Editas Medicine, Inc. — Q1 2019 Form 10-Q
Business context and period. Clinical-stage genome-editing company; unaudited results cover the three months ended March 31, 2019, compared with Q1 2018. Editas had no product sales. EDIT-101 for LCA10 was its most advanced program; other programs remained in research or preclinical development.
Financial performance and position
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Collaboration and R&D revenue | $2.1 million | $3.9 million; down 47% |
| Research and development expense | $15.8 million | $21.3 million; down 26% |
| General and administrative expense | $17.5 million | $14.2 million; up 23% |
| Total operating expenses | $33.3 million | $35.5 million; down 6% |
| Operating loss | $31.3 million | $31.6 million |
| Net loss | $29.2 million | $30.9 million; loss per share $0.60 vs. $0.67 |
| Operating cash used | $29.0 million | $22.5 million |
| Cash, cash equivalents and marketable securities | $342.1 million at March 31, 2019 | $368.955 million at December 31, 2018 |
Q1 2019 interest income was $2.1 million, compared with $0.4 million in Q1 2018. Investing activities provided $50.6 million, primarily reflecting marketable-security maturities net of purchases; financing activities provided $1.5 million from stock-option exercises. Cash, cash equivalents and restricted cash totaled $159.6 million at quarter-end. The company reported an accumulated deficit of $444.7 million and stockholders’ equity of $217.2 million.
Deferred revenue was $129.3 million at March 31, 2019, including $23.4 million current and $105.9 million non-current. There was no conventional debt balance reported at quarter-end; operating lease liabilities totaled $18.4 million. Future minimum operating lease payments were $22.9 million, including leases signed but not yet commenced.
Material changes versus the prior comparable period
- Revenue fell $1.9 million, mainly because Q1 2019 included no Juno revenue and Allergan revenue declined by $0.9 million; a Beam out-license contributed approximately $0.1 million.
- R&D expense declined $5.5 million, principally because Q1 2018 included costs for acquired non-capitalized assets. G&A rose $3.3 million, driven by higher professional services and stock-based compensation, partly offset by lower intellectual-property fees.
- Operating cash use increased by $6.5 million year over year. Management attributed much of the working-capital movement to decreases in accrued expenses and deferred revenue.
- Cash and marketable securities declined from $369.0 million at December 31, 2018 to $342.1 million at March 31, 2019; the quarter included operating cash burn and portfolio maturities and purchases.
- Adoption of the new lease standard in Q1 2019 resulted in recognition of operating-lease right-of-use assets and liabilities. It also removed the previously recorded building asset and construction-financing lease obligation and generated a $0.8 million opening accumulated-deficit adjustment.
Outlook, commentary and risks
- Management said existing cash, cash equivalents, marketable securities and anticipated interest income were expected to fund operating and capital needs for at least 24 months from the filing date. The company cautioned that estimates rely on assumptions and capital may be used sooner than expected.
- Management expected expenses and losses to continue increasing as programs advance, and did not expect profitability in 2019 or the foreseeable future. No formal revenue or earnings guidance was provided.
- The company and Allergan planned to begin EDIT-101 patient screening in mid-2019 and dosing in the second half of 2019, targeting approximately 10–20 patients in the United States and Europe. These were plans, not guarantees.
- Editas elected to share equally with an Allergan affiliate in U.S. profits and losses for EDIT-101 and is responsible for half of U.S. development costs; Allergan retains final decision-making authority in the event of a dispute. The company reported $5.3 million of combined Q1 program expense, of which it recognized 50% in R&D expense.
- Licensor patent-prosecution and dispute costs remain significant and uncertain: Editas recognized $3.4 million of reimbursement expense in Q1 2019. The filing describes ongoing patent opposition and re-examination proceedings, including European patent revocations and appeals. No litigation contingency reserve was recorded, and the company reported it was not party to litigation at quarter-end.
- Key business risks include clinical and regulatory failure, possible off-target genome-editing effects, patient recruitment and manufacturing delays, dependence on partners, competition, and the potential need for substantial additional capital. Editas also disclosed interim CEO and CFO roles and an active search for permanent executives.
Important facts for investors to verify
- Whether EDIT-101 screening and dosing began on the stated schedule, and what trial enrollment and safety updates show.
- Whether the stated 24-month liquidity runway remains supportable given operating cash use, planned program spending and patent-related costs.
- Developments in the Broad-related U.S. and European patent proceedings, including appeals, re-examination and potential effects on Editas’s licensed rights.
- How much deferred collaboration revenue is recognized over time, and whether Juno or Allergan milestones, options or cost-sharing arrangements produce additional cash.
- The scale and timing of future U.S. EDIT-101 expenses under the 50/50 profit-sharing arrangement, as well as any changes in executive leadership.