Editas Medicine, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Editas is a clinical-stage genome-editing company developing CRISPR-based medicines. It has no product sales; reported revenue is from collaborations and other research and development arrangements.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Collaboration and other R&D revenue | $5.7 million | $2.1 million |
| Research and development expense | $34.6 million | $15.8 million |
| General and administrative expense | $17.8 million | $17.5 million |
| Total operating expense | $52.3 million | $33.3 million |
| Operating loss | $(46.6) million | $(31.3) million |
| Other income, net | $8.9 million | $2.0 million |
| Net loss | $(37.7) million | $(29.2) million |
| Basic and diluted loss per share | $(0.69) | $(0.60) |
| Net cash used in operating activities | $(54.1) million | $(29.0) million |
- Cash and cash equivalents were $232.9 million; marketable securities were $182.1 million. Together, these totaled approximately $415.0 million at March 31, 2020.
- Total assets were $466.7 million and total liabilities were $232.2 million. The filing reports no borrowings; liabilities include lease obligations and deferred collaboration revenue.
- Current assets were $425.1 million versus current liabilities of $68.9 million. Deferred revenue totaled $182.4 million, including $40.6 million current.
- Cash, cash equivalents and restricted cash decreased by $4.6 million during the quarter. Investing cash inflow of $46.5 million mainly reflected net maturities of marketable securities; financing provided $3.0 million from stock-option exercises.
- No product gross margin is reported because the company has not generated product revenue.
Changes and unusual items
- Revenue increased by $3.7 million year over year, primarily from increased Allergan collaboration revenue and other license and collaboration arrangements.
- R&D expense increased by $18.7 million, primarily from $14.5 million higher process and platform development costs, including manufacturing and clinical costs and a first-quarter in-license arrangement. Increased staffing and facility costs also contributed.
- Operating expenses rose 57% and net loss increased 29% year over year. G&A expense was broadly stable.
- Other income included a $7.3 million unrealized gain on Beam Therapeutics equity securities following Beam’s February 2020 IPO. This non-cash gain contributed to reported earnings but was deducted in reconciling net loss to operating cash flow.
- Operating cash use increased by $25.1 million year over year; the cash-flow statement also reflects changes in working capital, including a decrease in accrued expenses.
Outlook, management commentary and risks
- Management expected cash, cash equivalents, marketable securities and anticipated interest income to fund operating expenses and capital needs for at least 24 months from the filing date. The company also stated that it would require substantial additional capital and did not expect profitability in 2020 or the foreseeable future.
- EDIT-101, for LCA10, was in a Phase 1/2 trial and remained open for enrollment. The company aimed to complete dosing in the adult low-dose cohort and dose at least one adult mid-dose patient by year-end 2020, with potential data by year-end.
- For EDIT-301, an experimental treatment for sickle cell disease and beta-thalassemia, the company aimed to file an IND for sickle cell disease by year-end 2020.
- COVID-19 had not significantly affected Q1 financial condition, results or liquidity, but its future impact was uncertain. The company instituted work-from-home measures and restricted on-site activity. It delayed development of its autosomal dominant retinitis pigmentosa 4 research program and no longer planned to declare a development candidate for it by year-end 2020. The filing identified potential disruption to trials, preclinical work, manufacturing, suppliers, and financing.
- Key risks include clinical and manufacturing failure, uncertain regulatory pathways for genome editing, competition, and reliance on collaborators and third-party manufacturers. Patent risks are particularly significant: CRISPR-related U.S. interference and re-examination proceedings were ongoing, and several licensed European patents had been revoked or amended; appeals and oppositions remained unresolved.
- The company reported no material changes to contractual obligations, no off-balance-sheet arrangements, effective disclosure controls, and no material changes to internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether EDIT-101 enrollment and planned 2020 dosing or data milestones were achieved, and how COVID-19 affected trial timing.
- Whether the EDIT-301 IND target and other stated development plans were met.
- Cash burn, investment balances and runway relative to the company’s 24-month estimate, including the effect of future R&D spending and financing needs.
- How much future reported income depends on collaboration revenue and non-cash investment revaluations, rather than product sales.
- Developments in CRISPR patent interference, opposition and re-examination proceedings, and their potential effect on the company’s licensed intellectual property.