery modality provides the basis for a targeted efficient, precise, and highly versatile gene editing system, capable of gene correction, gene silencing or gene activation, and/or multiplex editing of several genes simultaneously. We are currently advancing a broad, diversified portfolio of base editing programs against distinct editing targets, utilizing the full range of our development capabilities. We believe the flexibility and versatility of our base editors may lead to broad therapeutic applicability and transformational potential for the field of precision genetic medicines.
We believe that building an integrated platform combining our gene editing capabilities with advanced delivery and manufacturing capabilities will give us the maximum flexibility to develop our own sustainable portfolio and to create a hub for partnering with other companies to unlock the full potential of precision genetic medicine across all possible applications.
Ex vivo electroporation for hematology: Sickle cell disease and beta-thalassemia
We are using base editing to pursue the development of two complementary approaches to treating sickle cell disease, a severe inherited blood disease caused by a single point mutation, E6V, in the beta globin gene (BEAM-101 and BEAM-102), and one approach to treat beta-thalassemia, another inherited blood disorder characterized by severe anemia caused by reduced production of functional hemoglobin due to insufficient expression of the beta globin protein (BEAM-101).
BEAM-101: Recreating naturally-occurring protective mutations to activate fetal hemoglobin
Our development candidate, BEAM-101, reproduces single base changes seen in individuals with Hereditary Persistence of Fetal Hemoglobin, or HPFH, to potentially protect them from the effects of mutations causing sickle cell disease or beta thalassemia.
We have achieved proof-of-concept in vivo with long-term engraftment of base edited human CD34 cells in mice for BEAM-101. Persistence of engraftment and high levels of editing have been confirmed in several preclinical studies, including in studies using material generated at a clinically relevant scale. Following conversations with regulators and supported by our off-target biology assays, we initiated Investigational New Drug, or IND-enabling studies in 2020 and expect to file an IND for BEAM-101 during the second half of 2021.
22
BEAM-102: Direct correction of the sickle cell mutation
Our second base editing approach that we are developing for sickle cell disease, BEAM-102, is a direct correction of the causative sickle mutation at position 6 of the beta globin gene. This approach has been enabled by our inlaid base editors, or IBEs, which are architectural variants of base editors that have attributes of enhanced specificity and altered activity windows relative to foundational base editors. Our IBEs expand the breadth of potential base editing targets by extending the range of editing windows that can be created for any given CRISPR protein used to target the DNA. By inserting the deaminase into the CRISPR protein at various strategic positions, thereby repositioning the deaminase’s editing window, IBEs enable editing outside the traditional editing window. BEAM-102 directly corrects the causative mutation in sickle cell disease by recreating a naturally-occurring normal human hemoglobin variant, HbG-Makassar. By making a single A-to-G edit, we have demonstrated in primary human CD34+ cells isolated from sickle cell disease patients the ability to create the naturally occurring Makassar variant of hemoglobin. This variant, which was identified in humans and first published in 1970, has the same function as the wild-type variant and does not cause sickle cell disease. Distinct from other approaches, cells that are successfully edited in this way are fully corrected, no longer containing the sickle protein.
During the second quarter of 2020, we published preclinical data on BEAM-102 demonstrating that our adenine base editors, or ABEs, can efficiently convert the causative Hemoglobin S, or HbS, point mutation, to HbG-Makassar, with high efficiency (more than 80%). In this preclinical study, the Makassar variant does not cause hemoglobin to polymerize and red blood cells to sickle and, therefore, edited cells are cured through elimination of the disease-causing protein. The results from this study confirmed the ability of the Makassar variant to protect cells from sickling, even in the context of mono-allelic editing (with one sickle allele and one corrected allele). We plan to initiate IND-enabling studies for BEAM-102 during 2021.
Ex vivo electroporation for multiplex editing: CAR-T cell therapies
The initial indications that we plan to target with our chimeric antigen receptor T-cell, or CAR-T, product candidates are relapsed, refractory T-cell acute lymphoblastic leukemia, or T-ALL, a severe disease affecting children and adults, and Acute Myeloid Leukemia, or AML. We believe that our approach has the potential to produce higher response rates and deeper remissions than existing approaches. Our proof-of-concept pre-clinical experiments have demonstrated the ability of base editors to efficiently modify up to 8 genomic loci simultaneously in primary human T cells with efficiencies ranging from 85-95% as measured by flow cytometry of target protein knockdown. Importantly, these results were achieved without the generation of chromosomal rearrangements, as detected by sensitive methods such as UDiTaSTM or G-banded Karyotyping and with no loss of cell viability from editing. Our proof-of-concept experiments have also demonstrated robust T-cell killing of target tumor cells both in vitro and in vivo.
BEAM-201: Universal CD7-targeting CAR-T cells
BEAM-201 is our potent and specific anti-CD7, multiplex edited, allogeneic CAR-T development candidate for the treatment of relapsed/refractory T-ALL. BEAM-201 is produced using a Good Manufacturing Practice, or cGMP, compliant, clinical-scale process in which T-cells derived from healthy donors are simultaneously base edited at four genomic loci, then transduced with a lentivirus coding for an anti-CD7 CAR. The resulting cells are universally-compatible, allogeneic (“off the shelf”) CD7-targeting CAR-T cells, resistant to both fratricide and immunosuppression. To our knowledge, BEAM-201 is the first cell therapy featuring four simultaneous edits. In August 2021, we announced that we had initiated IND-enabling studies for BEAM-201.
Non-viral delivery for liver diseases: Alpha-1 antitrypsin deficiency and glycogen storage disorder 1a
We are currently using a variety of cationic lipids from various sources to advance our programs for genetic liver diseases, which include Alpha-1 Antitrypsin Deficiency, or Alpha-1, and Glycogen Storage Disease Type IA, or GSDIa (also known as Von Gierke disease).
Alpha-1 is a severe inherited genetic disorder that can cause progressive lung and liver disease. The most severe form of Alpha-1 arises when a patient has a point mutation in both copies of the SERPINA1 gene at amino acid 342 position (E342K, also known as the PiZ mutation or the “Z” allele). With the high efficiency and precision of our base editors, we aim to utilize our ABEs to enable the programmable conversion of A-to-T and G-to-C base pairs and precisely correct the E342K point mutation back to the wild type sequence.
GSDIa is an inborn disorder of glucose metabolism caused by mutations in the G6PC gene, which results in low blood glucose levels that can be fatal if patients do not adhere to a strict regimen of slow-release forms of glucose, administered every one to four hours (including overnight). Our approach to treating patients with GSDIa is to apply base editing using LNP delivery to repair the two most prevalent mutations that cause the disease, R83C and Q347X.
We continue to advance our liver disease programs. In 2020, we showed the ability to directly correct the mutation causing Alpha-1, providing both in vitro and in vivo preclinical proof-of-concept for base editing to correct this disease. We have also achieved editing levels in vivo, in preclinical models, for the correction of the two most prevalent mutations causing GSDIa, which could be clinically relevant if reproduced in humans.
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An important next step for our liver disease programs is finalizing our LNP formulation, and we are making progress on developing a formulation using proof-of-concept targets.
To date, with this formulation, we have shown high levels of editing in mice at doses consistent with clinical use. In addition, in May 2021, we announced initial data from our evaluation of various LNP formulations and mRNA production processes using an mRNA-encoding ABE and guide RNA to target the ALAS1 gene, a surrogate payload for genetic liver diseases. These data showed improved in vivo editing in the livers of non-human primates from less than 10% initially to 52% at a total RNA dose of 1.5 mg/kg. These data also demonstrated that these formulations were well tolerated by non-human primates at 1.5 mg/kg with mild and transient liver enzyme elevations, and showed promising interim stability, maintaining potency after 8 weeks at -20⁰C. We are continuing to work on optimizing our LNP formulations and believe we are on track to nominate our first development candidate from our liver portfolio in the second half of 2021.
Viral delivery for ocular and CNS disorders: Stargardt disease
We are currently evaluating AAV technology to correct one of the most prevalent mutations in the ABCA4 gene causing Stargardt disease, a progressive macular degeneration. This mutation is known as the G1961E point mutation.
Our base editing approach is to repair the G1961E point mutation in the ABCA4 gene. Disease modeling using tiny spot stimuli, or light stimuli through holes that are equivalent in size to a single photoreceptor cell, suggests that only 12%-20% of these cells are sufficient to preserve vision. We anticipate, therefore, that editing percentages in the range of 12%-20% of these cells would be disease-modifying, since each edited cell will be fully corrected and protected from the biochemical defect.
We have identified a base editor that is able to edit approximately 45% of the alleles in recombinant cells carrying the human mutated sequence. Given that the base editor is larger than the packaging capacity of a single AAV, we use a split AAV system that delivers the base editor via two AAV vectors. Once inside the cell, the two halves of the editor are recombined to create a functional base editor. In a human retinal pigment epithelial cell line (ARPE-19 cells) in which we have knocked in the ABCA4 G1961E point mutation, we have demonstrated the precise correction of approximately 75% of the disease alleles at 5 weeks after dual infection with the split AAV system.
Delivery of genetic medicines
To complement our next-generation gene editing technologies, we are also making significant investments in a broad suite of delivery technologies to deliver our gene editing payloads to the right cells to enable potentially curative therapy. These delivery technologies include ex vivo electroporation, nonviral vectors such as LNPs, and viral vectors such as AAVs. In our pipeline, we have initially focused on applications of these technologies that are clinically-validated, such as ex vivo editing of blood stem cells or LNP delivery to the liver. Longer term, we are also investing in more innovative delivery options, such as LNPs that could target other organs beyond the liver, or novel viral vectors beyond AAV. We have also developed critical enabling capabilities such as mRNA manufacturing and cell processing for autologous and allogeneic cell therapy.
Consistent with this approach, our recent acquisition of Guide Therapeutics, Inc., or Guide, expands our ability to explore new tissues and disease indications with our editing technologies. Guide’s proprietary screening technology, which utilizes DNA barcodes to enable high throughput in vivo LNP screening, provides us with access to an existing broad library of lipids and lipid formulations, and the ability to generate additional novel LNPs that we believe could accelerate novel nonviral delivery of gene editing payloads to tissues beyond the liver.
Collaborations
We believe our base editing technology has potential across a broad array of genetic diseases. To fully realize this potential, we have established and will continue to seek out innovative collaborations, licenses, and strategic alliances with pioneering companies and with leading academic and research institutions. Additionally, we have and will continue to pursue relationships that potentially allow us to accelerate our preclinical research and development efforts. These relationships will allow us to aggressively pursue our vision of maximizing the potential of base editing to provide life-long cures for patients suffering from serious diseases.
Ex vivo electroporation for hematologic diseases and oncology
Boston Children’s Hospital
In July 2020, we formed a strategic alliance with Boston Children’s Hospital, or Boston Children’s. Under the terms of the agreement, we will sponsor research programs at Boston Children’s to facilitate development of disease-specific therapies using our proprietary base editing technology. Boston Children’s will also serve as a clinical site to advance bench-to-bedside translation of our pipeline across certain therapeutic areas of interest, including programs in sickle cell disease and pediatric leukemias and exploration of new programs targeting other diseases.
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Magenta Therapeutics
In June 2020, we announced a non-exclusive research and clinical collaboration agreement with Magenta Therapeutics Inc., or Magenta, to evaluate the potential utility of MGTA-117, Magenta’s novel targeted antibody-drug conjugate for conditioning of patients with sickle cell disease and beta-thalassemia receiving our base editing therapies. Conditioning is a critical component necessary to prepare a patient’s body to receive the edited cells, which carry the corrected gene and must engraft in the patient’s bone marrow in order to be effective. Today’s conditioning regimens rely on nonspecific chemotherapy or radiation, which are associated with significant toxicities. MGTA-117 is designed to precisely target only hematopoietic stem and progenitor cells, to spare immune cells, and has shown high selectivity, potent efficacy, wide safety margins and broad tolerability in non-human primate models. MGTA-117 may be capable of clearing space in bone marrow to support long-term engraftment and rapid recovery in patients. Combining the precision of our base editing technology with the more targeted conditioning regimen enabled by MGTA-117 has the potential to further improve therapeutic outcomes for patients suffering from these severe diseases. We will be responsible for clinical trial costs related to development of our base editors when combined with MGTA-117, while Magenta will continue to be responsible for all other development costs of MGTA-117.
Non-Viral delivery for liver diseases
Verve Therapeutics
In April 2019, we entered into a collaboration and license agreement, or the Verve Agreement, with Verve Therapeutics Inc., or Verve, a company focused on developing genetic medicines to safely edit the genome of adults to permanently lower LDL cholesterol and triglyceride levels and thereby treat coronary heart disease. This collaboration allows us to more fully realize the potential of base editing in treating cardiovascular diseases, an area outside of our core focus where the Verve team has significant expertise. Under the terms of the agreement, Verve received exclusive access to our base editing technology, gene editing, and delivery technologies for human therapeutic applications against certain cardiovascular targets. In exchange, we received shares of Verve common stock. Additionally, we will receive milestone payments for certain clinical and regulatory events and we retain the option, after the completion of Phase 1 studies, to participate in future development and commercialization, and share 50 percent of U.S. profits and losses, for any product directed against these targets. Verve granted to us a non-exclusive license under know-how and patents controlled by Verve, and an interest in joint collaboration technology. Either party may owe the other party other milestone payments for certain clinical and regulatory events related to the delivery technology products. Royalty payments may become due by either party to the other based on the net sales of any commercialized delivery technology products under the agreement. Per the terms of our agreement with Verve, we can exercise our right to participate in the future development and commercialization of any programs at the completion of Phase 1 studies.
In January 2021, Verve announced it had selected VERVE-101 as its lead product to be developed initially for the treatment of heterozygous familial hypercholesterolemia, or HeFH, a potentially fatal genetic heart disease. Individuals with HeFH have a genetic mutation causing extremely high LDL-C levels in the blood. Over time, high LDL-C builds up in the heart’s arteries, resulting in reduced blood flow or blockage, and ultimately heart attack or stroke. Inactivation of the proprotein convertase subtilisin/kexin type 9, or PCSK9, gene has been shown to up-regulate LDL receptor expression, which leads to lower LDL-C levels. By making a single A-to-G change in the DNA genetic sequence of PCSK9, VERVE-101 aims to inactivate the target gene.
In January 2021, Verve also reported additional preclinical proof-of-concept data in non-human primates that demonstrated the successful use of ABEs to turn off PCSK9. Utilizing ABE technology licensed from us and an optimized guide RNA packaged in an engineered LNP, Verve announced data demonstrating that in vivo base editing of the PCSK9 gene in the liver of non-human primates resulted in durable and consistent lowering of blood LDL-C and blood PCSK9 protein levels following a single course of treatment. In its pre-clinical studies, Verve reported that a single intravenous infusion achieved a 59% reduction in blood LDL-C at two weeks, which was maintained at six months post treatment, and that LDL-C reduction over this time period averaged 61%. Verve also disclosed that during this same six-month time period, the average blood PCSK9 protein level was reduced by 89%. Verve further reported that the treatment was well tolerated with no adverse events reported during the study and that in studies of primary human hepatocytes, clear evidence of on-target editing was observed with no evidence of off-target editing.
Verve announced the closing of its initial public offering in June 2021, at which time we owned 546,970 shares of its common stock. Following the initial public offering, the equity securities are included in long-term investments on the consolidated balance sheet. We recorded the investment at fair value as of June 30, 2021 which resulted in of the recognition of $26.9 million of other income for the six months ended June 30, 2021. The value of this investment as of June 30, 2021 is $29.3 million.
Viral delivery for ophthalmology and CNS diseases
Institute of Molecular and Clinical Ophthalmology Basel
In July 2020, we announced a research collaboration with the Institute of Molecular and Clinical Ophthalmology Basel, or IOB. Founded in 2018 by a consortium that includes Novartis, the University Hospital of Basel and the University of Basel, IOB is a leader in basic and translational research aimed at treating impaired vision and blindness. Clinical scientists at IOB have also helped to develop better ways to measure how vision is impacted by Stargardt disease.
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Additionally, researchers at IOB have developed living models of the retina, known as organoids, which can be used to test novel therapies. Under the terms of the agreement, the companies will leverage IOB’s unique expertise in the field of ophthalmology along with our novel base editing technology to advance programs directed to the treatment of certain ocular diseases, including Stargardt disease.
Complement-Driven Diseases
Apellis Pharmaceuticals
In June 2021, we entered into a research collaboration agreement, or the Apellis Agreement, with Apellis Pharmaceuticals, Inc., or Apellis, focused on the use of certain of our base editing technology to discover new treatments for complement system-driven diseases. Under the terms of the Apellis Agreement, we will supply certain of our base editing technology and conduct preclinical research on up to six base editing programs that target specific genes within the complement system in various organs, including the eye, liver, and brain. Apellis will have exclusive rights to license each of the six programs and will assume responsibility for subsequent development. We may elect to enter into a 50-50 U.S. co-development and co-commercialization agreement with Apellis with respect to one program licensed under the collaboration.
As part of the collaboration, we are eligible to receive a total of $75.0 million in upfront and near-term milestones from Apellis, which is comprised of $50.0 million received upon signing and an additional $25.0 million payment on June 30, 2022, the one-year anniversary of the signing date of the Apellis Agreement. Following any exercise of the opt-in license rights for any of the six programs, we will be eligible to receive development, regulatory, and sales milestones from Apellis, as well as royalty payments on sales. The collaboration has an initial term of five years and may be extended up to two years on a per year and program-by-program basis. We have received the $50.0 million fee as of July 2021.
Manufacturing
To realize the full potential of base editors as a new class of medicines and to enable our parallel investment strategy in multiple delivery modalities, we are building customized and integrated capabilities across discovery, manufacturing, and preclinical and clinical development. Due to the critical importance of high-quality manufacturing and control of production timing and know-how, we have taken steps toward establishing our own manufacturing facility, which will provide us the flexibility to manufacture a variety of different product modalities. We believe this investment will maximize the value of our portfolio and capabilities, the probability of technical success of our programs, and the speed at which we can provide life-long cures to patients.
In August 2020, we entered into a lease agreement with Alexandria Real Estate Equities, Inc. to build a 100,000 square foot current cGMP compliant manufacturing facility in Research Triangle Park, North Carolina intended to support a broad range of clinical programs. We will invest up to $83.0 million over a five-year period and anticipate that the facility will be operational by the first quarter of 2023. The project will be facilitated, in part, by a Job Development Investment Grant approved by the North Carolina Economic Investment Committee, which authorizes potential reimbursements based on new tax revenues generated through the project. The facility will be designed to support manufacturing for our ex vivo cell therapy programs in hematology and oncology and in vivo non-viral delivery programs for liver diseases, with flexibility to support manufacturing of our viral delivery programs, and ultimately, scale-up to support potential commercial supply.
For our initial waves of clinical programs, we will use contract manufacturing organizations, or CMOs, with relevant manufacturing experience in genetic medicines.
Acquisitions
In February 2021, we entered into an Agreement and Plan of Merger, or the Guide Merger Agreement, to acquire Guide Therapeutics, Inc., or Guide. Pursuant to the Guide Merger Agreement, we paid Guide’s former stockholders and optionholders upfront consideration in an aggregate amount of $120.0 million, excluding customary purchase price adjustments, in shares of our common stock, based upon the volume-weighted average price of the common stock over the ten trading day period ending on February 19, 2021. In addition, Guide’s former stockholders and optionholders are eligible to receive up to an additional $100.0 million in technology milestone payments and $220.0 million in product milestone payments, payable in our common stock.
COVID-19
With the ongoing concern related to the COVID-19 pandemic in the year ended December 31, 2020 and the six months ended June 30, 2021, we have maintained and expanded the business continuity plans to address and mitigate the impact of the COVID-19 pandemic on our business. In March 2020, to protect the health of our employees, and their families and communities, we restricted access to our offices to personnel who performed critical activities that must be completed on-site, limited the number of such personnel that can be present at our facilities at any one time, and requested that most of our employees work remotely. In May 2020, as certain states eased restrictions, we established new protocols to better allow our full laboratory staff access to our facilities. These protocols included several shifts working over a seven-day week protocol. In June 2021, as states continued to ease restrictions, we started to allow for all of our employees to work on-site at our facilities, with fewer restrictions, particularly for vaccinated employees. We expect to
26
continue incurring additional costs to ensure we adhere to the guidelines instituted by the Centers for Disease Control and to provide a safe working environment to our onsite employees.
The extent to which the COVID-19 pandemic impacts our business, our corporate development objectives, results of operations and financial condition, including the value of and market for our common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the duration, scope and severity of the pandemic, the duration and extent of travel restrictions and social distancing in the United States and other countries, business closures and business disruptions, the effectiveness of actions taken in the United States and other countries to contain and treat the disease, periodic spikes in infection rates, new strains of the virus that cause outbreaks of COVID-19, and the broad availability of effective vaccines. Disruptions to the global economy, disruption of global healthcare systems, and other significant impacts of the COVID-19 pandemic could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
While the COVID-19 pandemic did not significantly impact our business or results of operations during the six months ended June 30, 2021, the length and extent of the pandemic, its consequences, and containment efforts will determine the future impact on our operations and financial condition.
Critical accounting policies and significant judgements
Our critical accounting policies are those policies which require the most significant judgments and estimates in the preparation of our condensed consolidated financial statements. We have determined that our most critical accounting policies are those relating to stock-based compensation, variable interest entities, fair value measurements, and leases. There have been no significant changes to our existing critical accounting policies and significant accounting policies discussed in the 2020 Form 10-K, except as discussed below.
Asset Acquisitions
In 2018, we adopted ASU 2017-01, Business Combinations, or ASU 2017-01, which clarified the definition of a business. We measure and recognize asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets, which includes transaction costs, and the consideration is allocated to the items acquired based on a relative fair value methodology. Goodwill is not recognized in asset acquisitions. In an asset acquisition, the cost allocated to acquire in-process research and development with no alternative future use is charged to research and development expense at the acquisition date.
At the time of acquisition, we determine if a transaction should be accounted for as a business combination or acquisition of assets.
Contingent Consideration Liabilities
We may be required to make milestone payments to the former stockholders and optionholders of Guide in the form of our common stock based on the achievement of certain product and technology milestones. The payments are accounted for under ASC 480, Distinguishing Liabilities from Equity. These contingent consideration liabilities are carried at fair value which was estimated by applying a probability-based model, which utilized inputs that were unobservable in the market. The estimated fair value of contingent consideration liabilities, initially measured and recorded on the acquisition date, are considered to be a Level 3 measurement and are reviewed quarterly, or whenever events or circumstances occur that indicate a change in fair value. The contingent consideration liabilities are recorded at fair value at the end of each reporting period with changes in estimated fair values recorded in other income (expense) in the condensed consolidated statements of operations.
The estimated fair value is determined based on probability adjusted discounted cash flow models that include significant estimates and assumptions pertaining to technology and product development. Significant changes in any of the probabilities of success would result in a significantly higher or lower fair value measurement. Significant changes in the probabilities as to the periods in which milestones will be achieved would result in a significantly lower or higher fair value measurement.
Financial operations overview
General
We were incorporated on January 25, 2017 and commenced operations shortly thereafter. Since our inception, we have devoted substantially all of our resources to building our base editing platform and advancing development of our portfolio of programs, establishing and protecting our intellectual property, conducting research and development activities, organizing and staffing our company, business planning, raising capital and providing general and administrative support for these operations. To date, we have financed our operations primarily through the sales of our redeemable convertible preferred stock and proceeds from offerings of our common stock.
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 from product sales and do not expect to generate revenue from the sale of our products for the foreseeable future. Since inception we have incurred significant operating losses. Our net losses for the six months ended June 30, 2021 and 2020 were $277.8 million and $64.7 million, respectively. As of June 30, 2021, we had an accumulated deficit of $675.4 million. 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
27
clinical development; build and operate our cGMP, facility in North Carolina, further develop our base editing platform; continue to make investments in delivery technology for our base editors, including in connection with our recent acquisition of Guide; conduct research activities as we seek to discover and develop additional product candidates; maintain, expand, enforce, defend and protect our intellectual property portfolio; and continue to hire research and development, clinical and commercial personnel. In addition, we expect to continue to incur additional costs associated with operating as a public company and implementing controls over financing reporting.
As a result of these anticipated expenditures, we will need additional financing to support our continuing operations and pursue our growth 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, collaborations, strategic alliances, and licensing arrangements. We may be unable to raise additional funds or enter into such other agreements when needed on favorable terms or at all. Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We can give no assurance that we will be able to secure such additional sources of funds to support our operations, or, if such funds are available to us, that such additional funding will be sufficient to meet our needs.
Research and development expenses
Research and development expenses consist of costs incurred in performing research and development activities, which include:
We expense research and development costs as incurred. 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 product platform and proof-of-concept studies that are not necessarily allocable to a specific target.
We expect that our research and development expenses will increase substantially in connection with our planned preclinical and future clinical development activities.
General and administrative expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our administrative functions. General and administrative expenses also include 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 continue to incur increased costs associated with being a public company and implementing controls over financial reporting, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with the requirements of the Nasdaq Global Select Market and SEC , director and officer insurance costs, and investor and public relations costs.
Other income and expenses
Other income and expenses consist of the following items:
28
Results of operations
Comparison of the three months ended June 30, 2021 and 2020
The following table summarizes our results of operations (in thousands):
|
|
Three Months Ended June 30, |
|
|
|
|
||||||
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|||
License revenue |
|
$ |
6 |
|
|
$ |
6 |
|
|
$ |
— |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
|
45,577 |
|
|
|
19,354 |
|
|
|
26,223 |
|
General and administrative |
|
|
13,403 |
|
|
|
6,937 |
|
|
|
6,466 |
|
Total operating expenses |
|
|
58,980 |
|
|
|
26,291 |
|
|
|
32,689 |
|
Loss from operations |
|
|
(58,974 |
) |
|
|
(26,285 |
) |
|
|
(32,689 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|||
Change in fair value of derivative liabilities |
|
|
(42,300 |
) |
|
|
(8,700 |
) |
|
|
(33,600 |
) |
Change in fair value of long-term investments |
|
|
25,814 |
|
|
|
517 |
|
|
|
25,297 |
|
Change in fair value of contingent consideration liabilities |
|
|
(741 |
) |
|
|
— |
|
|
|
(741 |
) |
Interest and other income (expense), net |
|
|
(52 |
) |
|
|
250 |
|
|
|
(302 |
) |
Total other income (expense) |
|
|
(17,279 |
) |
|
|
(7,933 |
) |
|
|
(9,346 |
) |
Net loss |
|
$ |
(76,253 |
) |
|
$ |
(34,218 |
) |
|
$ |
(42,035 |
) |
License revenue
License revenue was approximately $6.0 thousand for the three months ended June 30, 2021 and 2020. License revenue represents revenue recorded under the Verve Agreement.
Research and development expenses
Research and development expenses were $45.6 million and $19.4 million for the three months ended June 30, 2021 and 2020, respectively. The increase of $26.2 million was primarily due to the following:
Research and development expenses will continue to increase as we continue our current research programs, initiate new research programs, continue the preclinical development of our product candidates and conduct any future preclinical studies and clinical trials for any of our product candidates.
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General and administrative expenses
General and administrative expenses were $13.4 million and $6.9 million for the three months ended June 30, 2021 and 2020, respectively. The increase of $6.5 million was primarily due to the following:
Change in fair value of derivative liabilities
During the three months ended June 30, 2021, we recorded $42.3 million of expense related to the change in fair value of success payment liabilities as compared to $8.7 million expense for the three months ended June 30, 2020 due to increases in the price of our common stock. A portion of the success payment obligations were paid in June 2021; the remaining success payment obligations are still outstanding as of June 30, 2021 and will continue to be revalued at each reporting period.
Change in fair value of long-term investments
During the three months ended June 30, 2021, we recorded other income of $25.8 million as a result of the increase in the value of Verve's common stock.
Change in contingent consideration liabilities
During the three months ended June 30, 2021, we recorded $0.7 million of expense related to the change in fair value of the Guide technology and product contingent consideration liabilities.
Interest and other income (expense), net
The decrease in interest and other income (expense), net was primarily due to a decrease in interest income driven by decreased market rates.
Comparison of the six months ended June 30, 2021 and 2020
The following table summarizes our results of operations, together with the change in dollars (in thousands):
|
|
Six Months Ended June 30, |
|
|
|
|
||||||
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|||
License revenue |
|
$ |
12 |
|
|
$ |
12 |
|
|
$ |
— |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
|
235,683 |
|
|
|
40,903 |
|
|
|
194,780 |
|
General and administrative |
|
|
23,676 |
|
|
|
13,749 |
|
|
|
9,927 |
|
Total operating expenses |
|
|
259,359 |
|
|
|
54,652 |
|
|
|
204,707 |
|
Loss from operations |
|
|
(259,347 |
) |
|
|
(54,640 |
) |
|
|
(204,707 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|||
Change in fair value of derivative liabilities |
|
|
(44,200 |
) |
|
|
(11,400 |
) |
|
|
(32,800 |
) |
Change in fair value of long-term investments |
|
|
26,852 |
|
|
|
517 |
|
|
|
26,335 |
|
Change in fair value of contingent consideration liabilities |
|
|
(1,046 |
) |
|
|
— |
|
|
|
(1,046 |
) |
Interest and other income (expense), net |
|
|
(72 |
) |
|
|
847 |
|
|
|
(919 |
) |
Total other income (expense) |
|
|
(18,466 |
) |
|
|
(10,036 |
) |
|
|
(8,430 |
) |
Net loss |
|
$ |
(277,813 |
) |
|
$ |
(64,676 |
) |
|
$ |
(213,137 |
) |
License revenue
License revenue was approximately $12.0 thousand for the six months ended June 30, 2021 and June 30, 2020. License revenue represents Verve license revenue recorded under the Verve Agreement.
30
Research and development expenses
Research and development expenses were $235.7 million and $40.9 million for the six months ended June 30, 2021 and 2020, respectively. The increase of $194.8 million was primarily due to the following:
Research and development expenses will continue to increase as we continue our current research programs, initiate new research programs, continue the preclinical development of our product candidates and conduct any future preclinical studies and clinical trials for any of our product candidates.
General and administrative expenses
General and administrative expenses were $23.7 million and $13.7 million for the six months ended June 30, 2021 and 2020, respectively. The increase of $9.9 million was primarily due to the following:
Change in fair value of derivative liabilities
During the six months ended June 30, 2021, we recorded $44.2 million of expense related to the change in fair value of success payment liabilities as compared to $11.4 million expense for the six months ended June 30, 2020 due to increases in the price of our common stock. A portion of the success payments was paid in shares in June 2021; the remaining success payment obligations are still outstanding as of June 30, 2021 and will continue to be revalued at each reporting period.
Change in fair value of long-term investments
During the six months ended June 30, 2021 we recorded income of $26.9 million as a result of the increase in the value of Verve's common stock.
Change in contingent consideration liabilities
During the six months ended June 30, 2021, we recorded $1.0 million of expense related to the change in fair value of the Guide technology and product contingent consideration liabilities as a result of the change in assumptions for the achievement of the milestones.
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Interest and other income (expense), net
The decrease in interest and other income (expense), net was primarily due to a decrease in interest income driven by decreased market rates.
Liquidity and capital resources
Since our inception in January 2017, we have not generated any revenue from product sales, have generated only limited license revenue from the Verve Agreement, and have incurred significant operating losses and negative cash flows from our operations. We expect to incur significant expenses and operating losses for the foreseeable future as we advance the preclinical and, if successful, the clinical development of our product candidates. In February 2020, we completed our IPO in which we issued and sold 12,176,471 shares of our common stock, including 1,588,235 shares of common stock sold pursuant to the underwriters’ full exercise of their option to purchase additional shares, at a public offering price of $17.00 per share. We received net proceeds from our IPO of $188.3 million, after deducting underwriting discounts and offering expenses payable by us. In October 2020, we issued and sold 5,750,000 shares of our common stock, including 750,000 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $23.50 per share, for aggregate gross proceeds of $135.1 million. We received approximately $126.6 million in net proceeds after deducting applicable underwriting discounts and offering expenses. In January 2021, we issued and sold 2,795,700 shares of our common stock in a private placement at an offering price of $93.00 per share for aggregate gross proceeds of $260.0 million. We received $252.0 million in net proceeds after deducting offering expenses payable by us. To date, we have funded our operations primarily through equity offerings.
In April 2021, we filed a universal shelf registration statement on Form S-3 with the SEC, or the 2021 Shelf, to register for sale an indeterminate amount of our common stock, preferred stock, debt securities, warrants and/or units in one or more offerings, which became effective upon filing with the SEC (File No. 333-254946).
In April 2021, we entered into an at the market, or ATM, sales agreement, or the Sales Agreement, with Jefferies LLC, or Jefferies, pursuant to which we were entitled to offer and sell, from time to time at prevailing market prices, shares of our common stock having aggregate gross proceeds of up to $300.0 million. We agreed to pay Jefferies a commission of up to 3.0% of the aggregate gross sale proceeds of any shares sold Jefferies under the Sales Agreement. As of June 30, 2021, we have sold 2,908,009 shares of our common stock under the ATM at an average price of $103.16 per share for aggregate gross proceeds of $300.0 million, before deducting commissions and offering expenses payable by us. Of the 2,908,009 shares, 1,761,285 were issued and gross proceeds of $163.2 million were received in June 2021, and 1,146,724 were issued and gross proceeds of $136.8 million were received in July 2021. Through July 2021, we have received approximately $290.5 million in net proceeds after deducting commissions and offering expenses payable by us.
In July 2021, we and Jefferies entered into an amendment to the Sales Agreement, or the Amended Sales Agreement, to provide for an increase in the aggregate offering amount under the Sales Agreement, such that as of July 7, 2021, we may offer and sell shares of our common stock having an aggregate offering price of an additional $500.0 million. We sold 108,617 shares of our common stock under this agreement subsequent to June 30, 2021 through August 3, 2021 for aggregate gross cash proceeds of $11.0 million, before deducting commission fees and offering expenses payable by us.
As of June 30, 2021, we had $615.3 million in cash, cash equivalents, and marketable securities.
We are required to make success payments to Harvard and Broad Institute based on increases in the per share fair market value of our Series A-1 Preferred Stock and Series A-2 Preferred Stock or, subsequent to our IPO, our common stock. The amounts due may be settled in cash or shares of our common stock, at our discretion. In May 2021, the first success payment measurements occurred and success payments to Harvard and Broad Institute were calculated to be $15.0 million and $15.0 million, respectively. We elected to make each payment in shares of our common stock, and issued 174,825 shares to each of Harvard and Broad Institute to settle these liabilities in June 2021.
We have not yet commercialized any of our product candidates, and we do not expect to generate revenue from the sale of our products candidates for the foreseeable future. We anticipate that we may need to raise additional capital in order to continue to fund our research and development, including our planned preclinical studies and clinical trials, building, maintaining and operating a commercial-scale cGMP manufacturing facility, and new product development, as well as to fund our general operations. As and if necessary, we will seek to raise these additional funds through various potential sources, such as equity and debt financings or through corporate collaboration and license agreements. Especially in light of the COVID-19 pandemic, we can give no assurances that we will be able to secure such additional sources of funds to support our operations, or, if such funds are available to us, that such additional financing will be sufficient to meet our needs. For a more detailed discussion of risks related to COVID-19, please see Part I, Item 1A, Risk Factors—Risks related to our relationships with third parties, included in our 2020 Form 10-K.
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Cash flows
The following table summarizes our sources and uses of cash (in thousands):
|
|
Six Months Ended June 30, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Net cash used in operating activities |
|
$ |
(71,105 |
) |
|
$ |
(50,230 |
) |
Net cash used in investing activities |
|
|
(292,763 |
) |
|
|
(53,924 |
) |
Net cash provided by financing activities |
|
|
413,712 |
|
|
|
192,235 |
|
Net change in cash, cash equivalents and restricted cash |
|
$ |
49,844 |
|
|
$ |
88,081 |
|
Operating activities
Net cash used in operating activities for the six months ended June 30, 2021 was $71.1 million, consisting primarily of our net loss of $277.8 million, an increase in the fair value of a non-controlling equity investment of $26.9 million and an increase in prepaid expenses and other current assets of $3.1 million, offset by an increase in operating lease liabilities of $11.9 million and an increase in accounts payable and accrued expenses of $2.0 million, also offset by noncash charges consisting primarily of in-process research and development expense of $155.0 million, fair value of derivative liabilities of $44.2 million, stock-based compensation expense of $15.1 million, a change in operating lease ROU assets of $4.6 million, depreciation and amortization expense of $3.1 million, and change in fair value of contingent consideration liabilities of $1.0 million.
Net cash used in operating activities for the six months ended June 30, 2020 was $50.2 million, consisting primarily of our net loss of $64.7 million, an increase in prepaid expenses and other current assets of $4.2 million, a decrease in operating lease liabilities of $1.8 million, offset by noncash charges consisting primarily of stock-based compensation expense of $5.6 million, change in fair value of derivative liabilities of $11.4 million, depreciation expense of $2.2 million, and change in operating lease ROU assets of $2.0 million.
Investing activities
For the six months ended June 30, 2021, cash used in investing activities was primarily the net purchases of marketable securities of $265.7 million, and purchases of property and equipment of $27.7 million. We also received $0.6 million in net cash from our acquisition of Guide, after the payment of acquisition costs.
For the six months ended June 30, 2020, cash used in investing activities was primarily the net purchases of marketable securities of $47.8 million, and purchases of property and equipment of $5.4 million.
Financing activities
Net cash provided by financing activities for the six months ended June 30, 2021 consisted primarily of proceeds from our private placement offering of $260.0 million, proceeds from our ATM Sales Agreement of $158.3 million and proceeds from the exercise of stock options of $5.0 million, offset in part by the payment of equity offering costs of $8.5 million and repayments of equipment financing liabilities of $1.0 million.
Net cash provided by financing activities for the six months ended June 30, 2020 consisted primarily of proceeds from our IPO of $192.5 million, net of underwriting discounts, and proceeds of $1.6 million from equipment financing, and proceeds from the exercise of stock options of $0.5 million, offset by the payment of equity offering costs of $1.7 million, and repayments of equipment financing liabilities of $0.7 million.
Funding requirements
Our operating expenses are expected to increase substantially as we continue to advance our portfolio of programs.
Specifically, our expenses will increase if and as we:
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We expect that our cash, cash equivalents and marketable securities at June 30, 2021 will enable us to fund our current and planned operating expenses and capital expenditures for at least the next 12 months. We have based these estimates on assumptions that may prove to be imprecise, and we may exhaust our available capital resources sooner that we currently expect. Because of the numerous risks and uncertainties associated with the development our programs, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates.
Our future funding requirements will depend on many factors including:
A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Further, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.
Until such time, if ever, as we can generate substantial revenues from the sale of our product candidates, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements. We do not have any committed external source of funds. Debt financing, if available, may involve agreements that include restrictive covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. In addition, debt financings would result in increased fixed payment obligations.
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 we may have 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. We can give no assurance that we will be able to secure such additional sources of funds to support our operations, or, if such funds are available to us, that such additional funding will be sufficient to meet our needs.
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Contractual obligations
We enter into contracts in the normal course of business with contract research organizations and other vendors to assist in the performance of our research and development activities and other services and products for operating purposes. These contracts generally provide for termination on notice, and therefore are cancelable contracts and not included in the table of contractual obligations and commitments. During the six months ended June 30, 2021, 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 the 2020 Form 10-K with the exception of the commitments as described below.
During the six months ended June 30, 2021, we entered into the second phase of our April 2019 lease for office and laboratory space to be built. The minimum of undiscounted lease payments due under the second phase of this lease is $42.7 million.
In May 2021, the first success payment measurements under the Harvard License Agreement and Broad License Agreement occurred and success payments to Harvard and Broad Institute were calculated to be $15.0 million and $15.0 million, respectively. We elected to make each payment in shares of our common stock, and issued 174,825 shares of our common stock to each of Harvard and Broad Institute to settle these liabilities in June 2021.
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 the applicable regulations of the SEC.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk related to changes in interest rates. As of June 30, 2021, we had cash, cash equivalents, and marketable securities of $615.3 million, which consisted of cash, money market funds, commercial paper and corporate notes, U.S. Treasury securities and government securities. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term marketable securities. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, we believe an immediate 10% change in interest rates would not have a material effect on the fair market value of our investment portfolio. We have the ability to hold our investments until maturity, and therefore, we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a change in market interest rates on our investment portfolio.
We are not currently exposed to significant market risk related to changes in foreign currency exchange rates; however, we do contract with vendors that are located outside of the United States and may be subject to fluctuations in foreign currency exchange rates. We may enter into additional contracts with vendors located outside of the United States in the future, which may increase our foreign currency exchange risk.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on the evaluation of our disclosure controls and procedures as of June 30, 2021, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
We continuously seek to improve the efficiency and effectiveness of our internal controls. This results in refinements to processes throughout our company. There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are not currently subject to any material legal proceedings.
Item 1A. Risk Factors.
Investing in our common stock involves a high degree of risk. For a detailed discussion of the risks that affect our business, please refer to the section titled “Risk Factor Summary” and “Item 1A. Risk Factors” in the 2020 Form 10-K and “Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021. The COVID-19 pandemic may also have the effect of heightening many of the other risks described in the section titled “Item 1A. Risk Factors” in each of the 2020 Form 10-K and our quarterly reports, such as risks related to our need to raise additional funding, fluctuation of our quarterly financial results, and our ability to obtain regulatory approvals for our product candidates.
The risk factors set forth below represent new risk factors or those containing changes to the similarly titled risk factor included in “Item 1.A Risk Factors” of the 2020 Form 10-K.
If any of the product candidates we may develop, or the delivery modes we rely on to administer them, cause serious adverse events, undesirable side effects, or unexpected characteristics, such events, side effects or characteristics could delay or prevent regulatory approval of the product candidates, limit the commercial potential, or result in significant negative consequences following any potential marketing approval.
We have not evaluated any product candidates in human clinical trials. Moreover, there have been only a limited number of clinical trials involving the use of gene editing technologies and none involving base editing technology similar to our technology. It is impossible to predict when or if any product candidates we may develop will prove safe in humans. In the genetic medicine field, there have been several significant adverse events from gene therapy treatments in the past, including reported cases of leukemia, serious blood disorders and death. There can be no assurance that base editing technologies, or components of our product candidates or methods of delivery, will not cause undesirable side effects, as improper editing of a patient’s DNA and other effects could lead to lymphoma, leukemia, or other cancers, other serious conditions or syndromes or other aberrantly functioning cells.
A significant risk in any base editing product candidate is that “off-target” edits may occur, which could cause serious adverse events, undesirable side effects or unexpected characteristics. For example, Erwei Zuo et al. reported that cytosine base editors generated substantial off-target edits, that is, edits in unintended locations on the DNA, when tested in mouse embryos. Such unintended edits are referred to as “spurious deamination.” We cannot be certain that off-target editing will not occur in any of our planned or future clinical studies, and the lack of observed side effects in preclinical studies does not guarantee that such side effects will not occur in human clinical studies. We have developed assays that can detect off-target edits, even when such edits occur at very low frequencies. Using these assays, we have observed off-target edits in our base editing product candidates. As the sensitivity of these assays increases, it is possible that we will continue to detect more such off-target edits. While we do not believe that the off-target edits we have observed to date have had a material adverse impact on the safety or benefit of our product candidates, if, in the future, we detect off-target edits for a product candidate that negatively impact safety or efficacy, our ability to develop the product candidate as a therapeutic could be adversely affected. There is also the potential risk of delayed adverse events following exposure to base editing therapy due to the permanence of edits to DNA or due to other components of product candidates used to carry the genetic material. Further, because base editing makes a permanent change, the therapy cannot be withdrawn, even after a side effect is observed. In addition, Rees et al. and Grunewald et al. have reported that the deaminases we currently use in our C base editors and our A base editors for use in DNA base editing also cause unintended mutations in RNA for as long as the editor is present in the cell.
Although we and others have demonstrated the ability to engineer base editors to improve the specificity of their edits in a laboratory setting, we cannot be sure that our engineering efforts will be effective in any product candidates that we may develop. For example, we might not be able to engineer an editor to make the desired change or a by-stander edit could diminish the effectiveness of an edit that we make.
In certain rare DNA sequence contexts, where more than one edit occurs on a contiguous piece of DNA, the repair of two or more nicks may lead to a deletion. For example, in our BEAM-101 program, where we are simultaneously editing two positions in the promoters of the HBG2 and HBG1 genes, which share >99% sequence identity and are contiguous due to a gene duplication event, we observed a 5 kb deletion in HBG2 at single digit percentages in animal studies. We do not believe that such a deletion represents a safety or efficacy concern because healthy individuals, including those with hereditary persistence of fetal hemoglobin, with naturally-occurring deletions at this locus, including some as large as 13 kb, have been documented. However, if we were to observe deletions that have a negative effect on HbF upregulation or on other important cellular attributes, our ability to develop BEAM-101 as a therapeutic could be adversely affected.
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In certain of our programs, we plan to use LNPs to deliver our base editors. LNPs have been shown to induce oxidative stress in the liver at certain doses, as well as initiate systemic inflammatory responses that can be fatal in some cases. While we aim to continue to optimize our LNPs, there can be no assurance that our LNPs will not have undesired effects. Our LNPs could contribute, in whole or in part, to one or more of the following: immune reactions; infusion reactions; complement reactions; opsonization reactions; antibody reactions including IgA, IgM, IgE or IgG or some combination thereof; or reactions to the PEG from some lipids or PEG otherwise associated with the LNP. Certain aspects of our investigational medicines may induce immune reactions from either the mRNA or the lipid as well as adverse reactions within liver pathways or degradation of the mRNA or the LNP, any of which could lead to significant adverse events in one or more of our future clinical trials. Many of these types of side effects have been seen for legacy LNPs. There may be uncertainty as to the underlying cause of any such adverse event, which would make it difficult to accurately predict side effects in future clinical trials and would result in significant delays in our programs.
Our viral vectors including AAV or lentiviruses, which are relatively new approaches used for disease treatment, also have known side effects, and for which additional risks could develop in the future. In past clinical trials that were conducted by others with non-AAV vectors, several significant side effects were caused by gene therapy treatments, including reported cases of leukemia and death. Other potential side effects could include an immunologic reaction and insertional oncogenesis, which is the process whereby the insertion of a functional gene near a gene that is important in cell growth or division results in uncontrolled cell division, which could potentially enhance the risk of malignant transformation. If the vectors we use demonstrate a similar side effect, or other adverse events, we may be required to halt or delay further clinical development of any potential product candidates. Furthermore, the FDA has stated that lentiviral vectors possess characteristics that may pose high risks of delayed adverse events. Such delayed adverse events may occur in other viral vectors, including AAV vectors, at a lower rate.
In addition to side effects and adverse events caused by our product candidates, the conditioning administration process or related procedures which may be used in our electroporation pipeline also can cause adverse side effects and adverse events. Additionally, we have and may continue to collaborate with third parties to develop alternative conditioning regimes. We cannot predict if alternative conditioning regimes will be compatible with our product candidates. If in the future we are unable to demonstrate that such adverse events were caused by the conditioning regimens used, or administration process or related procedure, the FDA, the European Commission, EMA or other regulatory authorities could order us to cease further development of, or deny or limit approval of, our product candidates for any or all target indications. Even if we are able to demonstrate that adverse events are not related to the drug product or the administration of such drug product, such occurrences could affect patient recruitment, the ability of enrolled patients to complete the clinical trial, or the commercial viability of any product candidates that obtain regulatory approval.
If any product candidates we develop are associated with serious adverse events, undesirable side effects, or unexpected characteristics, we may need to abandon their development or limit development to certain uses or subpopulations in which the serious adverse events, undesirable side effects or other characteristics are less prevalent, less severe, or more acceptable from a risk-benefit perspective, any of which would have a material adverse effect on our business, financial condition, results of operations, and prospects. Many product candidates that initially showed promise in early stage testing for treating cancer or other diseases have later been found to cause side effects that prevented further clinical development of the product candidates.
If in the future we are unable to demonstrate that any of the above adverse events were caused by factors other than our product candidate, the FDA, the EMA or other regulatory authorities could order us to cease further development of, or deny approval of, any product candidates we are able to develop for any or all targeted indications. Even if we are able to demonstrate that all future serious adverse events are not product-related, such occurrences could affect patient recruitment or the ability of enrolled patients to complete the trial. Moreover, if we elect, or are required, to delay, suspend or terminate any clinical trial of any product candidate we may develop, the commercial prospects of such product candidates may be harmed and our ability to generate product revenues from any of these product candidates may be delayed or eliminated. Any of these occurrences may harm our ability to identify and develop product candidates, and may harm our business, financial condition, result of operations, and prospects significantly.
Additionally, if we successfully develop a product candidate and it receives marketing approval, the FDA could require us to adopt a Risk Evaluation and Mitigation Strategy, or REMS, to ensure that the benefits of treatment with such product candidate outweighs the risks for each potential patient, which may include, among other things, a medication guide outlining the risks of the product for distribution to patients, a communication plan to health care practitioners, extensive patient monitoring, or distribution systems and processes that are highly controlled, restrictive, and more costly than what is typical for the industry. Furthermore, if we or others later identify undesirable side effects caused by any product candidate that we develop, several potentially significant negative consequences could result, including:
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Any of these events could prevent us from achieving or maintaining market acceptance of any product candidates we may identify and develop and could have a material adverse effect on our business, financial condition, and results of operations.
Our owned patent applications and in-licensed patents and patent applications and other intellectual property may be subject to priority disputes or to inventorship disputes and similar proceedings. If we or our licensors are unsuccessful in any of these proceedings, we may be required to obtain licenses from third parties, which may not be available on commercially reasonable terms or at all, or to cease the development, manufacture, and commercialization of one or more of the product candidates we may develop, which could have a material adverse impact on our business.
Although we have an option to exclusively license certain patents and patent applications directed to Cas9 and Cas12a from Editas, who in turn has licensed such patents from various academic institutions including the Broad Institute, we do not currently have a license to such patents and patent applications. Certain of the U.S. patents and one U.S. patent application to which we hold an option are co-owned by the Broad Institute and MIT, and in some cases co-owned by the Broad Institute, MIT, and Harvard, which we refer to together as the Boston Licensing Parties, and were involved in U.S. interference No. 106,048 with one U.S. patent application co-owned by the University of California, the University of Vienna, and Emmanuelle Charpentier, which we refer to together as the University of California. On September 10, 2018, the Court of Appeals for the Federal Circuit, or the CAFC, affirmed the Patent Trial and Appeal Board of the USPTO’s, or PTAB’s, holding that there was no interference-in-fact. An interference is a proceeding within the USPTO to determine priority of invention of the subject matter of patent claims filed by different parties.
On June 24, 2019, the PTAB declared an interference (U.S. Interference No. 106,115) between 10 U.S. patent applications ((U.S. Serial Nos. 15/947,680; 15/947,700; 15/947,718; 15/981,807; 15/981,808; 15/981,809; 16/136,159; 16/136,165; 16/136,168; and 16/136,175) that are co-owned by the University of California, and 13 U.S. patents and one U.S. patent application (U.S. Patent Nos. 8,697,359; 8,771,945; 8,795,965; 8,865,406; 8,871,445; 8,889,356; 8,895,308; 8,906,616; 8,932,814; 8,945,839; 8,993,233; 8,999,641; and 9,840,713, and U.S. Serial No. 14/704,551)) that are co-owned by the Boston Licensing Parties, which we have an option to under the Editas License Agreement. In the declared interference, the University of California has been designated as the junior party and the Boston Licensing Parties have been designated as the senior party.
As a result of the declaration of interference, an adversarial proceeding in the USPTO before the PTAB has been initiated, which is declared to ultimately determine priority, specifically and which party was first to invent the claimed subject matter. Following oral arguments on the parties’ motions in May 2020, the PTAB issued a decision in September 2020, which included, in part, denying the Boston Licensing Parties motion that the University of California should be estopped in the current proceeding by the PTAB’s decision in the prior interference proceeding between the parties (No. 106,048), finding that the Boston Licensing Parties remain the senior party in the proceeding, and holding that the interference will proceed to the second, priority phase. An interference is typically divided into two phases. The first phase is referred to as the motions or preliminary motions phase while the second is referred to as the priority phase. In the first phase, each party may raise issues including but not limited to those relating to the patentability of a party’s claims based on prior art, written description, and enablement. A party also may seek an earlier priority benefit or may challenge whether the declaration of interference was proper in the first place. Priority, or a determination of who first invented the commonly claimed invention, is determined in the second phase of an interference. Although we cannot predict with any certainty how long the priority phase will actually take, it may take approximately a year or longer before a decision is made by the PTAB. The 10 University of California patent applications and the 13 U.S. patents and one U.S. patent application co-owned by the Boston Licensing Parties involved in U.S. Interference No. 106,115 generally relate to CRISPR/Cas9 systems or eukaryotic cells comprising CRISPR/Cas9 systems having fused or covalently linked RNA and the use thereof in eukaryotic cells. There can be no assurance that the U.S. interference will be resolved in favor of the Boston Licensing Parties. If the U.S. interference resolves in favor of University of California, or if the Boston Licensing Parties’ patents and patent application are narrowed, invalidated, or held unenforceable, we may lose the ability to license the optioned patents and patent application and our ability to commercialize our product candidates may be adversely affected if we cannot obtain a license to relevant third party patents that cover our product candidates. We may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be nonexclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. If we are unable to obtain a necessary license to a third-party patent on commercially reasonable terms, we may be unable to commercialize our base editing platform technology or product candidates or such commercialization efforts may be significantly delayed, which could in turn significantly harm our business.
We or our licensors may be subject to similar interferences in the future with the same risks as described above. For example, on December 14, 2020, the PTAB declared an interference (U.S. Interference No. 106,126) between 14 U.S. patents and two U.S. patent applications (U.S. Patent Nos. 8,697,359; 8,771,945; 8,795,965; 8,865,406; 8,871,445; 8,889,356; 8,889,418; 8,895,308; 8,906,616; 8,932,814; 8,945,839; 8,993,233; 8,999,641; and 9,840,713, and U.S. Serial Nos. 14/704,551 and 15/330,876) that are co-owned by the Boston Licensing Parties, which we have an option to under the Editas License Agreement, and one U.S. patent application (U.S. Serial Nos. 14/685,510) that is owned by Toolgen, Inc, or Toolgen. In the declared interference, the Boston Licensing Parties have been designated as the junior party and Toolgen has been designated as the senior party. In March 2021, the PTAB issued an order on preliminary motions, granting, in part, and denying, in part, certain motions proposed by the Boston Licensing Parties and Toolgen.
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Although we cannot predict with any certainty how long the preliminary motions phase will actually take, it may take approximately a year or longer before a decision on the motions is made by the PTAB. The 14 U.S. patents and two U.S. patent applications co-owned by the Boston Licensing Parties involved in U.S. Interference No. 106,126 generally relate to CRISPR/Cas9 systems or eukaryotic cells comprising CRISPR/Cas9 systems having fused or covalently linked RNA and the use thereof in eukaryotic cells.
On June 21, 2021, the PTAB declared an interference (U.S. Interference No. 106,133) between the same 14 U.S. patents and two U.S. patent applications (U.S. Patent Nos. 8,697,359; 8,771,945; 8,795,965; 8,865,406; 8,871,445; 8,889,356; 8,889,418; 8,895,308; 8,906,616; 8,932,814; 8,945,839; 8,993,233; 8,999,641; and 9,840,713, and U.S. Serial Nos. 14/704,551 and 15/330,876, co-owned by the Boston Licensing Parties) as named in the interference with Toolgen, and one U.S. patent application (U.S. Serial Nos. 15/456,204) that is owned by Sigma-Aldrich Co., LLC, or Sigma-Aldrich. In the declared interference, the Boston Licensing Parties have been designated as the junior party and Sigma-Aldrich has been designated as the senior party.
We or our licensors may also be subject to claims that former employees, collaborators, or other third parties have an interest in our owned patent applications or in-licensed patents or patent applications or other intellectual property as an inventor or co-inventor. If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such patent applications, such co-owners may be able to license their rights to other third parties, including our competitors. In addition, we may need the cooperation of any such co-owners to enforce any patents that issue from such patent applications against third parties, and such cooperation may not be provided to us.
If we or our licensors are unsuccessful in any interference proceedings or other priority, validity (including any patent oppositions), or inventorship disputes to which we or they are subject, we may lose valuable intellectual property rights through the loss of one or more of our owned, licensed, or optioned patents, or such patent claims may be narrowed, invalidated, or held unenforceable, or through loss of exclusive ownership of or the exclusive right to use our owned or in-licensed patents. In the event of loss of patent rights as a result of any of these disputes, we may be required to obtain and maintain licenses from third parties, including parties involved in any such interference proceedings or other priority or inventorship disputes. Such licenses may not be available on commercially reasonable terms or at all, or may be non-exclusive. If we are unable to obtain and maintain such licenses, we may need to cease the development, manufacture, and commercialization of one or more of the product candidates we may develop. The loss of exclusivity or the narrowing of our patent claims could limit our ability to stop others from using or commercializing similar or identical technology and product candidates. Even if we or our licensors are successful in an interference proceeding or other similar priority or inventorship disputes, it could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could result in a material adverse effect on our business, financial condition, results of operations, or prospects.
Item 2. Unregistered Sales of Equity Securities and Uses of Proceeds
Unregistered Sales of Equity Securities
The following unregistered sales of equity securities occurred during the three months ended June 30, 2021.
On June 10, 2021, we issued (i) 174,825 shares of common stock to Harvard in satisfaction of a $15.0 million success payment due to Harvard pursuant to the terms of the Harvard License Agreement and (ii) 174,825 shares of common stock to Broad Institute in satisfaction of a $15.0 million success payment due to Broad Institute pursuant to the terms of the Broad License Agreement. Each of the foregoing issuances was made pursuant to an exemption from registration contained in Section 4(a)(2) of the Securities Act.
Use of proceeds from registered securities
In February 2020, we closed our IPO in which we issued and sold 12,176,471 shares of our common stock, including 1,588,235 shares of common stock sold pursuant to the underwriters’ full exercise of their option to purchase additional shares, at a public offering price of $17.00 per share, for aggregate gross proceeds of $207.0 million. We received approximately $188.3 million in net proceeds after deducting underwriting discounts and offering expenses payable by us. None of the underwriting discounts and commissions or offering expenses were paid directly or indirectly to any directors or officers of ours or their associates or to persons owning 10% or more of any class of equity securities or to any affiliates of ours. All of the shares issued and sold in the IPO were registered under the Securities Act pursuant to a Registration Statement on Form S-1 (File No. 333-233985), which was declared effective by the SEC on February 5, 2020, and a Registration Statement on Form S-1 MEF (File No. 333-236284) filed pursuant to Rule 462(b) of the Securities Act. The offering commenced on February 5, 2020 and did not terminate until the sale of all the shares offered.
Our use of the net offering proceeds through the date of the filing of this Quarterly Report on Form 10-Q, is consistent with the use of proceeds described in our final prospectus filed with the SEC pursuant to Rule 424(b)(4) on February 7, 2020, and there has been no material change in our planned use of the balance of the net proceeds from our IPO described in such prospectus.
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Item 6. Exhibits.
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If Incorporated by Reference |
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Exhibit Number |
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Description of Exhibit |
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Form |
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File Number |
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Date of Filing |
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Exhibit Number |
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Filed Herewith |
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3.1 |
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Fourth Amended Certificate of Incorporation of Beam Therapeutics Inc. |
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8-K |
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001-39208 |
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02/11/2020 |
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3.1 |
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3.2 |
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8-K |
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001-39208 |
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02/11/2020 |
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3.2 |
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4.1 |
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8-K |
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001-39208 |
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01/19/2021 |
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10.1 |
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10.1 |
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X |
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10.2 |
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X |
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31.1 |
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X |
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31.2 |
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X |
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32.1 |
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X |
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32.2 |
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X |
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101.INS |
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XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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X |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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X |
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101.CAL |
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Inline XBRL Taxonomy Calculation Linkbase Document |
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X |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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X |
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101.LAB |
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Inline XBRL Taxonomy Label Linkbase Document |
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X |
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101.PRE |
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Inline XBRL Taxonomy Presentation Linkbase Document |
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X |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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X |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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BEAM THERAPEUTICS INC. |
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Date: August 10, 2021 |
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By: |
/s/ John Evans |
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John Evans |
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Chief Executive Officer |
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(Principal executive officer) |
Date: August 10, 2021 |
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By: |
/s/ Terry-Ann Burrell |
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Terry-Ann Burrell |
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Chief Financial Officer and Treasurer |
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(Principal financial and accounting officer) |
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