Q32 Bio Inc

Previous wording

Bempikibart (ADX-914), our most advanced product candidate, is a fully human anti–interleukin-7 receptor alpha, or IL-7Rα, antagonist monoclonal antibody designed to re-regulate adaptive immune function by blocking signaling mediated by interleukin-7, or IL-7, and thymic stromal lymphopoietin, or TSLP. Bempikibart is being studied in two double-blind, placebo-controlled Phase 2 clinical trials designed to establish proof of clinical concept and evaluate our selected Phase 2 dose. One trial is evaluating the use of bempikibart for the treatment of atopic dermatitis, or AD, and one for the treatment of alopecia areata, or AA. We have completed enrollment in the AA clinical trial and enrollment in the AD clinical trial remains ongoing. We are on track to report topline data from both Phase 2 clinical trials in the fourth quarter of 2024.

Current wording

Bempikibart (ADX-914), our most advanced product candidate, is a fully human anti–interleukin-7 receptor alpha, or IL-7Rα, antagonist monoclonal antibody designed to re-regulate adaptive immune function by blocking signaling mediated by interleukin-7, or IL-7, and thymic stromal lymphopoietin, or TSLP. Bempikibart is being studied in two double-blind, placebo-controlled Phase 2 clinical trials designed to establish proof of clinical concept and evaluate our selected Phase 2 dose. One trial is evaluating the use of bempikibart for the treatment of atopic dermatitis, or AD, and one for the treatment of alopecia areata, or AA. We have completed enrollment in both trials and are on track to report topline data from both Phase 2 clinical trials in the fourth quarter of 2024.

Previous wording

ADX-097, the lead product candidate from our complement inhibitor platform, is a humanized anti-C3d monoclonal antibody, or mAb, fusion protein. ADX-097 is designed to restore complement regulation – an integral part of the innate immune system – through a tissue targeted mechanism. ADX-097 is designed to inhibit alternative pathway complement activation locally in diseased tissues where complement-mediated pathology is actively manifest. We believe ADX-097 has the potential to drive improved clinical activity and address the limitations of the currently available systemic approaches to complement inhibition, including infection risk and the need for high drug doses and frequent administration, to achieve therapeutic levels of inhibition. We are developing ADX-097 for the treatment of renal and other complement-mediated diseases of high unmet need, including lupus nephritis, or LN, immunoglobulin A nephropathy, or IgAN, complement component 3 glomerulopathy, or C3G, and anti-neutrophil cytoplasmic antibody, or ANCA-associated vasculitis, or AAV. We have completed a Phase 1 clinical trial of ADX-097 in healthy volunteers. We expect to initiate an open-label Phase 2 renal basket program in the first half of 2024 and a Phase 2 clinical trial in AAV in the first half of 2025, with initial renal basket data anticipated by the end of 2024 and topline data from both the renal basket and AAV trials anticipated in the second half of 2025.

Current wording

ADX-097, the lead product candidate from our complement inhibitor platform, is a humanized anti-C3d monoclonal antibody, or mAb, fusion protein. ADX-097 is designed to restore complement regulation – an integral part of the innate immune system – through a tissue targeted mechanism. ADX-097 is designed to inhibit alternative pathway complement activation locally in diseased tissues where complement-mediated pathology is actively manifest. We believe ADX-097 has the potential to drive improved clinical activity and address the limitations of the currently available systemic approaches to complement inhibition, including infection risk and the need for high drug doses and frequent administration, to achieve therapeutic levels of inhibition. We are developing ADX-097 for the treatment of renal and other complement-mediated diseases of high unmet need, including lupus nephritis, or LN, immunoglobulin A nephropathy, or IgAN, complement component 3 glomerulopathy, or C3G, and anti-neutrophil cytoplasmic antibody, or ANCA-associated vasculitis, or AAV. We have completed a Phase 1 clinical trial of ADX-097 in healthy volunteers. We initiated and are enrolling patients in an open-label Phase 2 renal basket program in the first half of 2024 and expect to initiate a Phase 2 clinical trial in AAV in the first half of 2025, with initial renal basket data anticipated by the end of 2024 and topline data from both the renal basket and AAV trials anticipated in the second half of 2025.

Previous wording

In October 2023, Amgen, Inc., or Amgen, completed the acquisition of Horizon Therapeutics public limited company, or Horizon plc. Following its acquisition of Horizon plc, Legacy Q32 agreed with Amgen to mutually terminate the Horizon Agreements and in November 2023, Legacy Q32 and Horizon entered into a termination agreement, or the Horizon Termination Agreement, pursuant to which Horizon’s option to acquire the bempikibart program was terminated. As a result, Legacy Q32 retained the initial consideration and all development funding received under the Horizon Collaboration Agreement and regained full development and commercial rights to bempikibart. In consideration for the Horizon Termination Agreement, Legacy Q32 agreed to pay Horizon regulatory and sales milestones payments of up to an aggregate amount of $75.1 million upon the first achievement of certain regulatory and sales milestones with respect to bempikibart.

Current wording

In October 2023, Amgen, Inc., or Amgen, completed the acquisition of Horizon Therapeutics public limited company, or Horizon plc. Following its acquisition of Horizon plc, Legacy Q32 agreed with Amgen to mutually terminate the Horizon Agreements and in November 2023, Legacy Q32 and Horizon entered into a termination agreement, or the Horizon Termination Agreement, pursuant to which Horizon’s option to acquire the bempikibart program was terminated. As a result, Legacy Q32 retained the initial consideration, all development funding received under the Horizon Collaboration Agreement and regained full development and commercial rights to bempikibart. In consideration for the Horizon Termination Agreement, Legacy Q32 agreed to pay Horizon regulatory and sales milestones payments of up to an aggregate amount of $75.1 million upon the first achievement of certain regulatory and sales milestones with respect to bempikibart.

Previous wording

These potential payments to Horizon are not in exchange for a distinct good or service and, therefore; the Company accounts for consideration payable to Horizon as a reduction of the transaction price under the Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASC, Topic 606, Revenue from Contracts with Customers, or ASC 606. The Company concluded that the $55.0 million of arrangement consideration previously recognized should be fully constrained as a result of the contingent consideration payable to Horizon, and accordingly, the amounts previously recognized were reversed in the fourth quarter of 2023 and a refund liability was established for the $55.0 million cash received during the term of the Horizon Collaboration Agreement. No amounts have been recognized related to the remaining potential payment to Horizon (up to $20.1 million) as it cannot be deemed probable that the respective milestones will be achieved at this time.

Current wording

These potential payments to Horizon are not in exchange for a distinct good or service and, therefore; the Company accounts for consideration payable to Horizon as a reduction of the transaction price under the Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASC, Topic 606, Revenue from Contracts with Customers, or ASC 606. The Company concluded that the $55.0 million of arrangement consideration previously recognized should be fully constrained as a result of the contingent consideration payable to Horizon, and accordingly, the amounts previously recognized were reversed in the fourth quarter of 2023 and a refund liability was established for the $55.0 million cash received during the term of the Horizon Collaboration Agreement. No amounts have been recognized related to the remaining potential payment to Horizon (up to $20.1 million) as it is not probable that the respective milestones will be achieved at this time.

Previous wording

As of March 31, 2024, we had cash, cash equivalents and short-term investments of $135.3 million. We expect that our cash, cash equivalents and short-term investments will be sufficient to enable us to fund our operating expenses and capital expenditure requirements to mid-2026. This estimate is based on assumptions that may prove to be wrong, and we could use our capital resources sooner than currently anticipated.

Current wording

As of June 30, 2024, we had cash, cash equivalents and short-term investments of $107.6 million. We expect that our cash, cash equivalents and short-term investments will be sufficient to enable us to fund our operating expenses and capital expenditure requirements to mid-2026. This estimate is based on assumptions that may prove to be wrong, and we could use our capital resources sooner than currently anticipated.

Previous wording

General and administrative expenses primarily consist of salaries, bonuses, related benefits, and stock-based compensation expense for personnel in executive, finance, and administrative functions; professional fees for corporate legal and patent matters, consulting, accounting, and audit services; and travel expenses, insurance, technology costs and other allocated expenses. General and administrative expenses also include corporate facility costs, including rent, utilities, depreciation, and maintenance, not otherwise included in research and development expense. We recognize general and administrative expenses in the periods in which they are incurred. General and administrative expenses are expected to increase as a public company.

Current wording

General and administrative expenses primarily consist of salaries, bonuses, related benefits, and stock-based compensation expense for personnel in executive, finance, and administrative functions; professional fees for corporate legal and patent matters, consulting, accounting, and audit services; and travel expenses, insurance, technology costs and other allocated expenses. General and administrative expenses also include corporate facility costs, including rent, utilities, depreciation, and maintenance, not otherwise included in research and development expense. We recognize general and administrative expenses in the periods in which they are incurred. General and administrative expenses are expected to increase as we continue to operate as a public company.

Previous wording

Upon closing of the Merger, Legacy Q32 converted the outstanding Convertible Notes plus accrued interest into shares of common stock at 90% of the purchase price of the mandatory conversion event. As the Convertible Notes are recorded at fair value, a noncash gain of $15.9 million on the change in fair value prior to the conversion of convertible notes is reflected in the unaudited condensed consolidated statement of operation for the three months ended March 31, 2024.

Current wording

Upon closing of the Merger, Legacy Q32 converted the outstanding Convertible Notes plus accrued interest into shares of common stock at 90% of the purchase price of the mandatory conversion event. As the Convertible Notes are recorded at fair value, a noncash gain of $15.9 million on the change in fair value prior to the conversion of convertible notes is reflected in the unaudited condensed consolidated statement of operation for the six months ended June 30, 2024.

Previous wording

Other income (expense), net consists of interest income primarily earned on money market fund accounts and other short-term investments and interest expense related to our debt obligations.

Current wording

Other income (expense), net consists of interest income primarily earned on money market fund accounts and other short-term investments and interest expense related to our debt obligations. Also, we use the cost method to account for an investment in an entity in which we do not have the ability to exercise significant influence over operating and financial policies. Investments recorded using the cost method are assessed for any decrease in value that has occurred that is other than temporary and the other than temporary decrease in value is recognized in other income (expense), net.

Previous wording

We recognized no collaboration arrangement revenue for the three months ended March 31, 2024, compared to $2.9 million for the three months ended March 31, 2023. Legacy Q32 executed the Horizon Collaboration Agreement in August 2022 and began performing research services and recognizing revenue for the three months ending March 31, 2023 accordingly. Upon initiation of the Horizon Termination Agreement and pursuant to ASC 606, all previously recognized amounts were reversed in the fourth quarter of 2023. See further discussion under “Revenue” above.

Current wording

We recognized no collaboration arrangement revenue for the three months ended June 30, 2024, compared to $3.2 million for the three months ended June 30, 2023. Legacy Q32 executed the Horizon Collaboration Agreement in August 2022 and began performing research services and recognizing revenue in the first quarter of 2023 accordingly. Upon execution of the Horizon Termination Agreement and pursuant to ASC 606, all previously recognized amounts were reversed in the fourth quarter of 2023. See further discussion under “Revenue” above.

Previous wording

Research and development expenses were $9.8 million for the three months ended March 31, 2024, compared to $7.9 million for the three months ended March 31, 2023. Expenses related to our ADX-097 program decreased as the program was winding down after the completion of the Phase 1 clinical trials in 2023, including a decrease of $0.1 million in CMC redevelopment costs and a decrease of $1.0 million in Phase 1 clinical study costs when compared to the prior year. Expenses related to our bempikibart program increased due to an increase in clinical spend of $2.9 million and an increase in CMC costs of $0.4 million, partially offset by a decrease in toxicology costs of $0.3 million. The overall increase is due to the advancement of both clinical trials through the first quarter of 2024.

Current wording

Research and development expenses were $13.4 million for the three months ended June 30, 2024, compared to $8.0 million for the three months ended June 30, 2023. Expenses related to our ADX-097 program decreased as the program was winding down after the completion of the Phase 1 clinical trials in 2023, including a decrease of $0.5 million in Phase 1 clinical study costs and a decrease of $0.2 million in research costs when compared to the prior year. Expenses related to our bempikibart program increased as we continued to advance both clinical trials. Specifically, costs related to manufacturing clinical trial materials increased by $3.7 million and clinical spend increased by $1.8 million as we enrolled patients in both trials. These increases were partially offset by a decrease in toxicology costs of $0.1 million as compared to the prior year.

Previous wording

The increase in personnel-related and consultant costs was primarily related to an increase in headcount as compared to the same period in the prior year. Personnel-related and consultant costs for the three months ended March 31, 2024 and 2023 included stock-based compensation expense of $0.4 million and $0.3 million, respectively. Indirect research and development costs related to facility and other costs remained consistent over the prior year.

Current wording

The increase in personnel-related and consultant costs was primarily related to an increase in headcount as compared to the same period in the prior year. Personnel-related and consultant costs for the three months ended June 30, 2024 and 2023 included stock-based compensation expense of $0.4 million and $0.1 million, respectively.

Previous wording

Other income (expense), net was $0.2 million for the three months ended March 31, 2024, compared to $0.6 million for the three months ended March 31, 2023. Other income (expense), net for the three months ended March 31, 2024 is made up primarily of interest income of $0.3 million partially offset by interest expense of $0.1 million on our venture debt. The decrease in other income (expense), net is due to a higher average cash balance resulting in higher interest income for the three months ended March 31, 2023.

Current wording

Other income (expense), net was $2.4 million for the three months ended June 30, 2024, compared to $0.2 million for the three months ended June 30, 2023. Other income (expense), net for the three months ended June 30, 2024 includes the change in fair value of the CVR liability of $1.4 million, as well as interest income of $1.4 million partially offset by interest expense of $0.3 million on our venture debt. The increase in other income (expense), net is due to the change in fair value of the CVR liability that was not present in the prior year, as well as a higher average cash balance resulting in higher interest income for the three months ended June 30, 2024.

Previous wording

We record our share of gains or losses from OXB (US) LLC on a quarterly basis. For the three months ended March 31, 2024, we recorded a loss from equity method investment of $0.2 million, representing our share of OXB (US) LLC’s net loss. See Notes 2 and 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information regarding the equity method of accounting.

Current wording

Prior to May 22, 2024, we accounted for our investment in OXB (US) LLC using the equity method of accounting and recorded our share of gains or losses from OXB (US) LLC on a quarterly basis. For the three months ended June 30, 2024, we recorded a loss from equity method investment of $1.5 million, representing our share of OXB (US) LLC’s net loss. See Notes 2 and 6 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information regarding the equity method of accounting.

Previous wording

General and administrative expenses were $5.0 million for the three months ended March 31, 2024, compared to $2.4 million for the three months ended March 31, 2023. The increase is primarily due to costs associated with the Merger, including severance and retention payments to former employees of Homology, as well as other public company-related costs.

Current wording

General and administrative expenses were $9.5 million for the six months ended June 30, 2024, compared to $4.9 million for the six months ended June 30, 2023. The increase is primarily due to costs associated with the Merger, including severance and retention payments to former employees of Homology, as well as other public company-related costs. General and administrative expenses include stock-based compensation expense of $1.2 million and $0.4 million for the six months ended June 30, 2024 and 2023, respectively.

Previous wording

Upon closing of the Merger, Legacy Q32 converted its outstanding Convertible Notes plus accrued interest into shares of common stock at 90% of the purchase price of the mandatory conversion event. As the Convertible Notes are recorded at fair value, a gain of $15.9 million on the change in fair value prior to the conversion of convertible notes is reflected in the unaudited condensed consolidated statement of operation for the three months ended March 31, 2024. The change in the fair value of the convertible notes was less than $0.1 million for the three months ended March 31, 2023.

Current wording

Upon closing of the Merger, Legacy Q32 converted its outstanding Convertible Notes plus accrued interest into shares of common stock at 90% of the purchase price of the mandatory conversion event. As the Convertible Notes are recorded at fair value, a gain of $15.9 million on the change in fair value prior to the conversion of convertible notes is reflected in the unaudited condensed consolidated statement of operation for the six months ended June 30, 2024. The change in the fair value of the convertible notes was $1.3 million for the six months ended June 30, 2023.

Previous wording

Since inception, we have incurred significant operating losses and negative cash flows from operations. We have not yet commercialized any of our product candidates, which are in various phases of preclinical and clinical development, and we do not expect to generate revenue from sales of any products for several years, if at all. To date, we have funded our operations primarily from proceeds from the sales of our convertible preferred stock, convertible notes, venture debt, and proceeds from the Horizon Collaboration Agreement and from the Merger with Homology and accompanying Pre-Closing Financing. From inception through March 31, 2024, we raised $111.4 million in aggregate cash proceeds, net of issuance costs, from the sales of our Series A convertible preferred stock, Series A-1 convertible preferred stock and Series B convertible preferred stock and received payments of $55.0 million in connection with the Horizon Collaboration Agreement. We also received $30.0 million from the sales of convertible notes, $12.5 million from our venture debt, $61.3 million, net of issuance costs, in connection with the Merger with Homology and $42.0 million pursuant to the Pre-Closing Financing. As of March 31, 2024, we had cash, cash equivalents and short-term investments of $135.3 million.

Current wording

Since inception, we have incurred significant operating losses and negative cash flows from operations. We have not yet commercialized any of our product candidates, which are in various phases of preclinical and clinical development, and we do not expect to generate revenue from sales of any products for several years, if at all. To date, we have funded our operations primarily from proceeds from the sales of our convertible preferred stock, convertible notes, venture debt, and proceeds from the Horizon Collaboration Agreement and from the Merger with Homology and accompanying Pre-Closing Financing. From inception through June 30, 2024, we raised $111.4 million in aggregate cash proceeds, net of issuance costs, from the sales of our Series A convertible preferred stock, Series A-1 convertible preferred stock and Series B convertible preferred stock and received payments of $55.0 million in connection with the Horizon Collaboration Agreement. We also received $30.0 million from the sales of convertible notes, $12.5 million from our venture debt, $61.3 million, net of issuance costs, in connection with the Merger with Homology and $42.0 million pursuant to the Pre-Closing Financing. As of June 30, 2024, we had cash, cash equivalents and short-term investments of $107.6 million.

Previous wording

We have incurred significant operating losses since inception and, as of March 31, 2024, had an accumulated deficit of $186.1 million. We expect negative cash flows from operations and net losses for the foreseeable future as we continue to invest significantly in research and development of our product candidates and platform. We have not yet commercialized any product and do not expect to generate revenue from sales of any products for several years, if at all.

Current wording

We have incurred significant operating losses since inception and, as of June 30, 2024, had an accumulated deficit of $203.0 million. We expect negative cash flows from operations and net losses for the foreseeable future as we continue to invest significantly in research and development of our product candidates and platform. We have not yet commercialized any product and do not expect to generate revenue from sales of any products for several years, if at all.

Previous wording

Management based its projections of operating capital requirements on our current operating plan, which includes several assumptions that may prove to be incorrect, and we may use all of our available capital resources sooner than management expects. We expect to seek to raise additional capital through private or public equity or debt financings, loans or other capital sources, which could include collaborations, partnerships or other marketing, distribution, licensing or other strategic arrangements with third parties, or from grants, and may be required to seek additional capital sooner than planned. However, there can be no assurances that we will be able to raise additional capital from these sources on favorable terms, or at all.

Current wording

As of June 30, 2024, we had cash, cash equivalents and short-term investments of $107.6 million. We expect that our cash, cash equivalents and short-term investments as of June 30, 2024, will be sufficient to fund our operations through mid-2026. Management based its projections of operating capital requirements on our current operating plan, which includes several assumptions that may prove to be incorrect, and we may use all of our available capital resources sooner than management expects. We expect to seek to raise additional capital through private or public equity or debt financings, loans or other capital sources, which could include collaborations, partnerships or other marketing, distribution, licensing or other strategic arrangements with third parties, or from grants, and may be required to seek additional capital sooner than planned. However, there can be no assurances that we will be able to raise additional capital from these sources on favorable terms, or at all.

Previous wording

For the three months ended March 31, 2024, net cash used in operating activities was $14.6 million, which was primarily utilized for the funding of our operating expenses of $14.8 million as we incurred expenses associated with research and development activities including clinical trial activities associated with our bempikibart and ADX-097 programs, adjusted for non-cash expenses of $15.0 million. Non-cash expenses include a gain of $15.9 million recognized on the change in fair value prior to the conversion of convertible notes pursuant to the Merger with Homology on March 25, 2024, stock-based compensation expense of $0.4 million, loss from our equity method investment of $0.2 million, non-cash lease expenses of $0.1 million and depreciation expense of $0.1 million. The change in net operating assets and liabilities was primary attributable to a decrease in accrued expenses and other current liabilities of $2.2 million and an increase in other noncurrent assets of $0.6 million, partially offset by an increase in accounts payable of $0.9 million and a decrease in prepaid expenses and other current assets of $1.3 million.

Current wording

For the six months ended June 30, 2024, net cash used in operating activities was $36.8 million, which was primarily utilized for the funding of our operating expenses of $32.8 million as we incurred expenses associated with research and development activities including clinical trial activities associated with our bempikibart and ADX-097 programs, adjusted for non-cash expenses of $13.5 million. Non-cash expenses include a gain of $15.9 million recognized on the change in fair value prior to the conversion of convertible notes pursuant to the Merger with Homology on March 25, 2024, a gain of $1.4 million recognized on the change in fair value of the CVR liability, stock-based compensation expense of $1.7 million, loss from our equity method investment of $1.6 million, non-cash lease expenses of $0.3 million, depreciation expense of $0.2 million and amortization of premium on short-term investments of $0.2 million. The change in net operating assets and liabilities was primary attributable to a decrease in accrued expenses and other current liabilities of $4.9 million, a decrease in accounts payable of $1.5 million, an increase in other noncurrent assets of $0.6 million and a decrease in our operating lease liability of $0.5 million, partially offset by a decrease in prepaid expenses and other current assets of $0.2 million.

Previous wording

For the three months ended March 31, 2023, net cash used in operating activities of $12.5 million consisted of our net loss of $6.8 million and a change in net operating assets and liabilities of $6.3 million, partially offset by net non-cash operating expenses of $0.6 million. The change in net operating assets and liabilities was primarily attributable to a decrease in accounts payable and accrued expenses and other current liabilities of $3.7 million and a decrease in deferred revenue of $2.9 million, partially offset by a decrease in prepaid expenses and other current assets of $0.4 million. The non-cash operating expenses consisted mainly of a stock-based compensation expense of $0.3 million, non-cash lease expenses of $0.1 million and depreciation expense of $0.1 million.

Current wording

For the six months ended June 30, 2023, net cash used in operating activities of $23.9 million consisted of our net loss of $12.6 million and a change in net operating assets and liabilities of $11.1 million. The change in net operating assets and liabilities was primarily attributable to a decrease in deferred revenue of $6.2 million, a decrease in accrued expenses and other current liabilities of $4.0 million and a decrease in accounts payable of $0.7 million. The non-cash operating expenses consisted mainly of the change in fair value of the convertible notes of $1.3 million, stock-based compensation expense of $0.6 million, non-cash lease expenses of $0.3 million and depreciation expense of $0.3 million.

Previous wording

For the three months ended March 31, 2024, net cash provided by investing activities consisted of maturities of short-term investments during the period since the Merger.

Current wording

For the six months ended June 30, 2024, net cash provided by investing activities consisted of maturities of short-term investments during the period since the Merger.

Previous wording

For the three months ended March 31, 2023, net cash used in investing activities consisted of purchases of property and equipment.

Current wording

For the six months ended June 30, 2023, net cash used in investing activities consisted of purchases of property and equipment.

Previous wording

For the three months ended March 31, 2024, net cash provided by financing activities consisted of $53.2 million of cash acquired as part of the Merger, $42.0 million of proceeds from the issuance of common stock in the pre-closing financing and $7.0 million of proceeds from the borrowings under a new loan and security agreement, slightly offset by payments of $2.8 million of transaction costs related to the Merger.

Current wording

For the six months ended June 30, 2024, net cash provided by financing activities consisted of $53.2 million of cash acquired as part of the Merger, $42.0 million of proceeds from the issuance of common stock in the pre-closing financing and $7.0 million of proceeds from the borrowings under a new loan and security agreement, slightly offset by payments of $8.7 million of transaction costs related to the Merger.

Previous wording

For the year three months ended March 31, 2023, net cash provided by financing activities consisted of $15 thousand of proceeds from the exercise of common stock options.

Current wording

For the six months ended June 30, 2023, net cash provided by financing activities consisted of proceeds from the exercise of common stock options.

Previous wording

In connection with the Merger Agreement, certain third parties have into the Pre-Closing Financing as described above under “—Recent Developments—Merger with Homology and the Pre-Closing Financing.” On the Closing Date, following approval by the stockholders of Legacy Q32 and Homology, the Pre-Closing Financing closed immediately prior to the consummation of the Merger. Shares of Legacy Q32's common stock issued pursuant to the Pre-Closing Financing were converted into the right to receive 1,682,045 shares of Homology common stock, after taking into account the Reverse Stock Split.

Current wording

In connection with the Merger Agreement, certain third parties entered into the Pre-Closing Financing as described above under “—Recent Developments—Merger with Homology and the Pre-Closing Financing.” On the Closing Date, following approval by the stockholders of Legacy Q32 and Homology, the Pre-Closing Financing closed immediately prior to the consummation of the Merger. Shares of Legacy Q32’s common stock issued pursuant to the Pre-Closing Financing were converted into the right to receive 1,682,045 shares of Homology common stock, after taking into account the Reverse Stock Split.

Previous wording

Management expects our expenses to increase substantially in connection with our ongoing research and development activities, particularly as we advance the preclinical activities and clinical trials of our product candidates. In addition, we expect to incur additional costs associated with operating as a public company.

Current wording

Management expects our expenses to increase substantially in connection with our ongoing research and development activities, particularly as we advance the preclinical activities and clinical trials of our product candidates. In addition, we expect to continue to incur additional costs associated with operating as a public company.

Previous wording

Upon closing of the Merger, Legacy Q32 converted the outstanding Convertible Notes plus accrued interest into shares of common stock at 90% of the purchase price of the mandatory conversion event. As the Convertible Notes are recorded at fair value, a gain of $15.9 million on the change in fair value prior to the conversion of convertible notes is reflected in the condensed consolidated statement of operations for the three months ended March 31, 2024. We recorded a less than $0.1 million loss related to the change in fair value of the Convertible Notes for the three months ended March 31, 2023.

Current wording

Upon closing of the Merger, Legacy Q32 converted the outstanding Convertible Notes plus accrued interest into shares of common stock at 90% of the purchase price of the mandatory conversion event. As the Convertible Notes are recorded at fair value, a gain of $15.9 million on the change in fair value prior to the conversion of convertible notes is reflected in the condensed consolidated statement of operations for the six months ended June 30, 2024. We recorded a gain of $1.3 million related to the change in fair value of the Convertible Notes for the six months ended June 30, 2023.