prime medicine(PRME) - 2024 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for Prime Medicine, Inc., including balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining the company's business, accounting policies, and significant financial activities for the periods ended September 30, 2024 and 2023 Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time, highlighting financial position changes Condensed Consolidated Balance Sheets (in thousands) | Metric | September 30, 2024 | December 31, 2023 | | :----------------------------------------- | :----------------- | :---------------- | | Cash and cash equivalents | $117,977 | $41,574 | | Short-term investments | $52,642 | $74,639 | | Collaboration receivable — related party | $55,000 | — | | Total current assets | $246,071 | $142,976 | | Total assets | $332,784 | $193,851 | | Total current liabilities | $37,877 | $56,423 | | Deferred revenue — related party | $9,280 | — | | Deferred revenue, net of current — related party | $62,639 | — | | Total liabilities | $143,280 | $60,780 | | Total stockholders' equity | $189,504 | $133,071 | - Total assets increased significantly from $193.9 million at December 31, 2023, to $332.8 million at September 30, 2024, primarily driven by an increase in cash and cash equivalents and the recognition of a $55.0 million collaboration receivable from a related party[11] - Total liabilities more than doubled, from $60.8 million at December 31, 2023, to $143.3 million at September 30, 2024, largely due to the recognition of deferred revenue from a related party collaboration[11] Condensed Consolidated Statements of Operations and Comprehensive Loss This statement details the company's revenues, expenses, and net loss over specific periods, reflecting operational performance Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Collaboration revenue | $209 | — | $800 | — | | Research and development | $40,340 | $40,967 | $121,185 | $106,446 | | General and administrative | $14,101 | $10,492 | $37,860 | $30,303 | | Total operating expenses | $54,441 | $51,459 | $159,045 | $136,749 | | Loss from operations | $(54,232) | $(51,459) | $(158,245) | $(136,749) | | Total other income, net | $1,714 | $643 | $4,639 | $3,980 | | Net loss attributable to common stockholders | $(52,518) | $(50,708) | $(153,606) | $(132,490) | | Net loss per share, basic and diluted | $(0.44) | $(0.55) | $(1.34) | $(1.46) | - For the nine months ended September 30, 2024, the net loss attributable to common stockholders increased to $153.6 million from $132.5 million in the prior year, primarily due to higher operating expenses[12] - Collaboration revenue of $0.8 million was recognized for the nine months ended September 30, 2024, compared to none in the prior year, indicating the initiation of revenue-generating agreements[12] Condensed Consolidated Statements of Stockholders' Equity This statement tracks changes in the equity section of the balance sheet, including common stock, additional paid-in capital, and accumulated deficit Condensed Consolidated Statements of Stockholders' Equity (in thousands, except share amounts) | Metric | December 31, 2023 | September 30, 2024 | | :----------------------------------------- | :---------------- | :----------------- | | Common Shares Outstanding | 97,377,121 | 131,160,842 | | Additional Paid-in Capital | $624,414 | $834,417 | | Accumulated Deficit | $(491,330) | $(644,936) | | Total Stockholders' Equity | $133,071 | $189,504 | - Total stockholders' equity increased from $133.1 million at December 31, 2023, to $189.5 million at September 30, 2024, driven by significant increases in additional paid-in capital from public offerings and equity investments[16] - The number of common shares outstanding increased by over 33 million shares, from 97.4 million to 131.2 million, primarily due to a public offering and an equity investment from BMS[16][70][71] Condensed Consolidated Statements of Cash Flows This statement categorizes cash inflows and outflows into operating, investing, and financing activities, showing liquidity and solvency Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(139,110) | $(121,548) | | Net cash provided by (used in) investing activities | $20,204 | $(22,574) | | Net cash provided by financing activities | $195,875 | $461 | | Net change in cash, cash equivalents, and restricted cash | $76,969 | $(143,661) | | Cash, cash equivalents, and restricted cash at end of period | $132,039 | $57,455 | - Net cash used in operating activities increased to $139.1 million for the nine months ended September 30, 2024, from $121.5 million in the prior year, reflecting continued investment in operations[20][139] - Net cash provided by financing activities significantly increased to $195.9 million for the nine months ended September 30, 2024, primarily from public offerings and an equity investment from BMS, contrasting with $0.5 million in the prior year[20][143] - The company experienced a positive net change in cash, cash equivalents, and restricted cash of $77.0 million for the nine months ended September 30, 2024, a substantial improvement from a net decrease of $143.7 million in the same period last year[20][136] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the figures presented in the primary financial statements 1. Nature of the Business and Basis of Presentation This note describes the company's core business, its primary technology, and the foundational principles used in preparing the financial statements - Prime Medicine, Inc. is a biotechnology company focused on developing one-time curative genetic therapies using its Prime Editing technology[23][111] - The company incurred an accumulated deficit of $644.9 million as of September 30, 2024, and expects continued operating losses and negative cash flows[27] - Net proceeds of approximately $150.9 million were raised from a public offering in February 2024, and a $55.0 million upfront payment from BMS was received in October 2024, which, combined with existing cash, is expected to fund operations for at least the next twelve months[25][26][27] 2. Summary of Significant Accounting Policies This note outlines the key accounting principles, methods, and judgments applied in the preparation of the financial statements - No material changes to significant accounting policies have occurred since December 31, 2023, except for the disaggregation of 'Other income, net' on the condensed consolidated statements of operations[33][34] - The company recognizes revenue from collaboration and licensing agreements in accordance with ASC Topic 606, evaluating performance obligations and allocating transaction prices, including milestone payments based on probability of achievement[37][38][39][41] - The FASB has issued new ASUs on Segment Reporting (2023-07), Income Taxes (2023-09), and Disaggregation of Income Statement Expenses (2024-03), which the company is currently evaluating for potential impact on its disclosures[44][45][46] 3. Fair Value Measurements and Investments This note details the valuation methodologies and classifications of financial instruments, including cash equivalents and investments, based on fair value hierarchy Fair Value Hierarchy of Cash Equivalents and Investments (in thousands) | Asset Category | September 30, 2024 (Total) | December 31, 2023 (Total) | | :---------------------------------------- | :------------------------- | :------------------------ | | Money market funds | $59,329 | $24,209 | | Corporate debt securities | $13,034 | — | | U.S. Treasury and government securities | $40,603 | $74,639 | | Beam equity securities (Related party) | $4,908 | $5,452 | | Total cash equivalents and investments | $117,874 | $104,300 | - The company's total cash equivalents and investments increased to $117.9 million as of September 30, 2024, from $104.3 million at December 31, 2023, with a shift in composition including new corporate debt securities[49] - Investments in debt securities, primarily U.S. Treasury and government securities and corporate debt securities, are classified as Level 2 fair value measurements due to valuation using observable market inputs[49] 4. Property and Equipment, Net This note provides a breakdown of the company's tangible assets, their accumulated depreciation, and changes over the reporting period Property and Equipment, Net (in thousands) | Category | September 30, 2024 | December 31, 2023 | | :------------------------- | :----------------- | :---------------- | | Laboratory equipment | $26,024 | $23,873 | | Leasehold improvement | $5,463 | $579 | | Construction in progress | $1,751 | $5,402 | | Total property and equipment | $35,166 | $30,143 | | Less: Accumulated depreciation | $(11,879) | $(7,484) | | Total property and equipment, net | $23,287 | $22,659 | - Total property and equipment, net, increased slightly to $23.3 million at September 30, 2024, from $22.7 million at December 31, 2023, with significant increases in leasehold improvements and laboratory equipment[53] - Depreciation expense for the nine months ended September 30, 2024, was $4.4 million, up from $3.4 million in the same period of 2023, reflecting increased asset base[53] 5. Accrued Expenses and Other Current Liabilities This note itemizes the company's short-term obligations, including employee compensation, professional fees, and other current liabilities Accrued Expenses and Other Current Liabilities (in thousands) | Category | September 30, 2024 | December 31, 2023 | | :---------------------------------------- | :----------------- | :---------------- | | Accrued employee compensation and benefits | $7,510 | $8,270 | | Accrued professional fees | $5,575 | $2,273 | | Accrued license fee | $4,197 | — | | Total accrued expenses and other current liabilities | $18,684 | $14,110 | - Accrued expenses and other current liabilities increased to $18.7 million at September 30, 2024, from $14.1 million at December 31, 2023, primarily due to a new accrued license fee of $4.2 million[54] 6. Leases This note describes the company's lease agreements, including right-of-use assets, lease liabilities, and future undiscounted lease payments - The company commenced a lease for office and laboratory space at 60 First Street, Cambridge, in March 2024, recording a right-of-use asset of $44.9 million and a corresponding lease liability of $33.6 million[56][58] - New lease agreements and amendments for spaces at 480 and 500 Arsenal Street, Watertown, were entered into in August and September 2024, with the 500 Arsenal lease expected to commence in Q1 2025[60][61][63][66] Undiscounted Lease Payments (in thousands) | Period | Undiscounted Amounts | | :----------------- | :------------------- | | Remaining in 2024 | $1,591 | | 2025 | $19,773 | | 2026 | $23,387 | | 2027 | $22,921 | | 2028 | $22,294 | | Thereafter | $118,079 | | Total undiscounted lease payments | $208,045 | | Total operating lease liability | $41,248 | 7. Stockholder's Equity This note details changes in the company's equity structure, including common stock issuances, public offerings, and equity investments - In February 2024, the company issued and sold 22,560,001 shares of common stock and pre-funded warrants for 3,200,005 shares, generating approximately $150.9 million in net proceeds[25][70][72][170] - In September 2024, the company issued 11,006,163 shares of common stock to BMS for an aggregate purchase price of $55.0 million in an unregistered offering, subject to lock-up restrictions until September 30, 2027[71][94][167][168] - The company has an 'at the market offering' program to sell up to $300.0 million of common stock, but no sales have occurred under this program as of September 30, 2024[75][169] 8. Stock-Based Compensation This note explains the company's stock option plans, activity, and the associated compensation expense recognized over the reporting period Stock Option Activity (Nine Months Ended September 30, 2024) | Metric | Number of Shares | Weighted-Average Exercise Price | | :----------------------------------- | :--------------- | :------------------------------ | | Outstanding at December 31, 2023 | 7,641,863 | $9.79 | | Granted | 4,434,710 | $8.03 | | Exercised | (28,048) | $3.69 | | Cancelled or forfeited | (372,121) | $11.02 | | Outstanding at September 30, 2024 | 11,676,404 | $9.10 | | Options vested and exercisable at September 30, 2024 | 4,335,142 | $8.63 | - Total stock-based compensation expense for the nine months ended September 30, 2024, was $20.1 million, significantly higher than $9.5 million in the prior year, reflecting increased grants and headcount[88] - As of September 30, 2024, there was $46.7 million of unrecognized compensation cost related to time-based unvested stock options, expected to be recognized over a weighted-average period of 2.4 years[83] 9. Significant Agreements This note outlines key collaboration and licensing agreements, including terms, upfront payments, and potential milestone payments - In September 2024, the company entered into a Research Collaboration and License Agreement with Juno Therapeutics, Inc. (a BMS subsidiary), granting an exclusive worldwide license for Prime Editing technology for ex vivo T-cell therapeutic products[90][91] - Under the BMS Collaboration Agreement, the company will receive a $55.0 million upfront payment and a $55.0 million equity investment, and is eligible for over $3.5 billion in potential milestones (preclinical, development, commercialization) plus royalties[92][115] - As of September 30, 2024, the full transaction price of $72.0 million from the BMS Collaboration Agreement (upfront payment + equity premium) is recorded as deferred revenue, with no revenue recognized yet[96][97] 10. Net Loss per Share This note presents the calculation of basic and diluted net loss per share, considering the impact of common stock and common stock equivalents Net Loss per Share Attributable to Common Stockholders | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss attributable to common stockholders | $(52,518) | $(50,708) | $(153,606) | $(132,490) | | Weighted-average common shares outstanding | 119,764,270 | 91,846,835 | 114,492,416 | 90,469,866 | | Net loss per share, basic and diluted | $(0.44) | $(0.55) | $(1.34) | $(1.46) | - Basic and diluted net loss per share for the nine months ended September 30, 2024, was $(1.34), an improvement from $(1.46) in the prior year, despite a higher net loss, due to an increased weighted-average number of common shares outstanding[100] - Anti-dilutive common stock equivalents, including options to purchase common stock and unvested restricted common stock, totaling 15.6 million shares as of September 30, 2024, were excluded from diluted EPS calculation due to the net loss[101][102] 11. Related Party Transactions This note discloses transactions and agreements with entities or individuals considered related parties to the company - The company made payments of $0.1 million for scientific consulting to David Liu for the nine months ended September 30, 2024, under an agreement that terminated on September 1, 2024[103] - A settlement agreement with Myeloid Therapeutics in January 2024 resulted in a $13.5 million payment by the company to resolve arbitration proceedings[105] - An advisory services agreement with Jeffrey Marrazzo, a Board member, includes an annual fee of $50,000 and a grant of options to purchase 250,000 shares of common stock with a grant date fair value of $1.5 million[106] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of the company's business, a detailed analysis of its financial performance for the three and nine months ended September 30, 2024, compared to 2023, and a discussion of its liquidity, capital resources, and future funding requirements Overview This section provides an overview of the company's business, a detailed analysis of its financial performance for the three and nine months ended September 30, 2024, compared to 2023, and a discussion of its liquidity, capital resources, and future funding requirements - Prime Medicine is a biotechnology company focused on developing one-time curative genetic therapies using its versatile Prime Editing technology[111] - The company is strategically focusing its pipeline on high-value programs in hematology, immunology and oncology, liver, and lung, with chronic granulomatous disease (PM359) as its most advanced blood program[112][113] - A Research Collaboration and License Agreement with BMS was signed in September 2024, granting an exclusive worldwide license for Prime Editing technology for ex vivo T-cell therapeutic products, including a $55.0 million upfront payment and a $55.0 million equity investment[113][114][115] Components of Our Results of Operations This section provides an overview of the company's business, a detailed analysis of its financial performance for the three and nine months ended September 30, 2024, compared to 2023, and a discussion of its liquidity, capital resources, and future funding requirements - The company has not generated revenue from product sales and expects future revenue primarily from collaboration agreements[116] - Research and development expenses, which include personnel, lab supplies, facility costs, license fees, and clinical expenses, are expensed as incurred and are expected to increase substantially due to planned activities and the BMS Collaboration Agreement[117][118][119][120] - General and administrative expenses, covering executive, legal, finance, HR, and administrative functions, are also anticipated to increase with headcount growth and public company operating costs[121][122][123] Results of Operations This section provides an overview of the company's business, a detailed analysis of its financial performance for the three and nine months ended September 30, 2024, compared to 2023, and a discussion of its liquidity, capital resources, and future funding requirements Comparison of the Three Months Ended September 30, 2024 and 2023 This section provides an overview of the company's business, a detailed analysis of its financial performance for the three and nine months ended September 30, 2024, compared to 2023, and a discussion of its liquidity, capital resources, and future funding requirements Operating Expenses (Three Months Ended September 30, 2024 vs 2023, in thousands) | Expense Category | 2024 | 2023 | Change | | :------------------------------- | :------ | :------ | :------ | | Research and development | $40,340 | $40,967 | $(627) | | General and administrative | $14,101 | $10,493 | $3,608 | | Total other income, net | $1,714 | $643 | $1,071 | - Research and development expenses decreased by $0.6 million, primarily due to an $8.5 million decrease in lab supplies, partially offset by a $3.9 million increase in license fees related to the BMS Collaboration Agreement and a $1.7 million increase in personnel expenses[125][126] - General and administrative expenses increased by $3.6 million, mainly driven by a $2.5 million increase in personnel expense, with $1.9 million attributed to non-cash stock-based compensation[127] Comparison of the Nine Months Ended September 30, 2024 and 2023 This section provides an overview of the company's business, a detailed analysis of its financial performance for the three and nine months ended September 30, 2024, compared to 2023, and a discussion of its liquidity, capital resources, and future funding requirements Operating Expenses (Nine Months Ended September 30, 2024 vs 2023, in thousands) | Expense Category | 2024 | 2023 | Change | | :------------------------------- | :------- | :------- | :------- | | Research and development | $121,185 | $106,446 | $14,739 | | General and administrative | $37,860 | $30,303 | $7,557 | | Total other income, net | $4,639 | $3,980 | $659 | - Research and development expenses increased by $14.7 million, driven by a $9.1 million increase in personnel expense (including $4.4 million in stock-based compensation), an $8.9 million increase in facility-related expense, and a $3.5 million increase in license fees due to the BMS Collaboration Agreement[131] - General and administrative expenses rose by $7.6 million, primarily due to an $8.2 million increase in personnel expense, with $6.3 million from non-cash stock-based compensation, partially offset by a $1.7 million decrease in professional and consultant fees[132][133] Liquidity and Capital Resources This section provides an overview of the company's business, a detailed analysis of its financial performance for the three and nine months ended September 30, 2024, compared to 2023, and a discussion of its liquidity, capital resources, and future funding requirements - As of September 30, 2024, the company had $175.5 million in cash, cash equivalents, and investments (excluding restricted cash), or $189.6 million including restricted cash[138] - The company anticipates its existing cash, cash equivalents, and investments, along with the $55.0 million upfront payment from BMS received in October 2024, will be sufficient to fund operations into the first half of 2026[145] - Additional funding will be required to support ongoing R&D, identify product candidates, initiate preclinical and clinical trials, develop and protect intellectual property, and expand personnel[146] Cash Flows This section provides an overview of the company's business, a detailed analysis of its financial performance for the three and nine months ended September 30, 2024, compared to 2023, and a discussion of its liquidity, capital resources, and future funding requirements Summary of Cash Flows (Nine Months Ended September 30, in thousands) | Cash Flow Activity | 2024 | 2023 | | :--------------------------------------- | :---------- | :---------- | | Net cash used in operating activities | $(139,110) | $(121,548) | | Net cash provided by (used in) investing activities | $20,204 | $(22,574) | | Net cash provided by financing activities | $195,875 | $461 | | Net change in cash, cash equivalents, and restricted cash | $76,969 | $(143,661) | - Net cash used in operating activities for the nine months ended September 30, 2024, was $139.1 million, primarily driven by a $153.6 million net loss, offset by $71.9 million in deferred revenue from the BMS collaboration[139][140] - Net cash provided by investing activities was $20.2 million in 2024, a significant shift from $22.6 million used in 2023, mainly due to $25.0 million in maturities of marketable securities, net of purchases[142] - Net cash provided by financing activities surged to $195.9 million in 2024, up from $0.5 million in 2023, largely due to $132.1 million from a public offering, $38.1 million from BMS common stock issuance, and $18.8 million from pre-funded warrants[143] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, specifically interest rate risk and the effects of inflation, on its financial position and results of operations - The company is exposed to interest rate risk on its investment portfolio of cash equivalents and investments, totaling $189.6 million as of September 30, 2024[156] - Due to the short-term maturities and low-risk profile of its cash equivalents and investments, an immediate 10 percent change in interest rates is not expected to have a material effect on their fair market value[156] - Inflation could affect the company by increasing labor and research and development costs, potentially impacting its financial condition and results of operations, although no material impact has been observed to date[157] Item 4. Controls and Procedures This section details the company's disclosure controls and procedures, confirming their effectiveness, and reports on changes in internal control over financial reporting, specifically noting modifications due to the BMS Collaboration Agreement - Management evaluated the effectiveness of the company's disclosure controls and procedures as of September 30, 2024, concluding they provide reasonable assurance of achieving their objectives[160] - Modifications were made to internal control over financial reporting during the three months ended September 30, 2024, specifically affecting revenue and related accounts and disclosures, as a result of the BMS Collaboration Agreement[161] PART II - OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings This section states that as of September 30, 2024, the company was not involved in any litigation or legal proceedings deemed to have a material adverse effect on its business - As of September 30, 2024, the company was not a party to any litigation or legal proceedings that management believes are probable to have a material adverse effect on its business[164] Item 1A. Risk Factors This section refers readers to the detailed discussion of risks and uncertainties in the company's Annual Report on Form 10-K, noting no material changes to these risk factors since the previous filing - There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2023[165] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities This section details the company's equity security transactions, including an unregistered sale of common stock to BMS, the status of its 'at-the-market' offering program, and the proceeds from a registered public offering - In September 2024, the company sold 11,006,163 shares of common stock to BMS for $55.0 million in an unregistered offering, subject to lock-up restrictions until September 30, 2027[167][168] - The company has a $300.0 million 'at-the-market' equity offering program established in November 2023, but no shares have been sold under this program as of September 30, 2024[169] - A February 2024 public offering of common stock and pre-funded warrants generated approximately $150.9 million in net proceeds[170] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[171] Item 4. Mine Safety Disclosure This section indicates that mine safety disclosure is not applicable to the company - Mine safety disclosure is not applicable to the company[171] Item 5. Other Information This section states that there is no other information to report - There is no other information to report[171] Item 6. Exhibits This section provides a comprehensive list of exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, significant agreements, and certifications - Key exhibits include the Securities Purchase Agreement and Research Collaboration and License Agreement with Juno Therapeutics, Inc. (BMS), and Amendment No. 4 to the License Agreement with The Broad Institute, Inc.[174] - Certifications from the Principal Executive Officer and Principal Financial Officer, pursuant to the Sarbanes-Oxley Act, are also included as exhibits[174] Signatures This section contains the duly authorized signatures of the company's President and Chief Executive Officer and Chief Financial Officer, affirming the submission of the report - The report is signed by Keith Gottesdiener, President and Chief Executive Officer, and Allan Reine, Chief Financial Officer, on November 12, 2024[177][178]