Full Press Release Details
HOMOLOGY MEDICINES, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
On March 10, 2022, Homology Medicines, Inc. ( Homology or the Company ) closed the previously
announced transaction (the Transaction ) with Oxford Biomedica Solutions LLC (f/k/a Roadrunner Solutions LLC) ( Newco ), Oxford Biomedica (US), Inc. ( OXB ) and Oxford Biomedica plc ( OXB
Parent and, collectively with OXB, Oxford ), pursuant to the Equity Securities Purchase Agreement, dated as of January 28, 2022, by and among Homology, Newco and Oxford, whereby, among other things, Homology and
Oxford agreed to collaborate to operate Newco, which will provide adeno-associated virus ( AAV ) vector process development and manufacturing to pharmaceutical and biotechnology companies.
Immediately prior to the closing of the Transaction (the Closing ), Homology and Newco entered into a Contribution Agreement
(as previously disclosed in the Company s Current Report on Form 8-K filed with the Securities and Exchange Commission ( SEC ) on February 3, 2022), pursuant to which Homology
assigned and transferred to Newco all of Homology s assets that are primarily used in the manufacturing of AAV vectors for use in gene therapy or gene editing products (comprising, among other things, intellectual property, tangible property
and equipment and employees), but excluding certain assets related to manufacturing or testing of Homology s proprietary AAV vectors (collectively, the Transferred Assets ), in exchange for 175,000 common equity units in Newco
( Units ), and Newco assumed from Homology, and agreed to pay, perform and discharge when due, all of Homology s duties, obligations, liabilities, interests and commitments of any kind under, arising out of or relating to the
Effective as of the Closing, Homology sold to OXB, and OXB purchased from Homology, 130,000 Units (the
Transferred Units ) in exchange for $130.0 million. In connection with the Closing, OXB contributed $50.0 million in cash to Newco in exchange for an additional 50,000 Units. Immediately following the Closing,
(i) OXB owned 180,000 Units, representing 80 percent (80%) of the fully diluted equity interests in Newco, and (ii) Homology owned 45,000 Units, representing 20 percent (20%) of the fully diluted equity interests in Newco.
Pursuant to the Amended and Restated Limited Liability Company Agreement, dated as of March 10, 2022, by and among Newco, Oxford and the Company (the Newco Operating Agreement ), entered into in connection with the Transaction, the
Company is entitled to designate one director on the Board of Directors of Newco. Effective as of the Closing, the Transferred Assets are derecognized and the Company s ownership of 20% of the issued and outstanding Units is accounted for using
Pursuant to the Newco Operating Agreement, at any time following the three-year anniversary of the Closing,
(i) OXB will have an option to cause Homology to sell and transfer to OXB, and (ii) Homology will have an option to cause OXB to purchase from Homology, in each case all of Homology s equity ownership interest in Newco at a price
equal to 5.5 times the revenue for the immediately preceding 12-month period, subject to a specified maximum amount (the Put/Call Option ).
Concurrently with the Closing, the Company and Newco entered into a lease assignment and assumption agreement pursuant to which Homology
assigned all of its right, title and interest in, to and under its facility lease to Newco and a sublease agreement whereby Newco subleased certain premises in its facility to Homology. However, as the Company remains jointly and severally liable
for the payment of rent under the facility lease, the Company has not been released from being the primary obligor under such facility lease and therefore the related
right-of-use asset and lease liability are not derecognized and will remain on the Company s balance sheet. The Company also entered into certain ancillary
agreements with Newco, including a license and patent management agreement whereby Newco granted certain licenses to the Company, a supply agreement for a term of three years that includes certain annual minimum purchase commitments, a transitional
services agreement pursuant to which Homology will perform certain services for the benefit of Newco and Newco will perform certain services for the benefit of Homology, as well as several additional ancillary agreements.
The unaudited pro forma condensed consolidated financial information (or pro forma
financial information ) presents the pro forma financial position and results of operations of the Company giving effect to the Transaction. Specifically, the unaudited pro forma condensed consolidated balance sheet reflects adjustments that
depict the accounting for the Transaction required by GAAP ( pro forma balance sheet transaction accounting adjustments ) as of September 30, 2021 while the unaudited pro forma condensed consolidated statements of operations reflect
adjustments that depict the effects of the pro forma balance sheet transaction accounting adjustments assuming those adjustments were made as of January 1, 2020 ( pro forma income statement transaction accounting adjustments ). We
refer to pro forma balance sheet transaction accounting adjustments and pro forma income statement transaction accounting adjustments collectively as transaction accounting adjustments. The transaction accounting adjustments are
described in the accompanying notes.
The pro forma financial information are prepared in accordance with Article 11 of Regulation S-X. The pro forma financial information is based upon available information and assumptions that management considers to be reasonable, and such assumptions have been made solely for purposes of developing such pro
forma financial information for illustrative purposes in compliance with the disclosure requirements of the SEC. The pro forma financial information is not necessarily indicative of the financial position or results of operations that would have
actually occurred had the Transaction occurred on the dates indicated. In addition, these pro forma financial statements should not be considered to be indicative of the future financial performance and results of operations of the Company.
The pro forma financial information should be read in conjunction with the historical financial statements and accompanying notes included in
the Company s Annual Report on Form 10-K filed with the SEC on March 11, 2021 and the Company s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2021 filed with the SEC on November 15, 2021.
HOMOLOGY MEDICINES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of September 30, 2021
(in thousands, except share and per share amounts)
| Historical | Transaction Accounting Adjustments | Pro Forma | ||||||||||
| Assets | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 95,829 | $ | 130,000 | (a) | $ | 225,829 | |||||
| Short-term investments | 91,722 | $ | $ | 91,722 | ||||||||
| Prepaid expenses and other current assets | 4,266 | $ | $ | 4,266 | ||||||||
| Total current assets | 191,817 | 130,000 | 321,817 | |||||||||
| Property and equipment, net | 32,697 | $ | (29,935 | ) (a) | $ | 2,762 | ||||||
| Right-of-use assets | 5,028 | $ | $ | 5,028 | ||||||||
| Equity method investment | $ | 45,000 | (b) | $ | 45,000 | |||||||
| Restricted cash | 1,274 | $ | $ | 1,274 | ||||||||
| Total assets | $ | 230,816 | $ | 145,065 | $ | 375,881 | ||||||
| Liabilities and stockholders equity | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 3,522 | $ | $ | 3,522 | |||||||
| Accrued expenses and other liabilities | 10,017 | $ | 2,600 | (c) | $ | 12,617 | ||||||
| Operating lease liabilities | 1,959 | $ | $ | 1,959 | ||||||||
| Deferred revenue | 3,208 | $ | $ | 3,208 | ||||||||
| Total current liabilities | 18,706 | 2,600 | 21,306 | |||||||||
| Non-current liabilities: | ||||||||||||
| Operating lease liabilities, net of current portion | 11,582 | $ | $ | 11,582 | ||||||||
| Deferred revenue, net of current portion | 1,958 | $ | $ | 1,958 | ||||||||
| Total liabilities | 32,246 | 2,600 | 34,846 | |||||||||
| Commitments and contingencies (Note 7) | ||||||||||||
| Stockholders equity: | ||||||||||||
| Preferred stock | $ | $ | ||||||||||
| Common stock, $0.0001 par value | 6 | $ | $ | 6 | ||||||||
| Additional paid-in capital | 589,119 | $ | $ | 589,119 | ||||||||
| Accumulated other comprehensive gain (loss) | (5 | ) | $ | $ | (5 | ) | ||||||
| Accumulated deficit | (390,550 | ) | $ | 142,465 | (d) | $ | (248,085 | ) | ||||
| Total stockholders equity | 198,570 | 142,465 | 341,035 | |||||||||
| Total liabilities and stockholders equity | $ | 230,816 | $ | 145,065 | $ | 375,881 |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial
HOMOLOGY MEDICINES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine months ended September 30, 2021
(in thousands, except share and per share amounts)
| Historical | Transaction Accounting Adjustments | Pro Forma | ||||||||||
| Collaboration revenue | $ | 33,169 | $ | $ | 33,169 | |||||||
| Operating expenses: | ||||||||||||
| Research and development | 69,439 | (9,893 | ) (e) | 59,546 | ||||||||
| General and administrative | 26,054 | (1,187 | ) (f) | 24,867 | ||||||||
| Total operating expenses | 95,493 | (11,080 | ) | 84,413 | ||||||||
| Profit (loss) from operations | (62,324 | ) | 11,080 | (51,244 | ) | |||||||
| Other income: | ||||||||||||
| Interest income | 143 | 143 | ||||||||||
| Total other income | 143 | 143 | ||||||||||
| Equity method investment profit (loss) | (2 | ) (h) | (2 | ) | ||||||||
| Net profit (loss) | $ | (62,181 | ) | $ | 11,078 | $ | (51,103 | ) | ||||
| Net profit (loss) per share-basic and diluted | $ | (1.14 | ) | $ | (0.93 | ) | ||||||
| Weighted-average common shares outstanding-basic and diluted | 54,704,410 | 54,704,410 |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial
HOMOLOGY MEDICINES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Twelve months ended December 31, 2020
(in thousands, except share and per share amounts)
| Historical | Transaction Accounting Adjustments | Pro Forma | ||||||||||
| Collaboration revenue | $ | 2,702 | $ | $ | 2,702 | |||||||
| Operating expenses: | ||||||||||||
| Research and development | 100,392 | (10,248 | ) (e) | 90,144 | ||||||||
| General and administrative | 32,573 | 1,047 | (f) | 33,620 | ||||||||
| Total operating expenses | 132,965 | (9,201 | ) | 123,764 | ||||||||
| Profit (loss) from operations | (130,263 | ) | 9,201 | (121,062 | ) | |||||||
| Other income: | ||||||||||||
| Gain on derecognition of Transferred Assets | 139,950 | (g) | 139,950 | |||||||||
| Interest income | 1,569 | 1,569 | ||||||||||
| Total other income | 1,569 | 139,950 | 141,519 | |||||||||
| Equity method investment profit (loss) | (2 | ) (h) | (2 | ) | ||||||||
| Net profit (loss) | $ | (128,694 | ) | $ | 149,149 | $ | 20,455 | |||||
| Net profit (loss) per share | ||||||||||||
| Basic | $ | (2.80 | ) | $ | 0.45 | |||||||
| Diluted | $ | (2.80 | ) | $ | 0.43 | (i) | ||||||
| Weighted-average common shares outstanding | ||||||||||||
| Basic | 45,910,787 | 45,910,787 | ||||||||||
| Diluted | 45,910,787 | 47,035,260 | (i) |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial
HOMOLOGY MEDICINES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
(in thousands, except share and per share amounts)
description of the transaction accounting adjustments reflected in the unaudited pro forma consolidated financial statements based on preliminary estimates, which may change as additional information is obtained.
The following table summarizes the carrying value of the Transferred Assets in connection with the Transaction:
| (in thousands) | September 30, 2021 | |||
| Property and equipment, net | $ | 29,935 | ||
| Total assets disposed | $ | 29,935 |
The intellectual property sold had a carrying value of zero in the consolidated financial statements.
| (in thousands) | September 30, 2021 | |||
| Cash received | $ | 130,000 | ||
| Plus: Fair value of retained investment | 45,000 | |||
| Less: Carrying value of the Transferred Assets | (29,935 | ) | ||
| Estimated gain on decrecognition | $ | 145,065 |
| (in thousands) | January 1, 2020 | |||
| Cash received | $ | 130,000 | ||
| Plus: Fair value of retained investment | 45,000 | |||
| Less: Carrying value of the Transferred Assets | (35,050 | ) | ||
| Estimated gain on derecognition | $ | 139,950 |