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, 2023


☐	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 7, 2023, the registrant had 57,811,083 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, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including, without limitation, statements regarding the timing and anticipated benefits of and costs associated with our recent reduction in force and related strategic initiatives; our future results of operations and financial position, the anticipated impact of COVID-19 and the current economic environment on our business, the anticipated use of cash and business strategy, the potential, safety, efficacy, and regulatory and clinical progress of our product candidates, prospective products, product approvals, research and development costs, the anticipated timing and likelihood of success of clinical trials, the expected timing of the release of clinical trial data, the timing and expectations surrounding regulatory communications, our relationship with third-parties, our intent to engage in future strategic partnerships, and the plans and objectives of management for future operations and future results of anticipated products, are forward-looking statements. These statements are neither promises nor guarantees, but 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, though not all forward-looking statements use these words or expressions. The forward-looking statements in this Quarterly Report on Form 10-Q 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 on Form 10-Q 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 on Form 10-Q 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 on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q 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.

•

Any financial or strategic option we pursue may not be successful. Moreover, our decision to discontinue further program development efforts, with the exception of required actions, may not result in the anticipated savings for the Company and may adversely affect our business.

•

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.

•

Should we resume development of our product candidates, we would be 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.

•

Should we resume development of our product candidates, 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 initiated Phase 1 pheEDIT clinical trial. In addition, there have been a limited number of gene therapy products approved in the United States or in Europe and none of these products have utilized our AAVHSC platform.

•

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable.

•

Our product candidates have caused and may in the future 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 the length of time required to advance our product candidates through clinical trials, should we resume development of our product candidates, including the pace at which we advance patient enrollment, and potential regulatory approval of, or demand for, our potential products.

•

We currently contract with third parties, including 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 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, but there are no assurances that we will succeed in establishing and maintaining such 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.

•

Our recent reduction in force undertaken to significantly reduce our ongoing operating expenses may not result in our intended outcomes and may yield unintended consequences and additional costs.

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, 2023 and December 31, 2022 (Unaudited)	5
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022 (Unaudited)	6
	Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2023 and 2022 (Unaudited)	7
	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022 (Unaudited)	8
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (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	37
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, Use of Proceeds, and Issuer Purchases of Equity Securities	89
Item 3.	Defaults Upon Senior Securities	90
Item 4.	Mine Safety Disclosures	90
Item 5.	Other Information	90
Item 6.	Exhibits	91
Signatures		91

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, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	76,797		$	33,986
Short-term investments		50,274			141,040
Prepaid expenses and other current assets		4,265			5,989
Total current assets		131,336			181,015
Equity method investment		17,319			25,814
Property and equipment, net		845			1,078
Right-of-use assets		19,837			20,563
Total assets	$	169,337		$	228,470
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	3,393		$	1,144
Accrued expenses and other liabilities		17,845			18,715
Operating lease liabilities		1,701			1,561
Deferred revenue		—			1,156
Total current liabilities		22,939			22,576
Non-current liabilities:
Operating lease liabilities, net of current portion		27,023			27,916
Total liabilities		49,962			50,492
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, 2023 and December 31, 2022		—			—
Common stock, $0.0001 par value; 200,000,000 shares authorized; 57,798,133 and 57,483,910 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		6			6
Additional paid-in capital		612,482			607,513
Accumulated other comprehensive loss		(88	)		(404	)
Accumulated deficit		(493,025	)		(429,137	)
Total stockholders’ equity		119,375			177,978
Total liabilities and stockholders' equity	$	169,337		$	228,470

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,
	2023			2022			2023			2022
Collaboration revenue	$	354		$	802		$	1,156		$	1,604
Operating expenses:
Research and development		22,982			21,075			42,970			45,348
General and administrative		8,188			8,034			16,513			22,181
Total operating expenses		31,170			29,109			59,483			67,529
Loss from operations		(30,816	)		(28,307	)		(58,327	)		(65,925	)
Other income:
Gain on sale of business		—			—			—			131,249
Interest income		1,511			474			2,980			506
Total other income		1,511			474			2,980			131,755
Income (loss) before income taxes		(29,305	)		(27,833	)		(55,347	)		65,830
Benefit from (provision for) income taxes		—			105			—			(862	)
Loss from equity method investment		(5,739	)		(1,361	)		(8,541	)		(1,952	)
Net income (loss)	$	(35,044	)	$	(29,089	)	$	(63,888	)	$	63,016
Net income (loss) per share-basic	$	(0.61	)	$	(0.51	)	$	(1.11	)	$	1.10
Net income (loss) per share-diluted	$	(0.61	)	$	(0.51	)	$	(1.11	)	$	1.09
Weighted-average common shares outstanding-basic		57,795,285			57,385,578			57,756,032			57,334,078
Weighted-average common shares outstanding-diluted		57,795,285			57,385,578			57,756,032			57,869,443

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,
	2023			2022			2023			2022
Net income (loss)	$	(35,044	)	$	(29,089	)	$	(63,888	)	$	63,016
Other comprehensive gain (loss):
Change in unrealized gain (loss) on available for sale securities, net		94			(41	)		316			(34	)
Total other comprehensive gain		94			(41	)		316			(34	)
Comprehensive income (loss)	$	(34,950	)	$	(29,130	)	$	(63,572	)	$	62,982

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, 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


	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, 2023		57,483,910	$	6	$	607,513	$	(404	)	$	(429,137	)	$	177,978
Issuance of common stock from RSU vesting		194,525		—		—		—			—			—
Issuance of common stock pursuant to employee stock purchase plan		116,332		—		150		—			—			150
Stock-based compensation		—		—		2,369		—			—			2,369
Stock-based compensation for equity method investee		—		—		24		—			—			24
Other comprehensive gain		—		—		—		222			—			222
Net loss		—		—		—		—			(28,844	)		(28,844	)
Balance at March 31, 2023		57,794,767	$	6	$	610,056	$	(182	)	$	(457,981	)	$	151,899
Issuance of common stock from option exercises		3,366		—		2		—			—			2
Stock-based compensation		—		—		2,402		—			—			2,402
Stock-based compensation for equity method investee		—		—		22		—			—			22
Other comprehensive loss		—		—		—		94			—			94
Net loss		—		—		—		—			(35,044	)		(35,044	)
Balance at June 30, 2023		57,798,133	$	6	$	612,482	$	(88	)	$	(493,025	)	$	119,375

See notes to condensed consolidated financial statements.

HOMOLOGY MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(UNAUDITED)


	Six months ended June 30,
	2023			2022
Cash flows from operating activities:
Net income (loss)	$	(63,888	)	$	63,016
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		442			676
Noncash lease expense		726			655
Loss from equity method investment		8,541			1,952
Stock-based compensation expense		4,771			7,194
(Accretion of discount) amortization of premium on short-term investments		(1,519	)		(91	)
Loss on disposal of property and equipment		11			—
Gain on sale of business		—			(131,249	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		1,724			(6,088	)
Accounts payable		2,249			1,637
Accrued expenses and other liabilities		(862	)		1,646
Accrued income taxes		—			862
Deferred revenue		(1,156	)		(1,604	)
Operating lease liabilities		(753	)		(136	)
Net cash used in operating activities		(49,714	)		(61,530	)
Cash flows from investing activities:
Purchases of short-term investments		(25,282	)		(49,248	)
Maturities of short-term investments		117,883