0001558370-20-009821.txt : 20200807 0001558370-20-009821.hdr.sgml : 20200807 20200807080700 ACCESSION NUMBER: 0001558370-20-009821 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 57 CONFORMED PERIOD OF REPORT: 20200630 FILED AS OF DATE: 20200807 DATE AS OF CHANGE: 20200807 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: 201083788 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-20200630x10q.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, 2020

OR

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

For the transition period from ____________ to ________

Commission File Number 001-37687

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 July 31, 2020 was 62,269,906.

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, 2020 and December 31, 2019

3

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019

4

Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2020 and 2019

5

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2020 and 2019

6

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019

7

Notes to Condensed Consolidated Financial Statements

8

Item 2.

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

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

30

PART II. OTHER INFORMATION

31

Item 1.

Legal Proceedings

31

Item 1A.

Risk Factors

31

Item 6.

Exhibits

86

Signatures

87

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, 

2020

2019

ASSETS

Current assets:

Cash and cash equivalents

$

485,819

$

238,183

Marketable securities

112,901

218,957

Accounts receivable

 

1,865

 

418

Prepaid expenses and other current assets

 

9,541

 

6,286

Total current assets

 

610,126

 

463,844

Property and equipment, net

 

12,895

 

10,887

Right-of-use assets

28,569

28,761

Restricted cash and other non-current assets

 

3,891

 

5,393

Total assets

$

655,481

$

508,885

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

6,339

$

5,843

Accrued expenses

 

10,194

 

22,120

Deferred revenue, current

40,940

23,514

Operating lease liabilities

6,650

5,804

Other current liabilities

 

4,027

 

2,682

Total current liabilities

 

68,150

 

59,963

Operating lease liabilities, net of current portion

22,153

23,277

Deferred revenue, net of current portion

138,406

163,207

Other non-current liabilities

 

 

1

Total liabilities

228,709

246,448

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; 62,265,649 and 54,533,798 shares issued, and 62,103,649 and 54,355,798 shares outstanding at June 30, 2020 and December 31, 2019, respectively

 

6

 

5

Additional paid-in capital

 

1,037,100

 

811,546

Accumulated other comprehensive income

183

107

Accumulated deficit

 

(610,517)

 

(549,221)

Total stockholders’ equity

426,772

262,437

Total liabilities and stockholders’ equity

$

655,481

$

508,885

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, 

2020

2019

2020

2019

Collaboration and other research and development revenues

$

10,749

$

2,330

$

16,472

$

4,399

Operating expenses:

Research and development

 

28,007

 

23,565

 

62,576

 

39,408

General and administrative

 

14,081

 

14,414

 

31,852

 

31,903

Total operating expenses

 

42,088

 

37,979

 

94,428

71,311

Operating loss

 

(31,339)

 

(35,649)

 

(77,956)

 

(66,912)

Other income, net:

Other income (expense), net

 

7,175

 

(68)

 

14,509

 

(111)

Interest income, net

592

1,931

2,151

3,988

Total other income, net

 

7,767

 

1,863

 

16,660

 

3,877

Net loss

$

(23,572)

$

(33,786)

$

(61,296)

$

(63,035)

Net loss per share basic and diluted

$

(0.43)

$

(0.69)

$

(1.12)

$

(1.29)

Weighted-average common shares outstanding, basic and diluted

 

55,346,052

 

49,070,574

 

54,968,123

 

48,955,043

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, 

2020

2019

2020

2019

Net loss

$

(23,572)

$

(33,786)

$

(61,296)

$

(63,035)

Other comprehensive income:

Unrealized gain (loss) on marketable debt securities

 

(511)

 

16

 

76

 

74

Comprehensive loss

$

(24,083)

$

(33,770)

$

(61,220)

$

(62,961)

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, except share data)

    

    

Accumulated

    

    

Additional

Other

Other

Total

Common Stock

Paid-In

Comprehensive

Accumulated

Stockholders’

Shares

    

Amount

Capital

Income

Deficit

Equity

Balance at December 31, 2019

54,355,798

$

5

$

811,546

$

107

$

(549,221)

$

262,437

Exercise of stock options

233,208

3,047

3,047

Vesting of restricted common stock awards

213,393

Stock-based compensation expense

6,220

6,220

Unrealized gain on marketable debt securities

587

587

Net loss

(37,724)

(37,724)

Balance at March 31, 2020

54,802,399

$

5

$

820,813

$

694

$

(586,945)

$

234,567

Exercise of stock options

355,812

6,839

6,839

Issuance of common stock for public offering

6,900,000

1

203,681

203,682

Stock-based compensation expense

5,417

5,417

Vesting of restricted common stock awards

30,194

Purchase of common stock under benefit plans

15,244

350

350

Unrealized loss on marketable debt securities

(511)

(511)

Net loss

(23,572)

(23,572)

Balance at June 30, 2020

62,103,649

$

6

$

1,037,100

$

183

$

(610,517)

$

426,772

    

    

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

Stock-based compensation expense

7,855

7,855

Unrealized gain on marketable debt 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 awards

24,486

410

410

Purchase of common stock under benefit plan

16,226

283

283

Stock-based compensation expense

6,083

6,083

Unrealized gain on marketable debt 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

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

6

Editas Medicine, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(amounts in thousands)

Six Months Ended

June 30, 

    

2020

    

2019

Cash flow from operating activities

Net loss

$

(61,296)

$

(63,035)

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

Stock-based compensation expense

 

11,637

 

14,348

Depreciation

 

1,669

 

1,321

Unrealized gain on corporate equity securities

(14,525)

Other non-cash items, net

 

(289)

 

(1,959)

Changes in operating assets and liabilities:

 

 

Accounts receivable

(1,447)

18

Prepaid expenses and other current assets

(3,254)

301

Right-of-use assets

192

1,984

Other non-current assets

93

Accounts payable

1,026

(1,459)

Accrued expenses

(12,439)

(4,627)

Deferred revenue

 

(7,375)

 

621

Operating lease liabilities

 

(278)

 

(2,325)

Other current and non-current liabilities

1,344

3

Net cash used in operating activities

 

(84,942)

 

(54,809)

Cash flow from investing activities

Purchases of property and equipment

 

(3,993)

(2,231)

Proceeds from the sale of equipment

14

36

Purchases of marketable securities

(66,384)

(106,569)

Proceeds from maturities of marketable securities

191,000

235,500

Net cash provided by investing activities

 

120,637

 

126,736

Cash flow from financing activities

Proceeds from offering of common stock, net of issuance costs

203,964

Proceeds from exercise of stock options

9,886

3,619

Issuance of common stock under benefit plans

350

283

Net cash provided by financing activities

 

214,200

 

3,902

Net increase in cash, cash equivalents, and restricted cash

 

249,895

75,829

Cash, cash equivalents, and restricted cash, beginning of period

 

239,802

136,395

Cash, cash equivalents, and restricted cash, end of period

$

489,697

$

212,224

Supplemental disclosure of cash and non-cash activities:

Fixed asset additions included in accounts payable and accrued expenses

$

429

$

96

Cash paid in connection with operating lease liabilities

5,125

3,089

Offering costs included in accounts payable and accrued expenses

282

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

3,319

19,461


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 wholly-owned subsidiary of the Bristol-Myers Squibb Company (“Juno Therapeutics”), and payments received under a strategic alliance with Allergan Pharmaceuticals International Limited (which was acquired by AbbVie, Inc. in May 2020 and is referred to together with its affiliates as “Allergan”). In August 2020, the collaboration with Allergan was terminated. See Note 11, “Subsequent Events”.

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

In May 2020, the Company entered into a sales agreement with Cowen and Company, LLC (“Cowen”), under which the Company from time to time can issue and sell shares of its common stock through Cowen in at-the-market offerings for aggregate gross sale proceeds of up to $150.0 million ( the “ATM Facility”). As of June 30, 2020, the Company has not sold any shares of its common stock under the ATM Facility. In June 2020, the Company completed a public offering whereby the Company sold 6,900,000 shares of its common stock, inclusive of 900,000 shares of common stock sold by the Company pursuant to the full exercise of an option granted to the underwriters in connection with the offering and received net proceeds of approximately $203.7 million. As of June 30, 2020, the Company has raised an aggregate of $648.7 million in net proceeds through the sale of shares of its common stock in public offerings and at-the-market 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, 2020 and anticipated interest income will enable it to fund its operating expenses and capital expenditure requirements into 2023. The Company had an accumulated deficit of $610.5 million at June 30, 2020, 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, 2019 (the “Annual Report”).

The unaudited condensed consolidated financial statements include the accounts of the Company 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, 2020 and 2019 are referred to as the second quarter of 2020 and 2019, 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.

Corporate Equity Securities

The Company classifies investments in equity securities that have a readily determinable fair value as marketable securities in the Company’s condensed consolidated balance sheets. The Company’s marketable securities are stated at fair value. Typically, the fair value of these securities is based on a quoted price for an identical equity security. If the equity security has a restriction that is determined to be an attribute of the security that would transfer to a market participant, the fair value of the security is measured based on the quoted price for an otherwise identical unrestricted equity security, adjusted for the effect of the restriction. The adjustment reflects the discount that a market participant would demand for the risk relating to the inability to dispose of the security for a specified period of time. That adjustment is based on the nature and duration of the restriction and the limitations imposed by the restriction to a buyer. The Company records changes in the fair value of its equity securities in “Other Income (Expense), net” in the Company’s condensed consolidated statement of operations.

Recent Accounting Pronouncements – Recently Adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Statement Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (“ASU 2016-13”) which was clarified and amended by the issuances of ASUs 2018-19, 2019-04, 2019-05 and 2019-11 in November 2018, April 2019, May 2019 and November 2019, respectively. The new standard requires that expected credit losses relating to financial assets measured on an amortized cost basis to be measured using an expected-loss model, replacing the current incurred-loss model, and recorded through an allowance for credit losses which is a valuation account that is deducted from the amortized cost basis of the financial asset. ASU 2016-13 requires evaluation of credit loss based on historical experience, current conditions and reasonable and supportable forecasts. The Company’s estimate of expected credit losses includes a measure of the expected risk of credit loss even if the risk is remote. When assessing financial assets for credit losses, the Company pools financial assets with similar risk characteristics and performs a collective evaluation. However, the Company is not required to measure expected credit losses in which historical credit loss information adjusted for

9

current conditions and reasonable and supportable forecasts results in an expectation that nonpayment of the amortized cost basis is zero. At each reporting date, the Company will record an allowance for credit losses and reports it as credit loss expense which is included in “Other income (expense), net” in the Company’s condensed consolidated statement of operations. However subsequent increases or decreases in the fair value of available-for-sale securities that do not result in recognition or reversal of an allowance for credit loss or write-down will continue to be recorded in other comprehensive loss. The Company adopted the new standard and the related amendments on January 1, 2020 using a modified retrospective approach. The modified retrospective approach requires the Company to record a one-time adjustment to opening accumulated deficit as of the effective date. The Company concluded that there are no indicators of credit loss with respect to its available-for-sale debt securities which consist of U.S Treasury securities and government-agency bonds. The Company therefore did not record an allowance for credit losses or doubtful accounts upon adoption or during the first quarter of 2020. The adoption of ASU 2016-13 had no impact on the Company’s condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 was effective on January 1, 2020. The Company adopted ASU 2018-15 using the prospective transition approach, which allows the Company to change the accounting method without restating prior periods or recording cumulative adjustments. The adoption of ASU 2018-15 did not have a material impact on the Company’s condensed consolidated financial statements.

In 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which eliminates, adds, and modifies the disclosure requirements for fair value measurements. ASU 2018-13 was effective on January 1, 2020. The adoption of ASU 2018-13 results in additional disclosures related to the Company’s assets and liabilities that are valued based on Level 3 inputs and transfers between Level 1 and Level 2 fair value measurements. The adoption of ASU 2018-13 did not have a material impact on the Company’s financial statement footnote disclosures.

3. Cash Equivalents, Marketable Securities and Equity Securities

Cash equivalents and marketable securities consisted of the following at June 30, 2020 (in thousands):

Allowance

Gross

Gross

Amortized

for Credit

Unrealized

Unrealized

Fair

June 30, 2020

Cost

Losses

Gains

Losses

Value

Cash equivalents and marketable securities:

Money market funds

$

485,819

$

$

$

$

485,819

U.S. Treasuries

26,961

36

26,997

Government agency securities

67,565

147

67,712

Corporate equity securities

3,667

14,525

18,192

Total

$

584,012

$

$

14,708

$

$

598,720

10

Cash equivalents, marketable securities and equity securities consisted of the following at December 31, 2019 (in thousands):

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

December 31, 2019

Cost

Gains

Losses

Value

Cash equivalents and marketable securities:

Money market funds

$

230,201

$

$

$

230,201

U.S. Treasuries

71,348

20

71,368

Government agency securities

155,484

87

155,571

Equity securities included in other non-current assets:

Corporate equity securities

3,667

3,667

Total

$

460,700

$

107

$

$

460,807

As of June 30, 2020, the Company did not hold any marketable securities in an unrealized loss position. Furthermore, the Company has determined that there were no material changes in the credit risk of the debt securities.

There were no realized gains or losses on available-for-sale securities during the six months ended June 30, 2020 or 2019.

4. Fair Value Measurements

Assets measured at fair value on a recurring basis as of June 30, 2020 were as follows (in thousands):

    

    

Quoted Prices

    

Significant

    

in Active

Other

Significant

Markets for

Observable

Unobservable

June 30, 

Identical Assets

Inputs

Inputs

Financial Assets

2020

(Level 1)

(Level 2)

(Level 3)

Cash equivalents:

Money market funds

$

485,819

$

485,819

$

$

Marketable securities:

U.S. Treasuries

26,997

26,997

Government agency securities

67,712

67,712

Corporate equity securities

18,192

18,192

Restricted cash and other non-current assets:

Money market funds

3,877

3,877

Total financial assets

$

602,597

$

584,405

$

18,192

$

11

Assets measured at fair value on a recurring basis as of December 31, 2019 were as follows (in thousands):

    

    

Quoted Prices

    

Significant

    

in Active

Other

Significant

Markets for

Observable

Unobservable

December 31, 

Identical Assets

Inputs

Inputs

Financial Assets

2019

(Level 1)

(Level 2)

(Level 3)

Cash equivalents:

Money market funds

$

230,201

$

230,201

$

$

U.S. Treasuries

7,982

7,982

Marketable securities:

U.S. Treasuries

63,386

63,386

Government agency securities

155,571

155,571

Restricted cash and other non-current assets:

Corporate equity securities

3,667

3,667

Money market funds

1,619

1,619

Total financial assets

$

462,426

$

458,759

$

3,667

$

The Company holds an investment in Beam Therapeutics Inc. (“Beam Therapeutics”) consisting of shares of Beam Therapeutics’ common stock. Prior to Beam Therapeutics’ initial public offering in February 2020, 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, and are included in marketable securities on the condensed consolidated balance sheet with a fair value based on Level 2 inputs due to transfer restrictions associated with the securities. Upon the expiration of the transfer restrictions the Company expects to transfer the value of these equity securities from Level 2 to Level 1. During the three and six months ended June 30, 2020, the Company recorded unrealized gains of $7.2 million and $14.5 million, respectively in other income (expense), net on the consolidated statements of operations.

5. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

As of

June 30, 

December 31, 

    

2020

    

2019

Employee related expenses

$

4,179

$

4,971

Process and platform development expenses

2,266

 

735

Intellectual property and patent related fees

1,598

3,725

Sublicensing expenses

813

11,416

Professional service expenses

609

674

Other expenses

729

599

Total accrued expenses

$

10,194

$

22,120

12

6. Property and Equipment, net

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

    

As of

June 30, 

December 31, 

    

2020

    

2019

Laboratory equipment

$

16,656

$

14,571

Leasehold improvements

3,393

1,042

Computer equipment

 

858

 

858

Construction-in-progress

550

1,336

Furniture and office equipment

166

166

Software

 

118

 

118

Total property and equipment

 

21,741

 

18,091

Less: accumulated depreciation

 

(8,846)

 

(7,204)

Property and equipment, net

$

12,895

$

10,887

7. Commitments and Contingencies

The Company is a party to a number of license agreements under which the Company licenses patents, patent applications and other intellectual property from third parties. As such, the Company is obligated to pay licensors for various costs including upfront licenses fees, annual license fees, certain licensor expense reimbursements, success payments, research funding payments, and milestones triggerable upon certain development, regulatory, and commercial events as well as royalties on future products. These contracts are generally cancellable, with notice, at the Company’s option and do not have significant cancellation penalties. The terms and conditions as well as the accounting analysis for the Company’s significant commitments and contingencies are described in Note 8, “Commitments and Contingencies” to the consolidated financial statements included in the Annual Report. There have been no material changes to the terms and conditions, or the accounting conclusions previously disclosed in the Annual Report.

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. The Company incurred an aggregate of $2.8 million and $6.6 million in expense during the three and six months ended June 30, 2020, respectively, for such reimbursement. The Company incurred an aggregate of $3.5 million and $6.9 million in expense during the three and six months ended June 30, 2019, respectively, for such reimbursement.

8. Collaboration and Profit-Sharing Agreements

The Company has entered into multiple collaborations, out-licenses and strategic alliances with third parties that typically involve payments to or from the Company, including up-front payments, payments for research and development services, option payments, milestone payments and royalty payments to or from the Company. The terms and conditions as well as the accounting analysis for the Company’s significant collaborations, out-licenses and strategic alliances are described in Note 9, “Collaboration and Profit-Sharing Agreements” to the consolidated financial statements included in the Annual Report. There have been no material changes to the terms and conditions, or the accounting conclusions previously disclosed in the Annual Report.

13

Collaboration Revenue

As of June 30, 2020, the Company’s contract liabilities were primarily related to the Company’s collaboration with Juno Therapeutics and its strategic alliance with Allergan. The following table presents changes in the Company’s accounts receivable and contract liabilities for the six months ended June 30, 2020 (in thousands):

For the six months ended June 30, 2020

Balance at December 31, 2019

Additions

Deductions

Balance at June 30, 2020

Accounts receivable

$

418

$

1,447

$

$

1,865

Contract liabilities:

Deferred revenue

$

186,721

$

508

$

(7,883)

$

179,346

During the three and six months ended June 30, 2020, the Company recognized the following collaboration revenue (in thousands):

Three Months Ended

Six Months Ended

Revenue recognized in the period from:

June 30, 2020

Amounts included in deferred revenue at the beginning of the period

$

3,066

$

7,883

Performance obligations satisfied in previous periods

$

$

60

9. Stock-based Compensation

Total compensation cost recognized for all stock-based compensation awards in the condensed consolidated statements of operations was as follows (in thousands):

    

    

    

    

Three Months Ended

Six Months Ended

June 30, 

June 30, 

2020

2019

2020

2019

Research and development

$

2,673

$

3,853

$

5,730

$

7,235

General and administrative

 

2,744

 

2,640

 

5,907

 

7,113

Total stock-based compensation expense

$

5,417

$

6,493

$

11,637

$

14,348

Restricted Stock and Restricted Stock Unit Awards

The following is a summary of restricted stock and restricted stock unit awards activity for the six months ended June 30, 2020:

    

    

Weighted

Average

Grant Date

Fair Value

Shares

Per Share

Unvested restricted stock and restricted stock unit awards as of December 31, 2019

 

581,408

$

24.03

Issued

 

283,319

$

27.91

Vested

 

(243,587)

$

22.65

Forfeited

(105,009)

$