UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2021

OR

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

For the transition period from ___________________ to ___________________

Commission File Number: 001-38433

Homology Medicines, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	47-3468154
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
One Patriots Park Bedford, MA	01730
(Address of principal executive offices)	(Zip Code)

(781) 301-7277

(Registrant’s telephone number, including area code)

N/A

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

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value per share	FIXX	Nasdaq Global Select Market

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

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

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

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

As of November 1, 2021, the registrant had 57,150,274 shares of common stock, $0.0001 par value per share, outstanding.

FORWARD-LOOKING STATEMENTS

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

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

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

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

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SUMMARY RISK FACTORS

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

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

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

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

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

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

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

the COVID-19 pandemic could continue to adversely impact our business, including our preclinical studies and clinical trials;

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

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

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

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

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

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

3

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	5
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 (Unaudited)	5
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (Unaudited)	6
	Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2021 and 2020 (Unaudited)	7
	Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020 (Unaudited)	8
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (Unaudited)	10
	Notes to Condensed Consolidated Financial Statements (Unaudited)	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
PART II.	OTHER INFORMATION	39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	83
Item 3.	Defaults Upon Senior Securities	83
Item 4.	Mine Safety Disclosures	83
Item 5.	Other Information	84
Item 6.	Exhibits	85
Signatures		86

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

HOMOLOGY MEDICINES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(UNAUDITED)

	As of
	September 30, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	95,829		$	217,431
Short-term investments		91,722			—
Prepaid expenses and other current assets		4,266			2,133
Total current assets		191,817			219,564
Property and equipment, net		32,697			37,002
Right-of-use assets		5,028			5,897
Restricted cash		1,274			1,274
Total assets	$	230,816		$	263,737
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	3,522		$	4,722
Accrued expenses and other liabilities		10,016			9,803
Operating lease liabilities		1,959			2,501
Deferred revenue		3,208			5,632
Total current liabilities		18,705			22,658
Non-current liabilities:
Operating lease liabilities, net of current portion		11,582			12,941
Deferred revenue, net of current portion		1,958			32,143
Total liabilities		32,245			67,742
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.0001 par value, 10,000,000 shares authorized; no shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		—			—
Common stock, $0.0001 par value; 200,000,000 shares authorized;    57,150,274 and 50,268,666 shares issued as of September 30, 2021 and    December 31, 2020, respectively; and 57,149,978 and 50,265,575 shares    outstanding as of September 30, 2021 and December 31, 2020, respectively		6			5
Additional paid-in capital		589,119			524,358
Accumulated other comprehensive loss		(5	)		—
Accumulated deficit		(390,549	)		(328,368	)
Total stockholders’ equity		198,571			195,995
Total liabilities and stockholders' equity	$	230,816		$	263,737

See notes to condensed consolidated financial statements.

5

HOMOLOGY MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(UNAUDITED)

	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020
Collaboration revenue	$	1,677		$	567		$	33,169		$	1,722
Operating expenses:
Research and development		23,987			20,417			69,439			77,197
General and administrative		8,351			8,423			26,054			24,986
Total operating expenses		32,338			28,840			95,493			102,183
Loss from operations		(30,661	)		(28,273	)		(62,324	)		(100,461	)
Other income:
Interest income		53			41			143			1,558
Total other income		53			41			143			1,558
Net loss	$	(30,608	)	$	(28,232	)	$	(62,181	)	$	(98,903	)
Net loss per share-basic and diluted	$	(0.54	)	$	(0.62	)	$	(1.14	)	$	(2.19	)
Weighted-average common shares outstanding-basic and diluted		57,106,639			45,227,231			54,704,410			45,196,459

See notes to condensed consolidated financial statements.

6

HOMOLOGY MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(UNAUDITED)

	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020
Net loss	$	(30,608	)	$	(28,232	)	$	(62,181	)	$	(98,903	)
Other comprehensive loss:
Change in unrealized gain (loss) on available for   sale securities, net		(7	)		(11	)		(5	)		(183	)
Total other comprehensive loss		(7	)		(11	)		(5	)		(183	)
Comprehensive loss	$	(30,615	)	$	(28,243	)	$	(62,186	)	$	(99,086	)

See notes to condensed consolidated financial statements.

7

HOMOLOGY MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share and per share amounts)

(UNAUDITED)

	Common Stock $0.0001 Par Value				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Gain (Loss)			Deficit			Equity
Balance at January 1, 2020		45,116,742	$	4	$	457,994	$	183		$	(199,674	)	$	258,507
Vesting of common stock from    option exercises		15,542		—		12		—			—			12
Issuance of common stock from    option exercises		34,311		—		135		—			—			135
Issuance of common stock pursuant to    employee stock purchase plan		39,471		—		537		—			—			537
Stock-based compensation		—		—		2,883		—			—			2,883
Other comprehensive loss		—		—		—		(202	)		—			(202	)
Net loss		—		—		—		—			(35,331	)		(35,331	)
Balance at March 31, 2020		45,206,066	$	4	$	461,561	$	(19	)	$	(235,005	)	$	226,541
Vesting of common stock from    option exercises		1,011		—		4		—			—			4
Issuance of common stock from    option exercises		3,576		—		16		—			—			16
Stock-based compensation		—		—		3,453		—			—			3,453
Other comprehensive gain		—		—		—		30			—			30
Net loss		—		—		—		—			(35,340	)		(35,340	)
Balance at June 30, 2020		45,210,653	$	4	$	465,034	$	11		$	(270,345	)	$	194,704
Vesting of common stock from    option exercises		1,011		—		5		—			—			5
Issuance of common stock from    option exercises		3,706		—		9		—			—			9
Issuance of common stock pursuant to    employee stock purchase plan		44,377		—		401		—			—			401
Stock-based compensation		—		—		3,346		—			—			3,346
Other comprehensive loss		—		—		—		(11	)		—			(11	)
Net loss		—		—		—		—			(28,232	)		(28,232	)
Balance at September 30, 2020		45,259,747	$	4	$	468,795	$	—		$	(298,577	)	$	170,222

8

	Common Stock $0.0001 Par Value				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Gain (Loss)			Deficit			Equity
Balance at January 1, 2021		50,265,575	$	5	$	524,358	$	—		$	(328,368	)	$	195,995
Vesting of common stock from    option exercises		1,011		—		4		—			—			4
Issuance of common stock from    option exercises		55,277		—		143		—			—			143
Issuance of common stock pursuant to    employee stock purchase plan		48,792		—		446		—			—			446
Issuance of common stock pursuant to    ATM, net of discounts and issuance costs		114,914		—		1,454		—			—			1,454
Stock-based compensation		—		—		3,883		—			—			3,883
Other comprehensive loss		—		—		—		(23	)		—			(23	)
Net loss		—		—		—		—			(1,073	)		(1,073	)
Balance at March 31, 2021		50,485,569	$	5	$	530,288	$	(23	)	$	(329,441	)	$	200,829
Issuance of common stock in follow-on offering, net of discounts and issuance costs		6,596,306		1		49,743		—			—			49,744
Vesting of common stock from    option exercises		1,011		—		4		—			—			4
Issuance of common stock from    option exercises		4,071		—		2		—			—			2
Stock-based compensation		—		—		4,473		—			—			4,473
Other comprehensive gain		—		—		—		25			—			25
Net loss		—		—		—		—			(30,500	)		(30,500	)
Balance at June 30, 2021		57,086,957	$	6	$	584,510	$	2		$	(359,941	)	$	224,577
Vesting of common stock from    option exercises		773		—		3		—			—			3
Issuance of common stock from    option exercises		117		—		—		—			—			—
Issuance of common stock pursuant to    employee stock purchase plan		62,131		—		380		—			—			380
Stock-based compensation		—		—		4,226		—			—			4,226
Other comprehensive loss		—		—		—		(7	)		—			(7	)
Net loss		—		—		—		—			(30,608	)		(30,608	)
Balance at September 30, 2021		57,149,978	$	6	$	589,119	$	(5	)	$	(390,549	)	$	198,571

See notes to condensed consolidated financial statements.

9

HOMOLOGY MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(UNAUDITED)

	Nine months ended September 30,
	2021			2020
Cash flows from operating activities:
Net loss	$	(62,181	)	$	(98,903	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		6,280			5,909
Noncash lease expense		869			686
Stock-based compensation expense		12,582			9,682
Accretion of discount (amortization of premium) on short-term investments		664			(197	)
Loss on disposal of property and equipment		6			—
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(2,133	)		938
Accounts payable		(1,123	)		486
Accrued expenses and other liabilities		225			924
Deferred revenue		(32,609	)