0001558370-19-007470.txt : 20190807 0001558370-19-007470.hdr.sgml : 20190807 20190807161335 ACCESSION NUMBER: 0001558370-19-007470 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 66 CONFORMED PERIOD OF REPORT: 20190630 FILED AS OF DATE: 20190807 DATE AS OF CHANGE: 20190807 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Editas Medicine, Inc. CENTRAL INDEX KEY: 0001650664 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 464097528 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-37687 FILM NUMBER: 191005598 BUSINESS ADDRESS: STREET 1: 11 HURLEY ST. CITY: CAMBRIDGE STATE: MA ZIP: 02141 BUSINESS PHONE: 617-401-9000 MAIL ADDRESS: STREET 1: 11 HURLEY ST. CITY: CAMBRIDGE STATE: MA ZIP: 02141 10-Q 1 edit-20190630x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2019

OR

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

For the transition period from ____________ to ________

Commission File Number 001-37687

EDITAS MEDICINE, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

46-4097528
(I.R.S. Employer
Identification No.)

11 Hurley Street
Cambridge, Massachusetts
(Address of principal executive offices)

02141
(Zip Code)

(617401-9000

(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

Common Stock, $0.0001 par value per share

EDIT

The Nasdaq Stock Market LLC

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

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

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

Large accelerated filer

Accelerated filer 

Non-accelerated filer

  

Smaller reporting company

Emerging growth company

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

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

The number of shares of Common Stock outstanding as of August 1, 2019 was 49,515,328.

Editas Medicine, Inc.

TABLE OF CONTENTS

    

    

Page

PART I. FINANCIAL INFORMATION

3

Item 1.

Financial Statements (unaudited)

3

Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018

3

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018

4

Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2019 and 2018

5

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2019 and 2018

6

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018

7

Notes to Condensed Consolidated Financial Statements

8

Item 2.

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

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

32

Item 4.

Controls and Procedures

33

PART II. OTHER INFORMATION

34

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 5.

Other Information

87

Item 6.

Exhibits

88

Signatures

89

2

PART I. FINANCIAL INFORMATION

Item 1.    Financial Statements.

Editas Medicine, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(amounts in thousands, except share and per share data)

    

June 30, 

    

December 31, 

2019

2018

ASSETS

Current assets:

Cash and cash equivalents

$

210,605

$

134,776

Marketable securities

107,325

234,179

Accounts receivable

 

12

 

30

Prepaid expenses and other current assets

 

6,298

 

5,791

Total current assets

 

324,240

 

374,776

Property and equipment, net

 

8,530

 

40,232

Right-of-use asset

17,477

Restricted cash and other non-current assets

 

5,378

 

5,378

Total assets

$

355,625

$

420,386

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

3,981

$

5,327

Accrued expenses

 

8,169

 

12,813

Deferred revenue, current

56,036

15,712

Operating lease liability

3,648

Other current liabilities

 

1,033

 

2,048

Total current liabilities

 

72,867

 

35,900

Operating lease liability, net of current portion

13,784

Deferred revenue, net of current portion

75,911

115,614

Construction financing lease obligation, net of current portion

 

 

32,417

Other non-current liabilities

 

1

 

293

Total liabilities

162,563

184,224

Commitments and contingencies (see note 7)

Stockholders’ equity

Preferred stock, $0.0001 par value per share: 5,000,000 shares authorized; no shares issued or outstanding

 

 

Common stock, $0.0001 par value per share: 195,000,000 shares authorized; 49,432,039 and 49,028,907 shares issued, and 49,241,093 and 48,758,951 shares outstanding at June 30, 2019 and December 31, 2018, respectively

 

5

 

5

Additional paid-in capital

 

671,522

 

652,464

Accumulated other comprehensive income (loss)

45

(29)

Accumulated deficit

 

(478,510)

 

(416,278)

Total stockholders’ equity

193,062

236,162

Total liabilities and stockholders’ equity

$

355,625

$

420,386

The accompanying notes are an integral part of the condensed consolidated financial statements.

3

Editas Medicine, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

(amounts in thousands, except per share and share data)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

2019

2018

2019

2018

Collaboration and other research and development revenues

$

2,330

$

7,372

$

4,399

$

11,299

Operating expenses:

Research and development

 

23,565

 

32,718

 

39,408

 

54,017

General and administrative

 

14,414

 

14,311

 

31,903

 

28,498

Total operating expenses

 

37,979

 

47,029

 

71,311

 

82,515

Operating loss

 

(35,649)

 

(39,657)

 

(66,912)

 

(71,216)

Other income, net:

Other (expense) income, net

 

(68)

 

154

 

(111)

 

336

Interest income, net

1,931

780

3,988

1,219

Total other income, net

 

1,863

 

934

 

3,877

 

1,555

Net loss

$

(33,786)

$

(38,723)

$

(63,035)

$

(69,661)

Net loss per share attributable to common stockholders, basic and diluted

$

(0.69)

$

(0.82)

$

(1.29)

$

(1.50)

Weighted-average common shares outstanding, basic and diluted

 

49,070,574

 

46,952,059

 

48,955,043

 

46,474,685

The accompanying notes are an integral part of the condensed consolidated financial statements.

4

Editas Medicine, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(unaudited)

(amounts in thousands)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

2019

2018

2019

2018

Net loss

$

(33,786)

$

(38,723)

$

(63,035)

$

(69,661)

Other comprehensive income (loss):

Unrealized gain on marketable debt securities

 

16

 

53

 

74

 

77

Comprehensive loss

$

(33,770)

$

(38,670)

$

(62,961)

$

(69,584)

The accompanying notes are an integral part of the condensed consolidated financial statements.

5

Editas Medicine, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(amounts in thousands)

    

    

Accumulated

    

    

Additional

Other

Other

Total

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders’

Shares

    

Amount

Capital

(Loss) Income

Deficit

Equity

Balance at December 31, 2018

48,758,951

$

5

$

652,464

$

(29)

$

(416,278)

$

236,162

Cumulative effect adjustment for adoption of new accounting guidance

803

803

Exercise of stock options

146,171

1,533

1,533

Vesting of restricted common stock awards

18,000

410

410

Stock-based compensation expense

7,445

7,445

Unrealized gain on marketable securities

58

58

Net loss

(29,249)

(29,249)

Balance at March 31, 2019

48,923,122

$

5

$

661,852

$

29

$

(444,724)

$

217,162

Exercise of stock options

277,259

2,894

2,894

Vesting of restricted common stock units and awards

24,486

410

410

Purchase of common stock under benefit plan

16,226

283

283

Stock-based compensation expenses

6,083

6,083

Unrealized gain on marketable securities

16

16

Net loss

(33,786)

(33,786)

Balance at June 30, 2019

49,241,093

$

5

$

671,522

$

45

$

(478,510)

$

193,062

    

    

Accumulated

    

    

Additional

Other

Other

Total

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders’

Shares

    

Amount

Capital

(Loss) Income

Deficit

Equity

Balance at December 31, 2017

44,507,960

$

4

$

514,002

$

(76)

$

(305,850)

$

208,080

Cumulative effect adjustment for adoption of new accounting guidance

(474)

(474)

Issuance of common stock from public offering, net of issuance costs of $0.1 million

1,429,205

48,493

48,493

Issuance of common stock for repayment of notes payable

305,909

9,530

9,530

Issuance of common stock for asset purchase agreement

56,099

1,942

1,942

Exercise of stock options

305,408

4,328

4,328

Vesting of restricted common stock

107,114

652

652

Stock-based compensation expense

5,878

5,878

Unrealized gain on marketable securities

24

24

Net loss

(30,939)

(30,939)

Balance at March 31, 2018

46,711,695

$

4

$

584,825

$

(52)

$

(337,263)

$

247,514

Issuance of common stock for repayment of notes payable

330,617

1

12,500

12,501

Exercise of stock options

192,687

2,597

2,597

Vesting of restricted common stock

103,481

677

677

Purchase of common stock under benefit plan

14,273

362

362

Stock-based compensation expense

6,349

6,349

Unrealized gain on marketable securities

53

53

Net loss

(38,723)

(38,723)

Balance at June 30, 2018

47,352,753

$

5

$

607,310

$

1

$

(375,986)

$

231,330

6

Editas Medicine, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(amounts in thousands)

Six Months Ended

June 30, 

    

2019

    

2018

Cash flow from operating activities

Net loss

$

(63,035)

$

(69,661)

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

Stock-based compensation expense

 

14,348

 

13,552

Depreciation

 

1,321

 

1,535

Non-cash research and development expense

 

 

14,442

Non-cash investment in equity securities

(3,667)

Other non-cash items, net

 

(1,959)

 

(1,098)

Changes in operating assets and liabilities:

 

 

Accounts receivable

18

317

Prepaid expenses and other current assets

301

(1,414)

Right-of-use asset

1,984

Other non-current assets

(92)

Accounts payable

(1,459)

984

Accrued expenses

 

(4,627)

 

2,032

Deferred revenue

 

621

 

3,877

Operating lease liability

(2,325)

Other current and non-current liabilities

3

Net cash used in operating activities

 

(54,809)

 

(39,193)

Cash flow from investing activities

Purchases of property and equipment

 

(2,231)

(2,401)

Proceeds from the sale of equipment

36

5

Purchases of marketable securities

(106,569)

(224,465)

Proceeds from maturities of marketable securities

235,500

196,000

Net cash provided by (used in) investing activities

 

126,736

 

(30,861)

Cash flow from financing activities

Proceeds from offering of common stock, net of issuance costs

48,471

Proceeds from exercise of stock options

3,619

6,925

Issuances of common stock under benefit plans

283

362

Payments on construction financing lease obligation

(410)

Net cash provided by financing activities

 

3,902

 

55,348

Net increase (decrease) in cash and cash equivalents

 

75,829

(14,706)

Cash, cash equivalents and restricted cash, beginning of period

 

136,395

148,249

Cash, cash equivalents and restricted cash, end of period

$

212,224

$

133,543

Supplemental disclosure of cash and non-cash activities:

Fixed asset additions included in accounts payable and accrued expenses

$

96

$

371

Receivable of proceeds from exercise of stock options

808

Cash paid in connection with operating lease liabilities

3,089

Right-of-use assets obtained in exchange of operating lease obligations

19,461

Reclassification of liability for common stock subject to repurchase

4

Issuance of common stock for settlement of liabilities (see note 7)

22,030

Issuance of common stock for asset acquisition

1,942

Adjustment to deferred revenue for revenue adoption

474

Offering costs included in accounts payable and accrued expenses

22

The accompanying notes are an integral part of the condensed consolidated financial statements.

7

Editas Medicine, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Nature of Business

Editas Medicine, Inc. (the “Company”) is a leading, clinical stage genome editing company dedicated to developing potentially transformative genomic medicines to treat a broad range of serious diseases. The Company was incorporated in the state of Delaware in September 2013. Its principal offices are in Cambridge, Massachusetts.

Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, and raising capital. The Company has primarily financed its operations through various equity financings, payments received under a research collaboration with Juno Therapeutics, Inc., a Celgene company that is a wholly-owned subsidiary of Celgene Corporation (“Juno Therapeutics”), and payments received under a strategic alliance and option agreement with Allergan Pharmaceuticals International Limited (“Allergan”).

The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations and ability to transition from pilot-scale manufacturing to large-scale production of products.

Liquidity

As of June 30, 2019, the Company has raised an aggregate of $328.3 million in net proceeds through the sale of shares of its common stock in public offerings. The Company has incurred annual net operating losses in every year since its inception. The Company expects that its existing cash, cash equivalents and marketable securities at June 30, 2019 and anticipated interest income will enable it to fund its operating expenses and capital expenditure requirements for at least the next 24 months following the date of this Quarterly Report on Form 10-Q. The Company had an accumulated deficit of $478.5 million at June 30, 2019 and will require substantial additional capital to fund its operations. The Company has never generated any product revenue. There can be no assurance that the Company will be able to obtain additional debt or equity financing or generate product revenue or revenues from collaborative partners, on terms acceptable to the Company, on a timely basis or at all. The failure of the Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Company’s business, results of operations, and financial condition.

8

2. Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The condensed consolidated financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “Annual Report”).

The unaudited condensed consolidated financial statements include the accounts of Editas Medicine, Inc. and its wholly owned subsidiary, Editas Securities Corporation. All intercompany transactions and balances of the subsidiary have been eliminated in consolidation. In the opinion of management, the information furnished reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the results for the reported interim periods. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The three months ended June 30, 2019 and 2018 are referred to as the second quarter of 2019 and 2018, respectively. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.

Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, “Summary of significant accounting policies,” to the consolidated financial statements included in the Annual Report. There have been no material changes to the significant accounting policies previously disclosed in the Annual Report other than as noted below.

Recent Accounting Pronouncements –Adopted

Leases

Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASC 842”), which amends a number of aspects of lease accounting and requires entities to recognize right-of-use assets and liabilities on the balance sheet.

At the inception of an arrangement the Company determines whether the arrangement contains a lease. If a lease is identified in an arrangement, the Company recognizes a right-of-use asset and liability on its balance sheet and determines whether the lease should be classified as a finance or operating lease. The Company does not recognize assets or liabilities for leases with lease terms of less than 12 months. Lease payments for short-term leases are recorded to operating expense on a straight-line basis over the lease term and variable lease payments are recorded in the period in which the obligation for those payments is incurred.

A lease qualifies as a finance lease if any of the following criteria are met at the inception of the lease: (i) there is a transfer of ownership of the leased asset to the Company by the end of the lease term, (ii) the Company holds an option to purchase the leased asset that it is reasonably certain to exercise, (iii) the lease term is for a major part of the remaining economic life of the leased asset, (iv) the present value of the sum of lease payments equals or exceeds substantially all of the fair value of the leased asset, and (v) the nature of the leased asset is specialized to the point that it is expected to provide the lessor no alternative use at the end of the lease term. All other leases are recorded as operating leases.

Finance and operating lease assets and liabilities are recognized at the lease commencement date based on the present value of the lease payments over the lease term using the discount rate implicit in the lease. If the rate is not readily determinable, the Company utilizes its incremental borrowing rate at the lease commencement date. Operating lease assets are further adjusted for prepaid or accrued lease payments. Operating lease payments are expensed using the

9

straight-line method as an operating expense over the lease term. Finance lease assets are amortized to depreciation expense using the straight-line method over the shorter of the useful life of the related asset or the lease term. Finance lease payments are bifurcated into (i) a portion that is recorded as imputed interest expense and (ii) a portion that reduces the finance liability associated with the lease.

The Company does not separate lease and non-lease components when determining which lease payments to include in the calculation of its lease assets and liabilities. Variable lease payments are expensed as incurred. If a lease includes an option to extend or terminate the lease, the Company reflects the option in the lease term if it is reasonably certain it will exercise the option.

The Company elected the modified-retrospective transition method, pursuant to which the Company recognized a cumulative-effect adjustment of $0.8 million to the opening balance of accumulated deficit on January 1, 2019 associated with de-recognizing the net asset balance recorded in property and equipment, net and the offsetting construction financing lease liability related to the Company’s headquarters which was previously accounted for under the built-to-suit guidance in Accounting Standards Codification (“ASC”) 840, Leases (“ASC 840”). This resulted in a reversal of $32.6 million from total assets and $33.4 million from total liabilities. All prior period balances are presented in accordance with ASC 840. As of January 1, 2019, the Company recorded a right-of-use asset of $19.5 million and lease liability of $19.7 million associated with the adoption of ASC 842. In addition, the Company elected to adopt the package of three practical expedients for leases that commenced prior to January 1, 2019, allowing it not to reassess (i) whether any expired or existing contracts contain leases, (ii) the lease classification for any expired or existing leases and (iii) the initial indirect costs for any existing leases. The Company did not elect the hindsight practical expedient which allows the Company to reassess the lease term as it was not relevant to the Company’s leases.

As of June 30, 2019, the Company had only operating leases and has recorded the $17.5 million asset balance and $17.4 million liability balance in right-of-use assets and operating lease liabilities, respectively, in the condensed consolidated balance sheet as of June 30, 2019. The Company has finalized changes to its controls to support lease accounting and related disclosures under the new standard.

Stock-Based Compensation

Effective January 1, 2019, the Company adopted ASU No. 2018-07, Compensation – Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which simplified the accounting for share-based payments to non-employees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The new guidance expands the scope of ASC 718, Compensation – Stock Compensation (“ASC 718”), which supersedes the guidance in ASC 505-50, Equity-Based Payments to Non-Employees (“ASC 505-50”). In accordance with the new guidance, the Company will account for share-based payments to non-employees by recognizing stock-based compensation expense equal to the grant date fair value of the share-based payment ratably over the requisite service period. The Company estimates the grant date fair value for each stock option using the Black-Scholes option-pricing model. For restricted stock awards and restricted stock unit awards, the Company estimates the value of each award using intrinsic value, which is based on the value of the underlying common stock less any purchase price. On the date of adoption, the Company estimated the fair value for all unvested non-employee stock options and restricted shares. The unvested stock-based compensation will be recorded over the remaining requisite service period.

Recent Accounting Pronouncements – Issued But Not Yet Adopted

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which modifies certain disclosure requirements on fair value measurements. The amendments regarding changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty are required to be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments are required to be applied retrospectively to all periods presented upon their effective date. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019 and interim periods within those years. The Company does not anticipate a material impact to disclosures as a result of the adoption of ASU 2018-13.

10

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The standard requires that a financial asset or a group of financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. Under current GAAP, a company only considered past events and current conditions in measuring an incurred loss. Under ASU 2016-13, the information that a company must consider is broadened in developing an expected credit loss estimate for assets measured either collectively or individually. The use of forecasted information incorporates more timely information in the estimate of expected credit loss. The new guidance will be effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted for annual and interim periods beginning after December 15, 2018. The guidance is applied using a modified retrospective, or prospective approach, depending on a specific amendment. The Company does not anticipate a material impact to disclosures as a result of the adoption of ASU 2016-13.

3. Cash Equivalents, Marketable Securities and Equity Securities

Cash equivalents, marketable securities and equity securities consisted of the following at June 30, 2019 (in thousands):

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

June 30, 2019

Cost

Gains

Losses

Value

Cash equivalents and marketable securities:

Money market funds

$

210,605

$

$

$

210,605

U.S. Treasuries

59,851

20

59,871

Government agency securities

47,429

25

47,454

Equity securities included in other non-current assets:

Corporate equity securities

3,667

3,667

Total

$

321,552

$

45

$

$

321,597

Cash equivalents, marketable securities and equity securities consisted of the following at December 31, 2018 (in thousands):

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

December 31, 2018

Cost

Gains

Losses

Value

Cash equivalents and marketable securities:

Money market funds

$

130,049

$

$

$

130,049

U.S. Treasuries

208,754

(24)

208,730

Government agency securities

29,940

(5)

29,935

Equity securities included in other non-current assets:

Corporate equity securities

3,667

3,667

Total

$

372,410

$

$

(29)

$

372,381

At June 30, 2019, the Company held two securities that were in an unrealized loss position. The aggregate fair value of securities held by the Company in an unrealized loss position for less than 12 months at June 30, 2019 was $9.0 million, and there were no securities held by the Company in an unrealized loss position for more than 12 months. Pursuant to the adoption of ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, the Company records changes in the fair value of its investments in corporate equity securities to “Other (expense) income, net” in the Company’s condensed consolidated statements of operations. The Company records unrealized gains (losses) on available-for-sale debt securities as a component of accumulated other comprehensive income (loss) until such gains and losses are realized.

As of June 30, 2019, the Company did not intend to sell, and was not more likely than not required to sell, the

11

debt securities in an unrealized loss position before recovery of their amortized cost bases. Furthermore, the Company has determined that there were no material changes in the credit risk of the debt securities. As a result, the Company determined it did not hold any marketable securities with any other-than-temporary impairment as of June 30, 2019.

There were no realized gains or losses on available-for-sale securities during the six months ended June 30, 2019 or 2018.

4. Fair Value Measurements

Assets measured at fair value on a recurring basis as of June 30, 2019 were as follows (in thousands):

    

    

Quoted Prices

    

Significant

    

in Active

Other

Significant

Markets for

Observable

Unobservable

June 30, 

Identical Assets

Inputs

Inputs

Financial Assets

2019

(Level 1)

(Level 2)

(Level 3)

Cash equivalents:

Money market funds

$

210,605

$

210,605

$

$

Marketable securities:

U.S. Treasuries

59,871

59,871

Government agency securities

47,454

47,454

Restricted cash and other non-current assets:

Corporate equity securities

3,667

3,667

Money market funds

1,619

1,619

Total financial assets

$

323,216

$

319,549

$

3,667

$

Assets measured at fair value on a recurring basis as of December 31, 2018 were as follows (in thousands):

    

    

Quoted Prices

    

Significant

    

in Active

Other

Significant

Markets for

Observable

Unobservable

December 31, 

Identical Assets

Inputs

Inputs

Financial Assets

2018

(Level 1)

(Level 2)

(Level 3)

Cash equivalents:

Money market funds

$

130,049

$

130,049

$

$

U.S. Treasuries

4,487

4,487

Marketable securities:

U.S. Treasuries

204,243

204,243

Government agency securities

29,935

29,935

Restricted cash and other non-current assets:

Corporate equity securities

3,667

3,667

Money market funds

1,619

1,619

Total financial assets

$

374,000

$

370,333

$

3,667

$

There were no transfers between fair value measurement levels during the six months ended June 30, 2019.

12

5. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

As of

June 30, 

December 31, 

    

2019

    

2018

Intellectual property and patent related fees

$

2,952

$

1,939

Employee related expenses

2,727

5,201

Professional service expenses

1,026

475

Process and platform development expenses

700

1,044

Sublicensing and success payment expenses

412

3,750

Other expenses

 

352

 

404

Total accrued expenses

$

8,169

$

12,813

13

6. Property and Equipment, net

Property and equipment, net consisted of the following (in thousands):

    

As of

June 30, 

December 31, 

    

2019

    

2018

Laboratory equipment

$

12,501

$

10,892

Computer equipment

733

733

Construction-in-progress

456

Leasehold improvements

 

289

 

289

Furniture and office equipment

166

166

Software

 

118

 

118

Building

35,167

Total property and equipment

 

14,263

 

47,365

Less: accumulated depreciation

 

(5,733)

 

(7,133)

Property and equipment, net

$

8,530

$

40,232

For additional information related to the removal of the building asset, refer to Footnote 7.

7. Commitments and Contingencies

Leases

In 2016, the Company entered into a lease agreement for 59,783 square feet of office and laboratory space located on Hurley Street in Cambridge, Massachusetts. The term of the lease began on October 1, 2016 and continues until October 2023. The Company has the option to extend the lease for an additional five-year term at market-based rates. The base rent payments commenced in November 2016 and continue through the term of the lease and are subject to increases over the term of the lease. The Company subleased approximately 10,000 square feet of the Hurley Street premises pursuant to a sublease, which commenced in February 2017 and terminated in June 2018.

In accordance with ASC 840 and for accounting purposes, the Company was deemed the owner of the building during the construction period due to the fact that the Company was involved in the construction project, including having responsibilities for cost overruns for planned tenant improvements that did not qualify as “normal tenant improvements” under the lease accounting guidance. Throughout the construction period, the Company recorded the project construction costs incurred as an asset, along with a corresponding construction financing lease obligation, on its balance sheet for the total amount of the project costs incurred whether funded by the Company or the landlord. Construction was completed in October 2016 and the Company considered the requirements for sale-leaseback accounting treatment, which included an evaluation of whether all risks of ownership had transferred back to the landlord, as evidenced by a lack of continuing involvement in the leased property. The Company determined that the arrangement did not qualify for sale-leaseback accounting treatment, the building asset would remain on the Company’s balance sheet at its historical cost, and such asset would be depreciated over its estimated useful life of 30 years. The Company bifurcated its future lease payments pursuant to the lease into (i) a portion that was allocated to the building and (ii) a portion that was allocated to the land on which the building is located, which was recorded as rental expense. Although the Company did not begin making lease payments pursuant to the lease until November 2016, the portion of the lease obligation allocated to the land was treated for accounting purposes as an operating lease that commenced upon execution of the lease in February 2016.

Effective January 1, 2019, the Company adopted ASC 842 and derecognized the balances relating to the building, accumulated depreciation and the corresponding construction financing lease as summarized in the table below (in thousands). In applying the ASC 842 transition guidance, the Company determined that the lease should be classified as an operating lease and recorded a right-of-use asset and lease liability on the effective date, accordingly.

14

As of

January 1, 2019

Property and equipment, net

$

32,627

Other current liabilities

$

(1,014)

Construction financing lease obligation, net of current portion

$

(32,417)

Accumulated deficit

$

803

The Company has two other operating leases for laboratory space. One of those leases, which commenced in April 2017, was amended in April 2018 and continues until March 2021. The second lease commenced in January 2018 and continues until June 2021. Base rent payments commenced at the beginning of each lease term and continues through the term of the respective lease. Base rent is also subject to increases over the term of the lease. In prior periods, the Company accounted for these leases as operating leases under ASC 840 and recognized straight-line rent expense over the remaining non-cancellable lease terms. As part of its adoption of ASC 842, effective January 1, 2019, the Company elected to apply the package of practical expedients which, among other things, allowed the Company to carry forward its existing lease classification under ASC 840. Additionally, the Company recorded right-of-use assets and lease liabilities for these operating leases on the effective date.

The Company’s leases are included on its condensed consolidated balance sheet as follows (in thousands):

As of

June 30, 

January 1,

2019

    

2019

Right-of-use asset

$

17,477

$

19,461

Lease liability, current

$

(3,648)

$

(3,848)

Lease liability, noncurrent

$

(13,784)

$

(15,909)

The following table contains a summary of the operating lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases during the three and six months ended June 30, 2019 (in thousands):

Three Months Ended

Six Months Ended

June 30, 2019

Operating lease costs

$

1,421

$

2,842

Variable lease costs

$

261

$

528

Total lease costs

$

1,682

$

3,370

Maturities of the Company’s lease liabilities in accordance with ASC 842 as of June 30, 2019 were as follows (in thousands):

Six Months Ended

Maturity of lease liabilities:

June 30, 2019

2019

$

2,293

2020

$

5,620

2021

$

4,761

2022

$

4,470

2023

$

3,802

Thereafter

$

Total minimum lease payments

$

20,946

Less: imputed interest

$

(3,514)

Total operating lease liabilities at June 30, 2019

$

17,432

The above table excludes $0.6 million of legally binding minimum lease payments for leases executed but not yet commenced as of June 30, 2019. Commencement occurred in July 2019.

15

The weighted-average remaining lease terms are 4.0 years and the weighted-average discount rate is 9.27%.

Licensor Expense Reimbursement

The Company is obligated to reimburse The Broad Institute, Inc. (“Broad”) and the President and Fellows of Harvard College (“Harvard”) for expenses incurred by each of them associated with the prosecution and maintenance of the patent rights that the Company licenses from them pursuant to the license agreement by and among the Company, Broad and Harvard, including the interference and opposition proceedings involving patents licensed to the Company under the license agreement, and other license agreements between the Company and Broad. As such, the Company anticipates that it has a substantial commitment in connection with these proceedings until such time as these proceedings have been resolved, but the amount of such commitment is not determinable. During the three and six months ended June 30, 2019, the Company recognized $3.5 million and $6.9 million in expense for such reimbursement, respectively. During the three and six months ended June 30, 2018, the Company recognized $3.5 million and $8.0 million in expense for such reimbursement, respectively.

Success Payments

In 2016, the Company entered into patent license agreements with each of The General Hospital Corporation, d/b/a Massachusetts General Hospital (“MGH”), and Broad (collectively, the “2016 License Agreements”). Pursuant to the terms of the 2016 License Agreements, the Company is required to make certain success payments to MGH, Broad and Wageningen University (“Wageningen” and such payments, collectively, the “Success Payments”), payable in cash or, at the Company’s election, common stock in the case of MGH or, in the case of Broad and Wageningen, promissory notes payable in cash or, at the Company’s election subject to certain conditions, common stock of the Company. The Success Payments are payable, if and when, the Company’s market capitalization reaches specified thresholds for a specific period of time or upon a sale of the Company for consideration in excess of those thresholds (collectively, the “Payment Conditions”).

The Success Payments were historically accounted for under the provisions of ASC 505-50. Effective January 1, 2019, the Company adopted ASU 2018-07, which expands the scope of ASC 718 and superseded ASC 505-50. In accordance with ASC 718, the Company will recognize a Success Payment when it becomes probable that the Payment Conditions will be met. However, the Company has the right to terminate any of the 2016 License Agreements at will upon written notice. Absent any of the Payment Conditions being achieved prior to termination, the Company would not be obligated to pay any Success Payments. As such, the Company will recognize the expense and liability associated with each Success Payment when it is probable that the amounts will become due. The Company records this expense as a research and development expense in its condensed consolidated statements of operations.