# Editas Medicine, Inc. (EDIT) FY 2021 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Editas Medicine, Inc.'s 10-K for fiscal year 2021.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1650664/000155837022001950/edit-20211231x10k.htm
Accession: 0001558370-22-001950
Filing date: 2022-02-24
Report date: 2021-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/EDIT/
All MD&A years: /company/EDIT/mda/
Next year: /company/EDIT/mda/fy2022/ (FY 2022)

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K.

Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. There are a number of important risks and uncertainties that could cause our actual results to differ materially from those indicated by forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Annual Report on Form 10-K, particularly in the section entitled “Risk Factors” in Part I, Item 1A that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.

You should read this Annual Report on Form 10-K and the documents that we have filed as exhibits to this Annual Report on Form 10-K completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Annual Report on Form 10-K are made as of the date of this Annual Report on Form 10-K,and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Overview

We are a leading, clinical stage gene editing company dedicated to developing potentially transformative gene editing medicines to treat a broad range of serious diseases. We have developed a proprietary gene editing platform based on CRISPR technology and we continue to expand its capabilities. Our product development strategy is to target diseases of high unmet need where we aim to make differentiated, transformational medicines using our gene editing platform. We are advancing in vivo gene editing medicines, in which the medicine is injected or infused into the patient to edit the cells inside their body, ex vivo gene-edited cell medicines, in which cells collected from a patient are edited with our technology and then administered back to that same patient, and cellular therapy medicines, in which we use our technology to edit induced human pluripotent stem cells that are subsequently differentiated into effector cells, such as natural killer (“NK”) cells, to develop medicines that can be administered to a patient. While our discovery efforts have ranged across several diseases and therapeutic areas, the areas where our programs are more mature are in our in vivo gene editing medicines to treat ocular diseases, our ex vivo gene-edited cell medicines to treat hemoglobinopathies, and our cellular therapy medicines to treat cancer.

In ocular diseases, our most advanced program is designed to address a specific genetic form of retinal degeneration called Leber congenital amaurosis 10 (“LCA10”), a CEP290-related retinal degenerative disorder for which we are not aware of any available therapies. In mid-2019, we initiated our Phase 1/2 BRILLIANCE clinical trial of EDIT-101, an experimental gene editing medicine to treat LCA10. The BRILLIANCE trial is designed to assess the safety, tolerability, and efficacy of EDIT-101. We initially planned to enroll up to 18 patients in the United States and Europe in up to five cohorts, and in 2021 completed dosing of the first three cohorts, the adult low-, mid- and high-dose cohorts. We are expanding enrollment in one or more of the previously completed adult cohorts to explore dose response and support establishment of registrational trial endpoints. We anticipate establishing these registrational trial endpoints by the end of 2022. We remain on track to complete dosing of the pediatric mid-dose cohort in the first half of 2022, and expect to initiate dosing of the pediatric high-dose cohort in 2022.

In the third quarter of 2021, we released preliminary clinical data from the first six patients with LCA10 treated with EDIT-101 demonstrating a favorable safety profile and encouraging signals of clinical benefit. For additional

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information regarding these clinical data, please see “Business—Our Gene Editing Medicine Programs—In Vivo Gene Editing Medicines - Ocular—Leber Congenital Amaurosis 10.” We expect to provide a clinical update on the BRILLIANCE trial in the second half of 2022, including safety and efficacy assessments on all patients who have had at least six months of follow-up evaluations.

For our ex vivo gene-edited cell medicines, our lead program is EDIT-301, an experimental medicine to treat sickle cell disease, a severe inherited blood disease that causes premature death, and transfusion-dependent beta-thalassemia (“TDT”). In January 2021, the U.S. Food and Drug Administration (the “FDA”) cleared the start of enrollment and dosing of patients in the first phase of our Phase 1/2 clinical trial of EDIT-301, which we refer to as our RUBY trial, for the treatment of sickle cell disease. This study is designed to validate the safety and beneficial effects of the cell editing process. The RUBY trial is currently enrolling study participants and is on track to begin dosing in the first half of 2022 with initial clinical results expected by the end of 2022. Prior to initiating a registrational trial, we will be required to develop a potency assay to ensure that the characteristics of the product released are as expected and confirmed by clinical data collected in the first patients treated, in response to an FDA partial clinical hold. In November 2021, we filed an IND application for a Phase 1/2 clinical trial of EDIT-301 for the treatment of TDT, which was cleared by the FDA in December 2021. We expect to initiate dosing in this trial during 2022.

In cellular therapy medicines, we continue to develop our capabilities to generate cells from induced human pluripotent stem cells to develop engineered cell medicines to treat cancer. We have advanced development of engineered iPSC-derived NK (“iNK”) cell medicines for solid tumors and generated edited NK cells from iPSCs with significantly increased anti-cancer activity. In December 2021, we declared a development candidate, referred to as EDIT-202, a highly differentiated iNK investigational medicine with double knock-in and double knock-out gene edits that are intended to enhance adaptive immune response and improve cell proliferation, cytolytic activity and persistence, as well as overcome suppressive tumor microenvironments. We expect to advance EDIT-202 in preclinical development during 2022.We are also advancing alpha-beta T cell experimental medicines in collaboration with Bristol-Myers Squibb Company (“BMS”). In May 2015, we entered into a collaboration with Juno Therapeutics, Inc., a wholly-owned subsidiary of BMS (“Juno Therapeutics”), to develop novel engineered alpha-beta T cell therapies for cancer and autoimmune diseases, which was amended and restated in each of May 2018 and November 2019, at which time we also entered into a related license agreement with Juno Therapeutics, which we collectively refer to as our collaboration with them.

Since our inception in September 2013, our operations have focused on organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio, assembling our core capabilities in gene editing, seeking to identify potential product candidates, and undertaking preclinical studies. Except for EDIT-101 and EDIT-301, all of our research programs are still in the preclinical or research stage of development and the risk of failure of all of our research programs is high. We have not generated any revenue from product sales. We have primarily financed our operations through various equity financings and payments received under our research collaboration with BMS and our former strategic alliance with Allergan Pharmaceuticals International Limited (together with its affiliates, “Allergan”), which was terminated in August 2020.

Since inception, we have incurred significant operating losses. Our net losses were $192.5 million, $116.0 million, and $133.7 million for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, we had an accumulated deficit of $857.7 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and from year to year. We anticipate that our expenses will increase substantially as we continue our current research programs and our preclinical development activities; progress the clinical development of EDIT-101 and EDIT-301; seek to identify additional research programs and additional product candidates; initiate preclinical testing and clinical trials for other product candidates we identify and develop, including preparing for and initiating the clinical development of EDIT-301 for the treatment of transfusion-dependent beta-thalassemia; maintain, expand, and protect our intellectual property portfolio, including reimbursing our licensors for such expenses related to the intellectual property that we in-license from such licensors; further develop our genome editing platform; hire additional clinical, quality control, and scientific personnel; and incur additional costs associated with operating as a public company. We do not expect to be profitable for the year ending December 31, 2022 or the foreseeable future.

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Although we did not experience any significant impact on our financial condition, results of operations or liquidity due to the ongoing COVID-19 pandemic during the year ended December 31, 2021, the pandemic has continuously evolved with new, more contagious, variants emerging from time to time, and near-term risks to our business remain. In response to COVID-19 and these variants, governments have implemented a variety of responses, including government-imposed quarantines, travel restrictions and other public health safety measures. As a result, the ultimate impact of the COVID-19 pandemic continues to be highly uncertain and we do not yet know the full extent of potential delays or impacts on our business, our ability to continue to raise additional capital, the EDIT-101 or EDIT-301 clinical trials, ongoing preclinical activities, or the global economy as a whole. We have taken steps in line with guidance from the U.S. Centers for Disease Control and Prevention, the Commonwealth of Massachusetts and the State of Colorado, the jurisdictions in which we primarily operate our business, to protect the health and safety of our employees and the community. In March 2020, we implemented a work from home policy, and restricted on-site activities at our facilities in Massachusetts and Colorado to certain manufacturing, laboratory and related support activities in light of the COVID-19 pandemic. Under our return to onsite work plans, we gradually resumed manufacturing, laboratory and related support activities at our facilities in Massachusetts and Colorado, and fully reopened our facilities in the third quarter of 2021 using a hybrid work model. However, in response to the recent spread of the Omicron variant, for January and a portion of February we temporarily reimposed the work from home policy and on-site activity restrictions. We will continue to monitor and respond to the changing conditions created by the pandemic, with focus on prioritizing the health and safety of our employees and maintaining safe and reliable operations of our facilities.

​

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Financial Operations Overview

Revenue

To date, we have not generated any revenue from product sales and we do not expect to generate any revenue from product sales for the foreseeable future. In connection with our collaboration with BMS, we have received an aggregate of $127.5 million in payments, which have primarily consisted of the initial upfront and amendment payments, development milestone payments and research funding support. We no longer receive research funding support. During the year ended December 31, 2021, we recognized $24.7 million of revenue related to our collaboration with BMS of which $22.7 million was previously deferred revenue. As of December 31, 2021, we had $68.0 million of deferred revenue related to BMS, of which $56.7 million is classified as long-term on our consolidated balance sheet. Under this collaboration, we will recognize revenue upon delivery of option packages to BMS or when milestones are achieved. As such, we expect that our revenue will fluctuate from quarter-to-quarter and year-to-year as a result of the timing of when these events occur.

In connection with our former strategic alliance with Allergan, we received an aggregate of $130.0 million in payments, which consisted of the initial upfront payment, an option exercise payment and a milestone payment. Prior to the termination of our agreements with Allergan, certain of these payments were deferred and were being recognized over the remaining contract term using the proportional performance method. During the third quarter of 2020, as a result of the termination of our agreements with Allergan, we recognized $63.2 million of revenue that consisted of previously deferred revenue net of a payment made to Allergan in connection with the termination.

For additional information about our revenue recognition policy related to the BMS collaboration or the Allergan strategic alliance, see “—Critical Accounting Policies and Estimates—Revenue Recognition” included in this Annual Report on Form 10-K.

For the foreseeable future we expect substantially all of our revenue will be generated from our collaboration with Juno Therapeutics, and any other collaborations or agreements we may enter into.

Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research, preclinical development, process and scale-up development, manufacture and clinical development of our product candidates, and the performance of development activities under our collaboration agreements. These costs are expensed as incurred and include:

[[GREPCENT_TABLE]]
[["","\u25cf","employee-related expenses including salaries, benefits, and stock-based compensation expense;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","costs incurred under clinical trial agreements with investigative sites;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","costs associated with conducting our preclinical, process and scale-up development, manufacturing, clinical and regulatory activities, including fees paid to third-party professional consultants, service providers and suppliers;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","costs of purchasing lab supplies and non-capital equipment used in our preclinical activities and in manufacturing preclinical and clinical study materials;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","costs incurred for the research and development activities under our collaboration agreements;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","facility costs including rent, depreciation, and maintenance expenses; and"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u25cf","fees for acquiring and maintaining licenses under our third-party licensing agreements, including any sublicensing or success payments made to our licensors."]]
[[/GREPCENT_TABLE]]

At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of any product candidates we may identify and develop. This is due to the numerous risks and uncertainties associated with developing such product candidates, including the uncertainty of:

[[GREPCENT_TABLE]]
[["","\u25cf","successful completion of preclinical studies, IND-enabling studies and natural history studies;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","successful enrollment in, and completion of, clinical trials;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","receipt of marketing approvals from applicable regulatory authorities;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","obtaining and maintaining patent and trade secret protection and non-patent exclusivity;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","launching commercial sales of a product, if and when approved, whether alone or in collaboration with others;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","acceptance of a product, if and when approved, by patients, the medical community, and third-party payors;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","effectively competing with other therapies and treatment options;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","a continued acceptable safety profile following approval;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","enforcing and defending intellectual property and proprietary rights and claims; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","achieving desirable medicinal properties for the intended indications."]]
[[/GREPCENT_TABLE]]

A change in the outcome of any of these variables with respect to the development of any product candidates we develop would significantly change the costs, timing, and viability associated with the development of that product candidate.

Research and development activities are central to our business model. We expect research and development costs to increase significantly for the foreseeable future as our development programs progress, including as we progress the clinical development of EDIT-101 and EDIT-301 as well as supporting preclinical studies for our other research programs.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation for personnel in executive, finance, investor relations, business development, legal, corporate affairs, information technology, facilities and human resource functions. Other significant costs include corporate facility costs not otherwise included in research and development expenses, legal fees related to intellectual property and corporate matters, and fees for accounting and consulting services.

We anticipate that our general and administrative expenses will increase in the future to support continued research and development activities and potential commercialization of any product candidates we identify and develop. These increases will include increased costs related to the hiring of additional personnel and fees to outside consultants. We also anticipate increased expenses related to reimbursement of third-party patent-related expenses and expenses associated with operating as a public company, including costs for audit, legal, regulatory, and tax-related services,

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director and officer insurance premiums, and investor relations costs. With respect to reimbursement of third-party intellectual property-related expenses specifically, given the ongoing nature of the opposition and interference proceedings involving the patents licensed to us under our license agreement with The Broad Institute, Inc. (“Broad”) and the President and Fellows of Harvard College (“Harvard”), we anticipate general and administrative expenses will continue to be significant.

Other (Expense) Income, Net

For the year ended December 31, 2021, other (expense) income, net consisted primarily of changes in interest income and accretion of discounts associated with other marketable securities.

For the year ended December 31, 2020, other (expense) income, net consisted primarily of changes in the fair value of equity securities, interest income and accretion of discounts associated with other marketable securities.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of our consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, and experience. The effects of material revisions in estimates, if any, will be reflected in the consolidated financial statements prospectively from the date of change in estimates.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policy used in the preparation of our consolidated financial statements requires the most significant judgments and estimates.

Revenue Recognition

We recognize revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), Topic 606, Revenue Recognition (“ASC 606”). Accordingly, we recognize revenue following the five step model prescribed under Accounting Standards Updates No. 2014-09, Revenue from Contracts with Customers: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation. We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations, and whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. As part of the accounting for these arrangements, we must develop assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. A significant portion of revenue recognized from our strategic alliance with Allergan, prior to termination, was related to research services performed for each clinical development program whereby revenue was recognized as the underlying services were performed using a proportional performance model. Prior to the termination of the arrangement with Allergan, we measured proportional performance based on full time employee hours incurred relative to projected full time employee hours to complete the research services for each clinical development program. We evaluated the measure of progress each reporting period and, if necessary, adjusted the measure of performance and related revenue recognition.

Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in our consolidated balance sheets.

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Accrued research and development expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to clinical research organizations, to investigative sites in connection with clinical trials, to sponsored research organizations, to service providers in connection with preclinical development activities and to service providers related to product manufacturing, development and distribution of clinical supplies.

We base our accrued expenses related to clinical trials on our estimates of the services performed and efforts expended pursuant to our contractual arrangements, including those with clinical research organizations. The financial terms of these agreements are sometimes subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our service providers will exceed the level of services performed and result in a prepayment of the clinical expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid accordingly.

Although we do not expect our estimates to be materially different from expenses actually incurred, if our estimates of the status and timing of services performed differs from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular period. To date, there have been no material differences from our estimates to the amounts actually incurred.

​

Results of Operations

Comparison of Years Ended December 31, 2021 and 2020

The following table summarizes our results of operations for the years ended December 31, 2021 and 2020, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","December 31,","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","2021","","2020","","Dollar Change","","\u200b","Percentage Change"],["Collaboration and other research and development revenues","\u200b","$","25,544","\u200b","$","90,732","\u200b","$","(65,188)","\u200b","\u200b","(72)","%"],["Operating expenses:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Research and development","\u200b","","142,507","\u200b","","157,996","\u200b","","(15,489)","\u200b","\u200b","(10)","%"],["General and administrative","\u200b","","76,183","\u200b","","67,576","\u200b","","8,607","\u200b","\u200b","13","%"],["Total operating expenses","\u200b","","218,690","\u200b","","225,572","\u200b","","(6,882)","\u200b","\u200b","(3)","%"],["Other income, net","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Other (expense) income, net","\u200b","","(1,698)","\u200b","","16,259","\u200b","","(17,957)","\u200b","\u200b","n/m","\u200b"],["Interest income, net","\u200b","","2,342","\u200b","","2,605","\u200b","","(263)","\u200b","\u200b","(10)","%"],["Total other income, net","\u200b","","644","\u200b","","18,864","\u200b","","(18,220)","\u200b","\u200b","(97)","%"],["Net loss","\u200b","$","(192,502)","\u200b","$","(115,976)","\u200b","$","(76,526)","\u200b","\u200b","66","%"]]
[[/GREPCENT_TABLE]]

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For our results of operations, we have included the respective percentage of changes, unless greater than 100% or less than (100)%, in which case we have denoted such changes as not meaningful (n/m).

Collaboration and Other Research and Development Revenues

Collaboration and other research and development revenues decreased by $65.2 million, to $25.5 million for the year ended December 31, 2021 from $90.7 million for the year ended December 31, 2020. This decrease was primarily attributable to $70.6 million of revenue recognized in the year ended December 31, 2020 as a result of the termination of our strategic alliance with Allergan, as well as to $7.6 million in revenue recognized in 2020 pursuant to an out-license agreement we entered into during the second quarter 2020, for which there was no similar revenue recognized during 2021. This decrease was partially offset by an increase of $13.5 million in revenue recognized pursuant to our research collaboration with Juno Therapeutics during the year ended December 31, 2021 compared to the year ended December 31, 2020.

Research and Development Expenses

Research and development expenses decreased by $15.5 million, to $142.5 million for the year ended December 31, 2021 from $158.0 million for the year ended December 31, 2020. The following table summarizes our research and development expenses for the years ended December 31, 2021 and December 31, 2020, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

​

[[GREPCENT_TABLE]]
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[[/GREPCENT_TABLE]]

​

The decrease in research and development expenses for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily attributable to:

[[GREPCENT_TABLE]]
[["","\u25cf","approximately $21.3 million in decreased sublicense and license fees resulting from success payments that were triggered during the fourth quarter of 2020 in connection to a license and sponsored research agreement with Broad which was partially offset by a success payment that was triggered during the first quarter of 2021;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","approximately $9.8 million in decreased external research and development expenses related to expenses incurred in the year ended December 31, 2020 under our profit-sharing arrangement with Allergan, including a one-time in-process research and development expense of $5.0 million for re-acquiring the rights to EDIT-101 from Allergan in the third quarter of 2020, as well as a decrease in expenses incurred"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","","related to an in-license arrangement that we entered into during the first quarter 2020 for which there was no similar expense in 2021; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","approximately $0.6 million in decreased other expenses."]]
[[/GREPCENT_TABLE]]

These decreases were partially offset by the following increases in research and development expenses:

[[GREPCENT_TABLE]]
[["","\u25cf","approximately $8.1 million in increased employee-related expenses due to an increase in the size of our workforce;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","approximately $5.0 million in increased stock-based compensation expenses primarily due to expense recognized in relation to an increase in restricted stock units granted to employees; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","approximately $3.1 million in increased facility and other related expenses primarily related to an increase in lab space."]]
[[/GREPCENT_TABLE]]

General and Administrative Expenses

General and administrative expenses increased by approximately $8.6 million, to $76.2 million for the year ended December 31, 2021 from $67.6 million for the year ended December 31, 2020. The following table summarizes our general and administrative expenses for the years ended December 31, 2021 and December 31, 2020, together with the changes in those items in dollars (in thousands) and the respective percentages of change:

​

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","December 31,","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","2021","","2020","","Dollar Change","\u200b","Percentage Change"],["Stock-based compensation expenses","\u200b","$","26,846","\u200b","$","11,576","\u200b","$","15,270","\u200b","n/m","\u200b"],["Employee related expenses","\u200b","\u200b","16,929","\u200b","\u200b","15,758","\u200b","\u200b","1,171","\u200b","7","%"],["Intellectual property and patent related fees","\u200b","","16,542","\u200b","","18,654","\u200b","","(2,112)","","(11)","%"],["Facility and other expenses","\u200b","","8,276","\u200b","","7,922","\u200b","","354","","4","%"],["Professional service expenses","\u200b","","7,590","\u200b","","13,666","\u200b","","(6,076)","","(44)","%"],["Total general and administrative expenses","\u200b","$","76,183","\u200b","$","67,576","\u200b","$","8,607","","13","%"]]
[[/GREPCENT_TABLE]]

​

The increase in general and administrative expenses for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily attributable to:

[[GREPCENT_TABLE]]
[["","\u25cf","approximately $15.3 million in increased stock-based compensation expenses related to the acceleration of vesting of certain equity awards held by our former Chief Executive Officer in connection with her separation from our company in February 2021, as well as stock-based compensation expenses as a result of market-based and performance-based awards that were granted to our current Chief Executive Officer and certain other employees in 2021;"]]
[[/GREPCENT_TABLE]]

​

[[GREPCENT_TABLE]]
[["","\u25cf","approximately $1.2 million in increased employee-related expenses primarily due to an increase in the size of our workforce and the timing of hiring key executives; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","approximately $0.4 million in increased facility and other expenses."]]
[[/GREPCENT_TABLE]]

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These increases were partially offset by the following decreases in general and administrative expenses:

[[GREPCENT_TABLE]]
[["","\u25cf","approximately $6.1 million in decreased professional service expenses primarily due to additional professional service expenses incurred in the third quarter of 2020 in connection with the termination of the Allergan agreement; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","approximately $2.1 million in decreased intellectual property and patent related fees."]]
[[/GREPCENT_TABLE]]

Total Other Income, Net

For the year ended December 31, 2021, total other income, net was $0.6 million, which was primarily attributable to interest income and accretion of discounts associated with marketable securities.

For the year ended December 31, 2020, total other income, net was $18.9 million, which was primarily attributable to the realized gains related to the sale of corporate equity securities, interest income and accretion of discounts associated with marketable securities.

Comparison of Years Ended December 31, 2020 and 2019

For a discussion of our results of operations for the year ended December 31, 2020 as compared to the year ended December 31, 2019, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 26, 2021.

Liquidity and Capital Resources

Sources of Liquidity

In January 2021, we completed a public offering in which we sold 3,500,000 shares of our common stock and received net proceeds of approximately $216.9 million. In February 2021, the underwriters in the public offering exercised their option to purchase an additional 525,000 shares, resulting in additional net proceeds to us of approximately $32.6 million. As of December 31, 2021, we have raised an aggregate of $898.0 million in net proceeds through the sale of shares of our common stock in public offerings and at-the-market offerings. We also have funded our business from payments received under our research collaboration with Juno Therapeutics and our former strategic alliance with Allergan. As of December 31, 2021, we had cash, cash equivalents and marketable securities of $619.9 million.

​

In May 2021, we entered into a common stock sales agreement with Cowen and Company, LLC (“Cowen”) under which we from time to time can issue and sell shares of our common stock through Cowen in at-the-market offerings for aggregate gross sale proceeds of up to $300.0 million (the “ATM Facility”). We have not sold any shares of our common stock under this ATM Facility as of the date of this Annual Report on Form 10-K.

​

In addition to our existing cash, cash equivalents and marketable securities, we are eligible to earn milestone and other payments under our collaboration agreement with Juno Therapeutics. Our ability to earn the milestone payments and the timing of earning these amounts are dependent upon the timing and outcome of our development, regulatory and commercial activities and, as such, are uncertain at this time. As of December 31, 2021, our right to contingent payments under our collaboration agreement with Juno Therapeutics is our only significant committed potential external source of funds.

​

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Cash Flows

The following table provides information regarding our cash flows for the years ended December 31, 2021 and 2020, respectively (in thousands):

[[GREPCENT_TABLE]]
[["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Year Ended"],["\u200b","\u200b","December 31,"],["\u200b","\u200b","2021","\u200b","2020"],["Net cash (used in) provided by:","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Operating activities","\u200b","$","(163,803)","\u200b","$","(179,843)"],["Investing activities","\u200b","","(54,466)","\u200b","","(140,522)"],["Financing activities","\u200b","","282,106","\u200b","","224,122"],["Net increase (decrease) in cash, cash equivalents, and restricted cash","\u200b","$","63,837","\u200b","$","(96,243)"]]
[[/GREPCENT_TABLE]]

​

Net Cash Used in Operating Activities

The use of cash in all periods resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital.

Net cash used in operating activities was approximately $163.8 million for the year ended December 31, 2021, which primarily consisted of operating expenses that relate to our on-going preclinical and clinical activities, a success payment that was settled in cash during the year, patent costs and license fees, rent expenses and increased costs as a result of staffing needs due to our expanding operations. These expenses were partially offset by cash inflows from license fees received in the period.

Net cash used in operating activities was approximately $179.8 million for the year ended December 31, 2020, which primarily consisted of our net loss which was adjusted for a non-cash research and development expense of $27.5 million related to a success payment that was triggered during the year that was subsequently settled in shares of common stock. The changes in working capital relate to our on-going preclinical and clinical activities, patent costs and license fees, rent expenses and increased costs as a result of staffing needs due to our expanding operations. These expenses were partially offset by the recognition of deferred revenue relating to the Allergan termination and a milestone payment.

Net Cash Used in Investing Activities

Net cash used in investing activities was approximately $54.5 million for the year ended December 31, 2021, primarily related to costs to acquire marketable securities of $409.0 million and purchases of property and equipment of $8.0 million, partially offset by proceeds from maturities of marketable securities of $362.4 million.

​

Net cash used in investing activities was approximately $140.5 million for the year ended December 31, 2020, primarily related to the costs to acquire marketable securities of $458.4 million and costs to acquire property and equipment of $7.2 million, partially offset by proceeds from maturities of marketable securities of $305.0 million and proceeds from the sale of corporate equity securities of $20.0 million.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was approximately $282.1 million for the year ended December 31, 2021 and consisted of $249.5 million in net proceeds received from the offering of our common stock in the first quarter and $31.5 million in proceeds received from exercises of options for our common stock.

Net cash provided by financing activities was approximately $224.1 million for the year ended December 31, 2020, primarily related to $203.7 million in net proceeds received from the offering of our common stock in the second quarter, and $19.5 million in proceeds received from exercises of options for our common stock.

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For a discussion of our cash flows for the year ended December 31, 2019, see Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 26, 2021.

Funding Requirements

We expect our expenses to increase in connection with our ongoing activities, particularly as we progress the clinical development of EDIT-101 and EDIT-301; further advance our current research programs and our preclinical development activities; seek to identify product candidates and additional research programs; initiate preclinical testing and clinical trials for other product candidates we identify and develop, including preparing for and initiating the clinical development of EDIT-301 for the treatment of transfusion-dependent beta-thalassemia; maintain, expand, and protect our intellectual property portfolio, including reimbursing our licensors for expenses related to the intellectual property that we in-license from such licensors; hire additional clinical, quality control, and scientific personnel; and incur costs associated with operating as a public company. In addition, if we obtain marketing approval for any product candidate that we identify and develop, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing, and distribution to the extent that such sales, marketing, and distribution are not the responsibility of a collaborator. We do not expect to generate significant recurring revenue unless and until we obtain regulatory approval for and commercialize a product candidate. Furthermore, since 2016 we have incurred, and in future years we expect to continue to incur, significant costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization efforts.

We expect that our existing cash, cash equivalents and marketable securities at December 31, 2021 will enable us to fund our operating expenses and capital expenditure requirements through 2023. Our forecast of the period of time through which our existing cash and cash equivalents and investments will be adequate to support our operations is a forward-looking statement and involves significant risks and uncertainties. We have based this forecast on assumptions that may prove to be wrong, and actual results could vary materially from our expectations, which may adversely affect our capital resources and liquidity. We could utilize our available capital resources sooner than we currently expect. The amount and timing of future funding requirements, both near- and long-term, will depend on many factors, including, but not limited to:

[[GREPCENT_TABLE]]
[["","\u25cf","the scope, progress, results, and costs of drug discovery, preclinical development, laboratory testing, and clinical or natural history study trials for the product candidates we develop;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the costs of progressing the clinical development of EDIT-101 to treat LCA10, including expanding trial enrollment to explore dose response and support establishment of registrational trial endpoints;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the costs of progressing the clinical development of EDIT-301 to treat sickle cell disease and preparing for and initiating the clinical development of EDIT-301 to treat transfusion-dependent beta-thalassemia;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the costs of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property and proprietary rights, and defending intellectual property-related claims;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the costs, timing, and outcome of regulatory review of the product candidates we develop;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the costs of future activities, including product sales, medical affairs, marketing, manufacturing, and distribution, for any product candidates for which we receive regulatory approval;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the success of our collaboration with Juno Therapeutics;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","whether Juno Therapeutics exercises any of its options to extend the research program term and/or to additional research programs under our collaboration;"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","\u25cf","our ability to establish and maintain additional collaborations on favorable terms, if at all;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the extent to which we acquire or in-license other medicines and technologies;"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the costs of reimbursing our licensors for the prosecution and maintenance of the patent rights in-licensed by us; and"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","\u25cf","the costs of operating as a public company."]]
[[/GREPCENT_TABLE]]

Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive, and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, any product candidate that we identify and develop, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of genomic medicines that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.

If we raise funds through additional collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations

As of December 31, 2021, we had non-cancelable operating leases with total future minimum lease payments of $29.1 million, of which $12.0 million will be payable in 2022. These minimum lease payments exclude our share of the facility operating expenses, real-estate taxes and other costs that are reimbursable to the landlord under the leases.

​

Our agreements with certain institutions to license intellectual property include potential milestone and success fees, sublicense fees, royalty fees, licensing maintenance fees, and reimbursement of patent maintenance costs that we may be required to pay. Our agreements to license intellectual property include potential milestone payments that are dependent upon the development of products using the intellectual property licensed under the agreements and contingent upon the achievement of development or regulatory approval milestones, as well as commercial milestones. These potential obligations are contingent upon the occurrence of future events and the timing and likelihood of such potential obligations are not known with certainty. For further information regarding these agreements, please see “Business—Our Collaborations and Licensing Strategy.”

We also enter into contracts in the normal course of business with contract research organizations, contract manufacturing organizations and other vendors to assist in the performance of our research and development activities and other services and products for operating purposes. These contracts generally provide for termination at any time upon prior notice.

​

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