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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission File Number: 001-40657

 

Omega Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

81-3247585

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

20 Acorn Park Drive

Cambridge, MA

02140

(Address of principal executive offices)

(Zip Code)

(617) 949-4360

Registrant’s telephone number, including area code

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.001 per share

 

OMGA

 

The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  

As of September 3, 2021, the registrant had 47,756,474 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 


 

 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

6

Item 1.

Financial Statements (Unaudited)

6

 

Condensed Balance Sheets

6

 

Condensed Statements of Operations and Comprehensive Loss

7

 

Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit

8

 

Condensed Statements of Cash Flows

9

 

Notes to Condensed Financial Statements (Unaudited)

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

25

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

34

PART II.

OTHER INFORMATION

35

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

92

Item 3.

Defaults Upon Senior Securities

93

Item 4.

Mine Safety Disclosures

93

Item 5.

Other Information

93

Item 6.

Exhibits

94

Signatures

96

 

2


 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, product candidate development, prospective products, product candidate approvals, research and development activities and costs, future revenue, timing and likelihood of success of our business plans, plans and objectives of management, future results and timing of clinical trials, treatment potential of our product candidates, and the market potential of our product candidates are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “would” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. The forward-looking statements in this Quarterly Report are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of known and unknown risks, uncertainties and assumptions, including those described under Part II, Item 1A. “Risk Factors” in this Quarterly Report. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

3


 

SUMMARY RISK FACTORS

 

Our business is subject to numerous risks and uncertainties, including those described in Part II Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our common stock. The principal risks and uncertainties affecting our business include the following:

 

 

 

Our product candidates are based on a novel technology, which makes it difficult to predict the time and cost of preclinical and clinical development and of subsequently obtaining regulatory approval, if at all.

 

 

 

No epigenomic controller medicines have been approved in this potentially new class of medicines, and may never be approved as a result of efforts by others or us. mRNA drug development has substantial development and regulatory risks due to the novel and unprecedented nature of this new category of medicines.

 

 

 

We have a limited operating history and no history of successfully developing or commercializing any approved product candidates, which may make it difficult to evaluate the success of our business to date and to assess the prospects for our future viability.

 

 

 

We have incurred significant losses since inception and expect to incur significant additional losses for the foreseeable future.

 

 

 

We require substantial additional financing, which may not be available on acceptable terms, or at all. A failure to obtain this necessary capital when needed could force us to delay, limit, reduce, or terminate our product development.

 

 

 

We have invested, and expect to continue to invest, in research and development efforts that further enhance the OMEGA platform. Such investments may affect our operating results, and, if the return on these investments is lower or develops more slowly than we expect, our revenue and operating results may suffer.

 

 

 

Preclinical development is uncertain, especially for a new class of medicines such as epigenomic controllers, and therefore our preclinical programs or development candidates may be delayed, terminated, or may never advance into the clinic, any of which may a have a material adverse impact on our platform or our business.

 

 

 

Our product candidates may be associated with serious adverse events, undesirable side effects or have other properties that could halt their clinical development, prevent their regulatory approval, limit their commercial potential, or result in significant negative consequences.

 

 

 

Due to increased demand for the manufacture of mRNA- and LNP-based vaccines to treat COVID-19, our ability to manufacture our product candidates for preclinical or clinical supply could be limited, which could adversely affect our development plans.

 

 

 

Our OEC candidates are based on novel technology and may be complex and difficult to manufacture. We may encounter difficulties in manufacturing, product release, shelf life, testing, storage, supply chain management or shipping.

 

 

 

We must adapt to rapid and significant technological change and respond to introductions of new products and technologies by competitors to remain competitive.

 

 

 

We will rely on third parties for the foreseeable future for the manufacture of materials for our research programs, preclinical studies and clinical trials and we do not have long-term contracts with many of these parties.

 

 

 

We are planning to acquire and establish our own manufacturing facility and infrastructure in addition to or in lieu of relying on contract development and manufacturing organizations for the manufacture of our product candidates, which will be costly, time-consuming, and which may not be successful.

 

 

 

We have a limited number of suppliers for the lipid excipients used in our product candidates and certain of our suppliers are critical to our production. If we were to lose a critical supplier, it could have a material adverse effect on our ability to complete the development of our product candidates. If we obtain regulatory approval for any of our product candidates, we would need to expand the supply of lipid excipients in order to commercialize them.

4


 

 

 

 

 

We are very early in our development efforts. All of our product candidates are in preclinical development or discovery and it will be many years before we commercialize a product candidate, if ever. If we are unable to advance our product candidates to clinical development, obtain regulatory approval and ultimately commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed.

 

 

 

If we are unable to obtain, maintain, enforce and adequately protect our intellectual property rights with respect to our technology and product candidates, or if the scope of the patent or other intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully develop and commercialize our technology and product candidates may be adversely affected.

 

 

   

 

 

 

5


 

 

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements.

Omega Therapeutics, Inc.

Condensed Balance Sheets

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

122,411

 

 

$

22,951

 

Prepaid expenses and other current assets

 

 

1,301

 

 

 

1,052

 

Deferred offering costs

 

 

1,585

 

 

 

 

Total current assets

 

 

125,297

 

 

 

24,003

 

Property and equipment, net

 

 

4,100

 

 

 

3,482

 

Restricted cash

 

 

341

 

 

 

341

 

Other assets

 

 

308

 

 

 

257

 

Total assets

 

$

130,046

 

 

$

28,083

 

Liabilities, redeemable convertible preferred stock, and stockholders’

   deficit

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,169

 

 

$

1,063

 

Accrued expenses

 

 

7,268

 

 

 

3,277

 

Other current liabilities

 

 

363

 

 

 

359

 

Long-term debt, current portion

 

 

3,000

 

 

 

3,000

 

Total current liabilities

 

 

11,800

 

 

 

7,699

 

Long-term debt, net

 

 

8,806

 

 

 

8,732

 

Other liabilities

 

 

1,331

 

 

 

1,055

 

Total liabilities

 

 

21,937

 

 

 

17,486

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

 

Redeemable convertible preferred stock:

 

 

 

 

 

 

 

 

Series A redeemable convertible preferred stock, par value of $0.001 per share; 57,125,232 shares authorized; 56,775,232 shares issued and outstanding as of June 30, 2021 and December 31, 2020; liquidation value of $25,500 as of June 30, 2021 and December 31, 2020

 

 

26,708

 

 

 

26,708

 

Series B redeemable convertible preferred stock, par value of $0.001 per share; 32,399,999 and 50,000,000 shares authorized as of June 30, 2021 and December 31, 2020, respectively; 32,399,999 shares issued and outstanding as of June 30, 2021 and December 31, 2020; liquidation value of $48,600 as of June 30, 2021 and December 31, 2020

 

 

48,517

 

 

 

48,517

 

Series C redeemable convertible preferred stock, par value of $0.001 per share; 43,333,333 shares authorized as of June 30, 2021; 41,833,328 shares issued and outstanding as of June 30, 2021; liquidation value of $125,500 as of June 30, 2021

 

 

125,368

 

 

 

 

Stockholders’ deficit:

 

 

 

 

 

 

 

 

Common stock, $0.001 par value; 175,000,000 and 137,700,000 shares authorized as of June 30, 2021 and December 31, 2020, respectively; 4,647,035 and 4,465,351 issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

 

5

 

 

 

5

 

Additional paid-in capital

 

 

2,634

 

 

 

1,592

 

Accumulated deficit

 

 

(95,123

)

 

 

(66,225

)

Total stockholders’ deficit

 

 

(92,484

)

 

 

(64,628

)

Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit

 

$

130,046

 

 

$

28,083

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

6


 

Omega Therapeutics, Inc.

Condensed Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

11,184

 

 

$

4,895

 

 

$

20,933

 

 

$

8,416

 

General and administrative

 

 

3,637

 

 

 

1,010

 

 

 

6,452

 

 

 

2,375

 

Related party expense, net

 

 

384

 

 

 

225

 

 

 

763

 

 

 

567

 

Total operating expenses

 

 

15,205

 

 

 

6,130

 

 

 

28,148

 

 

 

11,358

 

Loss from operations

 

 

(15,205

)

 

 

(6,130

)

 

 

(28,148

)

 

 

(11,358

)

Other expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(190

)

 

 

(194

)

 

 

(402

)

 

 

(387

)

Change in fair value of warrant liability

 

 

(11

)

 

 

1

 

 

 

(340

)

 

 

4

 

Other expense, net

 

 

(4

)

 

 

 

 

 

(8

)

 

 

 

Total other expense, net

 

 

(205

)

 

 

(193

)

 

 

(750

)

 

 

(383

)

Net loss and comprehensive loss

 

$

(15,410

)

 

$

(6,323

)

 

$

(28,898

)

 

$

(11,741

)

Net loss per common stock attributable to common stockholders, basic and diluted

 

$

(3.36

)

 

$

(1.58

)

 

$

(6.36

)

 

$

(2.99

)

Weighted-average common stock used in net loss per share attributable to common stockholders, basic and diluted

 

 

4,588,500

 

 

 

4,007,606

 

 

 

4,542,832

 

 

 

3,929,900

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

 

7


 

 

Omega Therapeutics, Inc.

Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit

(in thousands, except share amounts)

(Unaudited)

 

 

 

PREFERRED

STOCK - SERIES A

 

 

PREFERRED

STOCK - SERIES B

 

 

PREFERRED

STOCK - SERIES C

 

 

COMMON STOCK

 

 

ADDITIONAL

 

 

 

 

 

 

TOTAL

 

 

 

SHARES

 

 

PAR

VALUE

 

 

SHARES

 

 

PAR

VALUE

 

 

SHARES

 

 

PAR

VALUE

 

 

SHARES

 

 

PAR

VALUE

 

 

PAID-IN

CAPITAL

 

 

ACCUMULATED

DEFICIT

 

 

STOCKHOLDERS’

DEFICIT

 

As of January 1, 2020

 

 

56,775,232

 

 

$

26,708

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

3,775,292

 

 

$

5

 

 

$

854

 

 

$

(36,778

)

 

$

(35,919

)

Issuance of Series B redeemable convertible preferred stock, net of issuance costs of $62

 

 

 

 

 

 

 

 

24,066,666

 

 

 

36,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for options exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,588

 

 

 

 

 

 

7

 

 

 

 

 

 

7

 

Vesting of restricted stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

124,080

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

145

 

 

 

 

 

 

145

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,418

)

 

 

(5,418

)

As of March 31, 2020

 

 

56,775,232

 

 

$

26,708

 

 

 

24,066,666

 

 

$

36,038

 

 

 

 

 

$

 

 

 

3,914,960

 

 

$

5

 

 

$

1,006

 

 

$

(42,196

)

 

$

(41,185

)

Issuance of Series B redeemable convertible preferred stock, net of issuance costs of $11

 

 

 

 

 

 

 

 

3,333,333

 

 

 

4,989

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for options exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,933

 

 

 

 

 

 

11

 

 

 

 

 

 

11

 

Vesting of restricted stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

124,080

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock repurchased

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,564

)

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

107

 

 

 

 

 

 

107

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,323

)

 

 

(6,323

)

As of June 30, 2020

 

 

56,775,232

 

 

$

26,708

 

 

 

27,399,999

 

 

$

41,027

 

 

 

 

 

$

 

 

 

4,062,409

 

 

$

5

 

 

$

1,123

 

 

$

(48,519

)

 

$

(47,391

)

 

 

 

PREFERRED

STOCK - SERIES A

 

 

PREFERRED

STOCK - SERIES B

 

 

PREFERRED

STOCK - SERIES C

 

 

COMMON STOCK

 

 

ADDITIONAL

 

 

 

 

 

 

TOTAL

 

 

 

SHARES

 

 

PAR

VALUE

 

 

SHARES

 

 

PAR

VALUE

 

 

SHARES

 

 

PAR

VALUE

 

 

SHARES

 

 

PAR

VALUE

 

 

PAID-IN

CAPITAL

 

 

ACCUMULATED

DEFICIT

 

 

STOCKHOLDERS’

DEFICIT

 

As of January 1, 2021

 

 

56,775,232

 

 

$

26,708

 

 

 

32,399,999

 

 

$

48,517

 

 

 

 

 

$

 

 

 

4,465,351

 

 

$

5

 

 

$

1,592

 

 

$

(66,225

)

 

$

(64,628

)

Issuance of Series C redeemable convertible preferred stock, net of issuance costs of $132

 

 

 

 

 

 

 

 

 

 

 

 

 

 

41,833,328

 

 

 

125,368

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock for options exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

80,460

 

 

 

 

 

 

45

 

 

 

 

 

 

45

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

194

 

 

 

 

 

 

194

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,488

)

 

 

(13,488

)

As of March 31, 2021

 

 

56,775,232

 

 

$

26,708

 

 

 

32,399,999

 

 

$

48,517

 

 

 

41,833,328

 

 

$

125,368

 

 

 

4,545,811

 

 

$

5

 

 

$

1,831

 

 

$

(79,713

)

 

$

(77,877

)

Issuance of common stock for options exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101,224

 

 

 

 

 

 

118

 

 

 

 

 

 

118

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

685

 

 

 

 

 

 

685

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,410

)

 

 

(15,410

)

As of June 30, 2021

 

 

56,775,232

 

 

$

26,708

 

 

 

32,399,999

 

 

$

48,517

 

 

 

41,833,328

 

 

$

125,368

 

 

 

4,647,035

 

 

$

5

 

 

$

2,634

 

 

$

(95,123

)

 

$

(92,484

)

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

 

8


 

 

Omega Therapeutics, Inc.

Condensed Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Six months ended June 30,

 

 

 

2021

 

 

2020

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(28,898

)

 

$

(11,741

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

639

 

 

 

441

 

Amortization of debt issuance costs and debt discount

 

 

74

 

 

 

24

 

Change in fair value of warrant liability

 

 

340

 

 

 

(4

)

Change in fair value of success fee obligation

 

 

5

 

 

 

 

Stock-based compensation expense

 

 

879

 

 

 

252

 

Deferred rent

 

 

(62

)

 

 

(54

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(249

)

 

 

165

 

Deferred offering costs

 

 

(904

)

 

 

 

Other assets

 

 

(51

)

 

 

 

Accounts payable

 

 

67

 

 

 

(146

)

Accrued expenses and other current liabilities

 

 

3,007

 

 

 

(129

)

Other liabilities

 

 

(4

)

 

 

 

Net cash used in operating activities

 

 

(25,157

)

 

 

(11,192

)

Investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(914

)