8-K
Q32 Bio Inc. (QTTB)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 10, 2022
HOMOLOGY MEDICINES, INC.
(Exact name of Registrant as Specified in Its Charter)
| Delaware | 001-38433 | 47-3468154 |
|---|---|---|
| (State or other jurisdiction of<br> <br>incorporation or organization) | (Commission<br> <br>File Number) | (I.R.S. Employer<br> <br>Identification No.) |
| One Patriots Park<br>Bedford, MA | 01730 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
(781) 301-7277
(Registrant’s telephone number, include area code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br>Symbol(s) | Name of each exchange<br>on which registered |
|---|---|---|
| Common Stock,<br> <br>$0.0001 par value per share | FIXX | Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Item 1.01. Entry into a Material Definitive Agreement.
On March 10, 2022, in connection with the Transaction (as defined in Item 2.01 below), Homology Medicines, Inc. (“Homology”) entered into (i) a Contribution Agreement, (ii) an Amended and Restated Limited Liability Company Agreement (the “Newco Operating Agreement”), (iii) a Manufacturing and Supply Agreement, (iv) an Assignment and Assumption Agreement, and (v) a Sublease Agreement (collectively, the “Closing Agreements”). The material terms of the Closing Agreements are described in Item 1.01 of the Current Report on Form 8-K filed by Homology on February 3, 2022 (the “Signing 8-K”), and are incorporated herein by reference.
Item 2.01. Completion of Acquisition or Disposition of Assets.
On March 10, 2022, Homology closed the previously announced transaction with Oxford Biomedica Solutions LLC (f/k/a Roadrunner Solutions LLC) (“Newco”), Oxford Biomedica (US), Inc. (“OXB”) and Oxford Biomedica plc (“OXB Parent” and, collectively with OXB, “Oxford”), pursuant to the Equity Securities Purchase Agreement (the “Purchase Agreement”), dated as of January 28, 2022, by and among Homology, Newco and Oxford, whereby, among other things, Homology and Oxford agreed to collaborate to operate Newco, which will provide adeno-associated virus (“AAV”) vector process development and manufacturing to pharmaceutical and biotechnology companies (the “Transaction”).
Immediately prior to the closing of the Transaction (the “Closing”), Homology and Newco entered into a Contribution Agreement (as previously disclosed in the Signing 8-K), pursuant to which Homology assigned and transferred to Newco all of Homology’s assets that are primarily used in the manufacturing of AAV vectors for use in gene therapy or gene editing products, but excluding certain assets related to manufacturing or testing of Homology’s proprietary AAV vectors (collectively, the “Transferred Assets”), in exchange for 175,000 common equity units in Newco (“Units”) and Newco assumed from Homology, and agreed to pay, perform and discharge when due, all of Homology’s duties, obligations, liabilities, interests and commitments of any kind under, arising out of or relating to the Transferred Assets.
Effective as of the Closing, Homology sold to OXB, and OXB purchased from Homology, 130,000 Units (the “Transferred Units”) in exchange for $130.0 million. In connection with the Closing, OXB contributed $50.0 million in cash to Newco in exchange for an additional 50,000 Units. Immediately following the Closing, (i) OXB owned 180,000 Units, representing 80 percent (80%) of the fully diluted equity interests in Newco, and (ii) Homology owned 45,000 Units, representing 20 percent (20%) of the fully diluted equity interests in Newco. Pursuant to the Newco Operating Agreement, at any time following the three-year anniversary of the Closing, Homology will have an option to require OXB to purchase from Homology, and OXB will have an option to require Homology to sell to OXB, in each case all of Homology’s equity ownership interest in Newco at a price equal to 5.5 times the revenue for the immediately preceding 12-month period, subject to a specified maximum amount.
The disposition of the Transferred Assets and the Transferred Units constituted a disposition of a significant amount of assets for the purposes of Item 2.01 of Form 8-K. Accordingly, the pro forma financial information required by Item 9.01 is included as Exhibit 99.1 to this Current Report on Form 8-K.
Homology intends to file copies of the Purchase Agreement and the Closing Agreements, in certain cases with confidential portions redacted, with Homology’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Forward-Looking Statements Disclaimer
This Current Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this Current Report that do not relate to matters of historical fact should be considered forward-looking statements, including without limitation, statements regarding the collaboration between Homology and Oxford and the operation of Newco. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements, including, but not limited to, the following: we may not realize the anticipated benefits of the collaboration with Oxford; the impact of the COVID-19 pandemic on our business and operations, including our preclinical studies and clinical trials, and on general economic conditions; we have and expect to continue to incur significant losses; our need for additional funding, which may not be available; failure to identify additional product candidates and develop or commercialize marketable products; the early stage of our development efforts; potential unforeseen events during clinical trials could cause delays or other adverse consequences; risks relating to the regulatory approval process; our product candidates may cause serious adverse side effects; inability to maintain our collaborations, or the failure of these collaborations; our reliance on third parties, including for the manufacture of materials for our research programs, preclinical and clinical studies; failure to obtain U.S. or international marketing approval; ongoing regulatory obligations; effects of significant competition; unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives; product liability lawsuits; failure to attract, retain and motivate qualified personnel; the possibility of system failures or security breaches; risks relating to intellectual property and significant costs as a result of operating as a public company. These and other important factors discussed under the caption “Risk Factors” in Homology’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021 and our other filings with the Securities and Exchange Commission could cause actual results to differ materially from those indicated by the forward-looking statements made in this Current Report. Any such forward-looking statements represent management’s estimates as of the date of this Current Report. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change.
Item 9.01. Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
The following financial information is included as Exhibit 99.1 to this Current Report on Form 8-K and is filed herewith and incorporated herein by reference:
| • | Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2021. |
|---|---|
| • | Unaudited Pro Forma Condensed Consolidated Statements of Operations for the year ended December 31, 2020 and the nine months ended September 30, 2021. |
| --- | --- |
(d) Exhibits.
| Exhibit<br>No. | Description |
|---|---|
| 99.1 | Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2021 and Unaudited Pro Forma Condensed Consolidated Statements of Operations for the year ended December 31, 2020 and the nine months ended September 30, 2021 |
| 104 | Cover Page Interactive Data File (embedded within the inline XBRL document) |
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 hereunto duly authorized.
| HOMOLOGY MEDICINES, INC. | ||
|---|---|---|
| Date: March 16, 2022 | By: | /s/ W. Bradford Smith |
| W. Bradford Smith | ||
| Chief Financial and Business Officer and Treasurer |
EX-99.1
Exhibit 99.1
HOMOLOGY MEDICINES, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
On March 10, 2022, Homology Medicines, Inc. (“Homology” or the “Company”) closed the previously announced transaction (the “Transaction”) with Oxford Biomedica Solutions LLC (f/k/a Roadrunner Solutions LLC) (“Newco”), Oxford Biomedica (US), Inc. (“OXB”) and Oxford Biomedica plc (“OXBParent” and, collectively with OXB, “Oxford”), pursuant to the Equity Securities Purchase Agreement, dated as of January 28, 2022, by and among Homology, Newco and Oxford, whereby, among other things, Homology and Oxford agreed to collaborate to operate Newco, which will provide adeno-associated virus (“AAV”) vector process development and manufacturing to pharmaceutical and biotechnology companies.
Immediately prior to the closing of the Transaction (the “Closing”), Homology and Newco entered into a Contribution Agreement (as previously disclosed in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (“SEC”) on February 3, 2022), pursuant to which Homology assigned and transferred to Newco all of Homology’s assets that are primarily used in the manufacturing of AAV vectors for use in gene therapy or gene editing products (comprising, among other things, intellectual property, tangible property and equipment and employees), but excluding certain assets related to manufacturing or testing of Homology’s proprietary AAV vectors (collectively, the “Transferred Assets”), in exchange for 175,000 common equity units in Newco (“Units”), and Newco assumed from Homology, and agreed to pay, perform and discharge when due, all of Homology’s duties, obligations, liabilities, interests and commitments of any kind under, arising out of or relating to the Transferred Assets.
Effective as of the Closing, Homology sold to OXB, and OXB purchased from Homology, 130,000 Units (the “Transferred Units”) in exchange for $130.0 million. In connection with the Closing, OXB contributed $50.0 million in cash to Newco in exchange for an additional 50,000 Units. Immediately following the Closing, (i) OXB owned 180,000 Units, representing 80 percent (80%) of the fully diluted equity interests in Newco, and (ii) Homology owned 45,000 Units, representing 20 percent (20%) of the fully diluted equity interests in Newco. Pursuant to the Amended and Restated Limited Liability Company Agreement, dated as of March 10, 2022, by and among Newco, Oxford and the Company (the “Newco Operating Agreement”), entered into in connection with the Transaction, the Company is entitled to designate one director on the Board of Directors of Newco. Effective as of the Closing, the Transferred Assets are derecognized and the Company’s ownership of 20% of the issued and outstanding Units is accounted for using the equity method.
Pursuant to the Newco Operating Agreement, at any time following the three-year anniversary of the Closing, (i) OXB will have an option to cause Homology to sell and transfer to OXB, and (ii) Homology will have an option to cause OXB to purchase from Homology, in each case all of Homology’s equity ownership interest in Newco at a price equal to 5.5 times the revenue for the immediately preceding 12-month period, subject to a specified maximum amount (the “Put/Call Option”).
Concurrently with the Closing, the Company and Newco entered into a lease assignment and assumption agreement pursuant to which Homology assigned all of its right, title and interest in, to and under its facility lease to Newco and a sublease agreement whereby Newco subleased certain premises in its facility to Homology. However, as the Company remains jointly and severally liable for the payment of rent under the facility lease, the Company has not been released from being the primary obligor under such facility lease and therefore the related right-of-use asset and lease liability are not derecognized and will remain on the Company’s balance sheet. The Company also entered into certain ancillary agreements with Newco, including a license and patent management agreement whereby Newco granted certain licenses to the Company, a supply agreement for a term of three years that includes certain annual minimum purchase commitments, a transitional services agreement pursuant to which Homology will perform certain services for the benefit of Newco and Newco will perform certain services for the benefit of Homology, as well as several additional ancillary agreements.
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The unaudited pro forma condensed consolidated financial information (or “pro forma financial information”) presents the pro forma financial position and results of operations of the Company giving effect to the Transaction. Specifically, the unaudited pro forma condensed consolidated balance sheet reflects adjustments that depict the accounting for the Transaction required by GAAP (“pro forma balance sheet transaction accounting adjustments”) as of September 30, 2021 while the unaudited pro forma condensed consolidated statements of operations reflect adjustments that depict the effects of the pro forma balance sheet transaction accounting adjustments assuming those adjustments were made as of January 1, 2020 (“pro forma income statement transaction accounting adjustments”). We refer to pro forma balance sheet transaction accounting adjustments and pro forma income statement transaction accounting adjustments collectively as “transaction accounting adjustments.” The transaction accounting adjustments are described in the accompanying notes.
The pro forma financial information are prepared in accordance with Article 11 of Regulation S-X. The pro forma financial information is based upon available information and assumptions that management considers to be reasonable, and such assumptions have been made solely for purposes of developing such pro forma financial information for illustrative purposes in compliance with the disclosure requirements of the SEC. The pro forma financial information is not necessarily indicative of the financial position or results of operations that would have actually occurred had the Transaction occurred on the dates indicated. In addition, these pro forma financial statements should not be considered to be indicative of the future financial performance and results of operations of the Company.
The pro forma financial information should be read in conjunction with the historical financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K filed with the SEC on March 11, 2021 and the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 filed with the SEC on November 15, 2021.
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HOMOLOGY MEDICINES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of September 30, 2021
(in thousands, except share and per share amounts)
| Transaction AccountingAdjustments | Pro Forma | |||||||
|---|---|---|---|---|---|---|---|---|
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | 95,829 | $ | 130,000 | (a) | $ | 225,829 | ||
| Short-term investments | 91,722 | $ | — | $ | 91,722 | |||
| Prepaid expenses and other current assets | 4,266 | $ | — | $ | 4,266 | |||
| Total current assets | 191,817 | 130,000 | 321,817 | |||||
| Property and equipment, net | 32,697 | $ | (29,935 | ) (a) | $ | 2,762 | ||
| Right-of-use assets | 5,028 | $ | — | $ | 5,028 | |||
| Equity method investment | — | $ | 45,000 | (b) | $ | 45,000 | ||
| Restricted cash | 1,274 | $ | — | $ | 1,274 | |||
| Total assets | 230,816 | $ | 145,065 | $ | 375,881 | |||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | 3,522 | $ | — | $ | 3,522 | |||
| Accrued expenses and other liabilities | 10,017 | $ | 2,600 | (c) | $ | 12,617 | ||
| Operating lease liabilities | 1,959 | $ | — | $ | 1,959 | |||
| Deferred revenue | 3,208 | $ | — | $ | 3,208 | |||
| Total current liabilities | 18,706 | 2,600 | 21,306 | |||||
| Non-current liabilities: | ||||||||
| Operating lease liabilities, net of current portion | 11,582 | $ | — | $ | 11,582 | |||
| Deferred revenue, net of current portion | 1,958 | $ | — | $ | 1,958 | |||
| Total liabilities | 32,246 | 2,600 | 34,846 | |||||
| Commitments and contingencies (Note 7) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock | — | $ | — | $ | — | |||
| Common stock, 0.0001 par value | 6 | $ | — | $ | 6 | |||
| Additional paid-in capital | 589,119 | $ | — | $ | 589,119 | |||
| Accumulated other comprehensive gain (loss) | (5 | ) | $ | — | $ | (5 | ) | |
| Accumulated deficit | (390,550 | ) | $ | 142,465 | (d) | $ | (248,085 | ) |
| Total stockholders’ equity | 198,570 | 142,465 | 341,035 | |||||
| Total liabilities and stockholders’ equity | 230,816 | $ | 145,065 | $ | 375,881 |
All values are in US Dollars.
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
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HOMOLOGY MEDICINES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine months ended September 30, 2021
(in thousands, except share and per share amounts)
| Historical | Transaction AccountingAdjustments | Pro Forma | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Collaboration revenue | $ | 33,169 | $ | — | $ | 33,169 | |||
| Operating expenses: | |||||||||
| Research and development | 69,439 | (9,893 | ) (e) | 59,546 | |||||
| General and administrative | 26,054 | (1,187 | ) (f) | 24,867 | |||||
| Total operating expenses | 95,493 | (11,080 | ) | 84,413 | |||||
| Profit (loss) from operations | (62,324 | ) | 11,080 | (51,244 | ) | ||||
| Other income: | |||||||||
| Interest income | 143 | — | 143 | ||||||
| Total other income | 143 | — | 143 | ||||||
| Equity method investment profit (loss) | — | (2 | ) (h) | (2 | ) | ||||
| Net profit (loss) | $ | (62,181 | ) | $ | 11,078 | $ | (51,103 | ) | |
| Net profit (loss) per share-basic and diluted | $ | (1.14 | ) | $ | (0.93 | ) | |||
| Weighted-average common shares outstanding-basic and diluted | 54,704,410 | 54,704,410 |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
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HOMOLOGY MEDICINES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Twelve months ended December 31, 2020
(in thousands, except share and per share amounts)
| Historical | Transaction AccountingAdjustments | Pro Forma | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Collaboration revenue | $ | 2,702 | $ | — | $ | 2,702 | |||
| Operating expenses: | |||||||||
| Research and development | 100,392 | (10,248 | ) (e) | 90,144 | |||||
| General and administrative | 32,573 | 1,047 | (f) | 33,620 | |||||
| Total operating expenses | 132,965 | (9,201 | ) | 123,764 | |||||
| Profit (loss) from operations | (130,263 | ) | 9,201 | (121,062 | ) | ||||
| Other income: | |||||||||
| Gain on derecognition of Transferred Assets | — | 139,950 | (g) | 139,950 | |||||
| Interest income | 1,569 | — | 1,569 | ||||||
| Total other income | 1,569 | 139,950 | 141,519 | ||||||
| Equity method investment profit (loss) | — | (2 | ) (h) | (2 | ) | ||||
| Net profit (loss) | $ | (128,694 | ) | $ | 149,149 | $ | 20,455 | ||
| Net profit (loss) per share | |||||||||
| Basic | $ | (2.80 | ) | $ | 0.45 | ||||
| Diluted | $ | (2.80 | ) | $ | 0.43 | (i) | |||
| Weighted-average common shares outstanding | |||||||||
| Basic | 45,910,787 | 45,910,787 | |||||||
| Diluted | 45,910,787 | 47,035,260 | (i) |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
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HOMOLOGY MEDICINES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
(in thousands, except share and per share amounts)
(unaudited)
The following is a description of the transaction accounting adjustments reflected in the unaudited pro forma consolidated financial statements based on preliminary estimates, which may change as additional information is obtained.
| (a) | Sale Proceeds and Derecognition of the Transferred Assets: Includes an adjustment of $130.0 million in<br>cash proceeds from OXB. These adjustments also include the derecognition of the carrying value of the Transferred Assets of $29.9 million as of September 30, 2021. |
|---|
The following table summarizes the carrying value of the Transferred Assets in connection with the Transaction:
| (in thousands) | September 30,2021 | |
|---|---|---|
| Property and equipment, net | $ | 29,935 |
| Total assets disposed | $ | 29,935 |
The intellectual property sold had a carrying value of zero in the consolidated financial statements.
| (b) | Equity method investment: Represents the preliminary estimated fair value of the Company’s retained<br>investment in Newco as of September 30, 2021. This amount was determined by multiplying the 20% equity interest by the fair value of Newco, which was an estimated $225.0 million based on OXB’s $180.0 million cash contribution in<br>exchange for an 80% equity interest. The Company requires completion of final valuation work to determine the fair value of its retained investment, including the impact of the Put/Call Option. The accounting is expected to be completed in the first<br>fiscal quarter ending March 31, 2022. | ||
|---|---|---|---|
| (c) | Accrued expenses and other liabilities: Includes an adjustment to accrue transaction costs payable upon the<br>completion of the Transaction. | ||
| --- | --- | ||
| (d) | Accumulated deficit: The cumulative adjustments resulted in an adjustment to accumulated deficit of<br>$142.5 million related to the gain recognized upon the derecognition of the Transferred Assets on September 30, 2021 offset by accrued transaction costs of $2.6 million. The estimated gain was computed as follows:<br> | ||
| --- | --- | ||
| (in thousands) | September 30,2021 | ||
| --- | --- | --- | --- |
| Cash received | $ | 130,000 | |
| Plus: Fair value of retained investment | 45,000 | ||
| Less: Carrying value of the Transferred Assets | (29,935 | ) | |
| Estimated gain on decrecognition | $ | 145,065 | |
| (e) | Research and development: Includes adjustments for the elimination of internal costs associated with the AAV<br>vector process development and manufacturing, including the elimination of depreciation expense of $3.7 million for the year ended December 31, 2020 and $3.1 million for the nine months ended September 30, 2021. These adjustments<br>also include a reduction of lease expense of $0.8 million for the year ended December 31, 2020 and $0.6 million for the nine months ended September 30, 2021 associated with the assignment of the facility lease and related<br>sublease agreement. These adjustments also include the addition of external manufacturing costs that the Company expects would have been incurred under the supply agreement with Newco. | ||
| --- | --- |
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| (f) | General and administrative: Includes adjustments for the elimination of depreciation expense associated with<br>the Transferred Assets. For the year ended December 31, 2020, these adjustments are offset by an increase in expense due to transaction costs payable upon completion of the Transaction. | ||
|---|---|---|---|
| (g) | Gain on derecognition of Transferred Assets: Represents the estimated gain recognized upon the derecognition of<br>the Transferred Assets on January 1, 2020. The estimated gain was computed as follows: | ||
| --- | --- | ||
| (in thousands) | January 1,2020 | ||
| --- | --- | --- | --- |
| Cash received | $ | 130,000 | |
| Plus: Fair value of retained investment | 45,000 | ||
| Less: Carrying value of the Transferred Assets | (35,050 | ) | |
| Estimated gain on derecognition | $ | 139,950 | |
| (h) | Equity method investment profit (loss): Represents the estimated investment loss from Newco under the equity<br>method of accounting for the respective periods presented based on the Company’s 20% equity interest. This adjustment excludes the impact of Newco’s intangible asset amortization expense because the estimate of the fair value of the<br>intangible assets requires completion of final valuation work. The accounting is expected to be completed in the first fiscal quarter ending March 31, 2022. | ||
| --- | --- | ||
| (i) | Diluted earnings per share: Calculated by dividing pro forma net income by the weighted-average number of<br>common shares outstanding plus all potentially dilutive common stock equivalents, primarily shares issuable upon the exercise of stock options. The estimated effect of the dilutive stock options was an incremental 1,124,473 shares for the year ended<br>December 31, 2020. | ||
| --- | --- |
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