prme-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended June 30, 2024


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

For the transition period from ___________________ to ___________________

Commission file number 001-41536

Prime Medicine, Inc.

(Exact name of registrant as specified in its charter)


Delaware						84-3097762
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

60 First Street, Cambridge, MA						02141
(Address of principal executive offices)						(Zip code)

(617) 564-0013

(Registrant’s telephone number, including area code)

21 Erie Street, Cambridge, MA 02139

(Former name, former address and former fiscal year, if changed since last report)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.00001 per share	PRME	Nasdaq Global Market

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

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

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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

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

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

As of August 1, 2024, the registrant had 120,030,813 shares of common stock, par value $0.00001 per share, outstanding.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains express or implied statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, and objectives of management, are forward-looking statements, which are based on management’s belief and assumptions and on information currently available to our management. These statements involve substantial risks, assumptions and uncertainties. The words “anticipate,” “believe,” “envision,” “estimate,” “expect,” “goal,” “intend,” “may,” “plan,” “predict,” “project,” “strategy,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “contemplate,” “vision” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report on Form 10-Q include statements about:

•the initiation, timing, progress and results of our research and development programs, product candidates, preclinical studies and future clinical trials;

•our ability to demonstrate, and the timing of, preclinical proof-of-concept in vivo for multiple programs;

•our ability to advance any current and future product candidates that we may identify and successfully complete any clinical studies, including the manufacture of any such product candidates;

•our ability to pursue our areas of focus and any other additional programs we may advance;

•our ability to quickly leverage programs within our initial target indications and to progress additional programs to further develop our pipeline;

•the timing of our investigational new drug application submissions;

•the ability of our Prime Editing technology to address unmet medical needs in patients;

•the implementation of our strategic plans for our business, programs and technology;

•the scope and duration of protection we are able to establish and maintain for intellectual property rights covering our Prime Editing technology;

•developments related to our competitors and our industry;

•our ability to leverage the clinical, regulatory, and manufacturing advancements made by gene therapy and gene editing programs to accelerate our clinical trials and approval of product candidates;

•our ability to identify and enter into future license agreements and collaborations;

•developments related to our Prime Editing technology;

•regulatory developments in the United States and foreign countries;

•our ability to attract and retain key scientific and management personnel;

•our estimates of our expenses, capital requirements, needs for additional financing;

•the effect of unfavorable macroeconomic conditions or market volatility resulting from global economic conditions,

•our expectations regarding the anticipated timeline of our cash runway, future financial performance and our ability to continue as a going concern; and

•other risks and uncertainties, including those listed under the caption “Risk Factors.”

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and these statements may be affected by inaccurate assumptions or by known or unknown risks and uncertainties. You should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q and in subsequent SEC filings, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Unless otherwise disclosed, our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments we may make or enter into.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed as exhibits to our other filings with the Securities and Exchange Commission (the “SEC”) completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date hereof, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise after the date of such statements, except as required by applicable law.

This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business and the markets for our product candidates. Such information is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this data from our own internal estimates and research as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. While we are not aware of any misstatements regarding any third-party information presented in this Quarterly Report on Form 10-Q, their estimates, in particular as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties and are subject to change based on various factors, including those discussed under the section titled “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q, if any, our Annual Report on Form 10-K that was filed with the SEC on March 1, 2024, and in other SEC filings.

PRIME MEDICINE, INC.

FORM 10-Q

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024

TABLE OF CONTENTS


		Page
PART I - FINANCIAL INFORMATION		5
Item 1.	Financial Statements (unaudited)	5
	Condensed Consolidated Balance Sheets as of June 30 , 2024 and December 31, 2023	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30 , 2024 and 2023	6
	Condensed Consolidated Statements of Stockholders ’ Equity for the Three a nd Six Months Ended June 30 , 2024 and 2023	7
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023	9
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management ’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31

PART II - OTHER INFORMATION		33
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosure	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
	Signatures	36

From time to time we may use our website, our X (formerly known as Twitter) account (@PrimeMedicine) or our LinkedIn profile at https://www.linkedin.com/company/prime-medicine to distribute material information. Our financial and other material information is routinely posted to and accessible on the Investors section of our website, available at www.primemedicine.com. Investors are encouraged to review the Investors section of our website because we may post material information on that site that is not otherwise disseminated by us. Information that is contained in and can be accessed through our website or our social media is not incorporated into, and does not form a part of, this Quarterly Report on Form 10-Q.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

PRIME MEDICINE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in thousands, except share and per share amounts)	June 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	55,600	$	41,574
Short-term investments	102,575		74,639
Short-term investment — related party	4,693		5,452
Prepaid expenses	4,199		19,057
Other current assets	3,736		2,254
Total current assets	170,803		142,976

Property and equipment, net	23,812		22,659
Operating lease right-of-use assets	51,594		13,941
Restricted cash	13,496		13,496
Other assets	—		779
Total assets	$	259,705	$	193,851
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	4,638	$	19,537
Accrued expenses and other current liabilities (1)	10,895		14,110
Accrued settlement payment — related party	—		13,500
Operating lease liability	5,216		9,276
Total current liabilities	20,749		56,423
Operating lease liability, net of current	36,367		4,357

Research and development funding liability	6,000		—
Total liabilities	63,116		60,780
Commitments and contingencies
Stockholders’ equity
Common stock, par value of $0.00001 per share; 775,000,000 shares authorized; 120,030,813 and 97,377,121 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively	2		2
Additional paid-in capital	789,076		624,414
Accumulated other comprehensive loss	(71)		(15)
Accumulated deficit	(592,418)		(491,330)
Total stockholders’ equity	196,589		133,071
Total liabilities and stockholders’ equity	$	259,705	$	193,851

(1) Includes related party amount of $0.3 million as of December 31, 2023.

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

PRIME MEDICINE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except share and per share amounts)	2024		2023		2024		2023
Collaboration revenue	$	—	$	—	$	591	$	—
Operating expenses:
Research and development (1)	43,071		34,599		80,845		65,479
General and administrative	12,601		10,658		23,759		19,811
Total operating expenses	55,672		45,257		104,604		85,290
Loss from operations	(55,672)		(45,257)		(104,013)		(85,290)
Other income:
Accretion (amortization) of investments	1,486		1,964		2,316		2,782
Interest income	611		635		1,287		1,910
Change in fair value of short-term investment — related party	(1,925)		263		(759)		(1,438)
Other income, net	39		41		81		83
Total other income, net	211		2,903		2,925		3,337
Net loss before income taxes	(55,461)		(42,354)		(101,088)		(81,953)
Benefit (provision for) from income taxes	134		(31)		—		171



Net loss attributable to common stockholders	$	(55,327)	$	(42,385)	$	(101,088)	$	(81,782)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.46)	$	(0.47)	$	(0.90)	$	(0.91)
Weighted-average common shares outstanding, basic and diluted	119,188,866		90,467,298		111,827,522		89,769,970

Comprehensive loss:
Net loss	$	(55,327)	$	(42,385)	$	(101,088)	$	(81,782)
Change in unrealized loss on investments, net of tax	24		(63)		(56)		116
Comprehensive loss	$	(55,303)	$	(42,448)	$	(101,144)	$	(81,666)

(1) Includes related party amount of $0.3 million and $0.6 million for the three and six months ended June 30, 2023.

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

PRIME MEDICINE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Losses		Accumulated Deficit		Total Stockholders’ Equity
(in thousands, except share amounts)	Shares	Amount
Balance as of December 31, 2023	97,377,121	$	2	$	624,414	$	(15)	$	(491,330)	$	133,071
Issuance of common stock from public offering, net of issuance costs of $8.9 million	22,560,001	—		132,055		—		—		132,055
Issuance of pre-funded warrants, net of issuance costs of $1.2 million	—	—		18,800		—		—		18,800
Issuances of common under ESPP	74,488	—		436		—		—		436
Issuance of common stock upon exercise of stock options	9,664	—		36		—		—		36
Stock-based compensation expense	—	—		5,209		—		—		5,209
Change in unrealized loss on investments, net of tax	—	—		—		(80)		—		(80)
Net loss	—	—		—		—		(45,761)		(45,761)
Balance as of March 31, 2024	120,021,274	2		780,950		(95)		(537,091)		243,766
Issuance of common stock upon exercise of stock options	9,539	—		35		—		—		35
Stock-based compensation expense	—	—		8,091		—		—		8,091
Change in unrealized loss on investments, net of tax	—	—		—		24		—		24
Net loss	—	—		—		—		(55,327)		(55,327)
Balance as of June 30, 2024	120,030,813	$	2	$	789,076	$	(71)	$	(592,418)	$	196,589

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

PRIME MEDICINE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


	Common Stock	Additional Paid-in Capital		Accumulated Other Comprehensive Losses		Accumulated Deficit			Total Stockholders’ Equity
(in thousands, except share amounts)			Shares					Amount
Balance as of December 31, 2022		97,209,213		$	2	$	609,849		$	(384)	$	(293,197)	$	316,270
Issuance of common stock upon exercise of stock options		18,596		—		68			—		—		68
Stock-based compensation expense		—		—		1,681			—		—		1,681
Change in unrealized loss on investments, net of tax		—		—		—			179		—		179
Net loss		—		—		—			—		(39,397)		(39,397)
Balance as of March 31, 2023		97,227,809		2		611,598			(205)		(332,594)		278,801
Issuance of common stock upon exercise of stock options		42,106		—		166			—		—		166
Stock-based compensation expense		—		—		3,583			—		—		3,583
Change in unrealized loss on investments, net of tax		—		—		—			(63)		—		(63)
Net loss		—		—		—			—		(42,385)		(42,385)
Balance as of June 30, 2023		97,269,915		$	2	$	615,347		$	(268)	$	(374,979)	$	240,102

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

PRIME MEDICINE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
(in thousands)	2024		2023
Cash flows used in operating activities:
Net loss	$	(101,088)	$	(81,782)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation expense	13,300		5,264
Non cash lease expense	7,917		6,304
Depreciation expense	2,853		2,170
Change in fair value of short-term investment — related party	759		1,438
Amortization of premiums and discount on short-term investments	(2,079)		(1,403)
Deferred income taxes	—		(171)

Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(2,519)		(5,299)
Accounts payable	(9,230)		1,104
Accrued expenses and other current liabilities	(3,939)		(3,438)
Accrued settlement payment — related party	(13,500)		—
Lease liabilities	(5,672)		(6,569)
Net cash used in operating activities	(113,198)		(82,382)
Cash flows (used in) provided by investing activities:
Maturities of investments	110,000		65,000
Purchases of investments	(135,912)		(45,659)
Purchases of property and equipment	(4,226)		(3,975)
Payments of security deposits	—		(170)
Net cash (used in) provided by investing activities	(30,138)		15,196
Cash flows provided by financing activities:
Proceeds from follow-on offering, net of issuance costs	132,055		—
Proceeds from issuance of pre-funded warrants, net of issuance costs	18,800		—
Proceeds from research and development funding liability	6,000		—
Proceeds from ESPP offerings	436		—
Net proceeds from stock option exercises	71		143
Net cash provided by financing activities	157,362		143

Net change in cash, cash equivalents, and restricted cash	14,026		(67,043)
Cash, cash equivalents, and restricted cash at beginning of period	55,070		201,116
Cash, cash equivalents, and restricted cash at end of period	$	69,096	$	134,073

Reconciliation of cash, cash equivalents and restricted cash:
Cash, cash equivalents, and restricted cash at end of period	$	69,096	$	134,073
Less: restricted cash	13,496		13,496
Total cash, and cash equivalents	$	55,600	$	120,577

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

PRIME MEDICINE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
(in thousands)	2024		2023
Supplemental cash flow information:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	44,935	$	3,265

Supplemental disclosure of non-cash investing and financing activities:
Purchases of property and equipment included in accounts payable and accrued expenses	$	355	$	712

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

PRIME MEDICINE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.Nature of the Business and Basis of Presentation

Prime Medicine, Inc., together with its consolidated subsidiary (the “Company”) is a biotechnology company committed to delivering a new class of differentiated one-time curative genetic therapies to address the widest spectrum of diseases. The Company is deploying Prime Editing technology, which it believes is a versatile, precise, and efficient gene editing technology. The Company was incorporated in the State of Delaware in September 2019. Its principal offices are in Cambridge, Massachusetts.

Liquidity and Capital Resources

Since its inception, the Company has devoted substantially all of its resources to building its Prime editing platform and advancing development of its portfolio of programs, establishing and protecting its intellectual property, conducting research and development activities, organizing and staffing the company, business planning, raising capital and providing general and administrative support for these operations. To date, the Company has funded its operations primarily with proceeds from sales of preferred stock and from public offerings of its common stock.

In February 2024, the Company issued and sold 22,560,001 shares of its common stock, including 3,360,000 shares pursuant to the exercise of the underwriters’ option to purchase additional shares, at a price to the public of $6.25 per share. Further, in lieu of common stock to certain investors, the Company sold pre-funded warrants to purchase 3,200,005 shares of common stock at a public offering price of $6.24999 per pre-funded warrant, which represents the per share public offering price of each share of common stock less the $0.00001 per share exercise price for each pre-funded warrant. As a result of the offering, the Company received approximately $150.9 million in net proceeds, after deducting underwriting discounts, commissions and estimated offering costs of $10.1 million.

Since its inception, the Company has incurred substantial losses and, as of June 30, 2024, the Company had an accumulated deficit of $592.4 million. The Company expects to generate operating losses and negative operating cash flows for the foreseeable future. As of June 30, 2024, the Company maintains cash, cash equivalents, and investments of $162.9 million.

Going Concern

In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, ("ASC 205-40") the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date on which this Quarterly Report on Form 10-Q is filed. Based on the Company's cash, cash equivalents, short-term investments, and related party short-term investments as of June 30, 2024, the Company's current and forecasted level of operations, and its forecasted cash flows, the Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, and to generate profitable operations in the future. Management plans to provide for the Company’s capital requirements through financing or other transactions, and selling shares under the Company's “at the market offering” program. There can be no assurance that the Company will be able to raise additional capital to fund operations with terms acceptable to the Company, or at all. Because certain elements of management’s plans to mitigate the conditions that raised substantial doubt about the Company’s ability to continue as a going concern are outside of the Company’s control, including the ability to raise capital through an equity or other financing, those elements cannot be considered probable according to ASC 205-40, and therefore cannot be considered in the evaluation of mitigating factors. As a result, management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for 12 months from the date these condensed consolidated financial statements are issued.

The condensed consolidated financial statements as of June 30, 2024 have been prepared under the assumption that the Company will continue as a going concern for the next 12 months and that contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company’s ability to continue as a going concern is dependent upon its uncertain ability to obtain additional capital, reduce expenditures and/or execute on its business plan. These condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Risks and Uncertainties

The Company is subject to risks and uncertainties common to early stage companies in the biotechnology industry, including, but not limited to, completing preclinical studies and clinical trials, obtaining regulatory approval for product candidates, market acceptance of products, development by competitors of new technological innovations, dependence on key personnel, the ability to attract and retain qualified employees, reliance on third-party organizations, protection of proprietary technology, compliance with government regulations, and the ability to raise additional capital to fund operations. The Company’s product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure, and extensive compliance-reporting capabilities. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

The Company will need to raise additional capital to support its continuing operations and to pursue its growth strategy. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. The Company may be unable to raise additional capital or enter into such other agreements when needed on favorable terms or at all. The inability to raise capital as and when needed would have a negative impact on the Company’s financial condition and its ability to pursue its business strategy. The Company will need to generate significant revenue to achieve profitability, and it may never do so.

Basis of Presentation

The accompanying condensed consolidated financial statements reflect the operations of the Company and its wholly-owned subsidiary. Intercompany balances and transactions have been eliminated in consolidation. The accompanying condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the ASC and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

The accompanying condensed consolidated financial statements of Prime Medicine, Inc. are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2024, the results of its operations for the three and six months ended June 30, 2024 and 2023, the condensed consolidated statements of stockholders’ equity for the three and six months ended June 30, 2024 and 2023, and its cash flows for the six months ended June 30, 2024 and 2023. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2024 and 2023 are also unaudited. The results for the three and six months ended June 30, 2024 are not necessarily indicative of results to be expected for the year ending December 31, 2024, any other interim periods, or any future year or period. The condensed consolidated balance sheet data as of December 31, 2023 was derived from our audited financial statements, but does not include all disclosures required by U.S. GAAP. These interim financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2023, and notes thereto, which are included in the Company’s Annual Report on Form 10-K that was filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2024.

Change in Presentation

As of June 30, 2024, the Company disaggregated “Other income, net” on the condensed consolidated statements of operations and comprehensive loss into “Accretion (amortization) of investments,” “Interest income,” and “Other income, net”. This presentation has been conformed for all periods presented and had no impact on previously reported results.

2.Summary of Significant Accounting Policies

The Company’s significant accounting policies are disclosed in Note 2, Summary of significant accounting policies, in the audited consolidated financial statements for the year ended December 31, 2023, and notes thereto, included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 1, 2024. Since the date of those financial statements, there have been no material changes to its significant accounting policies, except as noted below.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions reflected within these condensed consolidated financial statements include, but are not limited to the valuation of the Company’s common stock and stock-based awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, as there are changes in circumstances, facts and experience. Actual results may differ materially from those estimates or assumptions.

Warrants

Management assesses warrants under ASC 480, Distinguishing Liabilities from Equity to determine whether they should be classified as equity or liability. If the classification is determined to be equity, proceeds received for the warrants are recorded as an increase to additional paid-in capital in the condensed consolidated balance sheets. If classified as a liability, the Company records the warrant as a liability on its consolidated balance sheet and remeasures this liability to fair value at each reporting date and recognizes changes in the fair value of the warrant liability as a component of other expense in the condensed consolidated statements of operations and comprehensive loss.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires all public entities, including public entities with a single reportable segment, to provide in interim and annual periods one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance. In addition, this guidance requires disclosures of significant segment expenses and other segment items as well as incremental qualitative disclosures. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods after December 15, 2024, with retrospective application required, and early adoption permitted. The Company is currently in the process of evaluating the effects of this guidance on its related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires enhanced income tax disclosures, including specific categories and disaggregation of information in the effective tax rate reconciliation, disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. This guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently in the process of evaluating the impact of this pronouncement on its related disclosures.

Other accounting standards that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption.

3.Fair Value Measurements and Investments

The following tables present the Company’s fair value hierarchy for its assets that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair value:


	As of June 30, 2024:
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	—	$	55,106	$	—	$	55,106


Short-term investments:
U.S. Treasury and government securities	—		68,850		—		68,850
Corporate debt securities	—		33,725		—		33,725
Related party short-term investment:
Beam equity securities	4,693		—		—		4,693
Total cash equivalents and investments	$	4,693	$	157,681	$	—	$	162,374


	As of December 31, 2023:
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	—	$	24,209	$	—	$	24,209
Short-term investment:
U.S. Treasury and government securities	—		74,639		—		74,639
Related party short-term investment:
Beam equity securities	5,452		—		—		5,452
Total cash equivalents and investments	$	5,452	$	98,848	$	—	$	104,300

The Company classifies its U.S. Treasury securities as short-term based on each instrument’s underlying contractual maturity date. The fair value of the Company’s U.S. Treasury securities, corporate debt securities, and money market funds are classified as Level 2 because they are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency and U.S. Treasury securities.

Investments in Debt Securities

Unrealized gains and losses of investments in debt securities consisted of the following:


	As of June 30, 2024:
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Short-term investments in debt securities:
U.S. Treasury and government securities	$	68,892	$	—	$	(42)	$	68,850
Corporate debt securities	33,753		—		(28)		33,725


Total short-term investments in debt securities	$	102,645	$	—	$	(70)	$	102,575


	As of December 31, 2023:
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Short-term investments:
U.S. Treasury and government securities	$	74,654	$	7	$	(22)	$	74,639
Total short-term investments in debt securities	$	74,654	$	7	$	(22)	$	74,639

The contractual maturities of the Company’s investments in debt securities held were as follows:


(in thousands)	June 30, 2024		December 31, 2023
Due within one year	$	102,575	$	74,639

Marketable securities in unrealized loss positions consisted of the following:


	As of June 30, 2024:
(in thousands, except number of securities)	Number of Securities	Fair Value		Gross Unrealized Losses
Investments in continuous loss position for less than 12 months:
U.S. Treasury and government securities	16	$	68,849	$	(42)
Corporate debt securities	19	$	33,725	$	(28)

Based on factors such as historical experience, market data, issuer-specific factors, and current economic conditions, the Company did not record an allowance for credit losses as of June 30, 2024 related to these investments. Further, given the lack of significant change in the credit risk, the Company does not consider these investments to be impaired.

4.Property and Equipment, Net

Property and equipment, net consisted of the following:

(in thousands)

June 30,
2024

December 31,
2023

Property and equipment:

Laboratory equipment

SEC Form 10-Q filed by Prime Medicine Inc.