QTTB US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our “Selected Consolidated Financial Data” and our consolidated financial statements, related notes and other financial information included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties such as our plans, objectives, expectations and intentions. As a result of many important factors, including those set forth in the section captioned “Risk Factors” and elsewhere in this Annual Report on Form 10-K, our actual results could differ materially from the results described in, or implied by, these forward-looking statements.

Overview

We are a clinical-stage genetic medicines company historically focused on transforming the lives of patients suffering from rare genetic diseases with significant unmet medical needs by addressing the underlying cause of the disease. Our proprietary platform is designed to utilize our human hematopoietic stem cell-derived adeno-associated virus vectors, or AAVHSCs, to precisely and efficiently deliver single administration genetic medicines in vivo through a nuclease-free gene editing modality, gene therapy, or gene therapy to express antibodies platform, or GTx-mAb, which is designed to produce antibodies throughout the body.

In July 2023, we completed a review of our business and our Board of Directors approved a plan to explore, review and evaluate a range of potential strategic options available to us, including, without limitation, an acquisition, merger, reverse merger, sale of assets, strategic partnerships or other transactions. Based on the financing environment and the anticipated clinical development timeline for our lead program, HMI-103, we stopped further development of our programs and reduced our workforce by 86% to significantly reduce our ongoing operating costs as we evaluated strategic alternatives.

Agreement and Plan of Merger

After a comprehensive review of strategic alternatives, on November 16, 2023, we entered into an Agreement and Plan of Merger, or the Merger Agreement, with Q32 Bio Inc., a Delaware corporation, or Q32, and Kenobi Merger Sub, Inc., a Delaware corporation and our direct, wholly owned subsidiary, or Merger Sub, pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Q32, with Q32 continuing as our wholly owned subsidiary and the surviving corporation of the merger, or the Merger. Our future operations are highly dependent on the success of the Merger and there can be no assurance that the Merger will be successfully consummated. If the Merger is completed, the business of Q32 will continue as the business of the combined company.

Merger Consideration

Subject to the terms and conditions of the Merger Agreement, (i) immediately prior to the effective time of the Merger, or the Effective Time, all Q32 preferred stock will be converted into Q32 common stock pursuant to the organizational documents of Q32, or the Q32 Preferred Stock Conversion, and (ii) at the Effective Time, (a) each outstanding share of Q32 common stock (excluding Q32 common stock issued in the Concurrent Financing, as described below) will be converted into the right to receive a number of shares of our common stock, or the Company Common Stock, calculated in accordance with the Merger Agreement, (b) each outstanding Q32 stock option and warrant that has not previously been exercised prior to the closing of the Merger will be assumed by us and become an option or warrant, as applicable, to purchase a number of shares of Company Common Stock and (c) the Q32 common stock issued in the Concurrent Financing will be converted into the right to receive a number of shares of Company Common Stock calculated in accordance with the Merger Agreement. The shares of Company Common Stock that will be issued to stockholders of Q32 will be calculated using a formula in the Merger Agreement based on the equity value of each of Q32 and us. Q32 has been ascribed an aggregate equity value of $195 million and our equity value is expected to be approximately $80 million subject to adjustment based on the amount of our net cash at closing of the Merger.

Concurrent Financing

Pursuant to the Merger Agreement, immediately prior to the Effective Time, Q32 will consummate a financing through the sale of its common stock for aggregate gross proceeds of $42 million based on the same aggregate equity value of Q32 used in the Merger, or the Concurrent Financing. On November 16, 2023, Q32 entered into subscription agreements with certain accredited investors, or the Investors, for the Concurrent Financing with expected gross proceeds to Q32 of $42 million. In connection with the Concurrent Financing, at the closing of the Merger, Q32 will enter into a registration rights agreement with the Investors providing for the registration under the Securities Act of 1933, as amended, or the Securities Act, of the shares of common stock sold in the Concurrent Financing. The consummation of the transactions contemplated by the subscription

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agreements is conditioned on the satisfaction or waiver of the conditions set forth in the Merger Agreement and in the subscription agreements. Shares of Q32 common stock issued pursuant to the Concurrent Financing will be converted into shares of Company Common Stock in the Merger in accordance with the Merger Agreement.

Contingent Value Rights Agreement

At the Effective Time, if any Legacy Assets (as defined below) have not been disposed of in a Legacy Asset Disposition (as defined below) or if additional consideration may be payable for the Legacy Assets (as defined below) after closing of the Merger, the Company and Equiniti Trust Company, LLC, a New York limited liability company, as the initial rights agent, or the Rights Agent, will enter into a Contingent Value Rights Agreement, or the CVR Agreement, pursuant to which our common stockholders of record as of the close of business on the last business day prior to the day on which the Effective Time occurs will receive one contingent value right (each, a “CVR”) for each outstanding share of Company Common Stock held by such stockholder on such date.

Each CVR will represent the contractual right to receive payments from us upon the actual receipt by us or our subsidiaries of certain contingent proceeds derived from any cash consideration that is paid to us or our subsidiaries as a result of the sale, transfer, license, assignment or other divestiture, disposition or commercialization of any of our assets, rights and interests relating to our HMI-103, HMI-204, Capsids and AAVHSC Platform, including any equity interests held directly or indirectly by us in Oxford Biomedica (US) LLC (f/k/a Oxford Biomedica Solutions LLC and Roadrunner Solutions LLC), or OXB (US), pursuant to that certain Equity Securities Purchase Agreement, dated as of January 28, 2022, by and between the Company and OXB Solutions, or the Legacy Assets, and such disposition, or a Legacy Asset Disposition, net of certain tax, transaction costs and certain other expenses.

The contingent payments under the CVR Agreement, if they become payable, will become payable to the Rights Agent for subsequent distribution to the holders of the CVRs. There can be no assurance that any holders of CVRs will receive payments with respect thereto. The right to the contingent payments contemplated by the CVR Agreement is a contractual right only and will not be transferable, except in the limited circumstances specified in the CVR Agreement. The CVRs will not be evidenced by a certificate or any other instrument and will not be registered with the Securities and Exchange Commission, or SEC. The CVRs will not have any voting or dividend rights and will not represent any equity or ownership interest in the Company or any of its affiliates. No interest will accrue on any amounts payable in respect of the CVRs.

Former Clinical Programs

Our former clinical programs include: HMI-103, an investigational gene editing candidate for the treatment of patients with phenylketonuria, or PKU; HMI-203, an investigational gene therapy candidate for the treatment of patients with mucopolysaccharidosis type II (MPS II), or Hunter syndrome; and HMI-102, an investigational gene therapy candidate for the treatment of adult patients with PKU. Our former preclinical programs include: HMI-104, a GTx-mAb gene therapy candidate for the treatment of patients with paroxysmal nocturnal hemoglobinuria, or PNH, and HMI-204, a gene therapy candidate for metachromatic leukodystrophy, or MLD. We are currently exploring strategic alternatives for HMI-103 (Adult/Pediatric PKU), HMI-204 (MLD) and our capsids and AAVHSC platform, including the sale of these programs.

In August 2023, we withdrew our Clinical Trial Application, or CTA, for HMI-203 in Canada. In September 2023, we withdrew our IND for HMI-102, which the FDA formally acknowledged in November 2023. In December 2023, we withdrew our IND for HMI-203 and in March 2024, we withdrew our IND for HMI-103. All clinical trial sites have been notified that all studies we had been conducting for our programs have been terminated; sites have been duly notified of their responsibilities. We have also withdrawn all orphan drug designations for our programs in both the United States and the EU.

In September 2023, we inactivated the pheEDIT Phase 1 gene editing clinical trial evaluating HMI-103 in adults with classical PKU (NCT05222178). In October 2023, we reported clinical data from the first dose cohort in the pheEDIT trial. As of the data cut-off date of September 14, 2023, HMI-103 was generally well-tolerated in all three participants with no serious adverse events, and the majority of treatment-related adverse events were mild and transient. All liver function tests remained in the normal range during the prophylactic immunosuppression regimen incorporating the T-cell inhibitor tacrolimus in combination with corticosteroid. Participant 1 experienced a reduction in plasma phenylalanine, or Phe, levels to below the U.S. American College of Medical Genetics and Genomics PKU treatment guideline threshold of <360 μmol/L, and the majority of Phe levels were below 360 mmol/L through 39 weeks post-dose, including after the initiation of dietary protein supplementation. Participant 2 experienced a meaningful plasma Phe reduction of 50% at 23 weeks post-dose. Participant 3 experienced a meaningful plasma Phe reduction of 60% at 14 weeks post-dose.

In August 2023, we terminated both the pheNIX Phase 1/2 gene therapy clinical trial evaluating HMI-102 in adults with classical PKU and the juMPStart Phase 1 gene therapy clinical trial evaluating HMI-203 in adults with Hunter Syndrome. INDs for both the pheNIX Phase 1/2 and juMPStart Phase 1 clinical trials have been withdrawn.

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Earlier-Stage Product Candidates

We completed IND-enabling studies with HMI-202, an investigational gene therapy for the treatment of patients with MLD. Applying the learnings from these IND-enabling studies, in August 2022, we announced the details of HMI-204, an optimized, in vivo, one-time gene therapy product candidate for the treatment of MLD. Following a single I.V. administration in the MLD murine model, this optimized candidate, which uses one of our proprietary AAVHSC capsids, crossed the blood-brain-barrier to the CNS and reached key peripheral organs involved in MLD. This resulted in expression of human ARSA, or hARSA, levels in multiple brain regions and cell types above the minimum level of enzyme needed to correct the MLD disease phenotype, hARSA activity levels in the brain predictive of functional assay improvements and hARSA activity in the serum. Additionally, these optimizations led to significant improvements in vector yield and superior packaging for the product candidate.

HMI-104 was a candidate from our GTx-mAb platform. This platform represents an additional way that we could potentially leverage our AAVHSCs in an effort to deliver one-time in vivo gene therapy to express and secrete antibodies from the liver, which we believe may allow us to target diseases with larger patient populations. In support of this program, we generated and presented preclinical data targeting complement protein 5, demonstrating preclinical proof-of-concept in PNH. A single I.V. dose of an AAVHSC GTx-mAb showed expression of full-length antibodies from the liver consistent with levels associated with anti-C5 therapeutics, sustained and robust Immunoglobulin G, or IgG, expression in vivo in a humanized murine liver model and a murine NOD-SCID model, and in vivo vector-expressed C5 mAb had potent functional activity as shown by an ex vivo hemolysis assay. Additionally, we observed sustained expression of C5 mAb in the presence of murine and human neonatal fragment crystallizable (Fc) receptor, or FcRn. We completed IND-enabling studies with HMI-104.

Oxford Biomedica (US) LLC Transaction

On March 10, 2022, we closed a transaction with Oxford Biomedica (US) LLC (f/k/a Roadrunner Solutions LLC and Oxford (US) LLC), or OXB (US) LLC, Oxford Biomedica (US), Inc., or OXB, and Oxford Biomedica plc, or OXB Parent, and collectively with OXB, Oxford, pursuant to the Equity Securities Purchase Agreement, or the Purchase Agreement, dated as of January 28, 2022, by and among Homology, OXB (US) LLC and Oxford, whereby, among other things, we and Oxford agreed to collaborate to operate OXB (US) LLC, which provides AAV vector process development and manufacturing services to biotechnology companies, which we refer to as the Oxford Biomedica (US) LLC Transaction, or the OXB (US) LLC Transaction. OXB (US) LLC incorporates our proven 'plug and play' process development and manufacturing platform, as well as our experienced team and high-quality GMP vector production capabilities that we built and operated since 2019.

Pursuant to the terms of the Purchase Agreement and a contribution agreement, or the Contribution Agreement, entered into between us and OXB (US) LLC prior to the closing of the OXB (US) LLC Transaction, or the Closing, we agreed to assign and transfer to OXB (US) LLC all of our assets that are primarily used in the manufacturing of AAV vectors for use in gene therapy or gene editing products, but excluding certain assets related to manufacturing or testing of our proprietary AAV vectors, or collectively, the Transferred Assets, in exchange for 175,000 common equity units in OXB (US) LLC, or Units, and OXB (US) LLC assumed from us, and agreed to pay, perform and discharge when due, all of our duties, obligations, liabilities, interests and commitments of any kind under, arising out of or relating to the Transferred Assets.

Effective as of the Closing, we sold to OXB, and OXB purchased from us, 130,000 Units, or the Transferred Units, in exchange for $130.0 million. In connection with the Closing, OXB contributed $50.0 million in cash to OXB (US) LLC 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 OXB (US) LLC, and (ii) we owned 45,000 Units, representing 20 percent (20%) of the fully diluted equity interests in OXB (US) LLC.

Pursuant to the Amended and Restated Limited Liability Company Agreement of OXB (US) LLC, or the OXB (US) LLC Operating Agreement, which was executed in connection with the Closing, at any time following the three-year anniversary of the Closing, (i) OXB will have an option to cause us to sell and transfer to OXB, and (ii) we will have an option to cause OXB to purchase from us, in each case all of our equity ownership interest in OXB (US) LLC at a price equal to 5.5 times the revenue for the immediately preceding 12-month period, subject to a maximum amount of $74.1 million. Pursuant to the terms of the OXB (US) LLC Operating Agreement, we are entitled to designate one director on the board of directors of OXB (US) LLC, currently Paul Alloway, Ph.D., our President and Chief Operating Officer.

Concurrently with the Closing, we entered into certain ancillary agreements with OXB (US) LLC including a license and patent management agreement whereby OXB (US) LLC granted certain licenses to us, a supply agreement, or the Supply Agreement, for a term of three years which includes certain annual minimum purchase commitments, a lease assignment pursuant to which we assigned all of our right, title and interest in, to and under our facility lease to OXB (US) LLC, a sublease agreement whereby OXB (US) LLC subleased certain premises in its facility to us, as well as several additional ancillary agreements.

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License Agreements

In April 2016, we entered into an exclusive license agreement with City of Hope, or COH, pursuant to which COH granted us an exclusive, sublicensable, worldwide license, or the COH License, to certain AAV vector-related patents and know-how owned by COH to develop, manufacture, use and commercialize products and services covered by such patents and know-how in any and all fields. On August 6, 2021, we received notice from COH that we did not accomplish at least one of the partnering milestones by the applicable deadline, as set forth in the COH License. This notice does not affect our exclusive license in the field of mammalian therapeutics, including all human therapeutics, associated diagnostics, and target validation, or the Mammalian Therapeutic Field, where we retain exclusive rights. Instead, the notice served as written notice that the exclusive license granted pursuant to the COH License in all fields except the Mammalian Therapeutic Field converted from exclusive to non-exclusive effective as of September 20, 2021, which was forty-five days from the receipt of notice. In connection with the conversion, any royalty obligations and sublicensee fees relating to fields outside of the Mammalian Therapeutic Field shall be reduced by a certain percentage. This change to our exclusive worldwide license with COH does not impact any of our therapeutic product development candidates, including HMI-102, HMI-103, HMI-104, HMI-203 and HMI-204.

Corporate Headquarters Lease

In November 2021, we entered into an amendment of our December 2017 lease agreement, or the Lease Amendment, for our corporate headquarters in Bedford, Massachusetts. The Lease Amendment increased the space under the lease by approximately 23,011 square feet, or the Expansion Premises, and extended the expiration date of the existing premises under the lease from February 2027 to June 2030. The term with respect to the Expansion Premises commenced May 1, 2022 and will continue for a period of ten years and five months. The term of the Expansion Premises and the existing premises are not coterminous. Annual base rent for the existing premises under the Lease Amendment is approximately $4.7 million beginning on March 1, 2027, and increases by three percent annually; annual base rent for the Expansion Premises is approximately $1.4 million per year and increases by three percent annually. The Lease Amendment allows for tenant improvement allowances not to exceed $6.3 million in the aggregate. Under the terms of the agreement with Oxford, our lease for our corporate headquarters, including the Expansion Premises, has been assigned to OXB (US) LLC with Homology subleasing a portion of lab and office space back from OXB (US) LLC. Effective October 1, 2023, we were released from being primary obligor under such lease. See Note 10 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information regarding our lease agreement.

Financial Overview

Since our inception in 2015 through December 31, 2023, we have raised approximately $721 million in aggregate net proceeds through our initial public offering, or IPO, in April 2018, follow-on public offerings of common stock in April 2019 and April 2021, proceeds from the sale of common stock under an “at-the-market” sales agreement, equity investments from pharmaceutical companies, preferred stock financings and our agreement with Oxford. Included in our net proceeds is a $130.0 million up-front cash payment from our agreement with Oxford, $50.0 million from a former collaboration partner, comprised of an up-front payment of $35.0 million and a $15.0 million equity investment, and a $60.0 million equity investment from Pfizer Inc., or Pfizer, through a private placement transaction. Should we resume development of one or more of our product candidates, we will require additional capital in order to advance our product candidates through clinical development and commercialization.

We were incorporated and commenced operations in 2015. Since our incorporation and until recently, we have devoted substantially all of our resources to organizing and staffing our Company, business planning, raising capital, developing our technology platform, advancing HMI-102, HMI-103 and HMI-203 through IND-enabling studies and into clinical trials, advancing HMI-202 and HMI-104 into IND-enabling studies, researching and identifying additional product candidates, developing and implementing manufacturing processes and manufacturing capabilities, building out our manufacturing and research and development space, enhancing our intellectual property portfolio and providing general and administrative support for these operations. To date, we have financed our operations primarily through the sale of common stock, through the sale of preferred stock, through funding from our collaboration partner and through proceeds received as a result of our transaction with OXB (US) LLC.

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future, if at all. We recognized $1.2 million and $3.2 million in collaboration revenue for the years ended December 31, 2023 and 2022, respectively.

Since inception, we have incurred significant operating losses. Our net losses for the years ended December 31, 2023 and 2022 were $113.0 million and $5.0 million, respectively. On March 10, 2022, we closed our transaction with OXB (US) LLC and recorded a gain of $131.2 million on the sale of our manufacturing business (see Note 6 to our consolidated financial

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statements included elsewhere in this Annual Report on Form 10-K for additional information regarding the OXB (US) LLC Transaction). As of December 31, 2023 and 2022, we had an accumulated deficit of $542.1 million and $429.1 million, respectively.

Our total operating expenses were $102.6 million and $136.5 million for the years ended December 31, 2023 and 2022, respectively. We expect our total operating expenses to decrease over the prior year as we reduced our workforce by 86% and stopped all further program development efforts. We expect to continue to incur costs and expenditures in connection with activities related to the Merger and we will continue to incur costs associated with operating as a public company. There can be no assurance, however, that we will be able to successfully consummate the Merger. The process of evaluating strategic transactions has been and, if the Merger is not consummated, may continue to be costly, time-consuming and complex, and we may incur significant costs related to these processes, such as legal, accounting and advisory fees and expenses and other related charges. A considerable portion of these costs were and will continue to be incurred regardless of whether the Merger is completed. Such expenses decrease the remaining cash available for use in our business. Failure to consummate the Merger could significantly impair our ability to enter into any strategic transactions and may significantly diminish or delay any future distributions to our stockholders.

Should we resume development of our product candidates, our ability to generate product revenue sufficient to achieve profitability would depend heavily on the successful development and eventual commercialization of one or more product candidates. Our future operating requirements will depend on many factors, including:

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the costs, timing, and results of research and development efforts for any product candidates, including clinical trials;

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the costs and timing of process development scale-up activities, and the adequacy of supply of any product candidates for preclinical studies and clinical trials through CMOs, including OXB (US) LLC;

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the costs and timing of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims, including any claims by third parties that we are infringing upon their intellectual property rights;

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the effect of competitors and market developments; and

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our ability to establish and maintain strategic collaborations, licensing or other agreements and the financial terms of such agreements for our product candidates.

As of December 31, 2023, we had cash, cash equivalents, and short-term investments of $82.7 million. Based on our current projections, including our recent reduction in force and stopping further program development efforts, we believe that our existing cash, cash equivalents, and short-term investments will enable us to continue operations for at least one year from the date of the filing of our Annual Report on Form 10-K for the year ended December 31, 2023. However, due to the discontinuation of all of our clinical trials and research activities, as well as our recent reduction in force of all but a few custodial employees, our management has concluded that there is a substantial doubt regarding our ability to continue as a going concern for more than twelve months after the date the consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2023 have been issued. See “Liquidity and Capital Resources.”

Components of Our Results of Operations

Revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future. We recorded $1.2 million in collaboration revenue for the year ended December 31, 2023, related to the Stock Purchase Agreement with Pfizer (see Note 17 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information regarding revenue recognition discussions).

Operating Expenses

Our operating expenses since inception have consisted solely of research and development costs and general and administrative costs.

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Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, and include:

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salaries, benefits and other related costs, including stock-based compensation expense, for personnel engaged in research and development functions;

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expenses incurred under agreements with third parties, including contract research organizations, or CROs, and other third parties that conduct research, preclinical activities and clinical trials on our behalf as well as CMOs, including OXB (US) LLC, that manufacture our product candidates for use in our preclinical testing and clinical trials;

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costs of outside consultants, including their fees and related travel expenses;

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the costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials; and

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allocated expenses for rent and other operating costs.

We expense research and development costs as incurred.

Research and development activities have historically been central to our business model. We expect our research and development expenses to continue to decrease significantly given the discontinuation of all of our clinical trials and research activities. Should we resume development of product candidates, we would expect research and development costs to increase significantly for the foreseeable future as the product candidate development programs progress.

Should we resume development of product candidates, the duration, costs and timing of development activities including clinical trials would depend on a variety of factors, including:

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the scope, rate of progress, expense and results of clinical trials, and other research and development activities that we may conduct;

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uncertainties in clinical trial design and patient enrollment rates;

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the actual probability of success for our product candidates, including the safety and efficacy results, early clinical data, competition, manufacturing capability and commercial viability;

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significant and changing government regulation and regulatory guidance;

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the timing and receipt of any marketing approvals; and

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the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.

Should we resume development of product candidates, a change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, human resources, legal, business development and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs, rent expense, maintenance of facilities and other operating costs including expenses associated with being a public company.

We expect our general and administrative expenses to decrease in the near future due to our recent workforce reduction. We have incurred and expect to continue to incur significant costs, however, related to our exploration of strategic alternatives, including legal, accounting and advisory expenses and other related charges.

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Other Income

Other income consists of a gain on the termination of our lease and interest income earned on our cash, cash equivalents, and short-term investments. Our interest income has increased due to significantly higher yields on invested funds during the year ended December 31, 2023 as compared to the prior year period.

Income Taxes

Since our inception in 2015, we have not recorded any U.S. federal or state income tax benefits for the net losses we have incurred in any year or for our earned research and development tax credits, due to our uncertainty of realizing a benefit from those items. As of December 31, 2023, we had federal and state net operating loss carryforwards of $326.2 million and $317.3 million, respectively, that expire at various dates through 2043, to the extent subject to expiration. As of December 31, 2023, we also had federal and state research and development tax credit carryforwards of $65.5 million and $17.2 million, respectively, that expire at various dates through 2043. Included in the $65.5 million of federal research and development credit carryforwards is $50.7 million of orphan drug credit carryforwards.

Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policy is the most critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Accrued Research and Development Expenses—As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel and vendors to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to contract research organizations and other third parties in connection with performing research activities on our behalf and conducting preclinical studies and clinical trials on our behalf and contract manufacturing organizations, including OXB (US) LLC, in connection with producing product for our clinical studies, vendors in connection with preclinical development activities and vendors related to product manufacturing and development and distribution of preclinical supplies.

We base our accrued expenses related to preclinical and clinical studies on our estimates of the services received and efforts expended pursuant to quotes and contracts with CROs that conduct and manage preclinical studies and clinical trials and CMOs, including OXB (US) LLC, that manufacture product for our research and development activities on our behalf. The financial terms of these agreements are sometimes subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical milestones. In accruing fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly.

Although we do not expect our estimates to be materially different from expenses actually incurred, if our estimates of the status and timing of services performed differs from the actual status and timing of services performed, we may report amounts that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of accrued research and development expenses.

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Results of Operations

Comparison of Years Ended December 31, 2023 and 2022

The following table summarizes our results of operations for the years ended December 31, 2023 and 2022:

For the Year ended December 31,

Operating expenses:

Restructuring and other charges 9,327 — 9,327

Other income:

Provision for income taxes — (715 ) 715

Collaboration Revenue

Collaboration revenue for the year ended December 31, 2023 was $1.2 million, compared to $3.2 million for the year ended December 31, 2022. Collaboration revenue in both periods was due to the recognition of deferred revenue related to the Stock Purchase Agreement with Pfizer. We previously recognized deferred revenue from Pfizer over Pfizer’s right of first refusal, or ROFR, period of 30 months during which Pfizer could have negotiated a potential collaboration on the development and commercialization of HMI-102 and HMI-103. The ROFR period expired in May 2023.

Research and Development Expenses

For the Year ended December 31,

External development costs for clinical programs:

Other development-stage programs' external development costs 13,526 9,794 3,732

Research and development expenses for the year ended December 31, 2023 were $62.0 million, compared to $98.4 million for the year ended December 31, 2022. The decrease of $36.3 million was primarily associated with our decision to stop further development of our programs and reduce our workforce by 86% in July 2023 in an effort to decrease our ongoing operating costs. As of December 31, 2023, we have no remaining obligations with our CRO or any other vendors associated with our former clinical trials and have recognized expense for any remaining contractual obligations owed under our Supply Agreement with OXB (US) LLC; there are no minimum purchase commitments under the Supply Agreement in 2024. All contracts with vendors previously performing research and development activities for us have been terminated and all expenses have been recorded.

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General and Administrative Expenses

General and administrative expenses for the year ended December 31, 2023 were $31.3 million, compared to $38.1 million for the year ended December 31, 2022.The decrease of $6.9 million was primarily due to a $4.6 million decrease in employee-related costs as a result of the reduction in workforce we instituted in the third and fourth quarters of 2023. In addition, consulting expenses decreased by $2.8 million as the prior year included a fee of $2.5 million paid to a strategic advisory firm that assisted us with the OXB (US) LLC transaction. There were also decreased market research costs, travel and insurance costs, all associated with our decision to reduce in the second half of 2023 our workforce in an effort to decrease ongoing operating costs.

Restructuring and Other Charges

In connection with the corporate restructuring that reduced our workforce by approximately 80 employees, or 86%, in the third quarter of 2023 and an additional 6 employees in the fourth quarter of 2023, we recorded a restructuring charge for severance and related costs of $10.3 million during the year ended December 31, 2023. We also modified certain stock options and restricted stock units granted to the terminated employees in a prior period. These equity modifications resulted in a net reduction to stock-based compensation expense of $1.0 million reflected within restructuring and other charges during the year ended December 31, 2023. See Notes 9 and 14 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information regarding restructuring and other charges. We did not record restructuring and other charges for the year ended December 31, 2022.

Gain on Sale of Business

Gain on sale of business for the year ended December 31, 2022 was $131.2 million. On March 10, 2022, we closed our transaction with OXB (US) LLC and recorded a gain of $131.2 million on the sale of our manufacturing business. See Note 6 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for details surrounding the sale.

Gain on Termination of Lease

Gain on lease termination for the year ended December 31, 2023 was $8.8 million. Effective October 1, 2023, we were released from being primary obligor under our corporate headquarters lease and therefore derecognized the right-of-use asset and operating lease liability, recording the difference as a gain within other income on the consolidated statements of operations. See Note 10 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for details surrounding the transaction.

Interest Income

Interest income for the year ended December 31, 2023 was $5.6 million, compared to $3.2 million for the year ended December 31, 2022. The increase of $2.4 million was primarily the result of interest income generated at higher yields on invested funds for the year ended December 31, 2023, compared to the year ended December 31, 2022.

Provision for Income Taxes

We recorded an income tax provision of $0.7 million for the year ended December 31, 2022. The tax provision predominately resulted from the gain associated with the sale of our manufacturing business due to the transaction with Oxford. Though we had taxable income for the year ended December 31, 2022, we had federal and state net operating loss carryforwards and research and development tax credits available to offset most of that taxable income for the period. We did not record an income tax provision (benefit) for the year ended December 31, 2023, as the Company was in a taxable loss position for the year.

Loss from Equity Method Investment

We record our share of gains or losses from OXB (US) LLC on a quarterly basis. For the year ended December 31, 2023 and 2022, we recorded a loss from equity method investment of $25.9 million and $5.5 million, respectively, representing our share of OXB (US) LLC's net loss during the year ended December 31, 2023 and the period from March 11, 2022 through December 31, 2022, respectively. For the year ended December 31, 2023, OXB (US) LLC recorded an impairment charge of $119.1 million which significantly increased OXB (US) LLC's net loss for the period. In addition, the loss from equity method investment for the year ended December 31, 2023 includes an other-than-temporary impairment charge of approximately $3.8 million we recorded because it was determined that the fair value of our equity method investment in OXB (US) LLC was less than its carrying value. After recording our share of OXB (US) LLC's net loss, the carrying value of our equity method

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investment was reduced to $0.0 million. See Notes 2 and 6 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information regarding the equity method of accounting.

Net Loss

Net loss for the year ended December 31, 2023 was $113.0 million, compared to $5.0 million for the year ended December 31, 2022. The increase in our net loss was primarily due to a gain of $131.2 million in the prior year on the sale of our manufacturing business, offset by our operating expenses as described above.

Liquidity and Capital Resources

Since our inception, we have incurred significant operating losses. We do not have any approved products and we have never generated any revenue from product sales. To date, we have financed our operations primarily through the sale of common stock, the sale of preferred stock, through an up-front payment and funding of research candidates from a collaboration partner and through the gross proceeds from our transaction with OXB (US) LLC. Since our inception in 2015, we have raised approximately $721 million in aggregate net proceeds through our IPO in April 2018, follow-on public offerings of common stock in April 2019 and April 2021, proceeds from the sale of common stock under an “at-the-market” sales agreement, equity investments from pharmaceutical companies, preferred stock financings and our agreement with Oxford. Included in our net proceeds is a $130.0 million up-front cash payment from our agreement with Oxford, $50.0 million from a former collaboration partner, comprised of an up-front payment of $35.0 million and a $15.0 million equity investment and a $60.0 million equity investment from Pfizer through a private placement transaction.

ATM Program

On March 9, 2023, we filed a Registration Statement on Form S-3 (File No. 333-270414) (the “Shelf”) with the SEC in relation to the registration of up to an aggregate of $250.0 million of our common stock, preferred stock, debt securities, warrants and/or units of any combination thereof for a period up to three years from the date of the filing. The Shelf became effective on March 17, 2023. We also simultaneously entered into a sales agreement with Cowen and Company, LLC (“Cowen”), as sales agent, providing for the offering, issuance and sale by the Company of up to an aggregate of $75.0 million of our common stock from time to time in “at-the-market” offerings under the Shelf (the “ATM”). We did not sell any shares of common stock under the ATM during the year ended December 31, 2023. As of December 31, 2023, there remained $75.0 million of common stock available for sale under the ATM.

Oxford Biomedica (US) LLC Transaction

On March 10, 2022, we closed a transaction with OXB (US) LLC pursuant to the Purchase Agreement, dated as of January 28, 2022, by and among Homology, OXB (US) LLC and Oxford, whereby, among other things, we and Oxford agreed to collaborate to operate OXB (US) LLC, which will provide AAV vector process development services and manufacturing services to pharmaceutical and biotechnology companies. Pursuant to the terms of the agreements entered into as part of the OXB (US) LLC Transaction, we have assigned and transferred to OXB (US) LLC all of our assets that are primarily used in the manufacturing of AAV vectors for use in gene therapy and gene editing products. Oxford paid us $130.0 million upfront and invested $50.0 million to fund the new company in exchange for an 80 percent ownership stake, while we own 20 percent of the new company. Also, at any time following the three-year anniversary of the closing of the transaction, Oxford has an option to cause us to sell and transfer to Oxford and we have an option to cause Oxford to purchase from us, in each case all of our equity ownership interest in OXB (US) LLC at a price equal to 5.5 times the revenue for the immediately preceding 12-month period, subject to a maximum amount of $74.1 million. See Note 6 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information regarding the Oxford transaction.

Strategic Collaborations and Investments

On November 9, 2020, we entered into the Stock Purchase Agreement with Pfizer, pursuant to which Pfizer purchased 5,000,000 shares of our common stock through a private placement transaction at a purchase price of $12.00 per share, for an aggregate purchase price of $60.0 million. Under the Stock Purchase Agreement, Pfizer was granted an exclusive right of first refusal, or ROFR, for a 30-month period to negotiate a potential collaboration on the development and commercialization of HMI-102 and HMI-103. The 30-month ROFR period expired on May 9, 2023. In addition to the ROFR, the Stock Purchase Agreement provided for an information sharing committee comprised of representatives of each company which served as a forum for sharing information regarding the development of HMI-102 and HMI-103 during the ROFR period. Additionally, Pfizer designated a member to join our Scientific Advisory Board to participate in matters related to the development of these programs.

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Strategic Review and Reduction in Force

On July 25, 2023, our board of directors approved a process to explore, review and evaluate a range of potential strategic options available to us, including, without limitation, an acquisition, merger, reverse merger, sale of assets, strategic partnerships or other transactions. Therefore, based on cost-reduction initiatives intended to reduce our ongoing operating expenses and maximize shareholder value as we evaluated strategic options, our board of directors also approved a reduction in our workforce by approximately 80 employees during the third quarter of 2023 and an additional 6 employees during the fourth quarter of 2023. In connection with this corporate restructuring, we recorded a restructuring charge for severance and related costs of $10.3 million in its consolidated statements of operations during the year ended December 31, 2023.

Cash Flows

Our cash, cash equivalents andshort-term investments totaled $82.7 million and $175.0 million as of December 31, 2023 and 2022, respectively. We had no indebtedness as of December 31, 2023 and 2022.

The following table summarizes our sources and uses of cash for each of the periods presented:

For the Year ended December 31,

Net cash used in operating activities $ (96,230 ) $ (113,661 )

Net cash provided by investing activities 101,326 36,716

Net cash provided by financing activities 184 596

Net change in cash, cash equivalents and restricted cash $ 5,280 $ (76,349 )

Operating Activities

Net cash used in operating activities for the year ended December 31, 2023 was $96.2 million, which was primarily utilized for the funding of our operating expenses of $102.6 million as we incurred expenses associated with research and development activities prior to our decision to stop further development of our programs. Such activities included clinical trial activities associated with our HMI-103 and HMI-203 programs, preclinical development activities for HMI-104 and research activities on other applications for our technology, adjusted for non-cash expenses of $23.9 million. Non-cash expenses includes an $25.9 million loss from our equity method investment in OXB (US) LLC, $7.3 million of stock-based compensation expense and noncash lease expense of $2.1 million, partially offset by an $8.9 million net gain recognized on the termination of our corporate lease and accretion on short-term investments of $2.9 million. The change in operating assets and liabilities of $7.2 million was driven by decreased accrued expenses and other liabilities of $11.7 million, decreased operating lease liabilities of $1.4 million and decreased deferred revenue of $1.2 million, partially offset by decreased prepaid expenses and other current assets of $5.0 million increased accounts payable of $2.1 million.

Net cash used in operating activities for the year ended December 31, 2022 was $113.7 million, which was primarily utilized for the funding of our operating expenses of $136.5 million, as we incurred expenses associated with research and development activities including clinical trial activities associated with our HMI-103, HMI-203 and HMI-102 programs, preclinical development activities including IND-enabling studies for HMI-104 and research activities on other applications for our technology, adjusted for non-cash expenses of $112.0 million, which includes the one-time gain of $131.2 million recognized on the sale of our manufacturing business to Oxford, and a change in operating assets and liabilities of $3.4 million. The change in operating assets and liabilities was driven by increased accrued expenses and other liabilities of $7.4 million largely due to materials produced for us by OXB (US) LLC and accrued for at year-end, offset by decreased deferred revenue of $3.2 million and decreased accounts payable of $1.0 million.

Investing Activities

Net cash provided by investing activities for the year ended December 31, 2023 was $101.3 million, primarily due to proceeds from maturities of short-term investments of $174.2 million, offset by purchases of short-term investments of $73.2 million.

Net cash provided by investing activities for the year ended December 31, 2022 was $36.7 million, primarily due to $130.0 million of cash received from Oxford pursuant to the OXB (US) LLC Transaction (see Note 6 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K). We also had proceeds from maturities of short-term investments of $65.5 million. These two items were offset by purchases of short-term investments of $157.5 million and purchases of property and equipment of $1.3 million.

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Financing Activities

Net cash provided by financing activities for the year ended December 31, 2023 was $0.2 million, primarily due to proceeds from the issuance of common stock pursuant to our employee stock purchase plan.

Net cash provided by financing activities for the year ended December 31, 2022 was $0.6 million, due to proceeds from the issuance of common stock pursuant to our employee stock purchase plan.

Funding Requirements

Operating expenses decreased during the year ended December 31, 2023 as compared to the year ended December 31, 2022. We expect total operating expenses to continue to decrease due to our decision to stop all further development of our product candidates and the recent implementation of a workforce reduction. We will continue to incur costs associated with operating as a public company. If we decide to resume the development of our product candidates, however, we would expect our expenses to increase in order to advance preclinical activities and clinical trials for product candidates in development. After a comprehensive review of strategic alternatives, on November 16, 2023, we entered into the Merger Agreement. Following the Merger, if successfully consummated, we do not anticipate any further development of our product candidates or programs.

As of December 31, 2023, we had cash, cash equivalents, and short term investments of $82.7 million. Based on our current projections, we believe that our existing cash, cash equivalents, and short-term investments as of December 31, 2023 will enable us to continue operations for at least one year from the date of this Annual Report on Form 10-K for the year ended December 31, 2023. However, in light of the discontinuation of all of our clinical trials and research activities, as well as our recent reduction in force of all but a few custodial employees, we have concluded that there is a substantial doubt regarding our ability to continue as a going concern for more than twelve months after the date the consolidated financial statements included elsewhere in this Annual Report on Form 10-K have been issued.

We have based these estimates on assumptions that may prove to be imprecise, and we may use our available capital resources sooner than we currently expect. In addition, its resource requirements could materially change if we are unable to consummate the Merger. As a result, we are unable to estimate the exact amount of our working capital requirements. Should we resume development of product candidates in the future, our future funding requirements would depend on and could increase significantly as a result of many factors, including:

•

the costs, timing, and results of research and development efforts, including clinical trials;

•

the costs and timing of process development scale-up activities, and the adequacy of supply of product candidates for preclinical studies and clinical trials through CMOs, including OXB (US) LLC;

•

the costs and timing of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims, including any claims by third parties that we are infringing upon their intellectual property rights;

•

the effect of competitors and market developments; and

•

our ability to establish and maintain strategic collaborations, licensing or other agreements and the financial terms of such agreements for our product candidates.

We maintain the majority of our cash and cash equivalents in accounts with major highly rated multi- national and local financial institutions, and our deposits at these institutions exceed insured limits. Market conditions can impact the viability of these institutions, and any inability to access or delay in accessing these funds could adversely affect our business and financial position. In the event of failure of any of the financial institutions where we maintains our cash and cash equivalents, there can be no assurance that we will be able to access uninsured funds in a timely manner or at all.

Further, the global economy, including credit and financial markets, has recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, rising interest and inflation rates, declines in consumer confidence, declines in economic growth, increases in unemployment rates, uncertainty about economic stability and COVID-19. All of these factors could impact our liquidity and future funding requirements, including but not limited to our ability to raise additional capital when needed on acceptable terms, if at all. The duration of this economic slowdown is uncertain and the impact on our business is difficult to predict. See “Risk Factors— Unstable global political or economic conditions may have serious adverse consequences on our business, financial condition and share price.”

Until such time, if ever, that we can generate product revenue and subject to our pursuit of a potential strategic transaction and the consummation of such potential transaction, we expect to finance our cash needs through a combination of

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equity offerings, debt financings, collaboration agreements, other third-party funding, strategic alliances, licensing arrangements and marketing and distribution arrangements.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our stockholders as common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through other third-party funding, collaboration agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we resume the development of product candidates and we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

Contractual Obligations

As of December 31, 2023, we had non-cancelable operating leases with total future minimum lease payments of $1.4 million, of which all will be payable in 2024. These minimum lease payments exclude our share of the facility operating expenses, real-estate taxes and other costs that are reimbursable to the landlord under the leases. These payments are for operating leases for our corporate headquarters in Bedford, Massachusetts, comprised of office, manufacturing and lab space that expire in June 2030 and May 2032. Under the terms of the OXB (US) LLC Transaction, our leases for this space has been assigned to OXB (US) LLC effective March 10, 2022, with Homology subleasing a portion of lab and office space back from OXB (US) LLC. Our sublease expires on December 31, 2024. On September 25, 2023, we signed and executed a release letter with our lessor related to our headquarters in Bedford, MA. The lessor agreed to release us of all obligations under the lease effective October 1, 2023 in exchange for a $0.1 million cash payment. On October 1, 2023, we derecognized the right-of-use asset and operating lease liability and recorded the difference as a gain within other income on the consolidated statements of operations. See Note 10 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information regarding our lease agreement.

Our agreements with certain institutions to license intellectual property include potential milestone and success fees, sublicense fees, royalty fees, licensing maintenance fees, and reimbursement of patent maintenance costs that we may be required to pay. Our agreements to license intellectual property include potential milestone payments that are dependent upon the development of products using the intellectual property licensed under the agreements and contingent upon the achievement of development or regulatory approval milestones, as well as commercial milestones. These potential obligations are contingent upon the occurrence of future events and the timing and likelihood of such potential obligations are not known with certainty. For further information regarding these agreements, please see Part I, Item 1. “Strategic Collaborations.”

Prior to our decision to stop further development of our products, we entered into contracts in the normal course of business with CROs and CMOs for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts generally did not contain any minimum purchase commitments and were cancelable by us upon prior notice of 30 days. Pursuant to the terms of the Supply Agreement with OXB (US) LLC entered into in March 2022, we agreed to purchase from OXB (US) LLC at least 50% of our clinical supply requirements of AAV-based products during the initial term of the Supply Agreement. We were committed to purchase a minimum number of batches of drug substance and drug product, as well as process development services, totaling approximately $29.7 million in 2023 under the Supply Agreement. We do not have any commitments to purchase products or services from OXB (US) LLC in 2024. The Supply Agreement provides for an initial term of three years, which period may be extended for an additional one-year term. After the initial term, we will have the right to terminate the Supply Agreement for convenience or other reasons specified in the Supply Agreement upon prior written notice. Either Party may terminate the Supply Agreement upon an uncured material breach by the other Party or upon the bankruptcy or insolvency of the other Party.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities.

Interest Rate Risk

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Our interest-earning assets consist of cash, cash equivalents, and short-term investments of $82.7 million, or 97.7% of our total assets at December 31, 2023, and $175.0 million, or 76.6% of our total assets at December 31, 2022. Interest income earned on these assets was approximately $5.6 million in 2023 and $3.2 million in 2022. Our interest income is sensitive to changes in the general level of interest rates, primarily U.S. interest rates. If a 10% change in interest rates were to have immediately occurred on December 31, 2023, this change would not have had a material effect on the fair value of our investment portfolio as of that date. At December 31, 2023, our cash equivalents consisted of bank deposits and money market funds. Such interest-earning instruments carry a degree of interest rate risk; however, historical fluctuations in interest income have not been significant for us. We had no debt outstanding as of December 31, 2023 and 2022.

Inflation Rate Risk

As of December 31, 2023, we do not believe that inflation has had a material effect on our business, financial condition or results of operations. To the extent inflation results in rising interest rates and has other adverse effects on the market, it may adversely affect our business, financial condition and results of operations.

Item 8. Financial Statements and Supplementary Data.

The financial statements required to be filed pursuant to this item are appended to this report. An index of those financial statements is found in Item 15 of Part IV of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Limitations on effectiveness of controls and procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of disclosure controls and procedures

Our management, with the participation of our principal executive officer and our principal financial officer, has evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on such evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2023.

Management’s annual report on internal control over financial reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Our management conducted an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management concluded that, as of December 31, 2023, our internal control over financial reporting was effective.

Attestation report of the registered public accounting firm

As a non-accelerated filer, we are not required to provide an attestation report of our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.

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Changes in internal control over financial reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

During the three months ended December 31, 2023, no director or officer of the Company adopted a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

On November 27, 2023, W. Bradford Smith, former Chief Financial and Business Officer, terminated a Rule 10b5-1 trading arrangement intended to satisfy the affirmative defense of Rule 10b5-1(c) and originally adopted on September 23, 2022 for the sale of up to 89,000 shares of the Company’s common stock until May 23, 2024.

On December 5, 2023, Arthur Tzianabos, Chairman of our Board of Directors and former Chief Executive Officer, terminated a Rule 10b5-1 trading arrangement intended to satisfy the affirmative defense of Rule 10b5-1(c) and originally adopted on September 23, 2022 for the sale of up to 539,640 shares of the Company’s common stock until December 31, 2024.

On December 5, 2023, Paul Alloway, President and Chief Operating Officer, terminated a Rule 10b5-1 trading arrangement intended to satisfy the affirmative defense of Rule 10b5-1(c) and originally adopted on September 23, 2022 for the sale of up to 24,097 shares of the Company’s common stock until November 23, 2024.

As of December 31, 2023, all of the Company’s “Rule 10b5-1 trading arrangements” and “non-Rule 10b5-1 trading arrangements” have been terminated.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Directors and Executive Officers

Information with respect to this item will be set forth in the Proxy Statement for the 2024 Annual Meeting of Stockholders (“Proxy Statement”) or an amendment to this Annual Report on Form 10-K (“Form 10-K/A”) under the headings “Election of Directors,” “Executive Officers,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance” and is incorporated herein by reference. The Proxy Statement or Form 10-K/A will be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report.

Code of Business Conduct and Ethics

Our board of directors has adopted a Code of Business Conduct and Ethics (“Code of Conduct”) applicable to all officers, directors and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller, and persons performing similar functions. A copy of our Code of Conduct is available at the Investors section of our website, located at www.homologymedicines.com, under “Investors—Governance Documents.” We intend to disclose on our website any amendments to, or waivers from, our Code of Business Conduct and Ethics that are required to be disclosed pursuant to the rules of the SEC, as well as Nasdaq’s requirement to disclose waivers with respect to directors and executive officers. The information contained on our website is not considered part of, or incorporated by reference into, this Annual Report on Form 10-K or any other filing that we make with the SEC.

Audit Committee and Audit Committee Financial Expert

We have a separately-designated standing audit committee (“Audit Committee”). The members of the Audit Committee are Matthew R. Patterson, Jeffrey V. Poulton and Mary Thistle. Ms. Thistle serves as the Chairperson of the Audit Committee. The members of our Audit Committee meet the requirements for financial literacy under the applicable rules of the SEC and Nasdaq. Our board of directors has determined that Ms. Thistle is an “audit committee financial expert” as defined by Item 407(d)(5)(ii) of Regulation S-K.

Family Relationships

There are no family relationships among any of our executive officers or directors.

Item 11. Executive Compensation.

Information with respect to this item will be set forth in the Proxy Statement or Form 10-K/A under the headings “Executive Compensation” and “Non-Employee Director Compensation” and is incorporated herein by reference. The Proxy Statement or Form 10-K/A will be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information with respect to this item will be set forth in the Proxy Statement or Form 10-K/A and is incorporated herein by reference. The Proxy Statement or Form 10-K/A will be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Information with respect to this item will be set forth in the Proxy Statement or Form 10-K/A under the heading “Certain Relationships and Related Transactions, and Director Independence” and is incorporated herein by reference. The Proxy Statement or Form 10-K/A will be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report.

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Item 14. Principal Accountant Fees and Services.

Information with respect to this item will be set forth in the Proxy Statement or Form 10-K/A under the heading “Principal Accountant Fees and Services” and is incorporated herein by reference. The Proxy Statement or Form 10-K/A will be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report.

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PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)(1) Financial Statements.

The following documents are included on pages F-1 through F-27 attached hereto and are filed as part of this Annual Report on Form 10-K.

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets F-4

Consolidated Statements of Operations F-5

Consolidated Statements of Comprehensive Loss F-6

Consolidated Statements of Stockholders’ Equity F-7

Consolidated Statements of Cash Flows F-8

Notes to Consolidated Financial Statements F-9

(a)(2) Financial Statement Schedules.

All financial statement schedules have been omitted because they are not applicable, not required or the information required is shown in the financial statements or the notes thereto.

(a)(3) Exhibits.

The following is a list of exhibits filed, furnished or incorporated by reference as part of this Annual Report on Form 10-K.

Incorporated by Reference

4.3 Description of Securities *

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97.1 Policy Relating to Recovery of Erroneously Awarded Compensation *

101.SCH Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents *

* Filed herewith.

** Furnished herewith.

# Indicates management contract or compensatory plan or arrangement.

† Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment.

^ Portions of this exhibit (indicated by asterisks) have been omitted pursuant to Regulation S-K, Item 601(b)(10)(iv).

^^ Registrant has omitted schedules and exhibits pursuant to Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of the omitted schedules and exhibits to the SEC upon request.

Item 16. Form 10-K Summary.

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Homology Medicines, Inc.

Date: March 12, 2024 By: /s/ Paul Alloway, Ph.D.

Paul Alloway, Ph.D.

President and Chief Operating Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Name Title Date

Paul Alloway, Ph.D.

Charles Michaud, Jr.

/s/ Arthur Tzianabos, Ph.D. Chairman of the Board of Directors March 12, 2024

Arthur Tzianabos, Ph.D.

/s/ Jeffrey V. Poulton Lead Independent Director March 12, 2024

Jeffrey V. Poulton

/s/ Steven Gillis, Ph.D. Director March 12, 2024

Steven Gillis, Ph.D.

/s/ Matthew R. Patterson Director March 12, 2024

Matthew R. Patterson

/s/ Alise S. Reicin, M.D. Director March 12, 2024

Alise S. Reicin, M.D.

/s/ Mary Thistle Director March 12, 2024

Mary Thistle

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HOMOLOGY MEDICINES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets F-4

Consolidated Statements of Operations F-5

Consolidated Statements of Comprehensive Loss F-6

Consolidated Statements of Stockholders’ Equity F-7

Consolidated Statements of Cash Flows F-8

Notes to Consolidated Financial Statements F-9

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Homology Medicines, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Homology Medicines, Inc. and its subsidiary (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows, for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s recurring losses from operations incurred since inception, the expectation of continuing losses for the foreseeable future, and discontinuation of all clinical trials and research activities, as well as the Company’s workforce reduction plan, raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Equity method investment — Refer to Notes 1 and 6 to the financial statements

Critical Audit Matter Description

The Company uses the equity method of accounting to account for its investment in Oxford Biomedica (US) LLC, or OXB (US) LLC. The Company's proportionate share of the net income or loss of OXB (US) LLC is included in consolidated net loss within the caption, loss from equity method investment. During the year-ended December 31, 2023, OXB (US) LLC recorded an impairment of certain long-lived assets, resulting in the Company recording an incremental $14.0 million loss from equity method investment and reducing the balance of the equity method investment to $0 as of December 31, 2023, which required

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significant estimates and assumptions related to future revenue projections and the selection of a revenue multiplier used in the market approach model.

We identified the estimation of future revenue projections and the use of a revenue multiplier associated with the valuation of the related asset group of OXB (US) LLC as a critical audit matter due to the significant judgments required in both the estimation of future revenue and the selection of the revenue multiplier used in the market approach model. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of the estimates and assumptions related to the forecasts of future revenues and selection of revenue multipliers.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the estimates and assumptions utilized in the market approach model used for the impairment analysis included the following, among others:

•

We (1) evaluated the reasonableness of the forecasts of future revenues by comparing those estimates to historical results and internal communications to management and the Board of Directors and (2) evaluated the reasonableness of the valuation methodology utilized in the fair value estimate.

•

We read the audited financial statements of OXB (US) LLC as of and for the year ended December 31, 2023, audited in accordance with auditing standards generally accepted in the United States of America.

•

We considered whether other information obtained during the course of our audit represented contradictory evidence in relation to selection of the revenue multiplier in the valuation model or the estimated revenue projections utilized in the model.

/s/ Deloitte & Touche LLP

Boston, Massachusetts

March 12, 2024

We have served as the Company's auditor since 2017.

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HOMOLOGY MEDICINES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

December 31,

Assets

Current assets:

Assets held for sale 260 —

Prepaid expenses and other current assets 1,001 5,989

Equity method investment — 25,814

Property and equipment, net — 1,078

Liabilities and stockholders' equity

Current liabilities:

Accrued expenses and other liabilities 7,021 18,715

Deferred revenue — 1,156

Non-current liabilities:

Operating lease liabilities, net of current portion — 27,916

Commitments and contingencies (Note 10) —

Stockholders’ equity:

Accumulated other comprehensive loss (5 ) (404 )

Total liabilities and stockholders' equity $ 84,564 $ 228,470

See notes to consolidated financial statements.

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HOMOLOGY MEDICINES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

For the Year ended December 31,

Operating expenses:

Restructuring and other charges 9,327 —

Other income:

Gain on sale of business — 131,249

Gain on lease termination 8,767 —

Income (loss) before income taxes (87,080 ) 1,198

Provision for income taxes — (715 )

Loss from equity method investment (25,881 ) (5,488 )

Net loss per share-basic and diluted $ (1.95 ) $ (0.09 )

See notes to consolidated financial statements.

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HOMOLOGY MEDICINES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

For the Year ended December 31,

Other comprehensive gain (loss):

Total other comprehensive gain (loss) 399 (397 )

See notes to consolidated financial statements.

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HOMOLOGY MEDICINES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share and per share amounts)

Shares Amount Capital Gain (Loss) Deficit Equity

Issuance of common stock from RSU vesting 106,890 — — — — —

Issuance of common stock from option exercises 293 — 1 — — 1

Stock-based compensation for equity method investee — — 79 — — 79

Other comprehensive loss — — — (397 ) — (397 )

Issuance of common stock from RSU vesting 373,519 — — — — —

Issuance of common stock from option exercises 26,166 — 16 — — 16

Stock-based compensation — — 7,324 — — 7,324

Stock-based compensation for equity method investee — — 67 — — 67

Other comprehensive gain — — — 399 — 399

See notes to consolidated financial statements.

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HOMOLOGY MEDICINES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

For the Year ended December 31,

Cash flows from operating activities:

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

Loss from equity method investment 25,881 5,488

Accretion of discount on short-term investments (2,948 ) (1,947 )

Non-cash gain on lease termination (8,866 ) —

(Gain) loss on disposal of property and equipment (94 ) 49

Gain on sale of business — (131,249 )

Changes in operating assets and liabilities:

Prepaid expenses and other current assets 4,988 840

Accrued expenses and other liabilities (11,686 ) 7,418

Operating lease liabilities (1,445 ) (719 )

Net cash used in operating activities (96,230 ) (113,661 )

Cash flows from investing activities:

Purchases of short-term investments (73,240 ) (157,460 )

Proceeds from sale of business — 130,000

Proceeds from sale of property and equipment 554 —

Purchases of property and equipment (228 ) (1,285 )

Net cash provided by investing activities 101,326 36,716

Cash flows from financing activities:

Proceeds from issuance of common stock from option exercises 16 1

Net cash provided by financing activities 184 596

Net change in cash, cash equivalents and restricted cash 5,280 (76,349 )

Cash, cash equivalents and restricted cash, beginning of period 33,986 110,335

Cash, cash equivalents and restricted cash, end of period $ 39,266 $ 33,986

Supplemental disclosures of noncash investing and financing activities:

Lease liability settled through termination of lease $ 28,338 $ —

Lease liability obtained in exchange for right-of-use asset $ 1,625 $ —

Cash paid for income taxes $ — $ 720

Unrealized gain (loss) on available for sale securities, net $ 399 $ (397 )

See notes to consolidated financial statements.

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HOMOLOGY MEDICINES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

Nature of Business—Homology Medicines, Inc. (the “Company” or "Homology") is a clinical-stage genetic medicines company historically focused on transforming the lives of patients suffering from rare diseases by addressing the underlying cause of the disease with one-time gene therapy and gene editing treatments. The Company was founded in March 2015 as a Delaware corporation. Its principal offices are in Bedford, Massachusetts.

On July 27, 2023, the Company announced that it had completed a review of its business and the Company's Board of Directors had approved a plan to explore, review and evaluate a range of potential strategic options available to the Company, including, without limitation, an acquisition, merger, reverse merger, sale of assets, strategic partnerships or other transactions. Based on the financing environment and the Company's anticipated clinical development timeline for its lead program, HMI-103, the Company also announced that it was stopping further development of its programs and reduced its workforce by 86% in an effort to significantly reduce its ongoing operating costs as it evaluated strategic alternatives. The workforce reduction was substantially completed in the third quarter of 2023 (see Note 9).

Agreement and Plan of Merger

After a comprehensive review of strategic alternatives, on November 16, 2023, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement"), with Q32 Bio Inc., a Delaware corporation ("Q32"), and Kenobi Merger Sub, Inc., a Delaware corporation and the Company's direct, wholly owned subsidiary ("Merger Sub"), pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Q32, with Q32 continuing as the Company's wholly owned subsidiary and the surviving corporation of the merger (the "Merger"). The Company's future operations are highly dependent on the success of the Merger and there can be no assurance that the Merger will be successfully consummated. If the Merger is completed, the business of Q32 will continue as the business of the combined company.

Merger Consideration

Subject to the terms and conditions of the Merger Agreement, (i) immediately prior to the effective time of the Merger (the “Effective Time”), all Q32 preferred stock will be converted into Q32 common stock pursuant to the organizational documents of Q32 (the “Q32 Preferred Stock Conversion”), and (ii) at the Effective Time, (a) each outstanding share of Q32 common stock (excluding Q32 common stock issued in the Concurrent Financing, as described below) will be converted into the right to receive a number of shares of the Company’s common stock (“Company Common Stock”), calculated in accordance with the Merger Agreement, (b) each outstanding Q32 stock option and warrant that has not previously been exercised prior to the closing of the Merger will be assumed by the Company and become an option or warrant, as applicable, to purchase a number of shares of Company Common Stock and (c) the Q32 common stock issued in the Concurrent Financing will be converted into the right to receive a number of shares of the Company’s Common Stock calculated in accordance with the Merger Agreement. The shares of Company Common Stock that will be issued to stockholders of Q32 will be calculated using a formula in the Merger Agreement based on the equity value of each of Q32 and the Company. Q32 has been ascribed an aggregate equity value of $195 million and the Company’s equity value is expected to be approximately $80 million subject to adjustment based on the amount of net cash of the Company at closing of the Merger.

Concurrent Financing

Pursuant to the Merger Agreement, immediately prior to the Effective Time, Q32 will consummate a financing through the sale of its common stock for aggregate gross proceeds of $42 million based on the same aggregate equity value of Q32 used in the Merger (the “Concurrent Financing”). On November 16, 2023, Q32 entered into subscription agreements with certain accredited investors (the “Investors”) for the Concurrent Financing with expected gross proceeds to Q32 of $42 million. In connection with the Concurrent Financing, at the closing of the Merger, Q32 will enter into a registration rights agreement with the Investors providing for the registration under the Securities Act of 1933, as amended (the “Securities Act”) of the shares of common stock sold in the Concurrent Financing. The consummation of the transactions contemplated by the subscription agreements is conditioned on the satisfaction or waiver of the conditions set forth in the Merger Agreement and in the subscription agreements. Shares of Q32 common stock issued pursuant to the Concurrent Financing will be converted into shares of Company Common Stock in the Merger in accordance with the Merger Agreement.

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Contingent Value Rights Agreement

At the Effective Time, if any Legacy Assets (as defined below) have not been disposed of in a Legacy Asset Disposition (as defined below) or if additional consideration may be payable for the Legacy Assets (as defined below) after closing of the Merger, the Company and Equiniti Trust Company, LLC, a New York limited liability company, as the initial rights agent (“Rights Agent”), will enter into a Contingent Value Rights Agreement (the “CVR Agreement”), pursuant to which the Company’s common stockholders of record as of the close of business on the last business day prior to the day on which the Effective Time occurs will receive one contingent value right (each, a “CVR”) for each outstanding share of Company Common Stock held by such stockholder on such date.

Each CVR will represent the contractual right to receive payments from the Company upon the actual receipt by the Company or its subsidiaries of certain contingent proceeds derived from any cash consideration that is paid to the Company or its subsidiaries as a result of the sale, transfer, license, assignment or other divestiture, disposition or commercialization of any of the Company’s assets, rights and interests relating to the Company’s HMI-103, HMI-204, Capsids and AAVHSC Platform, including any equity interests held directly or indirectly by the Company in Oxford Biomedica Solutions, LLC or its affiliates (“OXB Solutions”) pursuant to that certain Equity Securities Purchase Agreement, dated as of January 28, 2022, by and between the Company and OXB Solutions (the “Legacy Assets” and such disposition, a “Legacy Asset Disposition”), net of certain tax, transaction costs and certain other expenses.

The contingent payments under the CVR Agreement, if they become payable, will become payable to the Rights Agent for subsequent distribution to the holders of the CVRs. There can be no assurance that any holders of CVRs will receive payments with respect thereto. The right to the contingent payments contemplated by the CVR Agreement is a contractual right only and will not be transferable, except in the limited circumstances specified in the CVR Agreement. The CVRs will not be evidenced by a certificate or any other instrument and will not be registered with the Securities and Exchange Commission (the “SEC”). The CVRs will not have any voting or dividend rights and will not represent any equity or ownership interest in the Company or any of its affiliates. No interest will accrue on any amounts payable in respect of the CVRs.

Other Recent Developments

On March 9, 2023, the Company filed a Registration Statement on Form S-3 (File No. 333-270414) (the “Shelf”) with the SEC in relation to the registration of up to an aggregate of $250.0 million of its common stock, preferred stock, debt securities, warrants and/or units of any combination thereof for a period up to three years from the date of the filing. The Shelf became effective on March 17, 2023. The Company also simultaneously entered into a sales agreement with Cowen and Company, LLC (“Cowen”), as sales agent, providing for the offering, issuance and sale by the Company of up to an aggregate of $75.0 million of its common stock from time to time in “at-the-market” offerings under the Shelf (the “ATM”). The Company did not sell any shares of common stock under the ATM during the year ended December 31, 2023. As of December 31, 2023, there remained $75.0 million of common stock available for sale under the ATM.

On March 10, 2022, the Company closed a transaction with Oxford Biomedica (US) LLC ("OXB (US)"), to establish a new adeno-associated virus ("AAV") vector manufacturing company, Oxford Biomedica (US) LLC ("OXB (US) LLC") that provides AAV vector process development and manufacturing services to biotechnology companies. Under the terms of the agreement, the Company contributed its manufacturing team of 125 employees, manufacturing facility and equipment, manufacturing-related intellectual property and know-how and certain other assets. Oxford paid the Company $130.0 million of upfront cash and invested $50.0 million of cash to fund OXB (US) LLC in exchange for an 80 percent ownership interest, while Homology retained a 20 percent ownership interest in the new company and received a put option on this ownership position (see Note 6).

Since its inception and until recently, the Company has devoted substantially all of its resources to recruiting personnel, developing its technology platform and advancing its pipeline of product candidates through discovery, preclinical and clinical trials, developing and implementing manufacturing processes, building out manufacturing and research and development space, and maintaining and building its intellectual property portfolio. The Company is subject to a number of risks similar to those of other companies conducting high-risk, early-stage research and development of product candidates. Principal among these risks are dependency on key individuals and intellectual property, competition from other products and companies, and the technical and regulatory risks associated with the successful research, development and manufacturing of its product candidates.

To date, the Company has not generated any revenue from product sales and does not expect to generate any revenue from the sale of product in the foreseeable future. Through December 31, 2023, the Company has financed its operations primarily through public offerings of its common stock, the issuance of convertible preferred stock, and with proceeds from its transaction with Oxford (see Note 6), its collaboration and license agreement with a former collaboration partner and its private

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placement with Pfizer (see Note 17). During the year ended December 31, 2023, the Company incurred a loss from operations of $101.4 million and as of December 31, 2023, had $542.1 million in accumulated deficit.

The Company has incurred and expects to continue to incur costs and expenditures in connection with the process of evaluating strategic alternatives. Though the Company has executed the Merger Agreement with Q32 effective November 16, 2023, there can be no assurance that the Company will be able to successfully consummate the Merger or any other strategic transaction. The process of evaluating strategic options has been and may continue to be costly, time-consuming and complex and the Company may incur significant costs related to this continued evaluation, such as legal, accounting and advisory fees and expenses and other related charges.

Based on current projections, management believes that the Company's cash and cash equivalents and short-term investments as of December 31, 2023 will enable the Company to continue its operations for at least one year from the date of this filing. However, due to the consideration of certain qualitative factors, including the discontinuation of all clinical trials and research activities, as well as the Company's workforce reduction of all but a few custodial employees, management has concluded there is substantial doubt regarding the Company's ability to continue as a going concern for more than twelve months from the date that the consolidated financial statements included in this Annual Report on Form 10-K have been issued. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. Should the Company resume the development of product candidates, it would need to obtain substantial additional funding in connection with continuing operations, particularly if the Company were to resume its preclinical activities and clinical trials for its product candidates. There can be no assurance that the Company will be able to obtain sufficient capital to cover its costs on acceptable terms, if at all.

Basis of Presentation—The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation—The Company’s consolidated financial statements include the accounts of the Company and its subsidiary, Homology Medicines Securities Corporation, a wholly owned Massachusetts corporation, for the sole purpose of buying, selling, and holding securities on the Company’s behalf. All intercompany balances and transactions have been eliminated in the consolidated financial statements.

Use of Estimates—The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and the disclosure of contingent assets and liabilities as of and during the reporting period. The Company bases its estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, revenue recognition, accrued research and development expenses and the valuation of the Company's equity method investment. The Company assesses estimates on an ongoing basis; however, actual results could materially differ from those estimates.

Comprehensive Loss —Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The Company’s only element of other comprehensive income (loss) is unrealized gains and losses on available-for-sale investments.

Cash and Cash Equivalents and Restricted Cash—Cash and cash equivalents consist of standard checking accounts, money market accounts and certain investments. The Company considers all highly liquid investments with original or remaining maturities at the time of purchase of 90 days or less to be cash equivalents.

Short-Term Investments—Short-term investments represent holdings of available-for-sale marketable securities in accordance with the Company’s investment policy and cash management strategy. Short-term investments have maturities of greater than 90 days at the time of purchase and mature within one-year from the balance sheet date. Investments in marketable securities are recorded at fair value, with any unrealized gains and losses, reported within accumulated other comprehensive income as a separate component of stockholders’ equity until realized or until a determination is made that an other-than-temporary decline in market value has occurred. Any premium or discount arising at purchase is amortized and/or accreted to interest income and/or expense over the life of the underlying security. Such amortization and accretion, together with interest on securities, are included in interest income in the Company’s consolidated statements of operations. The cost of marketable

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securities sold is determined based on the specific identification method and any realized gains or losses on the sale of investments are reflected as a component of other income.

Concentrations of Credit Risk—Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash, cash equivalents and short-term investments. Periodically, the Company may maintain deposits in financial institutions in excess of government insured limits. The Company believes that it is not exposed to significant credit risk as its deposits are held at financial institutions that management believes to be of high credit quality and the Company has not experienced any losses on these deposits. The Company regularly invest excess cash with major financial institutions in money market funds, U.S. government and corporate debt securities and commercial paper, all of which can be readily purchased and sold using established markets. As of December 31, 2023, the Company’s cash and cash equivalents were held with two financial institutions. The Company believes that the market risk arising from its holdings of these financial instruments is mitigated based on the fact that many of these securities are either government-backed or of high credit rating.

Equity Method Investment—The Company uses the equity method of accounting to account for an investment in an entity that it does not control, but in which it has the ability to exercise significant influence over operating and financial policies. The Company's proportionate share of the net income or loss of the entity is included in consolidated net loss. Judgments regarding the level of influence over the equity method investment include consideration of key factors such as the Company's ownership interest, representation on the board of directors or other management body and participation in policy-making decisions.

Under the equity method of accounting, the Company’s investment is initially recorded at fair value on the consolidated balance sheets. Upon initial investment, the Company evaluates whether there are basis differences between the carrying value and fair value of the Company’s proportionate share of the investee’s underlying net assets. Typically, the Company amortizes basis differences identified on a straight-line basis over the underlying assets’ estimated useful lives when calculating the attributable earnings or losses, excluding the basis differences attributable to in-process research and development that has no alternative future use. If the Company is unable to attribute all of the basis differences to specific assets or liabilities of the investee, the residual excess of the cost of the investment over the proportional fair value of the investee’s assets and liabilities is considered to be equity method goodwill and is recognized within the equity investment balance, which is tracked separately within the Company’s memo accounts. The Company subsequently records in the statements of operations its share of income or loss of the other entity within other income/expense, which results in an increase or decrease to the carrying value of the investment. If the share of losses exceeds the carrying value of the Company’s investment, the Company will suspend recognizing additional losses and will continue to do so unless it commits to providing additional funding; however, if there are intra-entity profits this can cause the investment balance to go negative.

The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that a decline in value has occurred that is other than temporary. Evidence considered in this evaluation includes, but would not necessarily be limited to, the financial condition and near-term prospects of the investee, recent operating trends and forecasted performance of the investee, market conditions in the geographic area or industry in which the investee operates and the Company’s strategic plans for holding the investment in relation to the period of time expected for an anticipated recovery of its carrying value. If the investment is determined to have a decline in value deemed to be other than temporary it is written down to estimated fair value.

At December 31, 2023, the Company accounted for its investment in OXB (US) LLC using the equity method of accounting (see Note 6).

Offering Costs—The Company capitalizes incremental legal, professional accounting and other third-party fees that are directly associated with equity financings as other current assets until the transactions are completed. After equity financings are complete, these costs are recorded in stockholders’ equity as a reduction of additional paid-in capital generated as a result of the offering.

Leases—The Company determines if an arrangement is a lease at contract inception. The Company’s contracts are determined to contain a lease when all of the following criteria based on the specific circumstances of the arrangement are met: (1) there is an identified asset for which there are no substantive substitution rights; (2) the Company has the right to obtain substantially all of the economic benefits from the identified asset; and (3) the Company has the right to direct the use of the identified asset.

At the commencement date, operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of future lease payments over the expected lease term. The Company’s lease agreements do not provide an implicit rate. As a result, the Company utilizes an estimated incremental borrowing rate to discount lease payments, which is

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based on the rate of interest the Company would have to pay to borrow a similar amount on a collateralized basis over a similar term. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or lease incentives received. Operating lease cost is recognized over the expected term on a straight-line basis. The expected lease term includes noncancelable lease periods and, when applicable, periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option, as well as periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. Variable lease cost is recognized as incurred. Right-of-use assets are periodically evaluated for impairment.

The Company subleases a portion of its headquarters that is now occupied by OXB (US) LLC (see Note 18). Homology assigned all of its right, title and interest in, to and under this lease to OXB (US) LLC and effective October 1, 2023, the Company was released from being the primary obligor under such lease. Therefore, the related right-of-use asset and operating lease liability were derecognized as of October 1, 2023 and a new right-of-use asset and operating lease liability representing the present value of the future sublease payments to be made to OXB (US) LLC was recorded (see Note 10).

Guarantees and Indemnifications—As permitted under Delaware law, the Company indemnifies its officers, directors, consultants and employees for certain events or occurrences that happen by reason of the relationship with, or position held at, the Company. Through December 31, 2023, the Company had not experienced any losses related to these indemnification obligations, and no claims were outstanding. The Company does not expect significant claims related to these indemnification obligations and, consequently, concluded that the fair value of these obligations is negligible, and no related liabilities have been established.

Property and Equipment—Property and equipment are recorded at cost. Expenditures for repairs and maintenance are expensed as incurred. When assets are retired or disposed of, the assets and related accumulated depreciation are derecognized from the accounts, and any resulting gain or loss is included in the determination of net loss. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the asset.

Computer equipment and software 3 years

Laboratory equipment and office furniture 5 years

Manufacturing equipment 5 - 7 years

Leasehold improvements Shorter of the lease termor estimated useful life

Assets Held for Sale—The Company classifies assets as held for sale when the following conditions are met: (1) management has committed to a plan to sell, (2) the assets are available for immediate sale in their present condition, (3) the Company has initiated an active program to identify a buyer, (4) it is probable that a sale will occur within one year, (5) the assets are actively marketed for sale at a reasonable price in relation to their current fair value, and (6) there is a low likelihood of significant changes to the plan or that the plan will be withdrawn. If all of the criteria are met as of the balance sheet date, the assets are presented separately in the consolidated balance sheet as held for sale at the lower of the carrying amount or fair value less costs to sell. The assets are then no longer depreciated or amortized while classified as held for sale.

Impairment of Long-Lived Assets—The Company evaluates its long-lived assets, which consist primarily of property and equipment and right-of-use assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. To date, no impairments have been recognized for these assets.

Research and Development Costs—Research and development costs are charged to expense as incurred. Research and development expense consists of expenses incurred in performing research and development activities, including salaries and benefits, materials and supplies, preclinical and clinical expenses, stock-based compensation expense, depreciation of equipment, contract services, and other outside expenses.

Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information provided to the Company by its vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the consolidated financial statements as prepaid expense or accrued research and development expense.

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Income Taxes—The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the Company’s consolidated financial statements and tax returns. Deferred tax assets and liabilities are determined based upon the differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and for loss and credit carryforwards, using enacted tax rates expected to be in effect in the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that these assets may not be realized. The Company determines whether it is more likely than not that a tax position will be sustained upon examination. The tax benefit to be recognized for any tax position that meets the more-likely-than-not recognition threshold is calculated as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. If it is not more likely than not that a position will be sustained, none of the benefit attributable to the position is recognized. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes. Since inception, the Company has provided a valuation allowance for the full amount of the net deferred tax assets as the realization of the net deferred tax assets has not been determined to be more likely than not.

Segment Information—Operating segments are identified as components of an enterprise about which separate discrete financial information is made available for evaluation by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and assessing performance. The CODM is the Company’s President and Chief Operating Officer. The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company’s singular focus is dedicated to translating proprietary gene editing and gene therapy technology into novel treatments for patients with rare genetic diseases. All of the Company’s tangible assets are held in the United States.

Revenue Recognition—Revenue is recognized in accordance with FASB Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine the appropriate amount of revenue to be recognized for arrangements determined to be within the scope of ASC 606, the Company performs the following five steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect consideration it is entitled to in exchange for the goods or services it transfers to the customer.

The promised goods or services in the Company’s arrangements would likely consist of a license, rights to the Company’s intellectual property or research, development and manufacturing services. Performance obligations are promised goods or services in a contract to transfer a distinct good or service to the customer and are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources and (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whether promised goods or services are distinct, the Company considers factors such as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the intellectual property on its own or whether the required expertise is readily available and whether the goods or services are integral or dependent to other goods or services in the contract.

The Company estimates the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include fixed consideration and variable consideration. At the inception of each arrangement that includes variable consideration, the Company evaluates the amount of consideration to which the Company expects to be entitled to. The Company utilizes either the most likely amount method or expected value method to estimate the amount expected to be received based on which method best predicts the amount expected to be received. The amount of variable consideration that is included in the transaction price may be constrained and is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

The Company’s contracts may include development and regulatory milestone payments that are assessed under the most likely amount method and constrained until it is probable that a significant revenue reversal would not occur. Milestone payments that are not within the Company’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of such development and regulatory milestones and any related constraint, and if necessary, adjust its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenue in the period of adjustment.

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For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from the Company’s collaboration arrangement.

The Company allocates the transaction price based on the estimated standalone selling price of each performance obligation. The Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. The Company utilizes key assumptions to determine the stand-alone selling price, which may include other comparable transactions, pricing considered in negotiating the transaction and the estimated costs. Variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated are consistent with the amounts the Company would expect to receive for the satisfaction of each performance obligation.

The consideration allocated to each performance obligation is recognized as revenue when control is transferred for the related goods or services. For performance obligations which consist of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. The Company evaluates the measure of progress for its over-time arrangements at each reporting period and, if necessary, updates the measure of progress and revenue recognized.

Stock-based Compensation—The Company recognizes compensation expense for awards to employees and non-employees based on the grant date fair value of stock-based awards on a straight-line basis over the period during which an award holder provides service in exchange for the award. The fair value of options on the date of grant is calculated using the Black-Scholes option pricing model based on key assumptions such as stock price, expected volatility and expected term. The Company’s estimates of these assumptions are primarily based on the trading price of the Company’s stock, historical data, peer company data and judgment regarding future trends and factors. The Company recognizes forfeitures as they occur.

The purchase price of common stock under the Company’s employee stock purchase plan (“ESPP”) is equal to 85% of the lesser of (i) the fair market value per share of the common stock on the first business day of an offering period and (ii) the fair market value per share of the common stock on the purchase date. The fair value of the look-back provision under the ESPP is calculated using the Black-Scholes option pricing model. The fair value of the look-back provision plus the 15% discount is recognized as compensation expense over the 180-day purchase period.

Fair Value Measurements—Certain assets and liabilities are reported on a recurring basis at fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

•

Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities.

•

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

•

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Net Loss per Share—Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted-average number of common shares outstanding during the period and, if dilutive, the weighted-average number of potential shares of common stock. The weighted-average number of common shares included in the computation of diluted net loss gives effect to all potentially dilutive common equivalent shares, including outstanding stock options, restricted stock units and unvested shares of common stock.

Common stock equivalent shares are excluded from the computation of diluted net loss per share if their effect is antidilutive. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share

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attributable to common stockholders is generally the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

Recent Accounting Pronouncements—The Jumpstart Our Business Startups Act of 2012 permits an emerging growth company to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. The Company ceased to qualify as an emerging growth company effective December 31, 2023.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) to improve financial reporting by requiring more timely recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. ASU 2016-13 also requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. The Company adopted ASU 2016-13 on January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on the Company's consolidated financial statements and related disclosures.

3. CASH AND CASH EQUIVALENTS

From time to time, the Company may have cash balances in financial institutions in excess of federal deposit insurance limits. The Company has never experienced any losses related to these balances. The Company considers only those investments that are highly liquid, readily convertible to cash, and that mature within three months from date of purchase to be cash equivalents.

The following table summarizes the Company’s cash and cash equivalents:

December 31,

(in thousands)

4. SHORT-TERM INVESTMENTS

The Company may invest its excess cash in fixed income instruments denominated and payable in U.S. dollars including U.S. treasury securities, commercial paper, corporate debt securities and asset-backed securities in accordance with the Company’s investment policy that primarily seeks to maintain adequate liquidity and preserve capital.

The following table summarizes the Company’s short-term investments as of December 31, 2023 and December 31, 2022:

(in thousands)

(in thousands)

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The Company utilizes the specific identification method in computing realized gains and losses. The Company had no realized gains and losses on its available-for-sale securities for the years ended December 31, 2023 and 2022. The contractual maturity dates of all of the Company’s investments are less than one year.

5. FAIR VALUE MEASUREMENTS

The Company’s financial instruments consist of cash and cash equivalents, short-term investments, restricted cash and accounts payable. The carrying amount of cash, restricted cash and accounts payable are each considered a reasonable estimate of fair value due to the short-term maturity.

Assets measured at fair value on a recurring basis were as follows:

(in thousands)

Cash equivalents:

Money market mutual funds $ 38,517 $ 38,517 $ — $ —

Short-term investments:

Total short-term investments $ 43,387 $ — $ 43,387 $ —

(in thousands)

Cash equivalents:

Money market mutual funds $ 33,967 $ 33,967 $ — $ —

Short-term investments:

Short-term securities are valued using models or other valuation methodologies that use Level 2 inputs. These models are primarily industry-standard models that consider various assumptions, including time value, yield curve, volatility factors, default rates, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

There were no transfers between fair value measurement levels during the years ended December 31, 2023 and 2022.

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6. EQUITY METHOD INVESTMENT

Summary of Transaction

On March 10, 2022, the Company closed a transaction with OXB (US) LLC, Oxford Biomedica (US), Inc., ("OXB"), and Oxford, pursuant to the Equity Securities Purchase Agreement (the "Purchase Agreement"), dated as of January 28, 2022, by and among Homology, OXB (US) LLC and Oxford, whereby, among other things, Homology and Oxford agreed to collaborate to operate OXB (US) LLC, which provides AAV vector process development and manufacturing services to pharmaceutical and biotechnology companies (the "OXB (US) LLC Transaction").

Pursuant to the terms of the Purchase Agreement and a contribution agreement (the "Contribution Agreement") entered into between Homology and OXB (US) LLC prior to the closing of the OXB (US) LLC Transaction (the "Closing"), Homology contributed its manufacturing team of 125 employees and assigned and transferred to OXB (US) LLC all of its assets that are primarily used in the manufacturing of AAV vectors for use in gene therapy and gene editing products, including its manufacturing facility and equipment and manufacturing-related intellectual property and know-how, 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 OXB (US) LLC ("Units"), representing 100 percent (100%) of the ownership interest of OXB (US) LLC, and OXB (US) LLC assumed from the Company, and agreed to pay, perform and discharge when due, all of the Company's duties, obligations, liabilities, interests and commitments of any kind under, arising out of or relating to the Transferred Assets.

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 of cash consideration. In connection with the Closing, OXB contributed $50.0 million in cash to OXB (US) LLC in exchange for an additional, newly issued 50,000 Units. Immediately following the Closing, (i) OXB owned 180,000 Units, representing 80 percent (80%) of the fully diluted equity interests in OXB (US) LLC, and (ii) Homology owned 45,000 Units, representing 20 percent (20%) of the fully diluted equity interests in OXB (US) LLC.

Pursuant to the Amended and Restated Limited Liability Company Agreement of OXB (US) LLC (the "OXB (US) LLC Operating Agreement") which was executed in connection with the Closing, 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 OXB (US) LLC at a price equal to 5.5 times the revenue for the immediately preceding 12-month period (together, the "Options"), subject to a maximum amount of $74.1 million. Pursuant to the terms of the OXB (US) LLC Operating Agreement, Homology is entitled to designate one director to the board of directors of OXB (US) LLC, currently Paul Alloway, Homology's President and Chief Operating Officer.

Pursuant to the OXB (US) LLC Transaction, the Company also assigned all of its right, title and interest in, to and under its facility lease to OXB (US) LLC, with Homology subleasing a portion of lab and office space back from OXB (US) LLC. Effective October 1, 2023, the Company was released from being primary obligor under such lease. Therefore, the related right-of-use asset and operating lease liability were derecognized as of October 1, 2023 and a new right-of-use asset and operating lease liability representing the present value of the future sublease payments to be made to OXB (US) LLC was recorded (see Note 10).

Equity Method of Accounting

The Company has significant influence over, but does not control, OXB (US) LLC through its noncontrolling representation on OXB’s board of directors and the Company’s equity interest in OXB (US) LLC. In addition, the Company and OXB (US) LLC have intra-entity transactions through a series of agreements entered into in conjunction with the OXB (US) LLC Transaction, OXB (US) LLC granted certain licenses to the Company, and the Company has representation on the joint steering committee which oversees the activities governed by the Supply Agreement. Accordingly, the Company does not consolidate the financial statements of OXB (US) LLC and accounts for its investment using the equity method of accounting.

The Company recorded its equity method investment in OXB (US) LLC at fair value upon deconsolidation of OXB (US) LLC as of the Closing. The fair value of the equity method investment was determined based on the market approach. This approach estimated the fair value of OXB (US) LLC based on the implied value for the entity using the consideration paid, including the Options, for a controlling interest in OXB (US) LLC at the entity’s formation. As part of its fair value analysis, the Company determined that the Options are embedded in the common equity units because the Options are not legally detachable or separately exercisable. Accordingly, the equity method investment and the Options represent one unit of account and the fair value recorded reflects the value of the equity interest and the Options. The valuation included certain subjective

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assumptions including discounts for lack of control and marketability given the consideration paid for OXB (US) LLC was for a controlling interest in the entity and the Company owns a noncontrolling interest.

As of March 10, 2022, the Closing, the fair value of the Company’s investment in OXB (US) LLC was $31.2 million and the Company recorded a gain of $131.2 million on the sale of its manufacturing business in other income in the Company's consolidated statements of operations. The gain was computed as follows:

Plus: Fair value of equity method investment 31,223

Less: Carrying value of transferred assets (29,974 )

Gain on sale of business $ 131,249

During the year ended December 31, 2023, the Company determined that the fair value of its investment in OXB (US) LLC was negatively impacted due to a change in OXB (US) LLC' forecasted performance relative to expected performance when the Company initially invested in OXB (US) LLC. The Company determined that the decline in value was deemed to be other than temporary and recorded an impairment charge of $3.8 million to reduce its equity method investment to fair value. The impairment charge is included in the loss on equity method investment in the Company's consolidated statements of operations.

In addition, the Company records its share of income or losses from OXB (US) LLC on a quarterly basis. For the year ended December 31, 2023, OXB (US) LLC recorded an impairment charge of $119.1 million which significantly increased OXB (US) LLC's net loss for the period. After recording its share of OXB (US) LLC's net loss, the carrying value of the Company's equity method investment was reduced to $0.0 million.

Summarized Financial Information

Summarized financial information for OXB (US) LLC is as follows:

December 31,

Balance Sheet Data (in thousands)

December 31,

Statement of Operations Data (in thousands)

See Note 18 for information regarding the Company's related party transactions with OXB (US) LLC.

7. PROPERTY AND EQUIPMENT

Property and equipment, net consists of the following:

December 31,

(in thousands)

Laboratory equipment $ — $ 6,025

Computers and purchased software — 644

Furniture and fixtures — 645

Property and equipment, at cost — 7,314

Less: accumulated depreciation and amortization — (6,236 )

Property and equipment, net $ — $ 1,078

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In August 2023, consistent with its decision to stop further development of its programs and explore, review and evaluate a range of potential strategic options available to the Company, the Company committed to a plan to sell its remaining property and equipment and therefore has classified the amount as assets held for sale on the consolidated balance sheet as of December 31, 2023. The assets held for sale were reported at the lower of the carrying amount or fair value with no depreciation expense taken after August 2023. The Company expects to dispose of all assets held for sale during the first quarter of 2024.

Depreciation expense for the years ended December 31, 2023 and 2022 was approximately $0.6 million and$1.3 million, respectively. The Company disposed of approximately $0.5 million and $0.1 million of property and equipment, net during each of the years ended December 31, 2023 and 2022, respectively.

8. ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following:

December 31,

(in thousands)

Accrued compensation and benefits $ 5,755 $ 5,953

Accrued research and development expenses — 9,447

Total accrued expenses and other liabilities $ 7,021 $ 18,715

Accrued compensation and benefits includes a restructuring accrual for severance and related costs of approximately $4.6 million (see Note 9).

9. RESTRUCTURING AND OTHER CHARGES

On July 25, 2023, the Company's Board of Directors approved a process to explore, review and evaluate a range of potential strategic options available to the Company, including, without limitation, an acquisition, merger, reverse merger, sale of assets, strategic partnerships or other transactions. Therefore, based on cost-reduction initiatives intended to reduce the Company’s ongoing operating expenses and maximize shareholder value as the Company plans to pursue strategic options, the Company's Board of Directors approved a reduction in the Company’s workforce by approximately 80 employees, or 86% of the Company's workforce as of July 2023. Simultaneous with the signing of the Merger Agreement, the Company terminated another 6 employees in November 2023.

In connection with the reduction in force, the Company recorded a restructuring charge for severance and related costs of $10.3 million in the Company's consolidated statements of operations during the year ended December 31, 2023. The Company’s restructuring liability, which was included in accrued compensation and benefits, consisted of the following:

(in thousands) Employee-Related Costs

Accrued restructuring balance at January 1, 2023 $ —

Accrued restructuring balance at December 31, 2023 $ 4,613

The Company had previously granted certain of the terminated employees restricted stock units (“RSUs”) that vest in annual installments based on continued service to the Company, as well as options to purchase shares of the Company’s common stock that typically vest over a period of four years. In connection with the reduction in workforce, the Company agreed to accelerate the vesting of a portion of the RSUs that were unvested as of the employees’ termination dates, and also modify the stock options for terminated employees such that subject to the satisfaction of severance conditions, the terminated employees’ vested options will remain outstanding and exercisable until the first anniversary of each employee’s termination date. These equity modifications, described in detail in Note 14, resulted in a net reduction to stock based compensation

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expense of approximately $1.0 million reflected within restructuring and other charges in the Company's consolidated statements of operations during the year ended December 31, 2023.

10. COMMITMENTS AND CONTINGENCIES