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, 2022

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. YesNo

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). YesNo

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). YesNo

As of August 8, 2022, the registrant had 57,402,028 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, macroeconomic trends, general economic and market trends, the anticipated impact of the COVID-19 pandemic on our business, anticipated use of cash, business strategy, the potential, safety, efficacy, and regulatory and clinical progress of our product candidates, 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, timing and expectations surrounding regulatory communications, 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. Unless the context requires otherwise, we use the terms “Homology,” “the Company,” “we,” “us,” “our” and similar designations in this Quarterly Report on Form 10-Q to refer to Homology Medicines, Inc. and its wholly-owned subsidiary.

2


 

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. If we are unable to achieve and sustain profitability, the market value of our common stock will likely decline. We may never achieve or maintain 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 our product candidates, and if none of our candidates receives 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 time 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. Moreover, none of those trials has involved our nuclease-free gene editing technology, prior to our recently initiated Phase 1 pheEDIT clinical trial.
The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.
The COVID-19 pandemic has and could continue to adversely impact our business, including our preclinical studies and clinical trials.
Our product candidates may cause serious adverse events or undesirable side effects 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 currently contract with third parties, including the newly formed AAV vector manufacturing company, Oxford Biomedica Solutions LLC, for the manufacture of certain materials for our research programs, preclinical and clinical studies. This reliance on third parties increases the risk that we will not have sufficient quantities of such materials, product candidates, or any medicines that we may develop and commercialize, or that such supply will not be available to us at an acceptable cost or in compliance with regulatory requirements, which could delay, prevent, or impair our development or commercialization efforts.
Our contract manufacturers, including the newly formed AAV vector manufacturing company, Oxford Biomedica Solutions LLC, are subject to significant regulation with respect to manufacturing our product candidates. 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 them in any other jurisdiction, which would limit our ability to realize their full market potential.
We may collaborate with third parties for the development and commercialization of our product candidates. We may not succeed in establishing and maintaining collaborative relationships, which may significantly limit our ability to develop and commercialize our product candidates successfully, if at all.
If we are unable to obtain and maintain patent protection for our technology and products or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets.

 

3


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

5

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

5

 

Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 (Unaudited)

5

 

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021 (Unaudited)

6

 

Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2022 and 2021 (Unaudited)

7

 

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021 (Unaudited)

8

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (Unaudited)

9

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

10

Item 2.

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

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

42

Item 4.

Controls and Procedures

43

 

PART II.

 

OTHER INFORMATION

44

Item 1.

Legal Proceedings

44

Item 1A.

Risk Factors

44

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

93

Item 3.

Defaults Upon Senior Securities

93

Item 4.

Mine Safety Disclosures

93

Item 5.

Other Information

93

Item 6.

Exhibits

94

Signatures

95

 

 

4


 

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

 

 

 

June 30, 2022

 

 

December 31, 2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

176,188

 

 

$

108,382

 

Short-term investments

 

 

49,335

 

 

 

47,491

 

Assets held for sale

 

 

 

 

 

28,907

 

Prepaid expenses and other current assets

 

 

12,917

 

 

 

7,129

 

Total current assets

 

 

238,440

 

 

 

191,909

 

Equity method investment

 

 

29,298

 

 

 

 

Property and equipment, net

 

 

1,720

 

 

 

2,252

 

Right-of-use assets

 

 

15,151

 

 

 

15,607

 

Restricted cash

 

 

 

 

 

1,953

 

Total assets

 

$

284,609

 

 

$

211,721

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,762

 

 

$

2,366

 

Accrued expenses and other liabilities

 

 

12,940

 

 

 

11,406

 

Accrued income taxes

 

 

862

 

 

 

 

Operating lease liabilities

 

 

410

 

 

 

246

 

Deferred revenue

 

 

2,760

 

 

 

3,208

 

Total current liabilities

 

 

20,734

 

 

 

17,226

 

Non-current liabilities:

 

 

 

 

 

 

Operating lease liabilities, net of current portion

 

 

23,587

 

 

 

23,688

 

Deferred revenue, net of current portion

 

 

 

 

 

1,156

 

Total liabilities

 

 

44,321

 

 

 

42,070

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 10,000,000 shares authorized; no shares issued and outstanding at June 30, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000,000 shares authorized;
   
57,385,578 and 57,150,274 shares issued and outstanding as of
   June 30, 2022 and December 31, 2021, respectively

 

 

6

 

 

 

6

 

Additional paid-in capital

 

 

601,439

 

 

 

593,784

 

Accumulated other comprehensive loss

 

 

(41

)

 

 

(7

)

Accumulated deficit

 

 

(361,116

)

 

 

(424,132

)

Total stockholders’ equity

 

 

240,288

 

 

 

169,651

 

Total liabilities and stockholders' equity

 

$

284,609

 

 

$

211,721

 

 

 

 

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 June 30,

 

 

Six months ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Collaboration revenue

 

$

802

 

 

$

2,187

 

 

$

1,604

 

 

$

31,492

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

21,075

 

 

 

23,697

 

 

 

45,348

 

 

 

45,452

 

General and administrative

 

 

8,034

 

 

 

9,042

 

 

 

22,181

 

 

 

17,703

 

Total operating expenses

 

 

29,109

 

 

 

32,739

 

 

 

67,529

 

 

 

63,155

 

Loss from operations

 

 

(28,307

)

 

 

(30,552

)

 

 

(65,925

)

 

 

(31,663

)

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

Gain on sale of business

 

 

 

 

 

 

 

 

131,249

 

 

 

 

Interest income

 

 

474

 

 

 

52

 

 

 

506

 

 

 

90

 

Total other income

 

 

474

 

 

 

52

 

 

 

131,755

 

 

 

90

 

Income (loss) before income taxes

 

 

(27,833

)

 

 

(30,500

)

 

 

65,830

 

 

 

(31,573

)

Benefit from (provision for) income taxes

 

 

105

 

 

 

 

 

 

(862

)

 

 

 

Loss from equity method investment

 

 

(1,361

)

 

 

 

 

 

(1,952

)

 

 

 

Net income (loss)

 

$

(29,089

)

 

$

(30,500

)

 

$

63,016

 

 

$

(31,573

)

Net income (loss) per share-basic

 

$

(0.51

)

 

$

(0.54

)

 

$

1.10

 

 

$

(0.59

)

Net income (loss) per share-diluted

 

$

(0.51

)

 

$

(0.54

)

 

$

1.09

 

 

$

(0.59

)

Weighted-average common shares outstanding-basic

 

 

57,385,578

 

 

 

56,497,461

 

 

 

57,334,078

 

 

 

53,429,634

 

Weighted-average common shares outstanding-diluted

 

 

57,385,578

 

 

 

56,497,461

 

 

 

57,869,443

 

 

 

53,429,634

 

 

 

 

See notes to condensed consolidated financial statements.

 

6


 

HOMOLOGY MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(UNAUDITED)

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (loss)

 

$

(29,089

)

 

$

(30,500

)

 

$

63,016

 

 

$

(31,573

)

Other comprehensive gain (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gain (loss) on available for
  sale securities, net

 

 

(41

)

 

 

25

 

 

 

(34

)

 

 

2

 

Total other comprehensive gain (loss)

 

 

(41

)

 

 

25

 

 

 

(34

)

 

 

2

 

Comprehensive income (loss)

 

$

(29,130

)

 

$

(30,475

)

 

$

62,982

 

 

$

(31,571

)

 

 

 

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, 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

 

 

 

 

 

 

 

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, 2022

 

 

57,150,274

 

 

$

6

 

 

$

593,784

 

 

$

(7

)

 

$

(424,132

)

 

$

169,651

 

Issuance of common stock from
   RSU vesting

 

 

87,140

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock from
   option exercises

 

 

293

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Issuance of common stock pursuant to
   employee stock purchase plan

 

 

147,871

 

 

 

 

 

 

439

 

 

 

 

 

 

 

 

 

439

 

Stock-based compensation

 

 

 

 

 

 

 

 

4,051

 

 

 

 

 

 

 

 

 

4,051

 

Other comprehensive gain

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

 

 

 

7

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

92,105

 

 

 

92,105

 

Balance at March 31, 2022

 

 

57,385,578

 

 

$

6

 

 

$

598,275

 

 

$

 

 

$

(332,027

)

 

$

266,254

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,143

 

 

 

 

 

 

 

 

 

3,143

 

Stock-based compensation for equity method
   investee

 

 

 

 

 

 

 

 

21

 

 

 

 

 

 

 

 

 

21

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(41

)

 

 

 

 

 

(41

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29,089

)

 

 

(29,089

)

Balance at June 30, 2022

 

 

57,385,578

 

 

$

6

 

 

$

601,439

 

 

$

(41

)

 

$

(361,116

)

 

$

240,288

 

 

 

 

See notes to condensed consolidated financial statements.

8


 

HOMOLOGY MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(UNAUDITED)

 

 

 

Six months ended June 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

63,016

 

 

$

(31,573

)

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

 

 

 

 

 

 

Depreciation

 

 

676

 

 

 

4,181

 

Noncash lease expense

 

 

655

 

 

 

569

 

Loss from equity method investment

 

 

1,952

 

 

 

 

Stock-based compensation expense

 

 

7,194

 

 

 

8,356

 

(Accretion of discount) amortization of premium on short-term investments

 

 

(91

)

 

 

414

 

Loss on disposal of property and equipment

 

 

 

 

 

6

 

Gain on sale of business

 

 

(131,249

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(6,088

)

 

 

(2,511

)

Accounts payable

 

 

1,637

 

 

 

991

 

Accrued expenses and other liabilities

 

 

1,646

 

 

 

(2,106

)

Accrued income taxes

 

 

862

 

 

 

 

Deferred revenue

 

 

(1,604

)

 

 

(31,008

)

Operating lease liabilities

 

 

(136

)

 

 

(1,253

)

Net cash used in operating activities

 

 

(61,530

)

 

 

(53,934

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of short-term investments

 

 

(49,248

)

 

 

(97,392

)

Maturities of short-term investments

 

 

47,461

 

 

 

 

Proceeds from sale of business

 

 

130,000