Editas Medicine, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Unaudited results. Editas is a clinical-stage genome-editing company and has not generated product sales.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Collaboration and research revenue | $6.4 million | $0.4 million | $13.1 million | $6.9 million |
| Research and development expense | $43.7 million | $33.8 million | $81.6 million | $75.7 million |
| General and administrative expense | $16.9 million | $22.0 million | $36.5 million | $43.5 million |
| Operating loss | $54.2 million | $55.4 million | $105.0 million | $112.3 million |
| Net loss | $53.5 million | $55.3 million | $104.0 million | $112.0 million |
| Net loss per share | $0.78 | $0.81 | $1.52 | $1.67 |
| Operating cash used | — | — | $87.1 million | $88.4 million |
Revenue growth primarily reflected BMS exercising an option for an additional collaboration program. The company reported no product revenue; a conventional product gross margin is not applicable. Lower net losses year over year coincided with higher collaboration revenue and lower G&A, partly offset by increased R&D.
Balance sheet and liquidity
- Cash and cash equivalents were $169.4 million; marketable securities totaled $358.2 million. Combined cash, equivalents and marketable securities were $527.6 million at June 30, 2022, down from $619.9 million at December 31, 2021.
- Six-month operating cash use was $87.1 million. Investing activities provided $52.4 million, primarily from net maturities of marketable securities; financing activities provided $0.6 million. Cash, equivalents and restricted cash decreased $34.1 million.
- Total assets were $580.8 million and total liabilities were $115.4 million. Liabilities included $20.3 million of operating lease liabilities and $68.9 million of deferred revenue. The filing reports no borrowings or debt balance.
- Management expects existing cash, cash equivalents and marketable securities to fund operating expenses and capital needs into 2024. The company also says it will require substantial additional capital and may need to raise funds.
Material changes and business developments
- Q2 R&D expense rose 29% year over year, driven mainly by external development and manufacturing costs for EDIT-101, EDIT-301 and other programs, as well as workforce growth. Six-month R&D rose 8%.
- Q2 G&A expense fell 23%; six-month G&A fell 16%. The decreases were driven substantially by lower stock-based compensation compared with 2021, including the absence of prior-year executive-related awards, and lower patent-related legal fees.
- Editas dosed the first patient in the EDIT-301 RUBY sickle cell disease trial in Q2 and reported successful neutrophil and platelet engraftment. It remained on track to announce top-line data by year-end 2022.
- The FDA removed a previously disclosed partial clinical hold on RUBY in July 2022, after quarter-end; the company said this permits efficacy data from patients to be included in a future marketing application.
- EDIT-101 enrollment continued in adult and pediatric cohorts. The company planned a BRILLIANCE trial update in the second half of 2022 and expected to design registrational-trial criteria by year-end.
- Editas remained on track to dose the first EDIT-301 patient in its TDT trial in 2022. The FDA granted EDIT-301 Orphan Drug Designation for TDT in May 2022.
Outlook, risks and unusual items
- Management expects continued significant expenses and operating losses and does not expect profitability in 2022 or the foreseeable future. R&D spending is expected to increase as clinical programs advance.
- Cash runway and development timelines are forward-looking estimates subject to clinical, regulatory, operational and funding uncertainties. Failure to raise capital could require delaying, reducing or ending programs; equity financing could dilute shareholders.
- Key risks include clinical-trial and regulatory uncertainty, commercialization and manufacturing challenges, and intellectual-property disputes. The filing describes multiple U.S. patent interference proceedings involving Broad, CVC, ToolGen and Sigma-Aldrich, as well as European patent opposition proceedings. Outcomes and timing are uncertain and could affect the company’s rights or development programs.
- Patent prosecution and maintenance reimbursements to Broad and Harvard were $1.8 million for Q2 and $3.9 million for the first half of 2022; the company says its total commitment related to proceedings is substantial but not determinable.
- Unrealized losses on marketable debt securities were $2.9 million for the first half, reflected in other comprehensive loss. Management said a 100-basis-point immediate interest-rate change would not materially affect investment fair value.
- The filing reports no material impact from COVID-19 on results or liquidity in the first half, but says future effects remain uncertain. Disclosure controls were assessed as effective; no material change in internal control over financial reporting was reported.
Investor verification priorities
- Track actual cash burn against the stated runway into 2024, including the timing and terms of any financing or BMS milestone and option payments.
- Verify subsequent clinical updates, trial enrollment and safety/efficacy results for EDIT-101 and EDIT-301, along with regulatory developments.
- Monitor R&D spending, collaboration revenue recognition and the distinction between reported deferred revenue of $68.9 million on the balance sheet and the $56.7 million BMS-related deferred revenue cited in MD&A.
- Follow patent interference and opposition decisions, potential licensing or reimbursement costs, and any consequences for intellectual-property protection.
- Assess potential dilution from equity compensation and future financing; common shares outstanding were 68,718,434 at June 30, 2022.