SEC Filing | Homology Medicines, Inc.

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10-Q

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


☐	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 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.

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.

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

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.

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.

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.

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.

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