bluebird bio
Annual Report 2013

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549 FORM 10-K (Mark One)xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the fiscal year ended December 31, 2013OR ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934For the transition period from to Commission File Number: 001-35966 bluebird bio, Inc.(Exact Name of Registrant as Specified in Its Charter) Delaware 13-3680878(State or Other Jurisdiction ofIncorporation or Organization) (IRS EmployerIdentification No.) 150 Second Street Cambridge, Massachusetts 02141(Address of Principal Executive Offices) (Zip Code)(339) 499-9300(Registrant’s Telephone Number, Including Area Code) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No xIndicate 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 1934during 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 filingrequirements for the past 90 days. Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files). Yes x No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein,and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-K or any amendment to this Form 10-K. xIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe 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 x (Do not check if a smaller reporting company) Smaller reporting company ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No xThe aggregate market value of common stock held by non-affiliates of the registrant based on the closing price of the registrant’s common stock asreported on the Nasdaq Global Select Market on June 28, 2013, the last business day of the registrant’s most recently completed second quarter, was$224,772,374.As of February 24, 2014, there were 24,169,543 shares of the registrant’s common stock, par value $0.01 per share, outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s definitive Proxy Statement relating to its 2014 Annual Meeting of Stockholders are incorporated by reference into Part III ofthis Annual Report on Form 10-K where indicated. Such Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 daysafter the end of the fiscal year to which this report relates. Table of ContentsTable of Contents Page PART I. Item 1. Business 1 Item 1A. Risk Factors 49 Item 1B. Unresolved Staff Comments 82 Item 2. Properties 82 Item 3. Legal Proceedings 83 Item 4. Mine Safety Disclosures 83 PART II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 84 Item 6. Selected Financial Data 86 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 87 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 104 Item 8. Financial Statements and Supplementary Data 104 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 104 Item 9A. Controls and Procedures 104 Item 9B. Other Information 105 PART III. Item 10. Directors, Executive Officers and Corporate Governance 106 Item 11. Executive Compensation 106 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 106 Item 13. Certain Relationships and Related Transactions and Director Independence 106 Item 14. Principal Accountant Fees and Services 106 PART IV. Item 15. Exhibits and Financial Statement Schedules 107 Signatures Table of ContentsFORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they nevermaterialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. We make suchforward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Allstatements other than statements of historical facts contained in this Annual Report on Form 10-K are forward-looking statements. In some cases, you canidentify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,”“plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words or other comparable terminology. Theseforward-looking statements include, but are not limited to, statements about: • the initiation, timing, progress and results of our preclinical and clinical studies, and our research and development programs; • our ability to advance product candidates into, and successfully complete, clinical studies; • our ability to advance our viral vector manufacturing and transduction capabilities; • the timing or likelihood of regulatory filings and approvals; • the commercialization of our product candidates, if approved; • the pricing and reimbursement of our product candidates, if approved; • the implementation of our business model, strategic plans for our business, product candidates and technology; • the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology; • estimates of our expenses, future revenues, capital requirements and our needs for additional financing; • the potential benefits of strategic collaboration agreements and our ability to enter into strategic arrangements; • our ability to maintain and establish collaborations or obtain additional grant funding; • our financial performance; • developments relating to our competitors and our industry; and • other risks and uncertainties, including those listed under Part I, Item 1A. Risk Factors.Any forward-looking statements in this Annual Report on Form 10-K reflect our current views with respect to future events or to our future financialperformance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to bematerially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may causeactual results to differ materially from current expectations include, among other things, those listed under Part I, Item 1A. Risk Factors and elsewhere in thisAnnual Report on Form 10-K. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law,we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.This Annual Report on Form 10-K also contains estimates, projections and other information concerning our industry, our business, and the marketsfor certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Informationthat is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events orcircumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained thisindustry, business, market and other data 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.Table of ContentsPART IItem 1. BusinessOverviewWe are a clinical-stage biotechnology company focused on transforming the lives of patients with severe genetic and orphan diseases using gene therapyproducts. Many diseases have a genetic aspect whereby a mutated gene linked to a disease is passed down from generation to generation and causes the disease.Gene therapy seeks to introduce a functional copy of the defective gene into a patient’s own cells, a process called gene transfer. We believe that gene therapyhas the potential to change the way these patients are treated by correcting the underlying genetic defect that is the cause of their disease, rather than offeringsolutions that only address their symptoms. Accordingly, we believe gene therapy has the potential to provide transformative disease modifying effects withlife-long clinical benefits based on a single therapeutic administration.Each person’s hereditary genetic material, or genome, is encoded by deoxyribonucleic acid, or DNA, in sequences of genetic code called genes. Genes, inturn, through a process called gene expression, produce proteins that perform a vast array of functions within all living organisms. A mutation, or alteration,in the gene or in sequences that control the expression of that gene can cause proteins to be produced aberrantly in the cell—for example, too little or too muchprotein or malfunctioning protein can be produced in the cell—which can cause disease. Through gene transfer, a functional copy of the mutated gene isdelivered to the patient’s cells, thereby correcting the underlying genetic defect that causes aberrant gene expression.In the gene transfer process, a functional gene is delivered and incorporated into a patient’s cells through a delivery system called a vector, which aremost commonly based on naturally-occurring viruses that have been modified to take advantage of the virus’ natural ability to introduce genes into humancells. However, unlike naturally-occurring viruses, which replicate following infection of a target cell and have the capacity to infect new cells, gene therapyviral vectors are modified to be non-replicating by deleting that portion of the viral genome responsible for replication. Gene transfer using a viral vector iscalled transduction and the resulting gene-modified cells are described as transduced cells. Transduction can be accomplished either via ex vivo or in vivodelivery. In the ex vivo approach, cells are gene-modified outside of the patient’s body and the modified cells are transplanted back into the patient. In the invivo approach, vectors are introduced directly into the patient’s body to deliver the desired gene to the target cell.A growing body of gene therapy-based clinical data, the establishment of regulatory guidelines to govern the development and approval of gene therapyproducts and increased investment from the biopharmaceutical industry suggest that the time is now for gene therapy to emerge as an important newtherapeutic modality for patients with significant unmet medical need. We believe we are particularly well-positioned to drive the continued advancement ofgene therapy technology for the treatment of severe genetic and orphan diseases. We have assembled extensive expertise in viral vector design, manufacturingand gene transfer, a broad intellectual property estate, an experienced management team and a world-class group of scientific advisors and key opinion leaders.We refer to our viral vector and gene transfer technology and know-how as our gene therapy platform.We and our scientific collaborators have generated what we believe is human proof-of-concept data for our gene therapy platform in two underserveddiseases, each of which has been granted orphan drug status by U.S. and European regulatory authorities. We are conducting a Phase II/III clinical study withour most advanced product candidate, Lenti-D, to evaluate its safety and efficacy in subjects with childhood cerebral adrenoleukodystrophy, or CCALD, arare, hereditary neurological disorder affecting young boys that is often fatal. We also are conducting Phase I/II clinical studies in both the United States andEurope of our next most advanced product candidate, LentiGlobin, to evaluate its safety and efficacy in subjects with ß-thalassemia major and, in theEuropean clinical study, sickle cell disease, or SCD, which are rare, hereditary blood disorders that often lead to severe anemia and shortened lifespans.Orphan drug status has been granted for LentiGlobin for the treatment of SCD by U.S. regulatory authorities. We have transplanted the first ß-thalassemiamajor subject in the on-going European study. 1Table of ContentsIn March 2013, we announced a global strategic collaboration with Celgene Corporation to discover, develop and commercialize novel, disease-alteringgene therapies in oncology. The collaboration focuses on applying gene therapy technology to genetically modify a patient’s own T cells to target and destroycancer cells. Such modified T cells, called chimeric antigen receptor, or CAR, T cells have been shown to have beneficial effects in human clinical trials forpatients with B cell lymphomas. The multi-year research and development collaboration has the potential to lead to the development and commercialization ofmultiple CAR T cell products.Our gene therapy platform is based on viral vectors that utilize a modified, non-replicating version of the Human Immunodeficiency Virus Type 1, orHIV-1 virus, that has been stripped of all of the components required for it to self-replicate and infect additional cells. The HIV-1 virus is part of the lentivirusfamily of viruses, as a result of which we refer to our vectors as lentiviral vectors. Our lentiviral vectors are used to introduce a functional copy of a gene to thepatient’s own isolated blood stem cells, called hematopoietic stem cells, or HSCs, which reside in a patient’s bone marrow and are capable of differentiatinginto a wide range of cell types. HSCs are dividing cells, thus our approach allows for sustained expression of the modified gene as we are able to takeadvantage of a lifetime of replication of the gene-modified HSCs. Additionally, we have developed a proprietary cell-based vector manufacturing process that isboth reproducible and scalable. We believe our innovations in viral vector design and related manufacturing processes are important steps towards advancingthe field of gene therapy and in realizing its full potential on a commercial scale, a concept we refer to as the industrialization of gene therapy.Utilizing our industrialized gene therapy platform, we are developing product candidates comprising the patient’s own gene-modified HSCs. Clinicalproof-of-concept already exists for allogeneic hematopoietic stem cell transplant, or HSCT, an approach of treating a patient with HSCs contributed by a donorother than the patient that contain the properly functioning copy of the gene whose mutation has caused the underlying disease. However, this approach hassignificant limitations, including difficulties in finding appropriate genetically-matched donors and the risk of transplant-related rejection and mortality, and istherefore typically only offered on a limited basis. Our approach is intended to address the significant limitations of allogeneic HSCT while utilizing existingstem cell transplant infrastructure and processes. Also, because our approach has the potential to drive sustained expression of the functional protein encodedby the gene insert to provide a potentially single-administration, transformative therapy, we believe the value proposition offered by our product candidates forpatients, families, providers and payors would be significant.Although our initial focus is in CCALD, ß-thalassemia and SCD, we believe our gene therapy platform has broad therapeutic potential in a variety ofindications. We believe that our vectors can be used to introduce virtually any gene into a cell and have the potential to be manufactured on a commercial scalereproducibly and reliably, as each new vector is produced using substantially the same process. We also take advantage of lentivirus’ ability to transduceHSCs more efficiently than other vectors, such as those derived from another virus used in gene therapy approaches, called adeno-associated virus, or AAV,which gives us the potential to address diseases in a variety of cell lineages beyond those that are derived from HSCs, such as microglia (useful for CCALD),red blood cells (useful for ß-thalassemia and SCD), T cells (useful for cancer and immunology) and others.The potential of gene therapy to address severe genetic and orphan diseasesGene therapy—the time is nowGene therapy has been an evolving field for the last 20 years that has been characterized by great hope and potential. Gene therapy is an approach totreating disease through the introduction of a desired gene or gene sequence into a patient’s own cells to modulate or enhance the activity of such cells. Eachperson’s hereditary genetic material is encoded by deoxyribonucleic acid, or DNA, in sequences of genetic code called genes. Collectively, our gene expressionpatterns influence cell functionality by controlling protein production, either 2Table of Contentsdirectly or through other indirect regulatory mechanisms. A mutation, or alteration, in the gene or in sequences that control the expression of that gene can causeproteins to be produced aberrantly in the cell, which can cause disease.Gene therapy represents a unique opportunity to change the way patients with severe genetic and orphan diseases are treated by addressing theunderlying cause of their disease, rather than offering solutions that focus only on their symptoms. By correcting the underlying genetic defect, we believe genetherapy can provide transformative disease modifying effects—potentially with life-long clinical benefits based on a single therapeutic administration.Our belief in the potential of gene therapy to become a viable therapeutic modality is supported by several recent developments, including the following: • Growing body of promising clinical results. Over the last several years, a number of clinical studies of gene therapies have shown promisingefficacy and safety results in conditions such as retinal disease, adrenoleukodystrophy, or ALD, ß-thalassemia major, chronic lymphoidleukemia, hemophilia and Parkinson’s disease. • Significant design, manufacturing and process improvements. In recent years, we and others have designed new viral vectors with improvedsafety profiles over earlier generation vectors. Improvements in viral vector manufacturing techniques have also enabled the production of morepotent and efficient viral vectors on a commercially viable scale. • Growing support from regulators for gene therapy. Although the U.S. Food and Drug Administration, or the FDA, has not yet approved anyhuman gene therapy product for sale, it has provided guidance for the development of gene therapy products. For example, the FDA hasestablished the Office of Cellular, Tissue and Gene Therapies, or OCTGT, within its Center for Biologics Evaluation and Research, or CBER, toconsolidate the review of cell and gene therapy products, and the Cellular, Tissue and Gene Therapies Advisory Committee, or CTGTAC, toadvise CBER on its reviews. In addition, the FDA has issued a growing body of clinical guidelines, chemical, manufacturing and control, orCMC, guidelines and other guidelines, all of which are intended to facilitate industry’s development of gene therapy products. • First regulatory approval of a gene therapy product in the Western world. In 2012, the European Medicines Agency, or EMA, approved agene therapy product called Glybera, which is the first gene therapy product approved by regulatory authorities anywhere in the Western world. • Growing investment from the pharmaceutical and biotechnology industries. Companies such as GlaxoSmithKline plc, Sanofi/GenzymeCorporation, BioMarin Pharmaceutical Inc., Baxter International Inc., Shire plc, Biogen Idec through its partnership with Sangamo BioSciences,Inc., and Novartis AG are currently advancing programs in gene therapy. In addition, we have partnered with Celgene Corporation in the field ofoncology. • Increased interest in genetic screening. The growing market for both clinical and direct-to-consumer genetic testing and screening, includingnewborn screening initiatives for known hereditary diseases, points to increasing interest from patients and clinicians in therapeutic approachesthat target specific genetic defects to treat disease.Encouraged by these developments, we believe we are particularly well-positioned to drive the continued advancement of gene therapy technology intreating severe genetic and orphan diseases. We have assembled a leading position in the fields of gene therapy and severe genetic and orphan diseases,including extensive expertise in viral vector design, manufacturing and transduction, a broad intellectual property estate, an experienced management team anda world-class group of scientific advisors and key opinion leaders. Leveraging these capabilities, we have developed new, proprietary lentiviral vectorsdesigned to more safely deliver our product candidates to patients, as well as improved transduction techniques to more efficiently effect 3Table of Contentsgene transfer. We refer to our viral vector and transduction technology and know-how as our gene therapy platform. Our initial focus is on our two lead clinicalprograms in CCALD and ß-thalassemia major. However, we believe our gene therapy platform has broad applicability in a variety of severe genetic andorphan diseases beyond these initial indications, which we intend to explore selectively, either alone or through partnerships, such as our recently-announcedcollaboration with Celgene in the field of oncology.Our gene therapy platform and processOur gene therapy platform and product candidates are being developed based on a simple notion: to genetically modify a patient’s own cells tofundamentally correct or address the genetic basis underlying a disease. Although the notion of gene transfer to a patient’s own cells is simple, theprocesses of developing viral vectors capable of delivering the genetic material and inserting gene sequences safely into a patient’s target cells is highly technicaland demands significant expertise, experience and know-how. Leveraging our extensive expertise in viral vector design and manufacturing and transduction,we have developed a gene therapy platform that we believe is broadly applicable in a variety of indications with significant unmet medical need.The historical challenges for gene therapy relate to the three factors on which the success of a gene therapy product is primarily based—potency,efficiency and safety. The potency of a particular gene therapy product is measured by its effectiveness, which is based on successfully introducing the geneof interest into the target cells at a high enough frequency to achieve expression of the desired protein at a level sufficient to exert a therapeutic benefit. Theefficiency of a gene therapy product is measured by the amount of product that is required to create the desired effect, the period of time it takes for the therapyto go into effect, and also the period of time over which the therapy is effective. Safety is evaluated based on the nature and severity of any side effects,complications, conditions or diseases that may result from introducing genetic material into a person’s body and cells. Until recently, there has been a lack ofmanufacturing and transduction infrastructure that would enable the delivery of these therapies in a reliable and reproducible manner and at a commerciallyviable scale. However, over the last several years, we have focused on and made significant investments in developing improved, “next generation,” viralvectors and manufacturing processes and procedures to address each of these issues.These improvements include the following: • We have developed proprietary viral vectors with improved potency, efficiency and safety over those vectors used historically, which in somecases raised serious safety concerns. • We have developed proprietary vector manufacturing processes and techniques that produce a more purified and concentrated end product, asevidenced by the approximately 25 to 30-fold reduction in non-infectious viral particles as compared to viral vectors used in previous clinicalstudies (both ours and of others). • We are investing in the development of mid- to large-scale manufacturing systems designed to be both reproducible and sustainable, with a viewtowards supporting our product candidates, if approved, at commercial scale.We refer to these improvements as the “industrialization” of gene therapy manufacturing and production. We believe these improvements and ourcontinuing investment in our manufacturing platform will enable us to develop best-in-class, next generation gene therapy products for severe genetic andorphan diseases.Our proprietary lentiviral vectorsThe success of a gene therapy platform is highly dependent on the type of delivery system used. Our platform is based upon an ex vivo viral deliverysystem whereby a certain type of virus delivers the DNA that it is carrying into a cell and inserts this DNA into the cell’s existing DNA. We have developedsignificant expertise in designing a particular type of vector delivery system employing a lentivirus for use in gene therapy and have also 4Table of Contentsdeveloped and in-licensed relevant intellectual property, including know-how, related to lentiviral vectors. Our lentiviral construct design includes only theminimal viral components of the HIV-1 virus required to enable the vector to undergo one round of replication within the cell during manufacturing andsubsequently to enter the target cells and deliver the gene that it is carrying.We believe that our lentiviral vectors are particularly well-suited for treating a number of diseases and have certain advantages over other viral vectorsused in developing gene therapy products, including: • Sustained expression—Unlike other viral vectors based on other viruses, such as AAV, lentiviral vectors are capable of integrating thefunctional gene they carry into the DNA of the target cell’s chromosome. As such, they are well-suited to introduce a sustained therapeutic effect individing cells because the gene sequence introduced by the lentiviral vector will be replicated during cell division along with the rest of the cell’schromosomal DNA. Therefore, subsequent dividing cells resulting from the originally transduced cell will also carry the newly inserted genesequence. The power of lentiviral vectors is sustained expression: a single insertion of a functional gene into a dividing cell can have a multiplyingeffect on multiple downstream cells. Other vector platforms, such as AAV platforms, that take advantage of different viruses introduce genes intocells but they don’t actively integrate into a cell’s DNA and thus require many viral events to transform a cell. • Safety—In clinical studies of gene therapy product candidates conducted by other entities, earlier generations of integrating viral vectors based ona mouse gamma-retrovirus were shown to preferentially integrate into certain regulatory regions of genes (such as the promoter regions) and in someinstances inappropriately activate the cell to divide uncontrollably, leading to cancer through a process called insertional oncogenesis. These geneticalterations have led to several well-publicized adverse events, including several reported cases of leukemia, and highlighted the need to develop newgene therapy vectors with improved safety profiles. Next generation, lentiviral vectors, unlike gamma retroviruses, have a distinct pattern ofintegrating into regions that provide instructions for making proteins rather than preferentially integrating into regions that can lead to cellproliferation and cancer. We believe this difference in integration patterns is a critical factor in improving the safety profile of the vector, anddistinguishes them from earlier generations of integrating viral vectors. This integration pattern difference has been published in several studies,showing that lentiviral vectors have demonstrated an improved safety profile over gamma-retrovirus vectors, with no known clinical events ofinsertional oncogenesis or cancer. • Carrying capacity—Unlike AAV, the lentivirus is able to carry large therapeutic gene sequences (up to 8,000 base pairs) into a host cell. Thismay limit the utility of AAV in some diseases where the required gene sequences will be too large to fit into an AAV construct. In this regard,lentiviral vectors offer more flexibility. 5Table of ContentsOur focus on Hematopoietic Stem Cells (HSCs)Our gene therapy platform takes advantage of lentiviral vectors’ ability to stably integrate into the target cell’s chromosome by focusing on diseases wecan treat through genetic modification of hematopoietic stem cells, or HSCs, which when reintroduced back into the patient, differentiate into numerous othercell lineages, as depicted below. We believe our initial clinical indications—CCALD, ß-thalassemia major and SCD—can all be treated by introducing aspecific functional gene into HSCs taken from the patient to correct the gene defect responsible for the disease. HSCs are dividing stem cells that are permanently found in a patient’s bone marrow and are an ongoing replacement source of mature cell types as theydie off. HSCs produce progeny cells, called progenitors, that differentiate into all of the cellular elements that compose the blood, including microglia (usefulfor CCALD), red blood cells (useful for ß-thalassemia and SCD), T cells (useful for cancer and immunology) and others. As such, all progenitors derivedfrom a single gene therapy-modified HSC will carry the same corrective genetic modification, which we believe gives our approach the potential to deliver life-long clinical benefits based on a single therapeutic administration. We believe there are numerous diseases associated with genetic abnormalities in cell typesderived from HSCs that we can target using our gene therapy platform. 6Table of ContentsOur therapeutic approachThe delivery of a gene therapy product requires several steps, as illustrated in the figure below. Importantly, our approach seeks to leverage celltransplant procedures and infrastructure already widely used in the clinic for allogeneic HSCT. 1.We produce our lentiviral vector by co-transfecting a packaging cell line with multiple plasmids that separately encode the various components ofthe virus as well as the functional gene sequence the viral vector will carry. The use of multiple plasmids is an important safety step designed tofurther prevent the resulting lentiviral vectors from being able to replicate and cause infection on their own. 2.A sample of the patient’s own HSCs is extracted and isolated through a standard process known as apheresis, where HSCs are first mobilizedinto the blood stream from the bone marrow using a routinely-used pharmaceutical agent and then collected from the patient’s blood. In somecases, HSCs are extracted directly from the patient’s bone marrow. 3.The lentiviral vector is mixed with the patient’s isolated HSCs ex vivo. This leads to the insertion of the functional gene into the HSCs’ existingDNA, thus creating a pool of the patient’s own, or autologous, gene-modified cells. The cells are then washed to remove any remnants of the viralvector or culture media. These gene-modified HSCs are the therapeutic drug product that is delivered back into the patient. 4.Prior to administering our drug product, the patient undergoes a standard myeloablation procedure (also used in allogeneic HCST) to remove allendogenous bone marrow cells. The modified HSCs are then re-infused back into the patient (approximately one to two months after initialextraction of the patient’s HSCs) and begin re-populating a portion of the bone marrow as permanently modified HSCs in a process known asengraftment. The engrafted HSCs will go on to give rise to progenitor cell types with the functional gene. Following successful engraftment, weanticipate that clinical benefits for Lenti-D in CCALD, indicated by prevention of major functional disabilities, stabilization of NFS and Loesscore and resolution of gadolinium enhancement, will begin to become evident within 24 months of transplant, and that clinical benefits forLentiGlobin in ß-thalassemia and SCD, indicated by reduction or elimination of blood transfusion requirements, number of in-patienthospitalization days (post-transplant discharge) and, for SCD, several additional endpoints, will begin to become evident within 12-24 months oftransplant.We believe that our approach has several potential advantages over current treatment options for CCALD, ß-thalassemia and SCD, including thefollowing: • Single administration with potential life-long benefit. Our process allows us to potentially arrest, correct or treat a disease with a singletherapeutic administration as many of the corrected cells will live in the patient’s body and have the potential to deliver long-term, and possiblylife-long, effects. 7Table of Contents • We know exactly what gene to insert. We are initially pursuing diseases where the genetic abnormality is known and is found in a single gene,known as monogenic diseases. We therefore know what we are correcting and exactly what gene sequence to insert into the patient’s cells, thusmitigating against the uncertainty of the disease biology. • Allogeneic HSCT provides proof-of-concept for our approach. We are currently pursuing clinical indications for which allogeneic HSCT isalready a proven therapeutic option. Clinical proof-of-concept already exists for the diseases we are targeting via allogeneic HSCT, an approach oftreating a patient with HSCs contributed by a donor other than the patient that contain the properly functioning copy of the gene whose mutationhas caused the underlying disease. • We use the patient’s own cells. By using the patient’s own isolated HSCs, we believe our approach will eliminate many of the challengesassociated with allogeneic HSCT, such as the limited availability of optimally matched donors and risks of transplant rejection that often result inserious adverse events, such as graft-versus-host disease. Even where allogeneic HSCT is deemed successful, many patients are required tocomply with prolonged immunosuppressive drug regimens that increase the risk of opportunistic infections and other adverse events. • We modify our target cells ex vivo. By inserting the new functional DNA into the cells ex vivo, we reduce the risk of adverse events and removeone of the key biological complexities of any therapeutic—getting a drug directly to the target cells. • Administration of our drug product is consistent with existing stem cell transplant practices. The final step of our process, in whichpatients are myeloablated and then transfused with the finished drug product, is consistent with widely adopted stem cell transplant clinicalpractices and infrastructure already in use. • Value proposition to patients, families, providers and payors. Given the potentially dramatic clinical and life-long benefits anticipated fromsuch therapies delivered through potentially a single administration, we believe the value proposition for patients, families, providers and payorswould be significant.Put simply, we believe we have developed next generation vectors with improved potency, efficiency and safety using a reproducible, scalablemanufacturing process to address a variety of severe genetic and orphan diseases.Our strategyOur objective is to develop and commercialize a next generation of products based on the transformative potential of gene therapy to treat patients withsevere genetic and orphan diseases. Central to this effort is a collective determination within our Company to provide these patients with hope for a better life inthe face of limited or no long-term safe and effective treatment options. Specifically, our business strategy is based on the following principles: • Relentlessly focus on serving our patients. Our culture is rooted in a shared motivation to bring the transformative potential of gene therapy topatients in need. Our initial focus is on patients suffering from monogenic diseases such as CCALD, ß-thalassemia and SCD, as well as cancer;however, we believe there are many additional indications for which our technology may be applicable. • Be the world’s biggest gene therapy geeks. We believe our people and our culture (based on the principles: b colorful, b cooperative, b yourself)will continue to be fundamental to our success. We will continue to build a professional team of employees, advisors and collaborators with deepand industry-leading experience in the discovery, development, manufacturing and commercialization of gene therapy technologies to treat severegenetic and orphan diseases. We believe our expertise in this field—in terms of lentiviral vector design and gene therapy process industrialization—will allow us to 8Table of Contents continue developing next generation technologies that will overcome some of the challenges that have historically complicated the use of genetherapy on a broader scale and allow for deployment in many underserved severe genetic and orphan disease markets. We will continue ourefforts, which over the last several years have resulted in the production of early clinical proof-of-concept results in two diseases, theindustrialization of the gene therapy process and the generation of significant intellectual property. • Leverage our platform and technical expertise to build a gene therapy product engine for severe genetic and orphan diseases. We willcontinue to take advantage of the adaptability of our gene therapy platform in creating viral vectors and gene therapy products to address a broadrange of genetically-defined diseases. Unlike other gene modification approaches that may require extensive optimization for each gene target ordisease indication, each of our lentiviral vectors is produced using the same modified vector backbone and manufacturing system. This enablesus to generate new product candidates relatively quickly by essentially swapping in the new gene of interest and assessing its potency and purityusing standardized assays and tests. We believe our specific ability to design and manufacture lentiviral vectors quickly and reproducibly on acommercial scale will differentiate us from other gene therapy technologies and provides a strong competitive advantage in the long term. • Develop and commercialize drugs in our core disease areas and partner selectively to expand the scope of our pipeline. Our core diseaseareas are severe genetic and orphan diseases, such as CCALD and ß-thalassemia, that we believe to be good candidates for treatment with genetherapy. Given the relatively low prevalence of these diseases and the strong key opinion leader communities and patient advocacy groups aroundthem, we believe we can serve these markets with a small targeted commercial infrastructure. The broad potential of our platform also presents anopportunity for us to selectively form collaborative alliances to expand our capabilities and product offerings into other therapeutic areas andpotentially accelerate the development and commercialization of our products. For example, we recently announced a global strategic collaborationwith Celgene to discover, develop and commercialize novel, disease-altering gene therapies in oncology. • Pursue indications with high unmet medical need and greater probability of clinical, regulatory and commercial success. Each of ourthree current core indications are severe diseases with high unmet medical need. We believe there is a strong rationale for treating diseases like thesewith gene therapy because their underlying genetic abnormality is well-characterized and can be addressed by correcting or inserting a single gene.Given the poor prognosis and current lack of corrective treatment options for these diseases, we believe our gene therapy product candidates mayoffer a potential single-treatment alternative for these patients and their families. Our gene therapy products, if successful, may offer a potentiallysuperior long-term value proposition for our patients and the healthcare system more broadly, which will allow us to drive premium value whiledelivering patients life-altering treatments. 9Table of ContentsOur product candidate pipelineThe following table summarizes key information on our development programs. *The Phase II/III Starbeam Study (formerly referred to as ALD-102) is our first clinical study of our current Lenti-D viral vector and productcandidate. See “Business—Our Lenti-D product candidate.”**The Phase I/II HGB-205 and Northstar (formerly referred to as HGB-204) Studies are our first clinical studies of our current LentiGlobin viral vectorand product candidate. See “Business—Our LentiGlobin product candidate.”Our most advanced product candidate is called Lenti-D, which we are developing to treat patients with ALD. Initial proof-of-concept data from a clinicalstudy utilizing an approach similar to Lenti-D with an earlier generation lentiviral vector supplied by a third party were published in Science (2009). We areconducting a Phase II/III clinical study of Lenti-D in the United States, which we refer to as the Starbeam Study, to examine the feasibility, safety and efficacyof Lenti-D in preserving neurological function and stabilizing cerebral demyelination in subjects with CCALD, the most severe form of ALD. In the UK, wehave received regulatory approval for follow-up of patients after transplant in the United States. We also expect to initiate additional sites outside the UnitedStates, pending approvals from the applicable regulatory authorities. If successful, and pending further discussion with the FDA and EMA, the results fromthe Starbeam Study could potentially form the basis of a Biologics License Application, or BLA, submission to the FDA and a Marketing AuthorizationApplication, or MAA, to the EMA for this product candidate. However, there can be no assurance that the FDA and the EMA will not require additionalstudies before the approval of a BLA or MAA, respectively. See “Risk Factors—The results from our Starbeam Study (formerly referred to as ALD-102) maynot be sufficiently robust to support the submission of marketing approval for our Lenti-D product candidate. Before we submit Lenti-D for marketingapproval, the FDA and the EMA may require us to enroll additional subjects, conduct additional clinical studies, or evaluate subjects for an additional follow-up period.”Our next most advanced product candidate is called LentiGlobin, which we are developing to treat patients with ß-thalassemia and SCD. We havecompleted a Phase I/II clinical study (LG001) in France evaluating an earlier generation of our LentiGlobin vector for the treatment of ß-thalassemia major.Initial proof-of-concept data from this study were published in Nature (2010). All subjects from LG001 will be offered the possibility to enroll in the long termfollow-up study, LTF-303, to evaluate long-term safety and efficacy post-transplant. We are conducting an extension of this study under a revised protocol withour new LentiGlobin vector, which we refer to as the HGB-205 Study in subjects with ß-thalassemia major and severe SCD. We also have initiated a secondPhase I/II clinical program in the United States for LentiGlobin, which we refer to as the Northstar 10Table of Contents(HGB-204) Study, for the treatment of ß-thalassemia major. We expect to submit an IND with the FDA in mid-2014 to evaluate LentiGlobin in patients withsevere SCD and expect to enroll the first patient in 2014.In March 2013, we announced a global strategic collaboration with Celgene Corporation to discover, develop and commercialize novel disease-alteringgene therapies in oncology. The collaboration focuses on applying gene therapy technology to genetically modify a patient’s own T cells to target and destroycancer cells. Such modified T cells, called chimeric antigen receptor, or CAR, T cells have been shown to have beneficial effects in human clinical trials forpatients with B cell lymphomas. The multi-year research and development collaboration has the potential to lead to the development and commercialization ofmultiple CAR T cell products. See “—Our strategic alliance with Celgene.”Our Lenti-D opportunityAdrenoleukodystrophyAdrenoleukodystrophy is a rare X-linked, inherited, neurological disorder that is often fatal. ALD is caused by mutations in the ABCD1 gene whichencodes for a protein called the ALD protein, or ALDP, which plays a critical role in the breakdown and metabolism of very long-chain fatty acids, orVLCFA. Without functional ALDP, VLCFA accumulate in cells including neural cells in which they cause damage to the myelin sheath, a protective andinsulating membrane that surrounds nerve cells in the brain. This damage can result in decreased motor coordination and function, visual and hearingdisturbances, the loss of cognitive function, dementia, seizures, adrenal dysfunction and other complications, including death. The worldwide incidence ratefor ALD is approximately one in 20,000 newborn males.ALD is divided into various sub-segments with three main phenotypes that impact brain function: • CCALD (Childhood cerebral adrenoleukodystrophy): The most severe form of ALD is CCALD. CCALD accounts for about 30-40% ofpatients diagnosed with ALD and presents in young boys. CCALD is characterized by progressive destruction of myelin, leading to severe loss ofneurological function and eventual death. In boys affected by CCALD, learning and behavioral problems are often observed in mid-childhoodbetween the ages of 3 and 15 years (median age 7). In the absence of intervention, boys affected by CCALD typically experience rapiddegeneration into vegetative state, and ultimately death within a decade of diagnosis. • AMN (Adrenomyeloneuropathy): AMN which typically develops in adults aged 21 years and older, is the most common neurological form ofALD, accounting for 40-45% of all patients diagnosed with ALD. All patients with AMN present with more slowly progressive symptomsresulting from (non-inflammatory) disruption of the axons (which are a fundamental component of the central nervous system that allows nervesignals to be transmitted) in the spinal cord. Approximately 40% of these patients have or will develop cerebral disease similar to CCALD, withvarying degrees of associated inflammation. • ACALD (Adult Cerebral ALD): ACALD typically develops in males aged 15 years and older. It is also very severe, with progression ofneurologic symptoms that parallels the course of CCALD. ACALD accounts for approximately 5% of all patients diagnosed with ALD.Limitations of current treatment optionsThere is a clear unmet medical need for patients with the neurologic forms of ALD. Currently, the only effective treatment option for boys with CCALDis allogeneic HSCT. In this procedure, the patient is treated with HSCs containing the properly functioning copy of the gene contributed by a donor other thanthe patient. Allogeneic HSCT has also been shown to have potential clinical benefit in other forms of ALD including AMN and ACALD. 11Table of ContentsAllogeneic HSCT is typically performed early in the course of the disease, ideally using an unaffected matched sibling HSC donor to minimizecomplications. However, the majority of allogeneic HSCT procedures for CCALD are carried out with non-sibling matched donor cells, partially matchedrelated or unrelated donor cells and umbilical cord blood cells because a matched sibling donor is not available in most cases. The difficulty of finding asuitable sibling-matched donor is one of the primary drawbacks of this approach. Allogeneic HSCT is associated with significant morbidity and mortality,particularly in patients who undergo non-sibling-matched allogeneic HSCT. Complications of allogeneic HSCT include a 10-30% risk of engraftment failure inunrelated Human-Leukocyte-Antigen, or HLA, matched patients, a 12-16% incidence of life-threatening infection, and an approximately 30% risk of graft-versus-host-disease, or GVHD, a common complication in which donor immune cells (white blood cells in the graft) recognize the cells of the recipient (thehost) as “foreign” and attack them. As a result of these safety challenges, allogeneic HSCT in CCALD patients whose donor is not a matched sibling result insignificant mortality rates. In addition, because of the need for long-term immunosuppression following allogeneic HSCT, there is a prolonged risk ofopportunistic infections and other serious side effects associated with immunosuppressive drugs.Moreover, of the approximately 80 boys who are born with CCALD each year in the United States and European Union, we estimate that between 20%and 50% may have disease so advanced at the time of diagnosis that a beneficial outcome from treatment would be unlikely. This is attributed to rapid diseaseprogression and difficulty with early diagnosis, as the initial presentation of the signs and symptoms of CCALD are frequently misdiagnosed, for example asattention deficit hyperactivity deficit disorder. Newborn screening through a simple and inexpensive blood test is being developed to enable earlier detection ofCCALD and is available in several states. Based in part on the fact that several states are currently considering universal newborn screening for ALD, it is ourexpectation that newborn screening will be widely adopted in the United States within the next five years, and potentially elsewhere, providing for theopportunity to identify more boys for proactive monitoring of disease symptoms and early disease intervention.Our Lenti-D product candidateWe are developing our Lenti-D product candidate as a potential one-time treatment to halt the progression of CCALD. Our approach involves the ex vivoinsertion of a functional copy of the ABCD1 gene via an HIV-1 based lentiviral vector into the patient’s own HSCs to correct the aberrant expression of ALDPin patients with CCALD. HSCs derived from the patient’s own body are called autologous HSCs. We refer to autologous HSCs that have been modified tocarry the functional copy of the ABCD1 gene as the final Lenti-D drug product, or our Lenti-D product candidate. Upon successful engraftment of our Lenti-Dproduct candidate, we expect that microglia in the brain derived from the transduced HSCs will correct the metabolic abnormalities resulting from excessVLCFA and stabilize the demyelination and cerebral inflammation characteristic of CCALD.We have had and continue to have extensive dialogue with the FDA, the EMA and other regulatory authorities and advisory bodies concerning theclinical advancement of our Lenti-D product candidate.We transplanted the first subject in the Starbeam Study (formerly referred to as ALD-102) in the United States in 2013. In the UK, we have receivedregulatory approval for follow-up of patients after transplant in the United States. We also expect to initiate additional sites outside the United States, pendingapprovals from the applicable regulatory authorities. If successful, and pending further discussion with the regulatory authorities, the results from theStarbeam Study could potentially form the basis of a BLA submission to the FDA and an MAA to the EMA for this product candidate. However, there can beno assurance that the FDA and the EMA will not require additional studies before the approval of a BLA or MAA, respectively. The FDA has advised us thatthe Starbeam Study may not be deemed to be a pivotal study or may not provide sufficient support for a BLA submission. The FDA normally requires twopivotal clinical studies to approve a drug or biologic product, and thus the FDA may require that we conduct additional clinical studies of Lenti-D prior to aBLA submission. See “Risk Factors—The results from our Starbeam Study (formerly referred to as ALD-102) may not be sufficiently robust to support thesubmission of marketing approval for our Lenti-D product candidate. Before we submit Lenti-D for marketing approval, the FDA and the EMA may requireus to enroll additional subjects, conduct additional clinical studies, or evaluate subjects for an additional follow-up period.” 12Table of ContentsClinical development of our Lenti-D product candidateCompleted non-interventional retrospective study (the ALD-101 Study)Due to the rarity of CCALD, and the fact that allogeneic HSCT has historically not been subject to extensive systematic analysis in controlled clinicalstudies, the amount of clinical data necessary to precisely characterize progression of the disease and the efficacy and safety profile of allogeneic HSCT islargely absent from the current scientific literature. Accordingly, in order to properly design future clinical studies of Lenti-D and interpret the efficacy andsafety results thereof, at the recommendation of the FDA, we performed a non-interventional retrospective data collection study to assess the natural course ofdisease in CCALD patients that were left untreated, which we refer to as the untreated group or cohort, in comparison to the efficacy and safety data obtainedfrom patients that received allogeneic HSCT, which we refer to as the treated cohort. A non-interventional retrospective data collection study involves anexamination of historical clinical records from patients with the pertinent condition in order to assess the typical course of the condition and the efficacy andsafety of treatment options. In the study, we collected neurologic and neuropsychological assessments and neuroimaging data for both treated and untreatedpatients, as available; however, given the retrospective nature of the study, we were not able to collect comprehensive data for all subjects.For this study, we collected data from four U.S. sites and one French site on a total of 137 subjects, 72 of whom were untreated and 65 of whom weretreated with allogeneic HSCT. To our knowledge, the ALD-101 Study is the most comprehensive study ever conducted to characterize clinical outcomes inuntreated versus allogeneic HSCT-treated CCALD patient populations. The ALD-101 Study report was completed in March 2013.Three primary clinical measurements of CCALD disease progressionThe findings from the ALD-101 Study suggest that, although there are a wide number of cognitive, behavioral, functional and radiological modalitiesutilized to assess patients with CCALD, three are utilized most widely and consistently: • The Neurological Function Score (NFS). The NFS is a 25-point neurological function score that assesses fifteen neurological abnormalitiestypically caused by ALD. These neurological abnormalities are summarized below: Symptoms Score Loss of communication* 3 No voluntary movement* 3 Cortical blindness* 2 Tube feeding* 2 Wheelchair required* 2 Total incontinence* 2 Swallowing/other CNS dysfunctions 2 Spastic gait (needs assistance) 2 Hearing/auditory processing problems 1 Aphasia/apraxia 1 Visual impairment/fields cut 1 Running difficulties/hyperreflexia 1 Walking difficulties/spasticity/spastic gait (no assistance) 1 Episodes of incontinency 1 Nonfebrile seizures 1 Total 25 *Major Functional Disabilities (MFDs) 13Table of ContentsAmong the 15 functional domains in the NFS scale, we consider six to be of particular clinical importance because when these neurologicalabnormalities occur, the patient’s ability to function independently is severely compromised. These particular deficiencies, which we define as MajorFunctional Disabilities, or MFDs, are loss of communication, complete loss of voluntary movement, cortical blindness, requirement for tube feeding,wheelchair dependence and total incontinence. • The Loes score. The Loes score is a 34-point scale specifically designed to objectively measure the extent of central nervous system disease burdenbased on brain magnetic resonance imaging, or MRI, studies. The Loes score measures the extent and location of brain abnormalities such as thepresence of white matter changes, degree of demyelination and the presence of focal or global atrophy. A Loes score of one or more (i.e., thepresence of any such abnormalities) indicates significant disease, and patients with a Loes score of 10 or more generally are not considered to begood candidates for transplant therapy due to the advanced stage of the disease. • Gadolinium enhancement. One of the hallmarks of inflammatory disease in ALD patients is the presence of a compromised blood-brain barrierbehind the leading edge of demyelinating lesions in the brain. This can be assessed using a contrast agent called gadolinium in brain MRI studies.Evidence of gadolinium enhancement in the brain in a MRI study, referred to by clinicians as a gadolinium positive result, suggests thatneuroinflammation is present and the blood-brain barrier has been compromised, which in published studies has been shown to be a predictivebiomarker of ALD disease progression.Summary of findingsKey findings from the ALD-101 Study are summarized below: • Untreated, CCALD patients progress to dismal outcomes. In the untreated cohort, the median overall survival was 92 months (7.7 years)and the estimated probability of survival at five years was 55%. Although informative, survival data must be considered in light of the fact thatsupportive measures may be used to sustain life after progression to a vegetative state. 14Table of Contents • Baseline disease severity, as assessed by NFS and Loes scores, were good predictors of survival. In both the untreated and treated cohorts,significantly lower mortality rates were seen in patients with lower baseline NFS and Loes scores than in those with higher scores. Mortality Rate* NFS£ 1 NFS > 1 Loes  1 £ 9 Loes > 9 Untreated Cohort 42% 85% 46% 76% Treated Cohort 12% 29% 13% 28% *Mortality rate determined by the number of deaths that occurred at any time through the observation period post-CCALD diagnosis.As a consequence of this observation, and consistent with entry criteria that have been used in studies of allogeneic HSCT, the entry criteria forthe Starbeam Study excludes subjects with evidence of advanced disease on NFS and Loes score to prevent enrollment of subjects whose diseasewould be expected to progress to a poor outcome despite treatment. • MFDs occurred in the majority of the untreated cohort who showed evidence of gadolinium enhancement in brain MRI. Among the72 patients in the untreated cohort, data were available regarding the presence of MFDs at 24 months post-CCALD diagnosis in 56 of thesepatients. Among these 56 patients, 29 patients (52%) developed at least one MFD throughout the data collection period. Of the 18 cases in theuntreated cohort who were gadolinium positive, 13 (72%) had developed at least one MFD at 24 months from the time of their first gadoliniumpositive scan. We believe the finding that a large proportion of the untreated cohort with gadolinium enhancement progress to an MFD at24 months provides an important reference point by which to assess the success of treatment with our Lenti-D product candidate. Theseobservations support the requirement that subjects enrolled in the Starbeam Study demonstrate gadolinium enhancement at baseline and support aprimary endpoint based on the prevention of MFDs. • Gadolinium enhancement appears to be an objective, predictive measure of the likelihood of rapid progression. In the untreated cohort,of the 15 patients with scans that were gadolinium-positive and had repeat NFS assessments during the applicable observation period, most (12of the 15 patients) showed rapid progression of NFS scores, defined as an increase of greater than five points over the applicable observationperiod, with all 12 showing decline within six to 18 months. This observation supports the requirement that subjects enrolled in the StarbeamStudy demonstrate gadolinium enhancement at baseline. These patients would be expected to develop progressive disease without therapeuticintervention. • Allogeneic HSCT was associated with disease stabilization. Despite the significant risk of morbidity and mortality associated with allogeneicHSCT, successful transplantation was shown to provide clinically meaningful benefit to patients with CCALD, particularly those with early-stage disease. For the majority of patients in the treated cohort (63%), no MFD was present at 24 months post-HSCT. Allogeneic HSCT was alsoassociated with resolution of gadolinium enhancement. Of those patients who would meet eligibility criteria for the Starbeam study (baseline NFSof zero or one, gadolinium-positive at baseline, baseline Loes between 0.5 and nine, inclusive), three of 20 (15%) patients developed an MFDwithin 24 months post-allogeneic HSCT. • Consistent with published literature, allogeneic HSCT, particularly with unmatched/unrelated donors, was associated with clinicallysignificant morbidity and mortality. • Morbidity: Post-allogeneic HSCT, engraftment failure occurred in 12 of 65 (18%) patients, 10 of whom (83%) were transplanted withunrelated donor cells. Despite prophylaxis, the GVHD rate was 54%, including acute GVHD in 27 (42%) patients and chronic GVHD in12 (18%) patients. Due to the requirement for myeloablation prior to HSCT, the occurrence of GVHD and the requirement forimmunosuppressive therapy post-allogeneic HSCT, allogeneic HSCT is 15Table of Contents associated with a substantial risk of life-threatening infection. Infections were the most commonly reported serious adverse event, with atleast one serious infection reported in 19 (29%) patients post-allogeneic HSCT. The substantial morbidity associated with allogeneicHSCT for CCALD supports evaluating Lenti-D in the Starbeam Study as an alternative therapeutic option that is expected to avoid theissues of immune incompatibility seen with allogeneic HSCT. • Mortality: Post-allogeneic HSCT, the 100-day mortality rate was 8% and the overall one-year mortality rate was 19%. The estimatedprobability of two and five year survival rates post-allogeneic HSCT were 82% and 74%, respectively. As anticipated from the publishedliterature, analysis of survival by type of donor (matched sibling versus other) showed that the proportion of deaths through theobservation period post- allogeneic HSCT was lower in matched-sibling donor cases than in other allogeneic HSCT cases. The majority ofallogeneic HSCT patients (46 patients; 71%) were transplanted with unrelated donor cells given the limited availability of HLA-matchedsibling donors. As a result of this analysis, we determined to exclude patients with a sibling-matched donor from the Starbeam Study.We believe the results from the ALD-101 Study support the proposition that, while the approach of treating a patient with genetically corrected HSCs canstabilize the progression of disease in patients with CCALD, there remains a significant unmet medical need for safer therapies, particularly for patientswithout the option of a sibling-matched donor. We believe that many of the issues that contribute to the mortality and morbidity associated with allogeneicHSCT could be avoided using a patient’s own gene-modified HSCs. Importantly, the results from this study were also used to inform the criteria for patientand endpoint selection for our planned Starbeam Study, which we describe below.Previous clinical experience with lentiviral gene therapy for CCALD (the TG04.06.01 Study)Between September 2006 and September 2010, four boys with a confirmed diagnosis of CCALD were treated in Paris, France, in a Phase I/II study withautologous HSCs transduced ex vivo with a lentiviral vector carrying a functional ABCD1 gene before reinfusion. Short-term clinical data and biologicalexperience with the first two treated boys was first reported in Science (2009). The study is ongoing although no new subjects are expected to be enrolledbeyond the initial four boys.The TG04.06.01 Study is sponsored by the institut national de la santé et de la recherche médicale (French Institute of Health and Medical Research), orInserm, in Paris, and the lentiviral vector was supplied by a third party company not affiliated with bluebird bio. We are party to a strategic collaborationagreement with Inserm for the development of HSC gene therapies in this patient population, pursuant to which we are collaborating with Patrick Aubourg, thePrincipal Investigator of the TG04.06.01 Study.In the TG04.06.01 Study, all four subjects had cerebral demyelinating lesions with Loes scores ranging from two to seven prior to treatment. Gadoliniumcontrast enhancement indicated that the lesions were active and inflammatory in all four subjects. At the time of enrollment, each subject had a normalneurologic examination with NFS equal to zero.Below is a summary of the efficacy results for each of the four subjects in the TG04.06.01 Study as of March 2013. Under the study, these patients arecontinuing to be monitored for two to six years post-treatment and we expect updates regarding the clinical experience of these patients will be published fromtime to time by the principal investigators following these patients in the trial. • Subject One: Loes score stabilized at month 30 and remained stable through month 75. • Subject Two: Loes score stabilized at month 30 and remained stable through month 64. Gadolinium enhancement was initially positive, resolved,reappeared in the parietal area and then resolved and has remained negative. 16Table of Contents • Subject Three: Loes score stabilized at month 33 but gadolinium enhancement has persisted. Subject Three had active, progressive disease post-transplant resulting in the development of significant cognitive deficits with the loss of ability for new learning consistent with a frontal lobesyndrome, including the loss of spontaneous speech by month 33 and urinary incontinence. As of 54 months post-transplant, he had no furtherdecline in NFS or Loes scores since his month 33 evaluation. • Subject Four: Loes score stabilized at month 16 and remained stable at 24 months. Gadolinium enhancement disappeared 45 days post-transplant and was still not detectable at month 12. At the top of the figure is a series of brain MRI images showing an example of progressive white matter disease in an untreated patient with CCALD. Theexpanding “white” in the images from left to right illustrates increasing demyelination in the brain and represents severe disease. The images below representthe baseline (left) and recent (right) brain MRI images from the four boys treated in the TG04.06.01 Study. In contrast to the extensive progressive white matterdisease that might be seen in untreated CCALD, as shown at the top of the figure, the progression of white matter disease following treatment in theTG04.06.01 Study is more limited.We believe these efficacy results are consistent with outcomes that would be expected following successful allogeneic HSCT. All four boys were alive twoyears or more after treatment, while the ALD-101 Study would suggest an expected mortality rate of approximately 20% in the same two-year window post-allogeneic HSCT. As assessed by NFS and brain MRI, Subjects One, Two and Four showed encouraging evidence of disease stabilization. Additionally,gadolinium enhancement resolved in Subjects One, Two and Four, suggesting a reduction of neuroinflammation. These results also contrast with the naturalhistory of disease in untreated patients, which is characterized by continuous and rapid progression of cerebral demyelination in the majority of cases,particularly those with gadolinium enhancement on brain MRI. All four subjects demonstrated some deterioration of neurologic function within the second yearafter transplant, which is expected as it is also frequently seen following allogeneic HSCT, given the time it takes for transplant-derived microglial cells topopulate the brain. Although neurologic deficits have occurred in these subjects post-treatment, we are encouraged by the fact that neurologic disease hasstabilized in all four subjects.Importantly as of March 2013, there were no reported incidents of gene therapy-related safety concerns in the TG04.06.01 Study. The infusion procedurewas clinically uneventful for all four subjects, with all achieving 17Table of Contentssuccessful engraftment within 15 days post-transplant. In addition, none of these subjects experienced adverse events due to immune incompatibility issuestypically associated with allogeneic HSCT, such as graft rejection or GVHD.We believe the efficacy and safety results of the TG04.06.01 Study provide clinical proof-of-concept, as the lentiviral vector used in the study sharesmany features with our Lenti-D vector. In addition, the results of the TG04.06.01 Study were helpful in informing the design of our future Starbeam Study(previously referred to as ALD-102). The design of the Starbeam Study is built upon the observations made in the TG04.06.01 Study, but will enroll a largernumber of subjects, is a multi-center, international trial with a different primary endpoint determined by analysis of the ALD-101 Study data and inconsultation with experts in the field, and has a predefined criterion for clinical success. Additionally, with improvements we have introduced into the vectormanufacturing and transduction processes, we expect to obtain a higher frequency of gene-modified HSCs in subjects treated in the Starbeam Study comparedto what was achieved in the TG04.06.01 Study, which we believe will translate into improved clinical benefit by virtue of the increased expression of normally-functioning ALDP.Phase II/III clinical study (the Starbeam Study, formerly referred to as ALD-102)In April 2013, the FDA informed us that the IND we filed in March 2013 with the FDA for a Phase II/III clinical study to examine the feasibility, safetyand efficacy of our Lenti-D product candidate is now active and we transplanted the first subject in October 2013. We refer to this study as the StarbeamStudy (formerly referred to as ALD-102). The study is designed as a single-dose, open-label, non-randomized, international, multi-center Phase II/III study totest the safety and efficacy of our Lenti-D product candidate in preserving neurological function and stabilizing cerebral demyelination in subjects withCCALD. Subjects will be followed for 24 months post-transplant under this protocol. Per the FDA Guidance for Industry: Gene Therapy for ClinicalTrials—Observing Subjects for Delayed Adverse Events, we will be monitoring study subjects in a long-term follow up protocol to evaluate safety for up to15 years, and will also monitor efficacy endpoints to demonstrate a sustained treatment effect.Our clinical trial recruitment plans involve a multi-faceted approach, including: • clinical site community outreach programs; • global patient referral and support programs to bring patients from across the world to existing clinical sites; • gene therapy patient, family and physician education tools, including general gene therapy and ALD-specific websites and materials; • ALD patient advocacy engagement and support; and • continued publication of existing and future scientific and clinical ALD data.Up to 15 subjects will be enrolled in the study to obtain at least 12 evaluable subjects that have been transplanted with the Lenti-D drug product. In thestudy, subjects must be age fifteen years or younger with a confirmed diagnosis of active CCALD, including elevated levels of plasma VLCFA, a brain MRILoes score of 0.5 to nine, inclusive, evidence of gadolinium enhancement and an NFS £ one. Subjects with a willing matched sibling HSCT donor will beexcluded from the study. We initiated the Starbeam Study in 2013 and transplanted the first subject in October 2013.Based on results from our retrospective ALD-101 Study and consultation with leading clinicians in the field of ALD, we have defined the primaryefficacy endpoint in the Starbeam Study as the proportion of subjects who have no MFDs, as measured by NFS, at 24 months (±two months) post-transplant. Secondary efficacy evaluations, in each case measured at 24 months (±two months) post-transplant, capture the key assessments of 18Table of ContentsCCALD disease status, including the change from baseline in NFS and Loes score, resolution of gadolinium enhancement on MRI and determination of MFD-free survival and overall survival. The sample size for this study was not determined by formal statistical methods, but we believe it may be sufficient todemonstrate a robust effect on the binary response endpoint, where a responder is defined as a subject with no MFD at 24 months (±two months) followingtransplant. Thus, we expect the FDA and EMA will make a qualitative assessment of the efficacy and safety data from this study to evaluate whether theresults are sufficient to support a BLA.Safety evaluations will be performed during the study and will include evaluation of the following: success and kinetics of HSC engraftment; incidenceof transplant-related mortality through 100 and 180 days post-transplant; detection of vector-derived replication of the lentivirus; and characterization andquantification of events related to the location of insertion of the functional gene in target cells.If successful, we believe that the results from the Starbeam Study could form the basis of a BLA and an MAA. However, given the number of subjectsand design of the study and the qualitative/subjective assessment of the data, there can be no assurance the FDA or EMAwill not require one or more additionalclinical studies as a precursor to a BLA application or an MAA, respectively. The FDA has advised us that the Starbeam Study may not be deemed to be apivotal study or may not provide sufficient support for a BLA submission. The FDA normally requires two pivotal clinical studies to approve a drug orbiologic product, and thus the FDA may require that we conduct additional clinical studies of Lenti-D prior to a BLA submission. See “Risk Factors—Theresults from our Starbeam Study (formerly referred to as ALD-102) may not be sufficiently robust to support the submission of marketing approval for ourLenti-D product candidate. Before we submit Lenti-D for marketing approval, the FDA and the EMA may require us to enroll additional subjects, conductadditional clinical studies, or evaluate subjects for an additional follow-up period.”Preclinical evaluation of our Lenti-D product candidateWe have completed a single-dose toxicology study of our Lenti-D product candidate in immunodeficient mice following a single intravenousadministration. This study investigated the engraftment of normal human HSCs transduced with our Lenti-D vector and the reversibility of any toxicityfollowing a 28 and 91 day post-treatment recovery period. The assessment of toxicity was based on mortality, clinical observations, body and organ weights,and anatomic pathology. In addition, engraftment of the HSCs was analyzed in the bone marrow of all the interim and main sacrifice animals by fluorescence-activated cell sorting and by polymerase chain reaction procedures.Study results from the single dose toxicology study found no product candidate-related effects in body and organ weight, hematology or clinicalchemistry parameters. In addition, histopathological evaluation revealed that there were no product candidate-related microscopic findings. There were nosignificant group differences (aside from slight individual animal variation) in cellularity of the bone marrow in treated control and test animals, as determinedby light microscopy. Based upon the evaluation criteria used for the study, the Lenti-D drug product appeared to be well tolerated after single intravenousinjection.Additional potential clinical indications for Lenti-DThe ACALD and AMN subsets of the broader ALD patient population represent potential additional opportunities for our Lenti-D product candidate.Allogeneic HSCT has shown some early reported success in ACALD patients, suggesting autologous gene therapy with our Lenti-D product candidate mayalso be used to address these patients. AMN represents a population of heterogeneous patients with about 40% presenting with cerebral symptoms, however noknown allogeneic HSCT studies have been conducted in the AMN population to provide evidence for a gene therapy based approach in the treatment of thisdisease. The risk-reward balance and safety risks associated with allogeneic HSCT have limited its use in treating ACALD and AMN patients, which mayprovide an opportunity to expand the use of our Lenti-D gene therapy product in these indications to increase interest in gene therapy for the treatment of otherforms of ALD. 19Table of ContentsOur LentiGlobin opportunityß-thalassemiaOverviewß-thalassemia is a rare hereditary blood disorder caused by a genetic abnormality of the ß-globin gene resulting in defective red blood cells, or RBCs.Genetic mutations cause the absence or reduced production of the beta chains of hemoglobin, or ß-globin, thereby preventing the proper formation ofhemoglobin A, which normally accounts for greater than 95% of the hemoglobin in the blood of adults. Hemoglobin is an iron-containing protein in the bloodthat carries oxygen from the respiratory organs to the rest of the body. Hemoglobin A consists of four chains—two chains each of a-globin and ß-globin.Normally existing at an approximate 1:1 ratio, genetic mutations that impair the production of ß-globin can lead to a relative excess of a-globin, leading topremature death of red blood cells. The clinical implications of the a -globin/ß-globin imbalance are two-fold: first, patients lack sufficient RBCs andhemoglobin to effectively transport oxygen throughout the body and can become severely anemic; and second, the shortened life span and ineffectiveproduction of RBCs can lead to other complications such as splenomegaly, marrow expansion, bone deformities, and iron overload in major organs.The clinical course of ß-thalassemia correlates with the degree of globin chain imbalance. Nearly 200 different mutations have been described in patientswith ß-thalassemia. Symptoms of ß-thalassemia can include severe anemia, splenomegaly, marrow expansion, bone deformities and iron overload in majororgans. The clinical presentation varies widely, dependent largely upon the number and type of inherited mutation. Mutations can be categorized as thosewhich result in little or no functional ß-globin production (ß°) and those which result in decreased functional ß-globin production (ß+). ß-thalassemia majorrefers to any mutation pairing that results in the need for chronic transfusions due to severe anemia, and is the clinical finding in patients with ß°ß° genotypeas well as many with the ß°ß+ genotype. Affected patients produce as little as one to seven g/dL of hemoglobin (while a normal adult produces 12-18 g/dL ofhemoglobin). Hemoglobin E, which is another ß-globin mutation and is usually asymptomatic, can also result in ß-thalassemia major when paired with the ß°or ß+ mutations.ß-thalassemia is concentrated in populations of Mediterranean, South and Southeast Asian and Middle Eastern descent. It has been estimated that about1.5% (80 to 90 million people) of the global population are carriers of ß-thalassemia, with about 60,000 symptomatic individuals born annually, the greatmajority in the developing world. According to Thalassemia International Federation, about 288,000 patients with ß-thalassemia major are alive and registeredas receiving regular treatment around the world, of which it is estimated that about 15,000 live in the United States and Europe. Due to the rarity of thisdisease in the United States, published research on the prevalence of ß-thalassemia in the United States is limited, although it is estimated that due to changingimmigration patterns, 1.8 in 100,000 births in California are affected by ß-thalassemia. This data is derived from a mandatory screening program forhemoglobinopathies in that state.Limitations of current treatment optionsIn geographies where treatment is available, patients with ß-thalassemia major receive chronic blood transfusion regimens aimed at maintaining steadystate hemoglobin levels of approximately 9-10 g/dL. These regimens consist of infusions with units of pRBC every three to five weeks, the timing of which isbased predominantly on monitoring hemoglobin levels. Chronic blood transfusions can be effective at preventing the hallmark symptoms of childhood ß-thalassemia major, however, often lead to a large iron overload, which over time leads to mortality through iron-associated heart and liver toxicity. To preventiron overload-associated risks, patients must adhere to therapeutic iron chelation regimens to reduce the iron overload. Poor compliance with chelation regimensremains a key challenge; it is estimated that with typical compliance, the overall life expectancy for a patient with transfusion-dependent ß-thalassemia is only28 years. Even patients who are compliant with transfusion and iron chelation regimens can experience a reduced quality of life due to the burden of therapyand the fluctuating levels of hemoglobin on a month-to-month basis. 20Table of ContentsThe only potentially curative therapy for ß-thalassemia today is allogeneic HSCT. However, because of the significant risk of transplant-relatedmorbidity and mortality, transplants are offered primarily to pediatric patients with a matched sibling donor, which occurs in less than 25% of all cases.Allogeneic HSCT carries a significant risk of morbidity and mortality related to myeloablation (which decreases or eliminates the cells in the bone marrow andblood), immunosuppressive medications, graft failure, GVHD and opportunistic infections. Overall, ß-thalassemia major remains a devastating disease withan unmet medical need.In many developing countries where ß-thalassemia is more prevalent, such as Thailand, the lack of readily available chronic blood transfusions andoptimal iron chelation regimens represents a significant societal challenge. In these countries, children with ß-thalassemia major have a poor prognosis andexperience growth retardation, hepatosplenomegaly, or enlargement of the spleen, and skeletal deformities resulting from extra-medullary hematopoiesis.Ultimately, most die in childhood. We believe that safer therapies, such as those represented by our gene therapy approach, could offer a potential solution tothe challenges of treating ß-thalassemia patients across the world.Sickle cell diseaseOverviewSickle cell disease, or SCD, is a hereditary blood disorder resulting from a mutation in the ß-globin gene that causes polymerization of hemoglobinproteins and abnormal red blood cell function. The disease is characterized by anemia, vaso-occlusive pain crisis (a common complication of SCD in whichthere is severe pain due to obstructed blood flow in the bones, joints, lungs, liver, spleen, kidney, eye, or central nervous system), infections, stroke, overallpoor quality of life and early death in a large subset of patients. Under low-oxygen conditions, which are exacerbated by the red blood cell abnormalities, themutant hemoglobin aggregates causing the RBCs to take on a sickle shape (sickle cells), which causes them to aggregate and obstruct small blood vessels,thereby restricting blood flow to organs resulting in pain, cell death and organ damage. If oxygen levels are restored, the hemoglobin can disaggregate and theRBCs will return to their normal shape, but over time, the sickling damages the cell membrane and the cells fail to return to the normal shape even in high-oxygen conditions. Additionally, the sickle-shaped RBCs tend to rupture more easily, often resulting in damage to the blood vessels and iron overload that canultimately lead to organ failure and death.SCD is concentrated in populations of African, Middle Eastern and South Asian descent. The global incidence of SCD is estimated to be 250,000-300,000 births annually, and the global prevalence of the disease is estimated to be about 20-25 million. In the United States, where SCD is a standard part ofmandatory newborn screening, the incidence is more than 1,600 births annually with an estimated prevalence of 100,000 individuals.Limitations of current treatment optionsWhere adequate medical care is available, common treatments for patients with SCD include chronic blood transfusions and hydroxyurea. As is thecase with ß-thalassemia, chronic transfusions pose a compliance burden and are associated with significant risks that often leads to mortality through iron-associated heart and liver toxicity. Patients must also adhere to daily iron chelation regimens. A significant number of patients with SCD find it difficult toadhere to hydroxyurea treatment regimens due in part to drug-related toxicities.The only potentially curative therapy currently available for SCD is allogeneic HSCT, however because of the significant risk of transplant-relatedmorbidity and mortality, this option is usually offered primarily to pediatric patients with available sibling-matched donors. It is particularly difficult to findsuitable donors for individuals of African descent, and it is estimated that approximately 10% of eligible patients do so. In light of these factors, we believeSCD is a devastating disease with a significant unmet medical need. 21Table of ContentsOur LentiGlobin product candidateWe are developing our LentiGlobin product candidate as a potential one-time treatment for both ß-thalassemia major and severe SCD. Our approachinvolves the ex vivo insertion of a single codon variant of the normal ß-globin gene via an HIV-1 based lentiviral vector into the patient’s own HSCs to enableformation of normally functioning hemoglobin A and normal RBCs in patients with ß-thalassemia or SCD. Importantly, this codon variant, referred to asT87Q, also serves as a distinct biomarker used to quantify expression levels of the functional ß-globin protein in patients with ß-thalassemia and SCD, whilealso providing strong anti-sickling properties in the context of SCD. We refer to the gene-modified HSCs as the final LentiGlobin drug product, or ourLentiGlobin product candidate.We have had and continue to have a comprehensive dialogue with the FDA and other regulatory authorities and advisory bodies concerning the clinicaladvancement of our LentiGlobin product candidate.We are conducting our HGB-205 and Northstar (HGB-204) clinical studies and have transplanted the first patient in the HGB-205 study. We expect tohave preliminary data from one or both of these clinical studies in late 2014, although there can be no assurance this will be the case.Clinical development of our LentiGlobin product candidatePrevious clinical experience with lentiviral gene therapy for ß-thalassemia major (the LG001 Study)Between September 2006 and November 2011, three subjects with ß-thalassemia major were treated in France by our scientific collaborators in a PhaseI/II study with autologous HSCs transduced ex vivo with an earlier generation of our LentiGlobin vector, called HPV569. We refer to the HSCs transduced exvivo with the HPV569 vector as the HPV569 drug product. Clinical data and biological experience with one subject in this study (Subject Three) were firstreported in Nature (2010).Four subjects were enrolled in the LG001 Study, although only three subjects were actually treated with the HPV569 drug product—Subject One wasineligible due to pre-transplant complications. The other three subjects were successfully transplanted, however Subject Two received a dose of HPV569 drugproduct with cell counts well below current standards in transplant practice and failed to engraft. All subjects enrolled in the study required significanttransfusion support prior to treatment. Below is a summary of the results for the two subjects with successful engraftment: • Subject Three: During the first year post-transplant, Subject Three experienced a decline in both the volume and frequency of transfusionrequirements and eventually became transfusion-independent approximately one year post-treatment. Subject Three has remained transfusion-independent ever since (more than five years), even in light of regular blood withdrawals to eliminate iron accumulation in the body. Adverseevents considered to be treatment related were all attributable to study procedures or myeloablative conditioning, but not related to the HPV569drug product. One notable observation was the detection of partial clonal dominance of a common myeloid progenitor bearing an integrated vectorin the third intron of the HMGA2 gene, which resulted in a relatively large proportion of the gene therapy modified cells being derived from asingle clone in which the lentiviral vector had inserted into the HMGA2 gene. There was some initial concern that the observed clonal dominancemight represent a pre-leukemic event, however there have been no adverse clinical consequences of this event, or any signs of cancer, in over fiveyears since the observation was made. In fact, the presence of the HMGA2 clone has steadily declined over time to the point that it is no longer themost common clone. • Subject Four: After transplant, Subject Four experienced delayed recovery of platelets and required platelet transfusion thrice weekly until day100, with the last transfusion on day 122. Therapeutic hemoglobin in reticulocytes was detectable early post-transplant, however the levelsdeclined gradually. Subject Four is clinically stable and has fully engrafted two years post-treatment, but is 22Table of Contents producing only minimal amounts of therapeutics hemoglobin and, therefore, remains transfusion dependent. Adverse events considered to betreatment related were all attributable to study procedures or myeloablative conditioning, but not the HPV569 drug product.All subjects from LG001 will be offered the possibility to enroll in the long term follow-up study, LTF-303, to evaluate long-term safety and efficacypost-transplant.We believe that achieving transfusion independence in Subject Three is a direct benefit of treatment with the HPV569 drug product, as we are not awareof any reported cases of spontaneous transfusion independence in patients with ß-thalassemia major. While successful allogeneic HSCT may achievetransfusion independence, the mortality risk of allogeneic HSCT in adults with ß-thalassemia major exceeds 20%, and for that reason it is not a standardtherapeutic intervention for adult patients. The approach of using autologous gene-modified HSCs avoids the adverse consequences of immune incompatibilitythat are responsible for much of the mortality and morbidity associated with allogeneic HSCT.We believe the efficacy and safety results of the LG001 Study provide clinical proof-of-concept, as the lentiviral vector used in the study shares manyfeatures with our current LentiGlobin vector. In addition, the results of the LG001 Study were helpful in informing the design of our HGB-205 and Northstar(HGB-204) clinical studies. Additionally, with improvements we have introduced into the vector manufacturing and transduction processes, we expect toobtain a higher frequency of gene-therapy modified HSCs in the patients treated in the HGB-205 and Northstar clinical studies compared to what wasachieved in the LG001 Study, which we believe will translate into improved clinical efficacy and in improved clinical benefit by virtue of increased productionof normally functioning hemoglobin.Phase I/II clinical study for ß-thalassemia major and sickle cell disease (the HGB-205 Study)At the request of ANSM, in 2012 we submitted a CTA with a revised clinical protocol as a result of our decision to use our newer LentiGlobin BB305vector for our clinical studies going forward. A preclinical evaluation of LentiGlobin BB305 showed that transduction efficiency was higher with theLentiGlobin BB305 vector as compared to the HPV569 vector used in the LG001 Study to genetically modify the subjects’ own cells, resulting in higherexpression of the therapeutic ßA-T87Q-globin protein in transduced cells, despite unchanged expression levels per vector copy. The CTA was approved in2012, resulting in an active study, now called the HGB-205 study, which we initiated and transplanted the first patient in 2013. This continuation study is aPhase I/II clinical study to examine the safety and efficacy of our LentiGlobin BB305 Drug Product candidate in up to seven additional subjects with adiagnosis of ß-thalassemia major or SCD. Study subjects must be between five and 35 years of age with a diagnosis of ß-thalassemia major or severe SCD.Those with ß-thalassemia must have received at least 100 mL/kg/year of pRBCs per year for the past two years. Those with SCD must have failed to achieveclinical benefit from treatment with hydroxyurea and have an additional poor prognostic risk factor (e.g., recurrent veno-occlusive crises or acute chestsyndromes). All subjects must be eligible for allogeneic HSCT, but without a matched related donor. Subjects with a matched sibling allogeneic HSCT donorwill be excluded from the study.We are considering a number of approaches to support clinical sites with recruitment for the HGB-205 study, including community outreach programs,translation of educational resources, and patient advocacy engagement.For all subjects, efficacy will be measured by RBC transfusion requirements per month and per year, post-transplant and the number of total in-patienthospitalization days (post-transplant discharge) at six, 12 and 24 months. For SCD patients only, efficacy will be measured by the number of vaso-occlusivecrises or acute chest syndrome events at six, 12 and 24 months and evaluation of changes in the nature or frequency of the subject-specific main inclusioncriteria. 23Table of ContentsSafety evaluations to be performed during the study include success and kinetics of HSC engraftment, incidence of transplant-related mortality post-treatment, overall survival, detection of vector-derived replication-competent lentivirus in any subject and characterization of events of insertional mutagenesisleading to clonal dominance or leukemia.Phase I/II clinical study for ß-thalassemia major (the Northstar Study, formerly referred to as HGB-204)In December 2012, we submitted an IND with the FDA for a Phase I/II clinical study to examine the feasibility, safety and efficacy of our LentiGlobinBB305 Drug Product candidate in patients with ß-thalassemia. We refer to this study as the Northstar Study (formerly referred to as HGB-204). The study isa single-dose, open-label, non-randomized, multi-site Phase I/II clinical study in the United States to evaluate the safety and efficacy of the LentiGlobin productcandidate in increasing hemoglobin production and eliminating or reducing transfusion dependence following treatment. In January 2013, we were cleared tocommence the study and we initiated this study in 2013. We expect to submit an IND with the FDA in 2014 to evaluate LentiGlobin BB305 Drug Product inpatients with SCD.Our clinical trial recruitment plans for the Northstar Study involve a multi-faceted approach, including: • clinical site community outreach programs; • global patient referral and support programs to bring patients to existing clinical sites; • clinical site expansion in areas of high epidemiology; • gene therapy patient, family and physician education tools, including general gene therapy and ß-thalassemia specific websites and materials; • ß-thalassemia patient advocacy engagement; and • support and continued publication of existing and future ß-thalassemia scientific and clinical data.Up to 15 adults will be enrolled in the study. Study subjects must be between 18 and 35 years of age with a diagnosis of ß-thalassemia major and whoreceive at least 100 mL/kg/year of pRBCs or greater than or equal to eight transfusions of pRBCs per year in each of the two years preceding enrollment. Thesubjects must also be eligible for allogeneic HSCT.Efficacy will be evaluated primarily by the production of 2.0 g/dL of hemoglobin A containing ßA-T87Q-globin for the six-month period between 18 and24 months post-transplant. In order to allow for endogenous hemoglobin production following transplant, subjects will be transfused with RBCs only whentotal hemoglobin decreases below 7.0 g/dL. The rationale for the primary endpoint is that production of 2.0 g/dL of hemoglobin A containing ßA-T87Q-globinrepresents a clinically meaningful increase in endogenous hemoglobin production that would be expected to diminish transfusion requirements, and couldresult in transfusion independence in ß-thalassemia subjects.Exploratory efficacy endpoints include RBC transfusion requirements (measured in milliliters per kilogram) per month and per year, post-transplant.Safety evaluations to be performed during the study include success and kinetics of HSC engraftment, incidence of transplant-related mortality post-treatment,overall survival, detection of vector-derived replication-competent lentivirus in any subject and characterization of events of insertional mutagenesis leading toclonal dominance or leukemia. Subjects will be monitored by regular screening. Each subject will remain on study for approximately 26 months from time ofconsent and then will be enrolled in a long-term follow-up protocol that will assess safety and efficacy beyond 24 months.Preclinical evaluation of our LentiGlobin BB305 vectorSeveral nonclinical studies have been performed to support the use of our LentiGlobin BB305 vector. These studies were conducted in vitro in humanHSCs isolated from patients with SCD and in in vivo mouse transplant models. In these studies, transduction efficiency was shown to be higher with theLentiGlobin BB305 vector as compared to the LentiGlobin HPV569 vector, based on higher expression levels of the therapeutic ß-globin 24Table of Contentsprotein in cells transduced with this vector despite unchanged protein expression levels per vector copy. In vivo pharmacology and safety studies carried out ina mouse model for ß-thalassemia provided no evidence that our lentiviral vectors caused any adverse effects or alteration of bone marrow homeostasis in micetreated with syngeneiccells transduced with either the HPV569 or BB305 vector. In two independent in vitro immortalization, or IVIM, assays, LentiGlobinBB305 vector showed a reduced risk of IVIM and genotoxicity in murine HSCs as compared to positive control vectors known to have significant oncogenicpotential. Results of integration site analyses in mice treated with syngeneic bone marrow cells transduced with either LentiGlobin BB305 or HPV569 vectorsrevealed no signs for clonal outgrowth. The integration site profile of the two vectors was comparable and typical for HIV-1 based lentiviral vectors. Bothvectors showed a large overlap of integration sites in identical common integration site regions. Although integration near oncogenes was, in general, increasedin the analyzed vector samples compared to the theoretical random integration site data, there was no increase of integration sites near oncogenes in the post-transplant samples isolated from the bone marrow at necropsy compared to pre-transplant samples of transduced bone marrow.Previous preclinical experience with lentiviral gene therapy for sickle cell diseaseIn 2001, a preclinical proof-of-concept study, led by our scientific founder Dr. Philippe Leboulch and scientists at Harvard Medical School and theMassachusetts Institute of Technology, corrected sickle cell disease in mice using gene therapy. In the study, mice were bioengineered to contain a human genethat produced defective hemoglobin, causing SCD. HSCs containing the defective gene were removed from the bioengineered mice and gene-modified by theaddition of an anti-sickling gene using a lentiviral vector. The modified gene encoding for ßA-T87Q-globin gene produced ß-globin that gave rise to a modifiednormal hemoglobin molecule that prevented the sickling process. This gene construct is the same construct we use in our LentiGlobin product candidate. Afteradding the anti-sickling gene, the corrected marrow was then transplanted into other mice with SCD whose bone marrow had been removed by radiation. Tenmonths later, blood samples from the transplanted mice showed a high level of expression of the anti-sickling ß-hemoglobin gene. The results from thispreclinical proof-of-concept study for SCD were published in Science (2001).ManufacturingOur gene therapy platform has two main components: lentiviral vector production and the target cell transduction process, which results in drugproduct.Our lentiviral manufacturing process 25Table of ContentsOur lentiviral vectors are assembled using a human cell line called HEK293T. The HEK293T cells are maintained in disposable flasks until sufficientcell mass has been generated to fill approximately 40 ten tray cell factories, or TTCFs, then transferred and allowed to adhere to the bottom of thetrays. Adherent cells are transfected with multiple plasmids encoding all the genetic material required to assemble the lentiviral vector carrying such functionalgene of interest. The genetic material is delivered on multiple plasmids to reduce the odds of generating a replication-competent virus and improve the overallsafety of this step of the procedure. The transfected HEK293T cells then assemble our lentiviral vectors packaged with the functional gene of interest, whichbud off into the cell culture media. The media containing the assembled vectors is harvested, purified by a single chromatography step, concentrated andformulated prior to freezing for storage. These finished lentiviral vectors are what is ultimately used to transduce the HSCs isolated from the patient.We believe that our lentiviral vectors have broad applicability, since the majority of the viral production system can remain the same, while we changeonly the therapeutic gene “cassette” depending on the disease. In other words, the vector “backbone” stays the same, while only the therapeutic gene and relatedsequences are changed. If we were to undertake drug development in an additional indication, we believe we could rapidly move forward using this lentiviralvector backbone and associated assays, simply by switching the therapeutic gene insert and associated control elements.Although we intend to continue manufacturing our Lenti-D vectors in TTCFs, we are currently in the process of adapting our LentiGlobin vectorproduction technology to a larger, suspension-based bioreactor process with the potential to scale from 100 to upwards of 1,000 liters in a single productionrun. So far, we have demonstrated successful production of LentiGlobin vectors on a small scale and are currently transferring the new process to a contractmanufacturer to accommodate future demand for our drug candidates, if approved, in their current indications as well as those beyond our initial focus.Our target cell transduction process—creating the gene-modified cells (our drug product)The ultimate product of our manufacturing processes is the patient’s own gene-modified cells, which we refer to as our drug product. The process forproducing our drug product is as follows: 1.Selection: We extract HSCs from peripheral blood mononuclear cells obtained from the patient’s blood by apheresis (or alternatively, by bonemarrow harvest) following mobilization via a colony stimulating factor. The process is carried out using existing hospital infrastructure andstandard protocols currently in place for stem cell transplant procedures. 2.Pre-stimulation: The isolated HSCs are treated with a mixture of growth factors and additional proprietary processes that help enable anefficient transduction process. 3.Transduction: The isolated, purified and pre-treated HSCs are exposed to our lentiviral vectors containing the appropriate functional gene forup to 40 hours to facilitate transduction and insertion of the therapeutic DNA into the chromosomes of the target cells. 4.Final harvest: Once transduction is complete, the gene-modified HSCs are washed and re-suspended into cell culture media to remove anyresidual impurities. A portion of the harvested cells is removed for quality control release testing, which includes ensuring that transductionwas successful and the functional gene delivered by the vector is adequately expressed by the target cells. 5.Formulation and freeze: The remaining cells are appropriately formulated and cryopreserved. 26Table of ContentsThe final step is to return the gene-modified HSCs to the patient. Just prior to dosing, the drug product is thawed and sampled for cell number andviability to ensure the dose administered meets a pre-defined minimum.Of note, our proprietary lentiviral vector manufacturing and HSC transduction processes utilize operations and equipment that are common to thebiopharmaceutical industry. We rely exclusively on the use of contract manufacturing organizations to manufacture our Lenti-D and LentiGlobin vectors anddrug product candidates, and do not own or operate any of our own facilities for these purposes. However, we believe our team of technical personnel hasextensive manufacturing, analytical and quality experience as well as strong project management discipline to effectively oversee these contract manufacturingand testing activities, and to compile manufacturing and quality information for our regulatory submissions.Future applications and opportunitiesThe investments that we have made to industrialize our gene therapy platform, processes and manufacturing may have application to other severe geneticand orphan diseases. We believe that we have the opportunity to pursue other disease indications that would take advantage of our know-how and otherintellectual property, and expertise in three main areas: • Other lentiviral ex vivo applications: We believe our current gene therapy platform will enable us to develop and test new vectors based onsimilar viral vector backbones that carry different gene sequences for other hereditary diseases without the need for significant research work. Inthis way, we can move products efficiently through preclinical into clinical development. We may consider research and development programstargeting other monogenic, hereditary diseases that involve cells derived from HSCs. These programs may involve hereditary orphan diseases thatcould be developed and potentially commercialized on our own.We also are pursuing gene therapy programs that target other cell types, such as T cells, that leverage the unique properties of lentiviral vectors.Through our global partnership with Celgene, we are now developing gene therapy products by inserting novel gene sequences into a patient’s ownT cells using lentiviral vectors for oncology. This represents a direct application of our expertise in gene therapy and our capabilities, know-howand patents associated with lentiviral gene therapy for ex vivo applications. As we further develop this program, we will investigate theopportunity to expand the application to other cell types for new potential indications. • Lentiviral in vivo applications: Our expertise in lentiviral vector production and cell transduction also provides an opportunity to develop newlentiviral products for use in the in vivo setting. In this case, lentiviral vectors carrying certain gene sequences would be delivered directly to thedisease site (e.g., to the brain or eye) or into the bloodstream of the patient and, in each case, the vector would need to find the target cell in vivoand deliver the genetic material into those target cells. Although this represents a less controlled environment in which to transduce cells and delivergenetic material, it opens up additional orphan and large market indications where this approach is more appropriate for the disease and targetedcells. • Adeno-associated viral (AAV) vector platform targeting other diseases: Our team has extensive historic experience with AAV research anddevelopment programs. There is extensive evidence in the scientific literature supporting the use of these vectors for in vivo applications. Theunique properties of AAV vectors may offer advantages in some indications where lentiviral vectors might be less suited. For example, AAVvectors may be better suited for use in products delivered in vivo systematically. Our experience and know-how could be useful with an AAVplatform in these additional disease settings and we expect to explore cautiously and opportunistically AAV product candidates that could providea bolt-on platform and capability for us. 27Table of ContentsThe graphic below represents an example of the breadth of potential applications of our gene therapy platform. Strategic collaborationsOur objective is to develop and commercialize a next generation of products based on the transformative potential of gene therapy to treat patients withsevere genetic and orphan diseases. To access the substantial funding and other resources required to develop and commercialize gene therapy products, wehave formed, and intend to seek other opportunities to form, strategic alliances with collaborators who can augment our industry leading gene therapyexpertise. To date, we have focused on forging a limited number of significant strategic alliances with leading pharmaceutical partners and academiclaboratories where both parties contribute expertise to enable the discovery and development of potential gene therapy product candidates.Our strategic alliance with CelgeneIn March 2013, we announced a strategic collaboration with Celgene Corporation to discover, develop and commercialize novel disease-altering genetherapies in oncology. The collaboration focuses on applying gene therapy technology to genetically modify a patient’s own T cells, to target and destroy cancercells. Such modified T cells, which are called chimeric antigen receptor, or CAR, T cells, have been shown to have beneficial effects in human clinical trialsfor patients with B cell lymphomas. The multi-year research and development collaboration has the potential to lead to the development and commercializationof multiple CAR T cell products.Under the terms of the collaboration, for any product candidate selected for development under the collaboration, we are and will be responsible forconducting and funding all research and development activities performed up through completion of the initial Phase I clinical study, if any, of such productcandidate. This collaboration is governed by a joint steering committee, or JSC, formed by representatives from us and Celgene. The JSC, among otheractivities, reviews the collaboration program, reviews and evaluates product candidates and approves regulatory plans.On a product candidate-by-product candidate basis, up through a specified period following completion of an initial Phase I clinical study for suchproduct candidate, we have granted Celgene an option to obtain an exclusive worldwide license to develop and commercialize such product candidate pursuantto a written agreement, the form of which we have already agreed upon. If Celgene elects to exercise this option, it must pay 28Table of Contentsus an option fee, subject to reduction if we elect to co-develop and co-promote that product candidate in the United States. In addition to the option fee, Celgenewould also be obligated to pay us additional amounts based upon achievement of specified development and regulatory milestones and a percentage of net salesas a royalty, however, if we elect to co-develop and co-promote in the United States, this royalty only applies to sales outside the United States. The maximumoption fee payable to us under these agreements, together with the maximum additional payments payable to us upon achievement of specified clinical,regulatory and commercial milestones, is $225 million, and the royalties payable to us range from the mid-single digits to mid-teens. The royalties payable tous are subject to certain reductions, including for any royalty payments required to be made by Celgene to acquire patent rights, with an aggregate minimumfloor. Celgene will assume certain development obligations and must report on their progress in achieving these milestones on a quarterly basis. If we do elect toco-develop and co-promote the product candidate within the United States, we would share equally in all costs relating to developing, commercializing andmanufacturing the product candidate within the United States and we would share equally in the United States profits.Celgene will be solely responsible for all costs and expenses of manufacturing and supplying any optioned product candidates. Subject to customary“back-up” supply rights granted to Celgene, we have the sole right to manufacture or have manufactured supplies of vectors and associated payloadsmanufactured for incorporation into the optioned product candidate. We would do so under a written agreement, the form of which has not yet been agreedupon, although we have agreed upon certain material terms for such manufacturing and supply agreement. Celgene would reimburse us for our costs tomanufacture and supply such vectors and associated payloads, plus a modest mark-up.If Celgene does not exercise its option with respect to any product candidate prior to expiration of the applicable option period, then we have the right todevelop that product candidate outside the scope of the collaboration, subject to a Celgene opt-in right to obtain a license to that product candidate, which rightexists through a specified period following completion of a pivotal study for that product candidate.We received an up-front payment of $75.0 million from Celgene in connection with the collaboration. The collaboration term ends in March 2016,unless extended at Celgene’s option. Celgene may elect to extend the term twice, first for a period of two years and then for an additional period, in each case inconsideration of a specified payment to us. Either party may terminate the agreement upon written notice to the other party in the event of the other party’suncured material breach. Celgene may terminate the agreement for any reason upon prior written notice to us. If the agreement is terminated, rights to productcandidates in development at the time of such termination will be allocated to the parties through a mechanism included in the agreement. In addition, ifCelgene terminates the agreement for our breach, any then- existing co-development and co-promotion agreement will be automatically terminated and replacedwith a license agreement for such product candidate and any amounts payable by Celgene under any then-existing product license agreements will be reduced.Baylor College of MedicineSimultaneous with entering into the collaboration agreement with us, Celgene entered into a strategic collaboration with the Baylor College of Medicine, orBaylor, to discover, develop and commercialize CAR T cell products. We are not a party to this collaboration agreement, although, by virtue of our agreementswith Celgene, the joint steering committee under the Baylor-Celgene collaboration agreement will include representatives selected by us, together withrepresentatives selected by each of Celgene and Baylor. Under our collaboration agreement with Celgene, we may develop product candidates covered by theintellectual property rights of Baylor in this field, which intellectual property rights would be in-licensed by Celgene pursuant to its collaboration agreementwith Baylor.Call Option and Target Antigen LicenseDuring the initial three-year term of the collaboration and, if extended, during the first two-year extension term of the collaboration, in the event that weengage in a change in control transaction, including for such 29Table of Contentspurposes a merger or consolidation of bluebird bio or the sale of all or substantially all of our assets, or if another person or entity or group of persons orentities acquires at least 50% of our voting capital stock, then Celgene has the right, but not the obligation, to terminate the collaboration agreement and obtainperpetual, non-terminable, worldwide, exclusive, fully paid-up licenses to all, but not less than all, of the product candidates previously identified under thecollaboration agreement. We refer to this right to acquire such licenses as the call option.Under the call option, the product candidates to which Celgene would have the right to acquire fully paid-up licenses include any product candidatepreviously licensed out of the collaboration during the term of the collaboration, any product candidate for which we have exercised our right to co-develop andco-promote the product candidate within the United States, any product candidate for which Celgene previously declined its option to obtain a license and anyproduct candidate for which at least in vivo efficacy studies have been initiated or authorized by the JSC. The purchase price for such fully paid-up licenseswould be determined pursuant to a binding arbitration process and would be paid on or about the consummation of the change in control transaction with ouracquiror.In addition, during the initial three-year term of the collaboration, but not during any extension of the collaboration agreement, in the event that we engagein a change in control transaction described above and Celgene exercises the call option described above, then, in addition to the right to acquire the fully paid-up licenses described above, Celgene would also have the right to obtain a perpetual, non-terminable, worldwide, exclusive license to our intellectual property todevelop one or more CAR T cell products targeting one or more oncology associated target antigens identified by Celgene following the third anniversary of thecollaboration agreement. There is no limit to the number of oncology associated target antigens Celgene may select under this license. Upon commercializationof any such product candidate so licensed by Celgene, Celgene would be obligated to pay us a specified milestone payment upon regulatory approval and apercentage of net sales as a royalty. We refer to this license agreement to develop one or more CAR T cell products targeting one or more oncology associatedtarget antigens as the target antigen license.The call option and the right to acquire a target antigen license may have the effect of delaying or preventing a change in control transaction involving us,or may reduce the number of companies interested in acquiring us. See “Risk Factors—Provisions in our collaboration agreement with Celgene Corporationmay prevent or delay a change in control.”Intellectual propertyWe strive to protect and enhance the proprietary technology, inventions, and improvements that are commercially important to the development of ourbusiness, including seeking, maintaining, and defending patent rights, whether developed internally or licensed from third parties. We also rely on tradesecrets relating to our proprietary technology platform and on know-how, continuing technological innovation and in-licensing opportunities to develop,strengthen and maintain our proprietary position in the field of gene therapy that may be important for the development of our business. We additionally relyon regulatory protection afforded through orphan drug designations, data exclusivity, market exclusivity, and patent term extensions where available.Our commercial success may depend in part on our ability to obtain and maintain patent and other proprietary protection for commercially importanttechnology, inventions and know-how related to our business; defend and enforce our patents; preserve the confidentiality of our trade secrets; and operatewithout infringing the valid enforceable patents and proprietary rights of third parties. Our ability to stop third parties from making, using, selling, offering tosell or importing our products may depend on the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities.With respect to both licensed and company-owned intellectual property, we cannot be sure that patents will be granted with respect to any of our pending patentapplications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our existing patents or any patents that may begranted to us in the future will be commercially useful in protecting our commercial products and methods of manufacturing the same. 30Table of ContentsWe have developed or in-licensed numerous patents and patent applications and possess substantial know-how and trade secrets relating to thedevelopment and commercialization of gene therapy products. Our proprietary intellectual property, including patent and non-patent intellectual property, isgenerally directed to, for example, certain genes, methods of transferring genetic material into cells, processes to manufacture our lentivirus-based productcandidates and other proprietary technologies and processes related to our lead product development candidates. As of February 24, 2014, our patent portfolioincludes the following: • approximately 191 patents or patent applications that we own or have exclusively in-licensed from academic institutions and third parties relatedto lentiviral vectors and vector systems; • approximately 58 patents or patent applications that we have non-exclusively in-licensed or optioned from academic institutions and third partiesrelated to lentiviral vectors and vector systems; • approximately 18 patents or patent applications that we own or have exclusively in-licensed from academic institutions and third parties,including eight that are co-owned with MIT, related to vector manufacturing or production; • approximately seven patents or patent applications that have been non-exclusively in-licensed from academic institutions and third parties relatedto vector manufacturing or production; and • approximately 22 patents or patent applications that we own or have exclusively in-licensed from academic institutions and third parties related totherapeutic cellular products.Our objective is to continue to expand our portfolio of patents and patent applications in order to protect our gene therapy product candidates andlentiviral manufacturing process. Examples of the products and technology areas covered by our intellectual property portfolio are described below. See also “—License agreements.”Childhood Cerebral Adrenoleukodystrophy (CCALD)The CCALD platform includes three patent portfolios, described below. • Pasteur Institute. The Pasteur patent portfolio contains patent applications directed to FLAP/cPPT elements and lentiviral vectors utilized toproduce our Lenti-D product candidate for CCALD. As of February 24, 2014, we had an exclusive license (from Pasteur Institute) to eight issuedU.S. patents and one pending U.S. application. Corresponding foreign patents and patent applications include pending applications or issuedpatents in Australia, Canada, China, Europe, Hong Kong, Israel, and Japan. We expect the issued composition of matter patents to expire from2019-2023 in the United States, and from 2019-2020 in the rest of the world (excluding possible patent term extensions). Further, we expectcomposition of matter patents, if issued from the pending patent applications and if the appropriate maintenance, renewal, annuity or othergovernmental fees are paid, to expire in 2019-2020 (excluding possible patent term extensions). We expect the patents and patent applications inthis portfolio other than composition of matter patents, if issued, and if the appropriate maintenance, renewal, annuity, or other governmental feesare paid, to expire in 2019-2020 (worldwide, excluding possible patent term extensions). • RDF. The in-licensed patent portfolio from Research Development Foundation, or RDF, in part, contains patents and patent applications directedto aspects of our lentiviral vectors utilized to produce our Lenti-D product candidate for CCALD. As of February 24, 2014, we had an exclusivelicense (from RDF) to three issued U.S. patents and two pending U.S. application related to our lentiviral vector platform. Corresponding foreignpatents and patent applications related to our lentiviral vector platform include pending applications or issued patents in Canada, Europe, andIsrael. We expect the issued composition of matter patents to expire from 2022-2023 (excluding possible patent term extensions). Further, we expectcomposition of matter patents, if issued from the pending patent applications and if the appropriate maintenance, renewal, annuity or othergovernmental fees are paid, 31Table of Contents to expire in 2021-2022 (excluding possible patent term extensions). We expect the patents and patent applications in this portfolio other thancomposition of matter patents, if issued, and if the appropriate maintenance, renewal, annuity, or other governmental fees are paid, to expire in2021-2022 (worldwide, excluding possible patent term extensions). • bluebird bio. The bluebird bio patent portfolio contains patent applications directed to compositions of matter for CCALD gene therapy vectorsand compositions and methods of using the vectors and compositions in cell-based gene therapy of adrenoleukodystrophy oradrenomyeloneuropathy. As of February 24, 2014, we owned two pending U.S. applications and 13 pending corresponding foreign applications.We expect the composition of matter patent for the CCALD gene therapy vectors, if issued from the pending patent application and if theappropriate maintenance, renewal, annuity or other governmental fees are paid, to expire in 2032 (worldwide, excluding possible patent termextensions). We expect the other patents and patent applications in this portfolio, if issued, and if the appropriate maintenance, renewal, annuity,or other governmental fees are paid, to expire in 2032 (worldwide, excluding possible patent term extensions).ß-thalassemia/SCDThe ß-thalassemia/SCD platform includes three patent portfolios, described below. • Pasteur Institute. The in-licensed Pasteur patent portfolio contains the patents and patent applications described above directed towards aspectsof our lentiviral vectors utilized to produce our LentiGlobin product candidate for ß-thalassemia and SCD. • RDF. The in-licensed RDF patent portfolio contains the patents and patent applications described above directed towards aspects of our lentiviralvectors utilized to produce our LentiGlobin product candidate for ß-thalassemia and SCD. • MIT/bluebird bio. The co-owned patent portfolio contains patents and patent applications directed to certain specific compositions of matter forlentiviral ß-globin expression vectors. As of February 24, 2014, we co-owned one issued U.S. patent and two pending U.S. applications, as wellas corresponding foreign patents issued in Europe and Hong Kong. We expect the issued composition of matter patents to expire in 2023 (excludingpossible patent term extensions). Further, we expect composition of matter patents, if issued from the pending patent applications and if theappropriate maintenance, renewal, annuity or other governmental fees are paid, to expire in 2023 (excluding possible patent term extensions). Weexpect the other patents and patent applications in this portfolio, if issued, and if the appropriate maintenance, renewal, annuity, or othergovernmental fees are paid, to expire in 2023 (worldwide, excluding possible patent term extensions). We note that we have an exclusive license toMIT’s interest in this co-owned intellectual property.Lentiviral platform (e.g., vectors, manufacturing, and cell therapy products)The lentiviral platform, which is potentially applicable to the CCALD, ß-thalassemia, SCD and other potential programs, includes three patentportfolios, described below. • Pasteur Institute. The Pasteur patent portfolio contains the patents and patent applications described above. • RDF. The in-licensed RDF patent portfolio contains the patents and patent applications described above. • bluebird bio. One aspect of the bluebird bio patent portfolio contains patents and patent applications directed to certain specific compositions ofmatter and improved methods for selecting and delivering transduced cells. As of February 24, 2014, we owned one pending U.S. application andeight pending corresponding foreign applications. We expect any composition of matter or methods patents, if issued 32Table of Contents from a corresponding nonprovisional national stage application, and if the appropriate maintenance, renewal, annuity or other governmental feesare paid, to expire in 2031 (worldwide, excluding possible patent term extensions). We expect the other patents and patent applications in thisportfolio, if issued, and if the appropriate maintenance, renewal, annuity, or other governmental fees are paid, to expire in 2031 (worldwide,excluding possible patent term extensions). Another component of the bluebird bio patent portfolio includes the vector manufacturing platform andis potentially applicable to the CCALD, ß-thalassemia, SCD and other programs. This portion of the portfolio contains patents and patentapplications directed to compositions of matter for improved packaging cells and cell lines and improved methods for transfection andtransduction of therapeutic cells. As of February 24, 2014, we owned four pending PCT applications, which are due for national stage entry inMarch 2014 (2), January 2015 and February 2015. We expect composition of matter and method patents, if issued from a correspondingnonprovisional national stage application, and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, to expire in2032 (worldwide, excluding possible patent term extensions).In addition to the above, we have established expertise and development capabilities focused in the areas of preclinical research and development,manufacturing and manufacturing process scale-up, quality control, quality assurance, regulatory affairs and clinical trial design and implementation. Webelieve that our focus and expertise will help us develop products based on our proprietary intellectual property.The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file,the patent term is 20 years from the date of filing the non-provisional application. In the United States, a patent’s term may be lengthened by patent termadjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office in granting a patent, or may be shortened if apatent is terminally disclaimed over an earlier-filed patent.The term of a patent that covers an FDA-approved drug may also be eligible for patent term extension, which permits patent term restoration of a U.S.patent as compensation for the patent term lost during the FDA regulatory review process. The Hatch-Waxman Act permits a patent term extension of up to fiveyears beyond the expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review. A patentterm extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patent applicable to anapproved drug may be extended. Moreover, a patent can only be extended once, and thus, if a single patent is applicable to multiple products, it can only beextended based on one product. Similar provisions are available in Europe and other foreign jurisdictions to extend the term of a patent that covers an approveddrug. When possible, depending upon the length of clinical trials and other factors involved in the filing of a new drug application, or NDA, we expect toapply for patent term extensions for patents covering our product candidates and their methods of use.We may rely, in some circumstances, on trade secrets to protect our technology. However, trade secrets can be difficult to protect. We seek to protect ourproprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and contractors.We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical andelectronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements or securitymeasures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets may otherwise become known or beindependently discovered by competitors. To the extent that our consultants, contractors or collaborators use intellectual property owned by others in theirwork for us, disputes may arise as to the rights in related or resulting know-how and inventions. 33Table of ContentsLicense agreementsInserm-TransfertIn May 2009, we entered into an exclusive license with Inserm-Transfert, which is a wholly-owned subsidiary of Institut national de la santé et de larecherche médicale, for use of certain patents and know-how related to the ABCD1 gene and corresponding protein, for use in the field of human ALD therapy.This agreement was amended once in 2012 and again in 2013. Inserm-Transfert is referred to herein as Inserm. The Inserm licensed patent portfolio includes atleast three U.S. and foreign patents and patent applications. This portfolio has no pending applications. Inserm retains the right to practice the intellectualproperty licensed under the agreement for educational, clinical and preclinical studies purposes.Upon commercialization of our products covered by the in-licensed intellectual property, which we expect would include our Lenti-D product candidate,we will be obligated to pay Inserm a percentage of net sales as a royalty for the longer of the life of any patents covering the product or 10 years from firstcommercial sale. This royalty is in the low single digits. The royalties payable to Inserm are subject to reduction for any third party payments required to bemade, with a minimum floor in the low single digits.We are required to use all commercially reasonable efforts to develop licensed products and introduce them into the commercial market as soon aspractical, consistent with our reasonable business practices and judgment in compliance with an agreed upon development plan. We have assumed certaindevelopment, regulatory and commercial milestone obligations and must report on our progress in achieving these milestones on an annual basis.We may unilaterally terminate the license agreement at any time. Either party may terminate the agreement in the event of the other party’s material breachwhich remains uncured after 60 days of receiving written notice of such breach or in the event the other party become subject of a voluntary or involuntarypetition in bankruptcy and such petition is not dismissed with prejudice within 120 days after filing. In addition, Inserm may terminate the license agreementin the event that we cannot prove within 60 days of written notice from Inserm that we have been diligent in developing the licensed products and introducingthem into the commercial market.Absent early termination, the agreement will automatically terminate upon the expiration of all issued patents and filed patent applications within thepatent rights covered by the agreement or 10 years from the date of first commercial sale of a licensed product, whichever is later. The license grant ceases inconnection with any such termination. The longest lived patent rights licensed to us under the agreement are currently expected to expire in 2016.Institut PasteurIn September 2011, we entered into a license with Institut Pasteur for certain patents relating to the use of DNA sequences, lentiviral vectors andrecombinant cells in the field of ex vivo gene therapy in a range of indications. This agreement was amended twice in 2012 and a third time in 2013. TheInstitut Pasteur licensed patent portfolio includes at least 23 U.S. and foreign patents and patent applications. Any patents within this portfolio that haveissued or may yet issue would have a statutory expiration date in 2019 and 2020. The license is exclusive for products containing human (HIV-1 and HIV-2)lentiviral vector and non-exclusive for products containing non-human lentiviral vector. Institut Pasteur retains the right, on behalf of itself, its licensees andresearch partners, to conduct research using the licensed intellectual property.We have the right to grant sublicenses outright to third parties under the agreement. If we receive any income (cash or non-cash) in connection with suchsublicenses for products targeting indications other than ALD (including CCALD and AMN), or beta-hemoglobinopathies (including beta-thalassemia, andsickle cell disease), we must pay Institut Pasteur a percentage of such income varying from low single digits to lower to mid double digits depending on thenature of the sublicense. 34Table of ContentsUpon commercialization of our products covered by the in-licensed intellectual property, which we expect would include our Lenti-D and LentiGlobinproduct candidates, we will be obligated to pay Institut Pasteur a percentage of net sales as a royalty. This royalty varies depending on the indication of theproduct but in any event is in the low single digits. In addition, starting in 2016 we must make under this agreement an annual maintenance payment which iscreditable against royalty payments on a year-by-year basis. If the combined royalties we would be required to pay to Institut Pasteur and third parties is higherthan a pre-specified percentage, we may ask Institut Pasteur to re-negotiate our royalty rates under this relationship.We are required to use all reasonable commercial efforts (as compared to a company of similar size and scope) to develop and commercialize one or moreproducts in the license field and to obtain any necessary governmental approvals in respect of, and market the products in license field, if any. Additionally,we have assumed certain development and regulatory milestone obligations. We must report on our progress towards achieving these milestones on an annualbasis. We may unilaterally terminate the license agreement at any time by sending Institut Pasteur 90 day prior written notice. Either party may terminate thelicense in the event of the other party’s substantial breach which remains uncured after 60 days of receiving written notice of such breach. Institut Pasteur mayalso terminate the agreement in the event bankruptcy proceedings are opened against us and not dismissed within 60 days.Absent early termination, the agreement will automatically terminate upon the expiration of the last licensed patents. In the event the agreement isterminated, while the license grant would cease, we would retain the right to manufacture, import, use and sell licensed products for a certain period of timepost-termination. In addition, our ownership stake in certain jointly made improvements covered by the licensed patents would survive termination of theagreement. The longest lived patent rights licensed to us under the agreement are currently expected to expire in 2023.Stanford UniversityIn July 2002, we entered into a non-exclusive license agreement with the Board of Trustees of the Leland Stanford Junior University, referred to herein asStanford, which we amended and restated in April 2012. Under this agreement, we are granted a license to use the HEK293T cell line for any commercial ornon-commercial use for research, non-clinical and clinical development purpose and human and animal gene therapy products.We have the right to grant sublicenses outright to third parties under the agreement. For each such sublicense we grant, we must pay Stanford a fee(unless the sublicense is to a collaborating partner, contract manufacturer or contract research organization).Upon commercialization of our products covered by the in-licensed intellectual property, which we expect would include our Lenti-D product candidate,we will be obligated to pay Stanford a percentage of net sales as a royalty. This royalty varies with net sales but in any event is in the low single digits and isreduced for each third-party license that requires payments by us with respect to a licensed product, provided that the royalty to Stanford is not less than aspecified percentage which is less than one percent. Since April 2013, we have been paying Stanford an annual maintenance fee, which will be creditableagainst our royalty payments.We may unilaterally terminate the agreement by giving Stanford 30 days’ written notice. Stanford may also terminate the license agreement if after 30days of providing notice we are delinquent on any report or payment, are not using commercially reasonable efforts to develop, manufacture and/orcommercialize one or more licensed products, are in material breach of any provision or provide any false report. Termination of this agreement may require usto utilize different cell types for vector manufacturing, which could lead to delays.Absent early termination, the license will expire in April 2037. We may elect to extend the term for an additional 25 years so long as we have acommercial product on the market at that time and we are in material compliance with the license agreement. 35Table of ContentsMassachusetts Institute of TechnologyIn December 1996, we entered into an exclusive license with the Massachusetts Institute of Technology, referred to herein as MIT, for use of certainpatents in any field. This license agreement was amended in December 2003, May 2004 and June 2011. The licensed patent portfolio includes at least 26 U.S.and foreign patents and patent applications. Any patents within this portfolio that have issued or may yet issue would have a statutory expiration date in 2023.This license also has been amended to include a case jointly owned by MIT and us wherein we received the exclusive license to MIT’s rights in this case. MITretains the right to practice the intellectual property licensed under the agreement for noncommercial research purposes.We have the right to grant sublicenses outright to third parties under the agreement. In the event we sublicense the patent rights, we must pay MIT apercentage of all payments we receive from by the sublicensee. This percentage varies from mid-single digits to low double digits.Upon commercialization of our products covered by the in-licensed intellectual property, which we expect would include our LentiGlobin productcandidate, we will be obligated to pay MIT a percentage of net sales by us or our sublicensees as a royalty. This royalty is in the low single digits and isreduced for royalties payable to third parties, provided that the royalty to MIT is not less than a specified percentage that is less than one-percent. In addition,we make under this agreement an annual maintenance payment which may be credited against the royalty payments.We are required to use diligent efforts to market licensed products and to continue active, diligent development and marketing efforts for licensedproducts during the term of the agreement. We have assumed certain milestones with respect to raising capital investment and regulatory progress. We mustreport on our progress on achieving these milestones on an annual basis.We may unilaterally terminate the license agreement upon six months’ notice to MIT. MIT may terminate the agreement if we cease to carry on ourbusiness, or in the event of our material breach which remains uncured after 90 days of receiving written notice of such breach (30 days in the case ofnonpayment). In the event the agreement is terminated, while the license grant would cease, we would retain a right to complete manufacture of any licensedproducts in process and sell then-existing inventory. In addition, MIT would grant our sublicensees a direct license following such termination. With respect tojointly owned intellectual property, any termination would allow MIT to grant licenses to any third party to such intellectual property, without our approval,unless a sublicensee was already in place, in which case, MIT would grant our sublicensees a direct license.Research Development FoundationIn December 2011, we entered into an exclusive license with RDF to use certain patents that involve lentiviral vectors. The RDF licensed patent portfolioincludes at least 14 U.S. and foreign patents and patent applications. Any patents within this portfolio that have issued or may yet issue would have anexpected statutory expiration date of 2021 or 2022. RDF retains the right, on behalf of itself and other nonprofit academic research institutions, to practice anduse the licensed patents for any academic, non-clinical research and educational purposes. We have the right to grant sublicenses outright to third parties underthe agreement.Upon commercialization of our products covered by the in-licensed intellectual property, which we expect would include both our Lenti-D andLentiGlobin product candidates, we are obligated to pay RDF a percentage of net sales as a royalty. This royalty is in the low single digits and is reduced byhalf if during the following ten years from the first marketing approval the last valid claim within the licensed patent that covers the licensed product expires orends.We are required to use commercially reasonable and diligent efforts for a company of our size and resources to develop or commercialize one or morelicensed products, including our first licensed product by 2016 and a second licensed product by 2018. These diligence efforts include minimum annualroyalty payments to RDF, which are creditable against earned royalties otherwise due to RDF, and payments upon regulatory milestones. 36Table of ContentsRDF may terminate the agreement in the event of our material breach which remains uncured after 90 days of receiving written notice of such breach (30days in the case of nonpayment) or in the event we become bankrupt, our business or assets or property are placed in the hands of a receiver, assignee ortrustee, we institute or suffer to be instituted any procedure in bankruptcy court for reorganization or rearrangement of our financial affairs, make a generalassignment for the benefit of creditors, or if we or an affiliate or a sublicensee institutes any procedure challenging the validity or patentability of any patent orpatent application within the licensed patents, the agreement will immediately terminate.Absent early termination, the agreement will continue until its expiration upon the later of there being no more valid claims within the licensed patents orthe expiration of our royalty obligations on licensed products that are subject to an earned royalty, if such earned royalty is based on the minimum 10-yearroyalty period described above. In the event the agreement is terminated, while the license grant would cease, RDF will grant our sublicensees a direct license.The longest lived patent rights licensed to us under the agreement are in one U.S. patent currently expected to expire in 2025.CompetitionThe biotechnology and pharmaceutical industries are characterized by intense and rapidly changing competition to develop new technologies andproprietary products. While we believe that our proprietary asset estate and scientific expertise in the gene therapy field provide us with competitive advantages,we face potential competition from many different sources, including larger and better-funded pharmaceutical companies. Not only must we compete withother companies that are focused on gene therapy products but any products that we may commercialize will have to compete with existing therapies and newtherapies that may become available in the future.There are other organizations working to improve existing therapies or to develop new therapies for our initially selected indications. Depending on howsuccessful these efforts are, it is possible they may increase the barriers to adoption and success for our Lenti-D and LentiGlobin product candidates, ifapproved. These efforts include the following: • CCALD: The current standard of care for the treatment of CCALD is allogeneic HSCT. We understand that various academic centers around theworld are seeking to develop improvements to allogeneic HSCT. In addition, some physicians recommend glyceryl trierucate—better known asLorenzo’s Oil—to patients diagnosed with ALD or AMN. However, Lorenzo’s Oil has not been clinically proven to address the cerebral symptomsof ALD, and has not been approved by any major regulatory agency as a prescription drug. There are efforts underway to obtain FDA approvalfor Lorenzo’s Oil as a prescription drug. We are also aware of some early-stage, preclinical efforts in academic centers to investigate the use of anti-oxidants for patients with AMN. • ß-thalassemia: The current standard of care for the treatment of ß-thalassemia in the developed world is chronic blood transfusions to addressthe patient’s anemia. In addition, such patients often receive iron chelation therapy to help manage the iron overload associated with their chronicblood transfusions. We understand that established biopharmaceutical companies, such as Novartis AG and ApoPharma Inc., who provide theleading iron chelation therapy, are seeking to develop improvements to their product profile and accessibility. In addition, some patients with ß-thalassemia receive HCST treatment, particularly if a sufficiently well-matched source of donor cells is identified. We understand that variousacademic centers around the world are seeking to develop improvements to allogeneic HSCT. A number of different approaches are underinvestigation to improve treatment options, including iron modulating agents and fetal hemoglobin regulators. There are also several differentgroups developing gene therapy approaches for ß-thalassemia. Some of these groups use a similar ex vivo autologous approach, but make use ofdifferent vectors and different cell processing techniques. These include: Memorial Sloan Kettering, which received approval for its IND in 2012,and is actively recruiting for a Phase I/II gene therapy study; GlaxoSmithKline Plc, which has entered into an 37Table of Contents agreement with the San Raffaele Telethon Institute for Gene Therapy to advance several gene therapy programs, including one for ß-thalassemia,although to our knowledge no clinical studies have been initiated; and Sangamo BioSciences Inc., through its partnership with Biogen Idec,which has announced plans to investigate the use of zinc finger nuclease-mediated gene-correction techniques in hemoglobinopathies including ß-thalassemia, although to our knowledge no clinical studies have been initiated. • Sickle cell disease: The current standard of care for the treatment of SCD in the developed world is chronic blood transfusions or hydroxyurea (ageneric drug). In addition, such patients often receive iron chelation therapy to help manage the iron overload associated with chronic bloodtransfusions. We are aware of ongoing studies that continue to evaluate the efficacy and safety of hydroxyurea in various populations, and it canbe assumed that the data from these studies will influence future utilization of this therapeutic modality. In addition, some patients with SCDreceive allogeneic HSCT treatment, particularly if a sufficiently well-matched source of donor cells is identified. We understand that variousacademic centers around the world are seeking to develop improvements to allogeneic HSCT. There is also considerable interest from academiccenters and biopharmaceutical companies to develop new therapies for SCD. A number of different approaches are under investigation, targetingthe various aspects of SCD pathophysiology, including: fetal hemoglobin regulators, including HQK-1001 in Phase II studies supported byHemaQuest Pharmaceuticals Inc., and Vorinostat in Phase II studies supported by Merck & Co.; and pan-selectin inhibitors, including GMI-1070in Phase II studies supported by GlycoMimetics Inc. (in 2011, Pfizer Inc. and GlycoMimetics Inc. entered a global collaboration to advance thiscompound). There are also several different groups developing gene therapy approaches for SCD. Some of these groups use a similar ex vivoautologous approach, but make use of different vectors and different cell processing techniques. These include: UCLA, which has receivedfunding from the California Institute of Regenerative Medicine to pursue a Phase I/II gene therapy study for SCD, although to our knowledge noclinical studies have been initiated and Sangamo BioSciences Inc., through its partnership with Biogen Idec, which has announced plans toinvestigate the use of zinc finger nuclease-mediated gene-correction techniques in hemoglobinopathies including SCD, although to our knowledgeno clinical studies have been initiated.Many of our competitors, either alone or with their strategic partners, have substantially greater financial, technical and human resources than we doand significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of treatments andthe commercialization of those treatments. Accordingly, our competitors may be more successful than us in obtaining approval for treatments and achievingwidespread market acceptance. Our competitors’ treatments may be more effective, or more effectively marketed and sold, than any treatment we maycommercialize and may render our treatments obsolete or non-competitive before we can recover the expenses of developing and commercializing any of ourtreatments.Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among a smallernumber of our competitors. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishingclinical study sites and patient registration for clinical studies, as well as in acquiring technologies complementary to, or necessary for, our programs. Smalleror early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. We expectany treatments that we develop and commercialize to compete on the basis of, among other things, efficacy, safety, convenience of administration and delivery,price, the level of generic competition and the availability of reimbursement from government and other third-party payors. 38Table of ContentsOur commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, havefewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA orother regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strongmarket position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-partypayors seeking to encourage the use of generic products. If our therapeutic product candidates are approved, we expect that they will be priced at a significantpremium over competitive generic products.Government regulationBiological products, including gene therapy products, are subject to regulation under the Federal Food, Drug, and Cosmetic Act, or FD&C Act, and thePublic Health Service Act, or PHS Act, and other federal, state, local and foreign statutes and regulations. Both the FD&C Act and the PHS Act and theircorresponding regulations govern, among other things, the testing, manufacturing, safety, efficacy, labeling, packaging, storage, record keeping, distribution,reporting, advertising and other promotional practices involving biological products. FDA approval must be obtained before clinical testing of biologicalproducts, and each clinical study protocol for a gene therapy product is reviewed by the FDA and, in some instances, the NIH, through its RAC. FDAapproval also must be obtained before marketing of biological products. The process of obtaining regulatory approvals and the subsequent compliance withappropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources and we may not be ableto obtain the required regulatory approvals.Within the FDA, the CBER regulates gene therapy products. The CBER works closely with the NIH and its RAC, which makes recommendations tothe NIH on gene therapy issues and engages in a public discussion of scientific, safety, ethical and societal issues related to proposed and ongoing gene therapyprotocols. The FDA and the NIH have published guidance documents with respect to the development and submission of gene therapy protocols. The FDAalso has published guidance documents related to, among other things, gene therapy products in general, their preclinical assessment, observing subjectsinvolved in gene therapy studies for delayed adverse events, potency testing, and chemistry, manufacturing and control information in gene therapy INDs.Ethical, social and legal concerns about gene therapy, genetic testing and genetic research could result in additional regulations restricting or prohibitingthe processes we may use. Federal and state agencies, congressional committees and foreign governments have expressed interest in further regulatingbiotechnology. More restrictive regulations or claims that our products are unsafe or pose a hazard could prevent us from commercializing any products. Newgovernment requirements may be established that could delay or prevent regulatory approval of our product candidates under development. It is impossible topredict whether legislative changes will be enacted, regulations, policies or guidance changed, or interpretations by agencies or courts changed, or what theimpact of such changes, if any, may be.U.S. biological products development processThe process required by the FDA before a biological product may be marketed in the United States generally involves the following: • completion of nonclinical laboratory tests and animal studies according to good laboratory practices, or GLPs, and applicable requirements for thehumane use of laboratory animals or other applicable regulations; • submission to the FDA of an application for an IND, which must become effective before human clinical studies may begin; • performance of adequate and well-controlled human clinical studies according to the FDA’s regulations commonly referred to as good clinicalpractices, or GCPs, and any additional requirements 39Table of Contents for the protection of human research subjects and their health information, to establish the safety and efficacy of the proposed biological productfor its intended use; • submission to the FDA of a Biologics License Application, or BLA, for marketing approval that includes substantive evidence of safety, purity,and potency from results of nonclinical testing and clinical studies; • satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced to assesscompliance with GMP, to assure that the facilities, methods and controls are adequate to preserve the biological product’s identity, strength,quality and purity and, if applicable, the FDA’s current good tissue practices, or GTPs, for the use of human cellular and tissue products; • potential FDA audit of the nonclinical and clinical study sites that generated the data in support of the BLA; and • FDA review and approval, or licensure, of the BLA.Before testing any biological product candidate, including a gene therapy product, in humans, the product candidate enters the preclinical testing stage.Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as animalstudies to assess the potential safety and activity of the product candidate. The conduct of the preclinical tests must comply with federal regulations andrequirements including GLPs.Where a gene therapy study is conducted at, or sponsored by, institutions receiving NIH funding for recombinant DNA research, prior to thesubmission of an IND to the FDA, a protocol and related documentation is submitted to and the study is registered with the NIH Office of BiotechnologyActivities, or OBA, pursuant to the NIH Guidelines for Research Involving Recombinant DNA Molecules, or NIH Guidelines. Compliance with the NIHGuidelines is mandatory for investigators at institutions receiving NIH funds for research involving recombinant DNA, however many companies and otherinstitutions not otherwise subject to the NIH Guidelines voluntarily follow them. The NIH is responsible for convening the RAC, a federal advisory committee,that discusses protocols that raise novel or particularly important scientific, safety or ethical considerations at one of its quarterly public meetings. The OBAwill notify the FDA of the RAC’s decision regarding the necessity for full public review of a gene therapy protocol. RAC proceedings and reports are posted tothe OBA web site and may be accessed by the public.The clinical study sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any availableclinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. Some preclinical testing may continue even after the IND issubmitted. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA places the clinical study on a clinical hold within that30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin. With genetherapy protocols, if the FDA allows the IND to proceed, but the RAC decides that full public review of the protocol is warranted, the FDA will request at thecompletion of its IND review that sponsors delay initiation of the protocol until after completion of the RAC review process. The FDA may also impose clinicalholds on a biological product candidate at any time before or during clinical studies due to safety concerns or non-compliance. If the FDA imposes a clinicalhold, studies may not recommence without FDA authorization and then only under terms authorized by the FDA. Accordingly, we cannot be sure thatsubmission of an IND will result in the FDA allowing clinical studies to begin, or that, once begun, issues will not arise that suspend or terminate suchstudies.Clinical studies involve the administration of the biological product candidate to healthy volunteers or patients under the supervision of qualifiedinvestigators, generally physicians not employed by or under the study sponsor’s control. Clinical studies are conducted under protocols detailing, amongother things, the objectives of the clinical study, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to 40Table of Contentsmonitor subject safety, including stopping rules that assure a clinical study will be stopped if certain adverse events should occur. Each protocol and anyamendments to the protocol must be submitted to the FDA as part of the IND. Clinical studies must be conducted and monitored in accordance with the FDA’sregulations comprising the GCP requirements, including the requirement that all research subjects provide informed consent. Further, each clinical study mustbe reviewed and approved by an independent institutional review board, or IRB, at or servicing each institution at which the clinical study will be conducted.An IRB is charged with protecting the welfare and rights of study participants and considers such items as whether the risks to individuals participating inthe clinical studies are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consentthat must be signed by each clinical study subject or his or her legal representative and must monitor the clinical study until completed. Clinical studies alsomust be reviewed by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees basic and clinical researchconducted at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the environment.Human clinical studies are typically conducted in three sequential phases that may overlap or be combined: • Phase I. The biological product is initially introduced into healthy human subjects and tested for safety. In the case of some products for severe orlife-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial humantesting is often conducted in patients. • Phase II. The biological product is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarilyevaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing schedule. • Phase III. Clinical studies are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patient population atgeographically dispersed clinical study sites. These clinical studies are intended to establish the overall risk/benefit ratio of the product andprovide an adequate basis for product labeling.Post-approval clinical studies, sometimes referred to as Phase IV clinical studies, may be conducted after initial marketing approval. These clinicalstudies are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up.The FDA recommends that sponsors observe subjects for potential gene therapy-related delayed adverse events for a 15-year period, including a minimum offive years of annual examinations followed by ten years of annual queries, either in person or by questionnaire, of study subjects.During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, andclinical study investigators. Annual progress reports detailing the results of the clinical studies must be submitted to the FDA. Written IND safety reports mustbe promptly submitted to the FDA, the NIH and the investigators for serious and unexpected adverse events, any findings from other studies, tests inlaboratory animals or in vitro testing that suggest a significant risk for human subjects, or any clinically important increase in the rate of a serious suspectedadverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after thesponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspectedadverse reaction within seven calendar days after the sponsor’s initial receipt of the information. Phase I, Phase II and Phase III clinical studies may not becompleted successfully within any specified period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend a clinical study at anytime on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB cansuspend or terminate approval of a clinical study at its institution if the clinical study is not being conducted in accordance with the IRB’s requirements or ifthe biological product has been associated with unexpected serious harm to patients. 41Table of ContentsHuman gene therapy products are a new category of therapeutics. Because this is a relatively new and expanding area of novel therapeutic interventions,there can be no assurance as to the length of the study period, the number of patients the FDA will require to be enrolled in the studies in order to establish thesafety, efficacy, purity and potency of human gene therapy products, or that the data generated in these studies will be acceptable to the FDA to supportmarketing approval. The NIH and the FDA have a publicly accessible database, the Genetic Modification Clinical Research Information System whichincludes information on gene transfer studies and serves as an electronic tool to facilitate the reporting and analysis of adverse events on these studies.Concurrent with clinical studies, companies usually complete additional animal studies and must also develop additional information about thephysical characteristics of the biological product as well as finalize a process for manufacturing the product in commercial quantities in accordance with GMPrequirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHS Act emphasizes the importance ofmanufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producingquality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality, potency andpurity of the final biological product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstratethat the biological product candidate does not undergo unacceptable deterioration over its shelf life.U.S. review and approval processesAfter the completion of clinical studies of a biological product, FDA approval of a BLA, must be obtained before commercial marketing of the biologicalproduct. The BLA must include results of product development, laboratory and animal studies, human studies, information on the manufacture andcomposition of the product, proposed labeling and other relevant information. In addition, under the Pediatric Research Equity Act, or PREA, a BLA orsupplement to a BLA must contain data to assess the safety and effectiveness of the biological product for the claimed indications in all relevant pediatricsubpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may grantdeferrals for submission of data or full or partial waivers. Unless otherwise required by regulation, PREA does not apply to any biological product for anindication for which orphan designation has been granted. The testing and approval processes require substantial time and effort and there can be noassurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely basis, if at all.Under the Prescription Drug User Fee Act, or PDUFA, as amended, each BLA must be accompanied by a user fee. The FDA adjusts the PDUFA userfees on an annual basis. According to the FDA’s fee schedule, effective through September 30, 2014, the user fee for an application requiring clinical data,such as a BLA, is $2,169,100. PDUFA also imposes an annual product fee for biologics ($104,060) and an annual establishment fee ($554,600) onfacilities used to manufacture prescription biologics. Fee waivers or reductions are available in certain circumstances, including a waiver of the application feefor the first application filed by a small business. Additionally, no user fees are assessed on BLAs for products designated as orphan drugs, unless theproduct also includes a non-orphan indication.Within 60 days following submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before the agencyaccepts it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may requestadditional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application also is subject to reviewbefore the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review of the BLA. The FDA reviewsthe BLA to determine, among other things, whether the proposed product is safe and potent, or effective, for its intended use, and has an acceptable purityprofile, and whether the product is being manufactured in accordance with GMP to assure and preserve the product’s identity, safety, strength, quality,potency and purity. The FDA may refer applications for novel biological products or biological products that present difficult questions of safety or efficacy toan advisory 42Table of Contentscommittee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should beapproved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendationscarefully when making decisions. During the biological product approval process, the FDA also will determine whether a Risk Evaluation and MitigationStrategy, or REMS, is necessary to assure the safe use of the biological product. If the FDA concludes a REMS is needed, the sponsor of the BLA mustsubmit a proposed REMS; the FDA will not approve the BLA without a REMS, if required.Before approving a BLA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless itdetermines that the manufacturing processes and facilities are in compliance with GMP requirements and adequate to assure consistent production of theproduct within required specifications. For a gene therapy product, the FDA also will not approve the product if the manufacturer is not in compliance with theGTPs. These are FDA regulations that govern the methods used in, and the facilities and controls used for, the manufacture of human cells, tissues, andcellular and tissue based products, or HCT/Ps, which are human cells or tissue intended for implantation, transplant, infusion, or transfer into a humanrecipient. The primary intent of the GTP requirements is to ensure that cell and tissue based products are manufactured in a manner designed to prevent theintroduction, transmission and spread of communicable disease. FDA regulations also require tissue establishments to register and list their HCT/Ps with theFDA and, when applicable, to evaluate donors through screening and testing. Additionally, before approving a BLA, the FDA will typically inspect one ormore clinical sites to assure that the clinical studies were conducted in compliance with IND study requirements and GCP requirements. To assure GMP, GTPand GCP compliance, an applicant must incur significant expenditure of time, money and effort in the areas of training, record keeping, production, andquality control.Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteriafor approval and deny approval. Data obtained from clinical studies are not always conclusive and the FDA may interpret data differently than we interpret thesame data. If the agency decides not to approve the BLA in its present form, the FDA will issue a complete response letter that usually describes all of thespecific deficiencies in the BLA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, forexample, requiring additional clinical studies. Additionally, the complete response letter may include recommended actions that the applicant might take toplace the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the BLA, addressing all of thedeficiencies identified in the letter, or withdraw the application.If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings orprecautions be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in theform of a risk management plan, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical studies, sometimesreferred to as Phase IV clinical studies, designed to further assess a biological product’s safety and effectiveness, and testing and surveillance programs tomonitor the safety of approved products that have been commercialized.One of the performance goals agreed to by the FDA under the PDUFA is to review 90% of standard BLAs in 10 months and 90% of priority BLAs insix months, whereupon a review decision is to be made. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs and its reviewgoals are subject to change from time to time. The review process and the PDUFA goal date may be extended by three months if the FDA requests or the BLAsponsor otherwise provides additional information or clarification regarding information already provided in the submission within the last three monthsbefore the PDUFA goal date. 43Table of ContentsOrphan drug designationUnder the Orphan Drug Act, the FDA may grant orphan designation to a drug or biological product intended to treat a rare disease or condition, which isgenerally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and forwhich there is no reasonable expectation that the cost of developing and making a drug or biological product available in the United States for this type ofdisease or condition will be recovered from sales of the product. Orphan product designation must be requested before submitting an NDA or BLA. After theFDA grants orphan product designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan productdesignation does not convey any advantage in or shorten the duration of the regulatory review and approval process.If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, theproduct is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug or biologicalproduct for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphanexclusivity. Competitors, however, may receive approval of different products for the indication for which the orphan product has exclusivity or obtainapproval for the same product but for a different indication for which the orphan product has exclusivity. Orphan product exclusivity also could block theapproval of one of our products for seven years if a competitor obtains approval of the same biological product as defined by the FDA or if our productcandidate is determined to be contained within the competitor’s product for the same indication or disease. If a drug or biological product designated as anorphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan product exclusivity. Orphandrug status in the European Union has similar, but not identical, benefits.Expedited development and review programsThe FDA has a Fast Track program that is intended to expedite or facilitate the process for reviewing new drugs and biological products that meet certaincriteria. Specifically, new drugs and biological products are eligible for Fast Track designation if they are intended to treat a serious or life-threateningcondition and demonstrate the potential to address unmet medical needs for the condition. Fast Track designation applies to the combination of the product andthe specific indication for which it is being studied. The sponsor of a new drug or biologic may request the FDA to designate the drug or biologic as a FastTrack product at any time during the clinical development of the product. Unique to a Fast Track product, the FDA may consider for review sections of themarketing application on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections ofthe application, the FDA agrees to accept sections of the application and determines that the schedule is acceptable, and the sponsor pays any required userfees upon submission of the first section of the application.Any product submitted to the FDA for marketing, including under a Fast Track program, may be eligible for other types of FDA programs intended toexpedite development and review, such as priority review and accelerated approval. Under the Breakthrough Therapy program, products intended to treat aserious or life-threatening disease or condition may be eligible for the benefits of the Fast Track program when preliminary clinical evidence demonstrates thatsuch product may have substantial improvement on one or more clinically significant endpoints over existing therapies. Additionally, FDA will seek to ensurethe sponsor of a breakthrough therapy product receives timely advice and interactive communications to help the sponsor design and conduct a developmentprogram as efficiently as possible. Any product is eligible for priority review if it has the potential to provide safe and effective therapy where no satisfactoryalternative therapy exists or a significant improvement in the treatment, diagnosis or prevention of a disease compared to marketed products. The FDA willattempt to direct additional resources to the evaluation of an application for a new drug or biological product designated for priority review in an effort tofacilitate the review. Additionally, a product may be eligible for accelerated approval. Drug or biological products studied for their safety and effectiveness intreating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive 44Table of Contentsaccelerated approval, which means that they may be approved on the basis of adequate and well-controlled clinical studies establishing that the product has aneffect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on a clinical endpoint other than survival orirreversible morbidity. As a condition of approval, the FDA may require that a sponsor of a drug or biological product receiving accelerated approval performadequate and well-controlled post-marketing clinical studies. In addition, the FDA currently requires as a condition for accelerated approval pre-approval ofpromotional materials, which could adversely impact the timing of the commercial launch of the product. Fast Track designation, Breakthrough Therapydesignation, priority review and accelerated approval do not change the standards for approval but may expedite the development or approval process.Post-approval requirementsMaintaining substantial compliance with applicable federal, state, and local statutes and regulations requires the expenditure of substantial time andfinancial resources. Rigorous and extensive FDA regulation of biological products continues after approval, particularly with respect to GMP. We will rely, andexpect to continue to rely, on third parties for the production of clinical and commercial quantities of any products that we may commercialize. Manufacturersof our products are required to comply with applicable requirements in the GMP regulations, including quality control and quality assurance and maintenanceof records and documentation. Other post-approval requirements applicable to biological products, include reporting of GMP deviations that may affect theidentity, potency, purity and overall safety of a distributed product, record-keeping requirements, reporting of adverse effects, reporting updated safety andefficacy information, and complying with electronic record and signature requirements. After a BLA is approved, the product also may be subject to officiallot release. As part of the manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it is released fordistribution. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA together with a releaseprotocol showing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot. The FDA also mayperform certain confirmatory tests on lots of some products, such as viral vaccines, before releasing the lots for distribution by the manufacturer. In addition,the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness of biological products.We also must comply with the FDA’s advertising and promotion requirements, such as those related to direct-to-consumer advertising, the prohibition onpromoting products for uses or in patient populations that are not described in the product’s approved labeling (known as “off-label use”), industry-sponsoredscientific and educational activities, and promotional activities involving the internet. Discovery of previously unknown problems or the failure to complywith the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the market as well aspossible civil or criminal sanctions. Failure to comply with the applicable U.S. requirements at any time during the product development process, approvalprocess or after approval, may subject an applicant or manufacturer to administrative or judicial civil or criminal sanctions and adverse publicity. FDAsanctions could include refusal to approve pending applications, withdrawal of an approval, clinical hold, warning or untitled letters, product recalls, productseizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, mandated corrective advertising orcommunications with doctors, debarment, restitution, disgorgement of profits, or civil or criminal penalties. Any agency or judicial enforcement action couldhave a material adverse effect on us.Biological product manufacturers and other entities involved in the manufacture and distribution of approved biological products are required to registertheir establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies forcompliance with GMPs and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and qualitycontrol to maintain GMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder ofan approved BLA, including withdrawal of the product from the market. In addition, changes to the manufacturing process or facility generally require priorFDA approval 45Table of Contentsbefore being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims, are also subjectto further FDA review and approval.U.S. patent term restoration and marketing exclusivityDepending upon the timing, duration and specifics of the FDA approval of the use of our product candidates, some of our U.S. patents may be eligiblefor limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-WaxmanAmendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during productdevelopment and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 yearsfrom the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and the submission dateof a BLA plus the time between the submission date of a BLA and the approval of that application. Only one patent applicable to an approved biologicalproduct is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The U.S. PTO, in consultationwith the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we may intend to apply for restoration of patentterm for one of our currently owned or licensed patents to add patent life beyond its current expiration date, depending on the expected length of the clinicalstudies and other factors involved in the filing of the relevant BLA.A biological product can obtain pediatric market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existingexclusivity periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted basedon the voluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study.The Patient Protection and Affordable Care Act, or Affordable Care Act, signed into law on March 23, 2010, includes a subtitle called the Biologics PriceCompetition and Innovation Act of 2009 which created an abbreviated approval pathway for biological products shown to be similar to, or interchangeablewith, an FDA-licensed reference biological product. This amendment to the PHS Act attempts to minimize duplicative testing. Biosimilarity, which requiresthat there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency, can beshown through analytical studies, animal studies, and a clinical study or studies. Interchangeability requires that a product is biosimilar to the referenceproduct and the product must demonstrate that it can be expected to produce the same clinical results as the reference product and, for products administeredmultiple times, the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks ofdiminished efficacy relative to exclusive use of the reference biologic. However, complexities associated with the larger, and often more complex, structure ofbiological products, as well as the process by which such products are manufactured, pose significant hurdles to implementation that are still being workedout by the FDA.A reference biologic is granted twelve years of exclusivity from the time of first licensure of the reference product. On April 10, 2013, President Obamareleased his proposed budget for fiscal year 2014 and proposed to cut this twelve-year period of exclusivity down to seven years. He also proposed to prohibitadditional periods of exclusivity for brand biologics due to minor changes in product formulations, a practice often referred to as “evergreening.” The firstbiologic product submitted under the abbreviated approval pathway that is determined to be interchangeable with the reference product has exclusivity againstother biologics submitting under the abbreviated approval pathway for the lesser of (i) one year after the first commercial marketing, (ii) 18 months afterapproval if there is no legal challenge, (iii) 18 months after the resolution in the applicant’s favor of a lawsuit challenging the biologics’ patents if anapplication has been submitted, or (iv) 42 months after the application has been approved if a lawsuit is ongoing within the 42-month period.Additional regulationIn addition to the foregoing, state and federal laws regarding environmental protection and hazardous substances, including the Occupational Safety andHealth Act, the Resource Conservancy and Recovery Act and 46Table of Contentsthe Toxic Substances Control Act, affect our business. These and other laws govern our use, handling and disposal of various biological, chemical andradioactive substances used in, and wastes generated by, our operations. If our operations result in contamination of the environment or expose individuals tohazardous substances, we could be liable for damages and governmental fines. We believe that we are in material compliance with applicable environmentallaws and that continued compliance therewith will not have a material adverse effect on our business. We cannot predict, however, how changes in these lawsmay affect our future operations.U.S. Foreign Corrupt Practices ActThe U.S. Foreign Corrupt Practices Act, to which we are subject, prohibits corporations and individuals from engaging in certain activities to obtain orretain business or to influence a person working in an official capacity. It is illegal to pay, offer to pay or authorize the payment of anything of value to anyforeign government official, government staff member, political party or political candidate in an attempt to obtain or retain business or to otherwise influence aperson working in an official capacity.Government regulation outside of the United StatesIn addition to regulations in the United States, we will be subject to a variety of regulations in other jurisdictions governing, among other things, clinicalstudies and any commercial sales and distribution of our products. Because biologically sourced raw materials are subject to unique contamination risks,their use may be restricted in some countries.Whether or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to thecommencement of clinical studies or marketing of the product in those countries. Certain countries outside of the United States have a similar process thatrequires the submission of a clinical study application much like the IND prior to the commencement of human clinical studies. In the European Union, forexample, a CTA must be submitted to each country’s national health authority and an independent ethics committee, much like the FDA and the IRB,respectively. Once the CTA is approved in accordance with a country’s requirements, clinical study development may proceed.The requirements and process governing the conduct of clinical studies, product licensing, pricing and reimbursement vary from country to country. Inall cases, the clinical studies are conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their originin the Declaration of Helsinki.To obtain regulatory approval of an investigational biological product under European Union regulatory systems, we must submit a marketingauthorization application. The application used to file the BLA in the United States is similar to that required in the European Union, with the exception of,among other things, country-specific document requirements. The European Union also provides opportunities for market exclusivity. For example, in theEuropean Union, upon receiving marketing authorization, new chemical entities generally receive eight years of data exclusivity and an additional two years ofmarket exclusivity. If granted, data exclusivity prevents regulatory authorities in the European Union from referencing the innovator’s data to assess a genericapplication. During the additional two-year period of market exclusivity, a generic marketing authorization can be submitted, and the innovator’s data may bereferenced, but no generic product can be marketed until the expiration of the market exclusivity. However, there is no guarantee that a product will beconsidered by the European Union’s regulatory authorities to be a new chemical entity, and products may not qualify for data exclusivity. Products receivingorphan designation in the European Union can receive ten years of market exclusivity, during which time no similar medicinal product for the same indicationmay be placed on the market. An orphan product can also obtain an additional two years of market exclusivity in the European Union for pediatric studies.No extension to any supplementary protection certificate can be granted on the basis of pediatric studies for orphan indications. 47Table of ContentsThe criteria for designating an “orphan medicinal product” in the European Union are similar in principle to those in the United States. Under Article 3of Regulation (EC) 141/2000, a medicinal product may be designated as orphan if (1) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in the European Union when theapplication is made, or (b) the product, without the benefits derived from orphan status, would not generate sufficient return in the European Union to justifyinvestment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EuropeanUnion, or if such a method exists, the product will be of significant benefit to those affected by the condition, as defined in Regulation (EC) 847/2000. Orphanmedicinal products are eligible for financial incentives such as reduction of fees or fee waivers and are, upon grant of a marketing authorization, entitled to tenyears of market exclusivity for the approved therapeutic indication. The application for orphan drug designation must be submitted before the application formarketing authorization. The applicant will receive a fee reduction for the marketing authorization application if the orphan drug designation has been granted,but not if the designation is still pending at the time the marketing authorization is submitted. Orphan drug designation does not convey any advantage in, orshorten the duration of, the regulatory review and approval process.The 10-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the product no longer meets the criteriafor orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, marketingauthorization may be granted to a similar product for the same indication at any time if: • The second applicant can establish that its product, although similar, is safer, more effective or otherwise clinically superior; • The applicant consents to a second orphan medicinal product application; or • The applicant cannot supply enough orphan medicinal product.For other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conductof clinical studies, product licensing, pricing and reimbursement vary from country to country. In all cases, again, the clinical studies are conducted inaccordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal ofregulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.FacilitiesOur corporate headquarters are located in Cambridge, Massachusetts. On June 3, 2013, we entered into a lease for our new corporate headquarters,which encompasses approximately 43,600 square feet of office, research and development and laboratory space, located at 150 Second Street, Cambridge,Massachusetts. In December 2013, the construction was completed and we moved into the facility.As a result of our decision to relocate our corporate headquarters, we vacated our old facility in the first quarter of 2014, prior to the expiration of ourlease of 840 Memorial Drive, Cambridge, Massachusetts.EmployeesAs of December 31, 2013, we had 87 full-time employees, 26 of whom have Ph.D. or M.D. degrees. Of these full-time employees, 66 employees areengaged in research and development activities and 21 employees are engaged in finance, legal, human resources, facilities and general management. We haveno collective bargaining agreements with our employees and we have not experienced any work stoppages. We consider our relations with our employees to begood. 48Table of ContentsCorporate InformationWe were incorporated in Delaware in April 1992 under the name Genetix Pharmaceuticals, Inc., and subsequently changed our name to bluebird bio,Inc. in September 2010. We completed our initial public offering of our common stock in June 2013. Our mailing address and executive offices are located at150 Second Street, Cambridge, Massachusetts and our telephone number at that address is (339) 499-9300. We maintain an Internet website at the followingaddress: www.bluebirdbio.com. The information on our website is not incorporated by reference in this annual report on Form 10-K or in any other filings wemake with the Securities and Exchange Commission, or SEC.We make available on or through our website certain reports and amendments to those reports that we file with or furnish to the SEC in accordance withthe Securities Exchange Act of 1934, as amended. These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q, and our currentreports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. We make this informationavailable on or through our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC.Item 1A. Risk FactorsAn investment in shares of our common stock involves a high degree of risk. You should carefully consider the following information about theserisks, together with the other information appearing elsewhere in this Annual Report on Form 10-K, including our financial statements and relatednotes hereto, before deciding to invest in our common stock. The occurrence of any of the following risks could have a material adverse effect on ourbusiness, financial condition, results of operations and future growth prospects. In these circumstances, the market price of our common stock coulddecline, and you may lose all or part of your investment.Risks related to our financial condition and capital requirementsWe have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.We are a clinical-stage biotechnology company, and we have not yet generated significant revenues. We have incurred net losses in each year since ourinception in 1992, including net losses of $25.3 million and $23.7 million for the years ended December 31, 2013 and 2012, respectively. As ofDecember 31, 2013, we had an accumulated deficit of $98.7 million.We have devoted most of our financial resources to research and development, including our clinical and preclinical development activities. To date, wehave financed our operations primarily through the sale of equity securities and convertible debt and, to a lesser extent, through grants from governmentalagencies and charitable foundations. The amount of our future net losses will depend, in part, on the rate of our future expenditures and our ability to obtainfunding through equity or debt financings, strategic collaborations or additional grants. We have not completed pivotal clinical studies for any productcandidate and it will be several years, if ever, before we have a product candidate ready for commercialization. Even if we obtain regulatory approval to marketa product candidate, our future revenues will depend upon the size of any markets in which our product candidates have received approval, and our ability toachieve sufficient market acceptance, reimbursement from third-party payors and adequate market share for our product candidates in those markets.We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will increasesubstantially if and as we: • continue our research and preclinical and clinical development of our product candidates; • expand the scope of our current clinical studies for our product candidates; 49Table of Contents • initiate additional preclinical, clinical or other studies for our product candidates, including under our collaboration agreement with CelgeneCorporation; • further develop the manufacturing process for our vectors or our product candidates; • change or add additional manufacturers or suppliers; • seek regulatory and marketing approvals for our product candidates that successfully complete clinical studies; • establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval; • seek to identify and validate additional product candidates; • acquire or in-license other product candidates and technologies; • make milestone or other payments under any in-license agreements; • maintain, protect and expand our intellectual property portfolio; • attract and retain skilled personnel; • create additional infrastructure to support our operations as a public company and our product development and planned future commercializationefforts; and • experience any delays or encounter issues with any of the above.The net losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results ofoperations may not be a good indication of our future performance. In any particular quarter or quarters, our operating results could be below the expectationsof securities analysts or investors, which could cause our stock price to decline.We have never generated any revenue from product sales and may never be profitable.Our ability to generate revenue and achieve profitability depends on our ability, alone or with strategic collaboration partners, to successfully completethe development of, and obtain the regulatory approvals necessary to commercialize our product candidates. We do not anticipate generating revenues fromproduct sales for the foreseeable future, if ever. Our ability to generate future revenues from product sales depends heavily on our success in: • completing research and preclinical and clinical development of our product candidates; • seeking and obtaining regulatory and marketing approvals for product candidates for which we complete clinical studies; • developing a sustainable, scalable, reproducible, and transferable manufacturing process for our vectors and product candidates; • establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate (in amount and quality)products and services to support clinical development and the market demand for our product candidates, if approved; • launching and commercializing product candidates for which we obtain regulatory and marketing approval, either by collaborating with a partneror, if launched independently, by establishing a sales force, marketing and distribution infrastructure; • obtaining market acceptance of our product candidates and gene therapy as a viable treatment option; • addressing any competing technological and market developments; • implementing additional internal systems and infrastructure, as needed; 50Table of Contents • identifying and validating new gene therapy product candidates; • negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter; • maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; and • attracting, hiring and retaining qualified personnel.Even if one or more of the product candidates that we develop is approved for commercial sale, we anticipate incurring significant costs associated withcommercializing any approved product candidate. Our expenses could increase beyond expectations if we are required by the U.S. Food and DrugAdministration, or the FDA, the European Medicines Agency, or the EMA, or other regulatory agencies, domestic or foreign, to perform clinical and otherstudies in addition to those that we currently anticipate. Even if we are able to generate revenues from the sale of any approved products, we may not becomeprofitable and may need to obtain additional funding to continue operations.From time to time, we will need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain thisnecessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.We are currently advancing our Lenti-D and LentiGlobin product candidates through clinical development and other product candidates throughpreclinical development. Developing gene therapy products is expensive, and we expect our research and development expenses to increase substantially inconnection with our ongoing activities, particularly as we advance our product candidates in clinical studies.As of December 31, 2013, our cash and cash equivalents were $206.3 million. We expect that our existing cash and cash equivalents will be sufficientto fund our current operations through at least the end of 2015. However, our operating plan may change as a result of many factors currently unknown to us,and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, government or other third-party funding,marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or a combination of these approaches. In anyevent, we will require additional capital to obtain regulatory approval for, and to commercialize, our product candidates. Raising funds in the current economicenvironment may present additional challenges. Even if we believe we have sufficient funds for our current or future operating plans, we may seek additionalcapital if market conditions are favorable or if we have specific strategic considerations.Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop andcommercialize our product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable tous, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities,whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of additional equity orconvertible securities would dilute all of our stockholders. The incurrence of indebtedness would result in increased fixed payment obligations and we may berequired to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or licenseintellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also be required to seekfunds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable and we may be required to relinquishrights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on ourbusiness, operating results and prospects. 51Table of ContentsIf we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or more of our research ordevelopment programs or the commercialization of any product candidates or be unable to expand our operations or otherwise capitalize on our businessopportunities, as desired, which could materially affect our business, financial condition and results of operations.Risks related to the discovery and development of our product candidatesOur gene therapy product candidates are based on a novel technology, which makes it difficult to predict the time and cost of product candidatedevelopment and subsequently obtaining regulatory approval. At the moment, no gene therapy products have been approved in the United Statesand only one product has been approved in Europe.We have concentrated our therapeutic product research and development efforts on our gene therapy platform, and our future success depends on thesuccessful development of this therapeutic approach. There can be no assurance that any development problems we experience in the future related to our genetherapy platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experience delays indeveloping a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us fromcompleting our clinical studies or commercializing our products on a timely or profitable basis, if at all.In addition, the clinical study requirements of the FDA, the EMA and other regulatory agencies and the criteria these regulators use to determine thesafety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of the potential products.The regulatory approval process for novel product candidates such as ours can be more expensive and take longer than for other, better known or extensivelystudied pharmaceutical or other product candidates. At the moment, only one gene therapy product, UniQure’s Glybera, which received marketingauthorization from the EMA in 2012, has been approved in the Western world, which makes it difficult to determine how long it will take or how much it willcost to obtain regulatory approvals for our product candidates in either Europe or the United States. Approvals by the EMA may not be indicative of what theFDA may require for approval.Regulatory requirements governing gene and cell therapy products have evolved and may continue to change in the future. For example, the FDA hasestablished the Office of Cellular, Tissue and Gene Therapies within its Center for Biologics Evaluation and Research, or CBER, to consolidate the review ofgene therapy and related products, and the Cellular, Tissue and Gene Therapies Advisory Committee to advise CBER on its review. Gene therapy clinicalstudies conducted at institutions that receive funding for recombinant DNA research from the U.S. National Institutes of Health, or the NIH, are also subjectto review by the NIH Office of Biotechnology Activities’ Recombinant DNA Advisory Committee, or the RAC. Although the FDA decides whether individualgene therapy protocols may proceed, the RAC review process can impede the initiation of a clinical study, even if the FDA has reviewed the study andapproved its initiation. Conversely, the FDA can put an investigational new drug application, or IND, on clinical hold even if the RAC has provided afavorable review. Also, before a clinical study can begin at an NIH-funded institution, that institution’s institutional review board, or IRB, and its InstitutionalBiosafety Committee will have to review the proposed clinical study to assess the safety of the study. In addition, adverse developments in clinical trials ofgene therapy products conducted by others may cause the FDA or other regulatory bodies to change the requirements for approval of any of our productcandidates.These regulatory review agencies, committees and advisory groups and the new requirements and guidelines they promulgate may lengthen the regulatoryreview process, require us to perform additional studies, increase our development costs, lead to changes in regulatory positions and interpretations, delay orprevent approval and commercialization of these treatment candidates or lead to significant post-approval limitations or restrictions. As we advance ourproduct candidates, we will be required to consult with these regulatory and advisory groups and comply with applicable requirements and guidelines. If wefail to do so, we may be required to delay or 52Table of Contentsdiscontinue development of our product candidates. Delay or failure to obtain, or unexpected costs in obtaining, the regulatory approval necessary to bring apotential product to market could decrease our ability to generate sufficient product revenue to maintain our business.We may find it difficult to enroll patients in our clinical studies, which could delay or prevent clinical studies of our product candidates.Identifying and qualifying patients to participate in clinical studies of our product candidates is critical to our success. The timing of our clinical studiesdepends on the speed at which we can recruit patients to participate in testing our product candidates. We have experienced delays in some of our clinicalstudies, and we may experience similar delays in the future. If patients are unwilling to participate in our gene therapy studies because of negative publicityfrom adverse events in the biotechnology or gene therapy industries or for other reasons, including competitive clinical studies for similar patient populations,the timeline for recruiting patients, conducting studies and obtaining regulatory approval of potential products may be delayed. These delays could result inincreased costs, delays in advancing our product development, delays in testing the effectiveness of our technology or termination of the clinical studiesaltogether.We may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics to achieve diversity ina study, to complete our clinical studies in a timely manner. Patient enrollment is affected by factors including: • severity of the disease under investigation; • design of the study protocol; • size of the patient population; • eligibility criteria for the study in question; • perceived risks and benefits of the product candidate under study; • proximity and availability of clinical study sites for prospective patients; • availability of competing therapies and clinical studies; • efforts to facilitate timely enrollment in clinical studies; • patient referral practices of physicians; and • ability to monitor patients adequately during and after treatment.In particular, each of the conditions for which we plan to evaluate our current product candidates are rare genetic disorders with limited patient poolsfrom which to draw for clinical studies. It has been estimated that about 1.5% (80 to 90 million people) of the global population are carriers of ß-thalassemia,with about 60,000 symptomatic individuals born annually, the great majority in the developing world. According to Thalassemia International Federation,about 288,000 patients with ß-thalassemia major are alive and registered as receiving regular treatment around the world, of which it is estimated that about15,000 live in the United States and Europe. The global incidence of SCD is estimated to be 250,000-300,000 births annually with a global prevalenceestimated to be about 20-25 million. The worldwide incidence rate for adrenoleukodystrophy, or ALD, the superset of CCALD, is approximately one in 20,000newborn males. CCALD accounts for about 30-40% of patients diagnosed with ALD. Further, because newborn screening for CCALD is not widely adopted,and it can be difficult to diagnose CCALD in the absence of a genetic screen, we may have difficulty finding patients who are eligible to participate in ourstudy. The eligibility criteria of our clinical studies will further limit the pool of available study participants. Additionally, the process of finding anddiagnosing patients may prove costly. Finally, our treatment process requires that the patient be near one of our transduction facilities, as the hematopoieticstem cells, or HSCs, have limited viability following harvest and cannot be transported long distances. 53Table of ContentsOur current product candidates are being developed to treat rare conditions. We plan to seek initial marketing approval in the United States and theEuropean Union. We may not be able to initiate or continue clinical studies if we cannot enroll a sufficient number of eligible patients to participate in theclinical studies required by the FDA or the EMA or other regulatory agencies. Our ability to successfully initiate, enroll and complete a clinical study in anyforeign country is subject to numerous risks unique to conducting business in foreign countries, including: • difficulty in establishing or managing relationships with contract research organizations, or CROs, and physicians; • different standards for the conduct of clinical studies; • our inability to locate qualified local consultants, physicians and partners; and • the potential burden of complying with a variety of foreign laws, medical standards and regulatory requirements, including the regulation ofpharmaceutical and biotechnology products and treatment.If we have difficulty enrolling a sufficient number of patients to conduct our clinical studies as planned, we may need to delay, limit or terminateongoing or planned clinical studies, any of which would have an adverse effect on our business.We may encounter substantial delays in our clinical studies or we may fail to demonstrate safety and efficacy to the satisfaction of applicableregulatory authorities.Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical studies todemonstrate the safety, purity and potency, or efficacy, of the product candidates in humans. Clinical testing is expensive, time-consuming and uncertain as tooutcome. We cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at all. A failure of one or more clinicalstudies can occur at any stage of testing. Events that may prevent successful or timely completion of clinical development include: • delays in reaching a consensus with regulatory agencies on study design; • delays in reaching agreement on acceptable terms with prospective CROs and clinical study sites; • delays in obtaining required Institutional Review Board, or IRB, or Institutional Ethics Committee approval at each clinical study site; • delays in recruiting suitable patients to participate in our clinical studies; • imposition of a clinical hold by regulatory agencies, after an inspection of our clinical study operations or study sites; • failure by our CROs, other third parties or us to adhere to clinical study requirements; • failure to perform in accordance with the FDA’s good clinical practices, or GCP, or applicable regulatory requirements in other countries; • delays in the testing, validation, manufacturing and delivery of our product candidates to the clinical sites; • delays in having patients complete participation in a study or return for post-treatment follow-up; • clinical study sites or patients dropping out of a study; • occurrence of serious adverse events associated with the product candidate that are viewed to outweigh its potential benefits; or • changes in regulatory requirements and guidance that require amending or submitting new clinical protocols. 54Table of ContentsAny inability to successfully complete preclinical and clinical development could result in additional costs to us or impair our ability to generaterevenues from product sales, regulatory and commercialization milestones and royalties. In addition, if we make manufacturing or formulation changes to ourproduct candidates, we may need to conduct additional studies to bridge our modified product candidates to earlier versions. Clinical study delays could alsoshorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products tomarket before we do, which could impair our ability to successfully commercialize our product candidates and may harm our business and results ofoperations.If the results of our clinical studies are inconclusive or if there are safety concerns or adverse events associated with our product candidates, we may: • be delayed in obtaining marketing approval for our product candidates, if at all; • obtain approval for indications or patient populations that are not as broad as intended or desired; • obtain approval with labeling that includes significant use or distribution restrictions or safety warnings; • be subject to changes with the way the product is administered; • be required to perform additional clinical studies to support approval or be subject to additional post-marketing testing requirements; • have regulatory authorities withdraw their approval of the product or impose restrictions on its distribution in the form of a modified riskevaluation and mitigation strategy; • be subject to the addition of labeling statements, such as warnings or contraindications; • be sued; or • experience damage to our reputation.Treatment with our product candidates involves chemotherapy and myeloablative treatments, which can cause side effects or adverse events that areunrelated to our product candidate, but may still impact the success of our clinical studies. Additionally, our product candidates could potentially cause otheradverse events that have not yet been predicted. The inclusion of critically ill patients in our clinical studies may result in deaths or other adverse medicalevents due to other therapies or medications that such patients may be using. As described above, any of these events could prevent us from achieving ormaintaining market acceptance of our product candidates and impair our ability to commercialize our products.We have not completed any clinical studies of our current viral vectors or product candidates derived from these viral vectors. Success in earlyclinical studies may not be indicative of results obtained in later studies.Our current viral vectors and our product candidates have only just initiated evaluation in human clinical studies, and we may experience unexpectedresults in the future. Earlier gene therapy clinical studies, which we believe serve as proof-of-concept for our product candidates, utilized lentiviral vectorssimilar to ours. However, these studies should not be relied upon as evidence that our future clinical studies will succeed. Study designs and results fromprevious studies are not necessarily predictive of our future clinical study designs or results, and initial results may not be confirmed upon full analysis of thecomplete study data. Our drug product candidates may also fail to show the desired safety and efficacy in later stages of clinical development despite havingsuccessfully advanced through initial clinical studies.There is a high failure rate for drugs and biologics proceeding through clinical studies. A number of companies in the pharmaceutical and biotechnologyindustries have suffered significant setbacks in later stage clinical studies even after achieving promising results in earlier stage clinical studies. Data obtainedfrom 55Table of Contentspreclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. In addition, regulatory delays orrejections may be encountered as a result of many factors, including changes in regulatory policy during the period of product development.The results from our Starbeam Study (formerly referred to as ALD-102) may not be sufficiently robust to support the submission of marketingapproval for our Lenti-D product candidate. Before we submit Lenti-D for marketing approval, the FDA and the EMA may require us to enrolladditional subjects, conduct additional clinical studies, or evaluate subjects for an additional follow-up period.The FDA has advised us that our Starbeam Study (formerly referred to as ALD-102), which is a single-arm, open-label study to evaluate the safety andefficacy of our Lenti-D product candidate to halt the progression of CCALD, may not be deemed to be a pivotal study or may not provide sufficient supportfor a Biologics License Application, or BLA, submission. The FDA normally requires two pivotal clinical studies to approve a drug or biologic product, andthus the FDA may require that we conduct additional clinical studies of Lenti-D prior to a BLA submission. The FDA typically does not consider a singleclinical study to be adequate to serve as a pivotal study unless it is, among other things, well-controlled and demonstrates a clinically meaningful effect onmortality, irreversible morbidity, or prevention of a disease with potentially serious outcome, and a confirmatory study would be practically or ethicallyimpossible. Due to the nature of CCALD and the limited number of patients with this condition, a placebo-controlled and blinded study is not practicable forethical and other reasons. However, it is still possible that, even if we achieve favorable results in the Starbeam Study, the FDA may require us to enrolladditional subjects or conduct additional clinical studies, possibly involving a larger sample size or a different clinical study design, particularly if the FDAdoes not find the results from the Starbeam Study to be sufficiently persuasive to support a BLA submission. The FDA may also require that we conduct alonger follow-up period of subjects treated with our Lenti-D product candidate prior to accepting our BLA submission.In addition, the Starbeam Study was not designed to achieve a statistically significant efficacy determination. Rather, we expect that safety and efficacywill be evaluated in light of the data collected in our retrospective data collection study, the ALD-101 Study. However, due to the nature of this retrospectivedata collection study, and the limited number of patients with this condition, the FDA has advised us that the ALD-101 Study is not sufficiently robust toserve as a conventional historical control group and as a basis of comparison against the results of the Starbeam Study. Thus, we expect that the FDA willassess the totality of the safety and efficacy data from our Starbeam Study in reviewing any future BLA submission for our Lenti-D product candidate. Basedon this assessment, the FDA may require that we conduct additional preclinical or clinical studies prior to submitting or approving a BLA for this indication.It is possible that the FDA or the EMA may not consider the results of this study to be sufficient for approval of Lenti-D for this indication. If the FDAor the EMA requires additional studies, we would incur increased costs and delays in the marketing approval process, which may require us to expend moreresources than we have available. In addition, it is possible that the FDA and the EMA may have divergent opinions on the elements necessary for a successfulBLA and Marketing Authorization Application, or MAA, respectively, which may cause us to alter our development, regulatory and/or commercializationstrategies.In previous clinical studies involving viral vectors for gene therapy, some subjects experienced serious adverse events, including the developmentof leukemia due to vector-related insertional oncogenesis. If our vectors demonstrate a similar effect, we may be required to halt or delay furtherclinical development of our product candidates.A significant risk in any gene therapy product based on viral vectors is that the vector will insert near cancer-causing oncogenes leading to uncontrolledclonal proliferation of mature cancer cells in the patient. For example, in 2003, 20 subjects treated for X-linked severe combined immunodeficiency in two genetherapy studies using a murine gamma-retroviral vector showed correction of the disease, but the studies were terminated 56Table of Contentsafter five subjects developed leukemia (four of whom were subsequently cured). The cause of these adverse events was shown to be insertional oncogenesis,which is the process whereby the corrected gene inserts near a gene that is important in a critical cellular process like growth or division, and this insertionresults in the development of a cancer (often leukemia). Using molecular diagnostic techniques, it was determined that clones from these subjects showedretrovirus insertion in proximity to the promoter of the LMO2 proto-oncogene. Earlier generation retroviruses like the one used in these two studies have beenshown to preferentially integrate in regulatory regions of genes that control cell growth.These well-publicized adverse events led to the development of new viral vectors, such as lentiviral vectors, with improved safety profiles. In publishedstudies, lentiviral vectors have demonstrated an improved safety profile over gamma-retroviral vectors, with no known events of gene therapy-related adverseevents, which we believe is due to a number of factors including the tendency of these vectors to integrate within genes rather than in areas that control geneexpression, as well as their lack of strong viral enhancers. However, it should be noted that in our Phase I/II study (the LG001 Study) of autologous HSCstransduced ex vivo using an earlier generation of our LentiGlobin vector, called HPV569, we initially observed in one patient that a disproportionate numberof the cells expressing our functional gene had the same insertion site. Tests showed that this partial clonal dominance contained an insertion of the functionalgene in the HMGA2 gene that persisted for a period of two to three years. Although there was some initial concern that the observed clonal dominance mightrepresent a pre-leukemic event, there have been no adverse clinical consequences of this event, or any signs of cancer, in over five years since the observationwas made. The presence of the HMGA2 clone has steadily declined in this patient over time to the point that it is no longer the most common clone observed inthis patient.The risk of insertional oncogenesis remains a significant concern for gene therapy and we cannot assure that it will not occur in any of our planned orfuture clinical studies. There is also the potential risk of delayed adverse events following exposure to gene therapy products due to persistent biological activityof the genetic material or other components of products used to carry the genetic material. The FDA has stated that lentiviral vectors possess characteristics thatmay pose high risks of delayed adverse events. If any such adverse events occur, further advancement of our clinical studies could be halted or delayed,which would have a material adverse effect on our business and operations.Even if we complete the necessary preclinical and clinical studies, we cannot predict when or if we will obtain regulatory approval to commercializea product candidate or the approval may be for a more narrow indication than we expect.We cannot commercialize a product until the appropriate regulatory authorities have reviewed and approved the product candidate. Even if our productcandidates demonstrate safety and efficacy in clinical studies, the regulatory agencies may not complete their review processes in a timely manner, or we maynot be able to obtain regulatory approval. Additional delays may result if an FDA Advisory Committee or other regulatory advisory group or authorityrecommends non-approval or restrictions on approval. In addition, we may experience delays or rejections based upon additional government regulation fromfuture legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical studies and the reviewprocess. Regulatory agencies also may approve a treatment candidate for fewer or more limited indications than requested or may grant approval subject to theperformance of post-marketing studies. In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successfulcommercialization of our treatment candidates. For example, the development of our product candidates for pediatric use is an important part of our currentbusiness strategy, and if we are unable to obtain regulatory approval for the desired age ranges, our business may suffer.Even if we obtain regulatory approval for a product candidate, our products will remain subject to regulatory scrutiny.Even if we obtain regulatory approval in a jurisdiction, the regulatory authority may still impose significant restrictions on the indicated uses ormarketing of our product candidates, or impose ongoing requirements for 57Table of Contentspotentially costly post-approval studies or post-market surveillance. For example, the FDA typically advises that patients treated with gene therapy undergofollow-up observations for potential adverse events for a 15-year period. Additionally, the holder of an approved BLA is obligated to monitor and reportadverse events and any failure of a product to meet the specifications in the BLA. The holder of an approved BLA must also submit new or supplementalapplications and obtain FDA approval for certain changes to the approved product, product labeling or manufacturing process. Advertising and promotionalmaterials must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal and state laws.In addition, product manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA andother regulatory authorities for compliance with good manufacturing practices, or GMP, and adherence to commitments made in the BLA. If we or a regulatoryagency discovers previously unknown problems with a product such as adverse events of unanticipated severity or frequency, or problems with the facilitywhere the product is manufactured, a regulatory agency may impose restrictions relative to that product or the manufacturing facility, including requiringrecall or withdrawal of the product from the market or suspension of manufacturing.If we fail to comply with applicable regulatory requirements following approval of any of our product candidates, a regulatory agency may: • issue a warning letter asserting that we are in violation of the law; • seek an injunction or impose civil or criminal penalties or monetary fines; • suspend or withdraw regulatory approval; • suspend any ongoing clinical studies; • refuse to approve a pending marketing application, such as a BLA or supplements to a BLA submitted by us; • seize product; or • refuse to allow us to enter into supply contracts, including government contracts.Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generatenegative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and generaterevenues.Risks related to our reliance on third partiesWe expect to rely on third parties to conduct some or all aspects of our vector production, drug product manufacturing, protocol development,research and preclinical and clinical testing, and these third parties may not perform satisfactorily.We do not expect to independently conduct all aspects of our vector production, product manufacturing, protocol development, research and preclinicaland clinical testing. We currently rely, and expect to continue to rely, on third parties with respect to these items. In some cases these third parties are academic,research or similar institutions that may not apply the same quality control protocols utilized in certain commercial settings.Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of ourresponsibility to ensure compliance with all required regulations and study protocols. For example, for product candidates that we develop and commercializeon our own, we will remain responsible for ensuring that each of our IND-enabling studies and clinical studies are conducted in accordance with the studyplan and protocols. 58Table of ContentsIf these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our studies in accordance with regulatoryrequirements or our stated study plans and protocols, we will not be able to complete, or may be delayed in completing, the preclinical and clinical studiesrequired to support future IND submissions and approval of our product candidates.Any of these third parties may terminate their engagements with us at any time. If we need to enter into alternative arrangements, it could delay ourproduct development activities.Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured the product candidates ourselves, including: • the inability to negotiate manufacturing agreements with third parties under commercially reasonable terms; • reduced control as a result of using third-party manufacturers for all aspects of manufacturing activities; • the risk that these activities are not conducted in accordance with our study plans and protocols; • termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us; and • disruptions to the operations of our third-party manufacturers or suppliers caused by conditions unrelated to our business or operations,including the bankruptcy of the manufacturer or supplier.Any of these events could lead to clinical study delays or failure to obtain regulatory approval, or impact our ability to successfully commercializefuture products. Some of these events could be the basis for FDA action, including injunction, recall, seizure or total or partial suspension of production.We and our contract manufacturers are subject to significant regulation with respect to manufacturing our products. The manufacturingfacilities on which we rely may not continue to meet regulatory requirements and have limited capacity.We currently have relationships with a limited number of suppliers for the manufacturing of our viral vectors and product candidates. Each suppliermay require licenses to manufacture such components if such processes are not owned by the supplier or in the public domain and we may be unable totransfer or sublicense the intellectual property rights we may have with respect to such activities.All entities involved in the preparation of therapeutics for clinical studies or commercial sale, including our existing contract manufacturers for ourproduct candidates, are subject to extensive regulation. Components of a finished therapeutic product approved for commercial sale or used in late-stageclinical studies must be manufactured in accordance with GMP. These regulations govern manufacturing processes and procedures (including record keeping)and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale. Poorcontrol of production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in the properties or stabilityof our product candidates that may not be detectable in final product testing. We or our contract manufacturers must supply all necessary documentation insupport of a BLA on a timely basis and must adhere to the FDA’s good laboratory practices, or GLP, and GMP regulations enforced by the FDA through itsfacilities inspection program. Some of our contract manufacturers have not produced a commercially-approved product and therefore have not obtained therequisite FDA approvals to do so. Our facilities and quality systems and the facilities and quality systems of some or all of our third-party contractors mustpass a pre-approval inspection for compliance with the applicable regulations as a condition of regulatory approval of our product candidates or any of ourother potential products. In addition, the regulatory authorities may, at any time, audit or inspect a manufacturing facility involved with the preparation of ourproduct candidates or our other potential products or 59Table of Contentsthe associated quality systems for compliance with the regulations applicable to the activities being conducted. If these facilities do not pass a pre-approvalplant inspection, FDA approval of the products will not be granted.The regulatory authorities also may, at any time following approval of a product for sale, audit the manufacturing facilities of our third-partycontractors. If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicableregulations occurs independent of such an inspection or audit, we or the relevant regulatory authority may require remedial measures that may be costly and/ortime-consuming for us or a third party to implement and that may include the temporary or permanent suspension of a clinical study or commercial sales orthe temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially harmour business.If we or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA can impose regulatory sanctions including, among otherthings, refusal to approve a pending application for a biologic product, or revocation of a pre-existing approval. As a result, our business, financial conditionand results of operations may be materially harmed.Additionally, if supply from one approved manufacturer is interrupted, there could be a significant disruption in commercial supply. The number ofmanufacturers with the necessary manufacturing capabilities is limited. In addition, an alternative manufacturer would need to be qualified through a BLAsupplement which could result in further delay. The regulatory agencies may also require additional studies if a new manufacturer is relied upon forcommercial production. Switching manufacturers may involve substantial costs and is likely to result in a delay in our desired clinical and commercialtimelines.These factors could cause the delay of clinical studies, regulatory submissions, required approvals or commercialization of our product candidates,cause us to incur higher costs and prevent us from commercializing our products successfully. Furthermore, if our suppliers fail to meet contractualrequirements, and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, our clinical studies maybe delayed or we could lose potential revenue.We expect to rely on third parties to conduct, supervise and monitor our clinical studies, and if these third parties perform in an unsatisfactorymanner, it may harm our business.We expect to rely on CROs and clinical study sites to ensure our clinical studies are conducted properly and on time. While we will have agreementsgoverning their activities, we will have limited influence over their actual performance. We will control only certain aspects of our CROs’ activities.Nevertheless, we will be responsible for ensuring that each of our clinical studies is conducted in accordance with the applicable protocol, legal, regulatory andscientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities.We and our CROs are required to comply with the FDA’s GCPs for conducting, recording and reporting the results of clinical studies to assure that thedata and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical study participants are protected. The FDAenforces these GCPs through periodic inspections of study sponsors, principal investigators and clinical study sites. If we or our CROs fail to comply withapplicable GCPs, the clinical data generated in our future clinical studies may be deemed unreliable and the FDA may require us to perform additional clinicalstudies before approving any marketing applications. Upon inspection, the FDA may determine that our clinical studies did not comply with GCPs. Inaddition, our future clinical studies will require a sufficient number of test subjects to evaluate the safety and efficacy of our product candidates. Accordingly,if our CROs fail to comply with these regulations or fail to recruit a sufficient number of patients, we may be required to repeat such clinical studies, whichwould delay the regulatory approval process.Our CROs are not our employees, and we are therefore unable to directly monitor whether or not they devote sufficient time and resources to our clinicaland nonclinical programs, which must be conducted in accordance with GCPs and GLPs, respectively. These CROs may also have relationships with othercommercial 60Table of Contentsentities, including our competitors, for whom they may also be conducting clinical studies or other drug development activities that could harm ourcompetitive position. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality oraccuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for any otherreasons, our clinical studies may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercializeour product candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase,and our ability to generate revenues could be delayed.We also expect to rely on other third parties to store and distribute our vectors and products for any clinical studies that we may conduct. Anyperformance failure on the part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization ofour products, if approved, producing additional losses and depriving us of potential product revenue.Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that ourtrade secrets will be misappropriated or disclosed.Because we rely on third parties to manufacture our vectors and our product candidates, and because we collaborate with various organizations andacademic institutions on the advancement of our gene therapy platform, we must, at times, share trade secrets with them. We seek to protect our proprietarytechnology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consultingagreements or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietaryinformation. These agreements typically limit the rights of the third parties to use or disclose our confidential information, such as trade secrets. Despite thecontractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk thatsuch trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of theseagreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or otherunauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business.In addition, these agreements typically restrict the ability of our collaborators, advisors, employees and consultants to publish data potentially relating toour trade secrets. Our academic collaborators typically have rights to publish data, provided that we are notified in advance and may delay publication for aspecified time in order to secure our intellectual property rights arising from the collaboration. In other cases, publication rights are controlled exclusively byus, although in some cases we may share these rights with other parties. We also conduct joint research and development programs that may require us toshare trade secrets under the terms of our research and development partnerships or similar agreements. Despite our efforts to protect our trade secrets, ourcompetitors may discover our trade secrets, either through breach of these agreements, independent development or publication of information including ourtrade secrets in cases where we do not have proprietary or otherwise protected rights at the time of publication. A competitor’s discovery of our trade secretswould impair our competitive position and have an adverse impact on our business.Risks related to commercialization of our product candidatesWe intend to rely on third-party manufacturers to produce our vector, product candidates and other key materials, but we have not entered intobinding agreements with any such manufacturers to support commercialization. Additionally, these manufacturers do not have experienceproducing our vectors and product candidates at commercial levels and may not achieve the necessary regulatory approvals or produce ourvectors and products at the quality, quantities, locations and timing needed to support commercialization.We have not yet secured manufacturing capabilities for commercial quantities of our viral vectors or established transduction facilities in the desiredcommercialization regions to support commercialization of our 61Table of Contentsproducts. Although we intend to rely on third-party manufacturers for commercialization, we have only entered into agreements with such manufacturers tosupport our clinical studies. We may be unable to negotiate binding agreements with the manufacturers to support our commercialization activities atcommercially reasonable terms.No manufacturer currently has the experience or ability to produce our vectors and product candidates at commercial levels. We are currently developinga scalable manufacturing process for LentiGlobin, which we plan to transfer to one or more contract manufacturers. We may run into technical or scientificissues related to manufacturing or development that we may be unable to resolve in a timely manner or with available funds. Although we have been able toproduce our Lenti-D vector at commercial scale, we have not completed the characterization and validation activities necessary for commercial and regulatoryapprovals. If our manufacturing partners do not obtain such regulatory approvals, our commercialization efforts will be harmed.Additionally, since the HSCs have a limited window of stability following extraction from the patient, we must set up transduction facilities in theregions where we wish to commercialize our product. Currently, we rely on academic institutions and one third-party contract manufacturer in the UnitedStates and Europe, respectively, to produce our product candidates for our clinical studies. Since a portion of our target patient populations will be outside theUnited States and Europe, we will need to set up additional transduction facilities that can replicate our transduction process. Establishment of such facilitiesmay be impeded by technical, quality, or regulatory issues related to these new sites and we may also run into technical or scientific issues related to transferof our transduction process or other developmental issues that we may be unable to resolve in a timely manner or with available funds.Even if we timely develop a manufacturing process and successfully transfer it to the third-party vector and product manufacturers, if such third-partymanufacturers are unable to produce the necessary quantities of viral vectors and our product candidates, or in compliance with GMP or other pertinentregulatory requirements, and within our planned time frame and cost parameters, the development and sales of our products, if approved, may be materiallyharmed.In addition, any significant disruption in our supplier relationships could harm our business. We source key materials from third parties, either directlythrough agreements with suppliers or indirectly through our manufacturers who have agreements with suppliers. There are a small number of suppliers forcertain key materials that are used to manufacture our product candidates. Such suppliers may not sell these key materials to our manufacturers at the timeswe need them or on commercially reasonable terms. We do not have any control over the process or timing of the acquisition of these key materials by ourmanufacturers. Moreover, we currently do not have any agreements for the commercial production of these key materials.If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our productcandidates, we may be unable to generate any revenues.We have no experience selling and marketing our product candidates. To successfully commercialize any products that may result from our developmentprograms, we will need to develop these capabilities, either on our own or with others. We may enter into collaborations with other entities to utilize their maturemarketing and distribution capabilities, but we may be unable to enter into marketing agreements on favorable terms, if at all. If our future collaborativepartners do not commit sufficient resources to commercialize our future products, if any, and we are unable to develop the necessary marketing capabilities onour own, we will be unable to generate sufficient product revenue to sustain our business. We will be competing with many companies that currently haveextensive and well-funded marketing and sales operations. Without an internal team or the support of a third party to perform marketing and sales functions,we may be unable to compete successfully against these more established companies. 62Table of ContentsWe face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are more advancedor effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our product candidates.We are engaged in gene therapy, which is a rapidly changing field. We have competitors both in the United States and internationally, including majormultinational pharmaceutical companies, biotechnology companies and universities and other research institutions. Some of the pharmaceutical andbiotechnology companies we expect to compete with include GlaxoSmithKline plc, Sangamo BioSciences Inc. through their partnership with Biogen Idec,HemaQuest Pharmaceuticals, Inc., Merck & Co., Inc., Novartis AG, GlycoMimetics Inc., Kite Pharma, and Juno Therapeutics. In addition, manyuniversities and private and public research institutes are active in our target disease areas.Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff andexperienced marketing and manufacturing organizations. Competition may increase further as a result of advances in the commercial applicability oftechnologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing on anexclusive basis, products that are more effective or less costly than any product candidate that we may develop, or achieve earlier patent protection, regulatoryapproval, product commercialization and market penetration than us. Additionally, technologies developed by our competitors may render our potentialproduct candidates uneconomical or obsolete, and we may not be successful in marketing our product candidates against competitors.Even if we are successful in achieving regulatory approval to commercialize a product candidate faster than our competitors, we may face competitionfrom biosimilars due to the changing regulatory environment. In the United States, the Biologics Price Competition and Innovation Act of 2009 created anabbreviated approval pathway for biological products that are demonstrated to be “highly similar,” or biosimilar, to or “interchangeable” with an FDA-approved biological product. This new pathway could allow competitors to reference data from biological products already approved after 12 years from thetime of approval. In his proposed budget for fiscal year 2014, President Obama proposed to cut this 12-year period of exclusivity down to seven years. He alsoproposed to prohibit additional periods of exclusivity due to minor changes in product formulations, a practice often referred to as “evergreening.” In Europe,the European Commission has granted marketing authorizations for several biosimilars pursuant to a set of general and product class-specific guidelines forbiosimilar approvals issued over the past few years. In Europe, a competitor may reference data from biological products already approved, but will not beable to get on the market until 10 years after the time of approval. This 10-year period will be extended to 11 years if, during the first eight of those 10 years,the marketing authorization holder obtains an approval for one or more new therapeutic indications that bring significant clinical benefits compared withexisting therapies. In addition, companies may be developing biosimilars in other countries that could compete with our products. If competitors are able toobtain marketing approval for biosimilars referencing our products, our products may become subject to competition from such biosimilars, with theattendant competitive pressure and consequences. Expiration or successful challenge of our applicable patent rights could also trigger competition from otherproducts, assuming any relevant exclusivity period has expired.In addition, although our product candidates have been granted orphan drug status by the FDA and EMA, there are limitations to the exclusivity. In theUnited States, the exclusivity period for orphan drugs is seven years, while pediatric exclusivity adds six months to any existing patents or exclusivityperiods. In Europe, orphan drugs may be able to obtain 10 years of marketing exclusivity and up to an additional two years on the basis of qualifyingpediatric studies. However, orphan exclusivity may be reduced to six years if the drug no longer satisfies the original designation criteria. Additionally, amarketing authorization holder may lose its orphan exclusivity if it consents to a second orphan drug application or cannot supply enough drug. Orphan drugexclusivity also can be lost when a second applicant demonstrates its drug is “clinically superior” to the original orphan drug. 63Table of ContentsFinally, as a result of the expiration or successful challenge of our patent rights, we could face more litigation with respect to the validity and/or scope ofpatents relating to our competitors’ products. The availability of our competitors’ products could limit the demand, and the price we are able to charge, for anyproducts that we may develop and commercialize.The commercial success of any current or future product candidate will depend upon the degree of market acceptance by physicians, patients,third-party payors and others in the medical community.Ethical, social and legal concerns about gene therapy and genetic research could result in additional regulations restricting or prohibiting the productsand processes we may use. Even with the requisite approvals, the commercial success of our product candidates will depend in part on the medicalcommunity, patients, and third-party payors accepting gene therapy products in general, and our product candidates in particular, as medically useful, cost-effective, and safe. Any product that we bring to the market may not gain market acceptance by physicians, patients, third-party payors and others in themedical community. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not becomeprofitable. The degree of market acceptance of these product candidates, if approved for commercial sale, will depend on a number of factors, including: • the potential efficacy and potential advantages over alternative treatments; • the prevalence and severity of any side effects, including any limitations or warnings contained in a product’s approved labeling; • the prevalence and severity of any side effects resulting from the chemotherapy and myeloablative treatments associated with the procedure bywhich our product candidates are administered; • relative convenience and ease of administration; • the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; • the strength of marketing and distribution support and timing of market introduction of competitive products; • publicity concerning our products or competing products and treatments; and • sufficient third-party insurance coverage or reimbursement.Even if a potential product displays a favorable efficacy and safety profile in preclinical and clinical studies, market acceptance of the product will notbe known until after it is launched. Our efforts to educate the medical community and third-party payors on the benefits of the product candidates may requiresignificant resources and may never be successful. Such efforts to educate the marketplace may require more resources than are required by the conventionaltechnologies marketed by our competitors.If we obtain approval to commercialize our product candidates outside of the United States, a variety of risks associated with internationaloperations could materially adversely affect our business.If any of our product candidates are approved for commercialization, we may enter into agreements with third parties to market them on a worldwidebasis or in more limited geographical regions. We expect that we will be subject to additional risks related to entering into international business relationships,including: • different regulatory requirements for approval of drugs and biologics in foreign countries; • reduced protection for intellectual property rights; • unexpected changes in tariffs, trade barriers and regulatory requirements; • economic weakness, including inflation, or political instability in particular foreign economies and markets; 64Table of Contents • compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doingbusiness in another country; • workforce uncertainty in countries where labor unrest is more common than in the United States; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons,floods and fires.The insurance coverage and reimbursement status of newly-approved products is uncertain. Failure to obtain or maintain adequate coverage andreimbursement for new or current products could limit our ability to market those products and decrease our ability to generate revenue.The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford expensive treatments,such as stem cell transplants. Sales of our product candidates will depend substantially, both domestically and abroad, on the extent to which the costs of ourproduct candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed bygovernment health administration authorities, private health coverage insurers and other third-party payors. If reimbursement is not available, or is availableonly to limited levels, we may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursementamount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on our investment.There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, the principaldecisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S.Department of Health and Human Services, as CMS decides whether and to what extent a new medicine will be covered and reimbursed under Medicare.Private payors tend to follow CMS to a substantial degree. It is difficult to predict what CMS will decide with respect to reimbursement for fundamentallynovel products such as ours, as there is no body of established practices and precedents for these new products. Reimbursement agencies in Europe may bemore conservative than CMS. For example, a number of cancer drugs have been approved for reimbursement in the United States and have not been approvedfor reimbursement in certain European countries. In addition, costs or difficulties associated with the reimbursement of Glybera could create an adverseenvironment for reimbursement of other gene therapies.Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and webelieve the increasing emphasis on cost-containment initiatives in Europe, Canada, and other countries has and will continue to put pressure on the pricingand usage of our product candidates. In many countries, the prices of medical products are subject to varying price control mechanisms as part of nationalhealth systems. In general, the prices of medicines under such systems are substantially lower than in the United States. Other countries allow companies tofix their own prices for medicines, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation couldrestrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for ourproducts may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits.Moreover, increasing efforts by governmental and third-party payors, in the United States and abroad, to cap or reduce healthcare costs may cause suchorganizations to limit both coverage and level of reimbursement for new products approved and, as a result, they may not cover or provide adequate paymentfor our product 65Table of Contentscandidates. We expect to experience pricing pressures in connection with the sale of any of our product candidates, due to the trend toward managed healthcare,the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general,particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erectedto the entry of new products.Due to the novel nature of our technology and the potential for our product candidates to offer therapeutic benefit in a single administration, weface uncertainty related to pricing and reimbursement for these product candidates.Our target patient populations are relatively small, as a result of which the pricing and reimbursement of our product candidates, if approved, must beadequate to support commercial infrastructure. If we are unable to obtain adequate levels of reimbursement, our ability to successfully market and sell ourproduct candidates will be adversely affected. The manner and level at which reimbursement is provided for services related to our product candidates (e.g.,for administration of our product to patients) is also important. Inadequate reimbursement for such services may lead to physician resistance and adverselyaffect our ability to market or sell our products.If the market opportunities for our product candidates are smaller than we believe they are, our revenues may be adversely affected and ourbusiness may suffer. Because the target patient populations of our product candidates are small, we must be able to successfully identify patientsand achieve a significant market share to maintain profitability and growth.We focus our research and product development on treatments for severe genetic and orphan diseases. Our projections of both the number of people whohave these diseases, as well as the subset of people with these diseases who have the potential to benefit from treatment with our product candidates, are basedon estimates. These estimates may prove to be incorrect and new studies may change the estimated incidence or prevalence of these diseases. The number ofpatients in the United States, Europe and elsewhere may turn out to be lower than expected, may not be otherwise amenable to treatment with our products, ornew patients may become increasingly difficult to identify or gain access to, all of which would adversely affect our results of operations and our business.Risks related to our business operationsNegative public opinion and increased regulatory scrutiny of gene therapy and genetic research may damage public perception of our productcandidates or adversely affect our ability to conduct our business or obtain regulatory approvals for our product candidates.Public perception may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain the acceptance of the public or the medicalcommunity. In particular, our success will depend upon physicians specializing in the treatment of those diseases that our product candidates targetprescribing treatments that involve the use of our product candidates in lieu of, or in addition to, existing treatments they are already familiar with and forwhich greater clinical data may be available. More restrictive government regulations or negative public opinion would have a negative effect on our business orfinancial condition and may delay or impair the development and commercialization of our product candidates or demand for any products we may develop.For example, in 2003, 20 subjects treated for X-linked severe combined immunodeficiency in two gene therapy studies using a murine gamma-retroviral vectorshowed correction of the disease, but the studies were terminated after five subjects developed leukemia (four of whom were subsequently cured). Althoughnone of our current product candidates utilize these gamma-retroviruses, our product candidates use a viral delivery system. Adverse events in our clinicalstudies, even if not ultimately attributable to our product candidates (such as the many adverse events that typically arise from the transplant process) and theresulting publicity could result in increased governmental regulation, unfavorable public perception, potential regulatory delays in the testing or 66Table of Contentsapproval of our potential product candidates, stricter labeling requirements for those product candidates that are approved and a decrease in demand for anysuch product candidates.Our future success depends on our ability to retain key employees, consultants and advisors and to attract, retain and motivate qualifiedpersonnel.We are highly dependent on principal members of our executive team and key employees, the loss of whose services may adversely impact theachievement of our objectives. While we have entered into employment agreements with each of our executive officers, any of them could leave our employmentat any time, as all of our employees are “at will” employees. Recruiting and retaining other qualified employees, consultants and advisors for our business,including scientific and technical personnel, will also be critical to our success. There is currently a shortage of skilled executives in our industry, which islikely to continue. As a result, competition for skilled personnel is intense and the turnover rate can be high. We may not be able to attract and retain personnelon acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for individuals with similar skill sets. In addition,failure to succeed in preclinical or clinical studies may make it more challenging to recruit and retain qualified personnel. The inability to recruit or loss of theservices of any executive, key employee, consultant or advisor may impede the progress of our research, development and commercialization objectives.We will need to expand our organization and we may experience difficulties in managing this growth, which could disrupt our operations.As of December 31, 2013, we had 87 full-time employees. As we mature and undertake the activities required under our collaboration with Celgene, weexpect to expand our full-time employee base and to hire more consultants and contractors. Our management may need to divert a disproportionate amount ofits attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. We may not be able to effectivelymanage the expansion of our operations, which may result in weaknesses in our infrastructure, operational mistakes, loss of business opportunities, loss ofemployees and reduced productivity among remaining employees. For example, in the past there have been errors in the preparation of our financial statementsand there can be no assurance that other errors will not occur in the future as we grow. Our expected growth could require significant capital expenditures andmay divert financial resources from other projects, such as the development of additional product candidates. If our management is unable to effectivelymanage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenues could be reduced, and we may not be able toimplement our business strategy. Our future financial performance and our ability to commercialize product candidates and compete effectively will depend, inpart, on our ability to effectively manage any future growth.Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities, includingnon-compliance with regulatory standards and requirements and insider trading.We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants and commercial partners. Misconduct bythese parties could include intentional failures to comply with the regulations of the FDA and non-U.S. regulators, provide accurate information to the FDAand non-U.S. regulators, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or dataaccurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject toextensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations mayrestrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other businessarrangements. Such misconduct could also involve the improper use of information obtained in the course of clinical studies, which could result in regulatorysanctions and cause serious harm to our reputation or could cause regulatory agencies not to approve our product candidates. We 67Table of Contentshave adopted a code of conduct applicable to all of our employees, but it is not always possible to identify and deter employee misconduct, and the precautionswe take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmentalinvestigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, andwe are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition ofsignificant fines or other sanctions.We face potential product liability, and, if successful claims are brought against us, we may incur substantial liability and costs. If the use of ourproduct candidates harms patients, or is perceived to harm patients even when such harm is unrelated to our product candidates, our regulatoryapprovals could be revoked or otherwise negatively impacted and we could be subject to costly and damaging product liability claims.The use of our product candidates in clinical studies and the sale of any products for which we obtain marketing approval exposes us to the risk ofproduct liability claims. Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical companies or others sellingor otherwise coming into contact with our products. There is a risk that our product candidates may induce adverse events. If we cannot successfully defendagainst product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product liability claimsmay result in: • impairment of our business reputation; • withdrawal of clinical study participants; • costs due to related litigation; • distraction of management’s attention from our primary business; • substantial monetary awards to patients or other claimants; • the inability to commercialize our product candidates; and • decreased demand for our product candidates, if approved for commercial sale.We carry product liability insurance of $10 million per occurrence and $10 million aggregate limit. We believe our product liability insurance coverage issufficient in light of our current clinical programs; however, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts toprotect us against losses due to liability. If and when we obtain marketing approval for product candidates, we intend to expand our insurance coverage toinclude the sale of commercial products; however, we may be unable to obtain product liability insurance on commercially reasonable terms or in adequateamounts. On occasion, large judgments have been awarded in class action lawsuits based on drugs or medical treatments that had unanticipated adverseeffects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed ourinsurance coverage, could adversely affect our results of operations and business.Patients with the diseases targeted by our product candidates are often already in severe and advanced stages of disease and have both known andunknown significant pre-existing and potentially life-threatening health risks. During the course of treatment, patients may suffer adverse events, includingdeath, for reasons that may be related to our product candidates. Such events could subject us to costly litigation, require us to pay substantial amounts ofmoney to injured patients, delay, negatively impact or end our opportunity to receive or maintain regulatory approval to market our products, or require us tosuspend or abandon our commercialization efforts. Even in a circumstance in which we do not believe that an adverse event is related to our products, theinvestigation into the circumstance may be time-consuming or inconclusive. These investigations may interrupt our sales efforts, delay our regulatory approvalprocess in other countries, or impact and limit the type of regulatory approvals our product candidates receive or maintain. As a result of these factors, aproduct liability claim, even if successfully defended, could have a material adverse effect on our business, financial condition or results of operations. 68Table of ContentsIf we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs thatcould have a material adverse effect on the success of our business.We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling,use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, includingchemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of thesematerials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from ouruse of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significantcosts associated with civil or criminal fines and penalties.Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting fromthe use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities. In addition, wemay incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws andregulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines,penalties or other sanctions.We may not be successful in our efforts to identify or discover additional product candidates.The success of our business depends primarily upon our ability to identify, develop and commercialize products based on our gene therapy platform.Although our Lenti-D and LentiGlobin product candidates are currently in clinical development, our research programs, including those subject to ourcollaboration with Celgene, may fail to identify other potential product candidates for clinical development for a number of reasons. Our research methodologymay be unsuccessful in identifying potential product candidates or our potential product candidates may be shown to have harmful side effects or may haveother characteristics that may make the products unmarketable or unlikely to receive marketing approval.If any of these events occur, we may be forced to abandon our development efforts for a program or programs, which would have a material adverseeffect on our business and could potentially cause us to cease operations. Research programs to identify new product candidates require substantial technical,financial and human resources. We may focus our efforts and resources on potential programs or product candidates that ultimately prove to be unsuccessful.We may use our financial and human resources to pursue a particular research program or product candidate and fail to capitalize on programsor product candidates that may be more profitable or for which there is a greater likelihood of success.Because we have limited resources, we may forego or delay pursuit of opportunities with certain programs or product candidates or for indications thatlater prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitablemarket opportunities. Our spending on current and future research and development programs for product candidates may not yield any commercially viableproducts. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights tothat product candidate through strategic collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for usto retain sole development and commercialization rights to such product candidate, or we may allocate internal resources to a product candidate in a therapeuticarea in which it would have been more advantageous to enter into a partnering arrangement. 69Table of ContentsWe incur significant increased costs as a result of operating as a public company, and our management devotes substantial time to newcompliance initiatives.As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses that we did not incur as a privatecompany. In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC, and The Nasdaq Global Select Market have imposedvarious requirements on public companies. In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, wasenacted. There are significant corporate governance and executive compensation related provisions in the Dodd-Frank Act that require the SEC to adoptadditional rules and regulations in these areas such as “say on pay” and proxy access. Recent legislation permits us, as a smaller “emerging growth company,”to implement many of these requirements over a longer period and up to five years from the pricing date of our initial public offering, which was June 18,2013. We are taking advantage of this new legislation but cannot guarantee that we will not be required to implement these requirements sooner than budgeted orplanned and thereby incur unexpected expenses. Stockholder activism, the current political environment and the current high level of government interventionand regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact themanner in which we operate our business in ways we cannot currently anticipate. Our management and other personnel will need to devote a substantialamount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make someactivities more time-consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtaindirector and officer liability insurance and we may be required to incur substantial costs to maintain our current levels of such coverage.Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. The recent globalfinancial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn, such as the recent globalfinancial crisis, could result in a variety of risks to our business, including, weakened demand for our product candidates and our ability to raise additionalcapital when needed on acceptable terms, if at all. This is particularly true in Europe, which is undergoing a continued severe economic crisis. A weak ordeclining economy could also strain our suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for ourservices. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial marketconditions could adversely impact our business.We or the third parties upon whom we depend may be adversely affected by earthquakes or other natural disasters and our business continuityand disaster recovery plans may not adequately protect us from a serious disaster.Earthquakes or other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations,financial condition and prospects. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of ourheadquarters, that damaged critical infrastructure, such as the manufacturing facilities of our third-party contract manufacturers, or that otherwise disruptedoperations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery andbusiness continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event. We mayincur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, particularly when taken togetherwith our lack of earthquake insurance, could have a material adverse effect on our business. 70Table of ContentsRisks related to our intellectual propertyIf we are unable to obtain or protect intellectual property rights related to our product candidates, we may not be able to compete effectively in ourmarkets.We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our productcandidates. The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. Thepatent applications that we own or in-license may fail to result in issued patents with claims that cover our product candidates in the United States or in otherforeign countries. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found, which caninvalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue and even if such patents cover ourproduct candidates, third parties may challenge their validity, enforceability or scope, which may result in such patents being narrowed or invalidated.Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property, provide exclusivity for ourproduct candidates or prevent others from designing around our claims. Any of these outcomes could impair our ability to prevent competition from thirdparties, which may have an adverse impact on our business.If the patent applications we hold or have in-licensed with respect to our programs or product candidates fail to issue, if their breadth or strength ofprotection is threatened, or if they fail to provide meaningful exclusivity for our product candidates, it could dissuade companies from collaborating with us todevelop product candidates, and threaten our ability to commercialize, future products. Several patent applications covering our product candidates have beenfiled recently. We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patent or whether any issued patents will befound invalid and unenforceable or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by or licensed tous could deprive us of rights necessary for the successful commercialization of any product candidates that we may develop. Further, if we encounter delaysin regulatory approvals, the period of time during which we could market a product candidate under patent protection could be reduced. Since patentapplications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot becertain that we were the first to file any patent application related to a product candidate. Furthermore, if third parties have filed such patent applications, aninterference proceeding in the United States can be initiated by a third party to determine who was the first to invent any of the subject matter covered by thepatent claims of our applications. In addition, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years afterit is filed. Various extensions may be available however the life of a patent, and the protection it affords, is limited. Even if patents covering our productcandidates are obtained, once the patent life has expired for a product, we may be open to competition from generic medications.In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that isnot patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our product candidate discovery anddevelopment processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult toprotect. We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants,scientific advisors and contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security ofour premises and physical and electronic security of our information technology systems. While we have confidence in these individuals, organizations andsystems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our trade secrets mayotherwise become known or be independently discovered by competitors.Although we expect all of our employees and consultants to assign their inventions to us, and all of our employees, consultants, advisors and any thirdparties who have access to our proprietary know-how, information 71Table of Contentsor technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed or that our tradesecrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets orindependently develop substantially equivalent information and techniques. Misappropriation or unauthorized disclosure of our trade secrets could impair ourcompetitive position and may have a material adverse effect on our business. Additionally, if the steps taken to maintain our trade secrets are deemedinadequate, we may have insufficient recourse against third parties for misappropriating the trade secret. In addition, others may independently discover ourtrade secrets and proprietary information. For example, the FDA, as part of its Transparency Initiative, is currently considering whether to make additionalinformation publicly available on a routine basis, including information that we may consider to be trade secrets or other proprietary information, and it is notclear at the present time how the FDA’s disclosure policies may change in the future, if at all.Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. Asa result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable toprevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee that we will have anysuch enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could materially adverselyaffect our business, results of operations and financial condition.Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a substantialamount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceuticalindustries, including patent infringement lawsuits, interferences, oppositions and inter partes reexamination proceedings before the U.S. Patent andTrademark Office, or U.S. PTO, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications,which are owned by third parties, exist in the fields in which we are pursuing development candidates. As the biotechnology and pharmaceutical industriesexpand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the patent rights of thirdparties.Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patentapplications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our productcandidates. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issuedpatents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringesupon these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our productcandidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block ourability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire. Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, includingcombination therapy, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unlesswe obtained a license or until such patent expires. In either case, such a license may not be available on commercially reasonable terms or at all.Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop andcommercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and wouldbe a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, 72Table of Contentswe may have to pay substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringingproducts or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.We may not be successful in obtaining or maintaining necessary rights to gene therapy product components and processes for our developmentpipeline through acquisitions and in-licenses.Presently we have rights to the intellectual property, through licenses from third parties and under patents that we own, to develop our gene therapyproduct candidates. Because our programs may involve additional product candidates that may require the use of proprietary rights held by third parties, thegrowth of our business will likely depend in part on our ability to acquire, in-license or use these proprietary rights. In addition, our product candidates mayrequire specific formulations to work effectively and efficiently and these rights may be held by others. We may be unable to acquire or in-license anycompositions, methods of use, processes or other third-party intellectual property rights from third parties that we identify. The licensing and acquisition ofthird-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license or acquirethird-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due to theirsize, cash resources and greater clinical development and commercialization capabilities.For example, we sometimes collaborate with U.S. and foreign academic institutions to accelerate our preclinical research or development under writtenagreements with these institutions. Typically, these institutions provide us with an option to negotiate a license to any of the institution’s rights in technologyresulting from the collaboration. Regardless of such right of first negotiation for intellectual property, we may be unable to negotiate a license within thespecified time frame or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to other parties,potentially blocking our ability to pursue our program.In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquirethird-party intellectual property rights on terms that would allow us to make an appropriate return on our investment. If we are unable to successfully obtainrights to required third-party intellectual property rights, our business, financial condition and prospects for growth could suffer.If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwiseexperience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.We are a party to a number of intellectual property license agreements that are important to our business and expect to enter into additional licenseagreements in the future. Our existing license agreements impose, and we expect that future license agreements will impose, various diligence, milestonepayment, royalty and other obligations on us. If we fail to comply with our obligations under these agreements, or we are subject to a bankruptcy, the licensormay have the right to terminate the license, in which event we would not be able to market products covered by the license.We may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we have done sofrom time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we may be required to expendsignificant time and resources to develop or license replacement technology. If we are unable to do so, we may be unable to develop or commercialize theaffected product candidates, which could harm our business significantly. We cannot provide any assurances that third-party patents do not exist whichmight be enforced against our current product candidates or future products, resulting in either an injunction prohibiting our sales, or, with respect to oursales, an obligation on our part to pay royalties and/or other forms of compensation to third parties. 73Table of ContentsIn many cases, patent prosecution of our licensed technology is controlled solely by the licensor. If our licensors fail to obtain and maintain patent orother protection for the proprietary intellectual property we license from them, we could lose our rights to the intellectual property or our exclusivity with respectto those rights, and our competitors could market competing products using the intellectual property. In certain cases, we control the prosecution of patentsresulting from licensed technology. In the event we breach any of our obligations related to such prosecution, we may incur significant liability to our licensingpartners. Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues and iscomplicated by the rapid pace of scientific discovery in our industry. Disputes may arise regarding intellectual property subject to a licensing agreement,including: • the scope of rights granted under the license agreement and other interpretation-related issues; • the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; • the sublicensing of patent and other rights under our collaborative development relationships; • our diligence obligations under the license agreement and what activities satisfy those diligence obligations; • the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and ourpartners; and • the priority of invention of patented technology.If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptableterms, we may be unable to successfully develop and commercialize the affected product candidates.We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming andunsuccessful.Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to fileinfringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours or ourlicensors is not valid, is unenforceable and/or is not infringed, or may refuse to stop the other party from using the technology at issue on the grounds that ourpatents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of beinginvalidated or interpreted narrowly and could put our patent applications at risk of not issuing.Interference proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions with respect to our patentsor patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights to itfrom the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense oflitigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. Wemay not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may notprotect those rights as fully as in the United States.Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of ourconfidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results ofhearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a materialadverse effect on the price of our common stock. 74Table of ContentsRecent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and theenforcement or defense of our issued patents.On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a numberof significant changes to U.S. patent law, including provisions that affect the way patent applications will be prosecuted and may also affect patent litigation.The U.S. PTO is currently developing regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes topatent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, were enacted March 16, 2013. However, it is not clear what, ifany, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase theuncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have amaterial adverse effect on our business and financial condition.We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidentialinformation of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.We employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors orpotential competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently orotherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employee’s former employer or otherthird parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, wemay lose valuable intellectual property rights or personnel, which could adversely impact our business. Even if we are successful in defending against suchclaims, litigation could result in substantial costs and be a distraction to management and other employees.We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.We may also be subject to claims that former employees, collaborators or other third parties have an ownership interest in our patents or other intellectualproperty. We have had in the past, and we may also have to in the future, ownership disputes arising, for example, from conflicting obligations of consultantsor others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorshipor ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such asexclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we aresuccessful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and otherrequirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with theserequirements.Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to theU.S. PTO and various governmental patent agencies outside of the United States in several stages over the lifetime of the patents and/or applications. We havesystems in place to remind us to pay these fees, and we employ an outside firm and rely on our outside counsel to pay these fees due to non-U.S. patentagencies. The U.S. PTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment andother similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply, and in 75Table of Contentsmany cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there aresituations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rightsin the relevant jurisdiction. In such an event, our competitors might be able to enter the market and this circumstance would have a material adverse effect onour business.Issued patents covering our product candidates could be found invalid or unenforceable if challenged in court.If we or one of our licensing partners initiated legal proceedings against a third party to enforce a patent covering one of our product candidates, thedefendant could counterclaim that the patent covering our product candidate is invalid and/or unenforceable. In patent litigation in the United States, defendantcounterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of severalstatutory requirements, including lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation thatsomeone connected with prosecution of the patent withheld relevant information from the U.S. PTO, or made a misleading statement, during prosecution.Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. Suchmechanisms include re-examination, post grant review, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). Such proceedingscould result in revocation or amendment to our patents in such a way that they no longer cover our product candidates. The outcome following legal assertionsof invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating priorart, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/orunenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Such a loss of patent protection would have amaterial adverse impact on our business.Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.As is the case with other biotechnology companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining andenforcing patents in the biotechnology industry involve both technological and legal complexity, and is therefore obtaining and enforcing biotechnology patentsis costly, time-consuming and inherently uncertain. In addition, the United States has recently enacted and is currently implementing wide-ranging patentreform legislation. Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rightsof patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of eventshas created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and theU.S. PTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforceour existing patents and patents that we might obtain in the future.We have not yet registered trademarks for a commercial trade name for Lenti-D and failure to secure such registrations could adversely affect ourbusiness.We have not yet registered trademarks for a commercial trade name for Lenti-D. During trademark registration proceedings, we may receive rejections.Although we would be given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, in the U.S. PTO and incomparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancelregistered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings.Moreover, any name we propose to use with our product candidates in the United States must be approved by the FDA and the EMA in the European Union,regardless of whether we have registered it, or applied to register it, as a trademark. The FDA 76Table of Contentsand EMA typically conduct a review of proposed product names, including an evaluation of potential for confusion with other product names. If the FDA orEMA object to any of our proposed proprietary product names, we may be required to expend significant additional resources in an effort to identify a suitablesubstitute name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA and EMA.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and ourintellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of someforeign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able toprevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventionsin and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection todevelop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not asstrong as that in the United States. These products may compete with our products and our patents or other intellectual property rights may not be effective orsufficient to prevent them from competing.Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legalsystems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual propertyprotection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing ofcompeting products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantialcosts and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and ourpatent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate andthe damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights aroundthe world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.Risks related to ownership of our common stockThe market price of our common stock may be highly volatile, and you may not be able to resell your shares at or above the price at which youpurchase them.Companies trading in the stock market in general, and The Nasdaq Global Select Market in particular, have experienced extreme price and volumefluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors maynegatively affect the market price of our common stock, regardless of our actual operating performance.The market price of our common stock may be volatile. Our stock price could be subject to wide fluctuations in response to a variety of factors,including the following: • adverse results or delays in preclinical or clinical studies; • reports of adverse events in other gene therapy products or clinical studies of such products; • inability to obtain additional funding; • any delay in filing an IND or BLA for any of our product candidates and any adverse development or perceived adverse development with respectto the FDA’s review of that IND or BLA; 77Table of Contents • failure to develop successfully and commercialize our product candidates; • failure to maintain our existing strategic collaborations or enter into new collaborations; • failure by us or our licensors and strategic collaboration partners to prosecute, maintain or enforce our intellectual property rights; • changes in laws or regulations applicable to future products; • inability to obtain adequate product supply for our product candidates or the inability to do so at acceptable prices; • adverse regulatory decisions; • introduction of new products, services or technologies by our competitors; • failure to meet or exceed financial projections we may provide to the public; • failure to meet or exceed the financial projections of the investment community; • the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community; • announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us, our strategic collaboration partneror our competitors; • disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for ourtechnologies; • additions or departures of key scientific or management personnel; • significant lawsuits, including patent or stockholder litigation; • changes in the market valuations of similar companies; • sales of our common stock by us or our stockholders in the future; and • trading volume of our common stock.Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matterssubject to stockholder approval.Our executive officers, directors, and their affiliates beneficially own approximately 32% of our outstanding voting stock. Therefore, these stockholderswill have the ability to influence us through their ownership positions. These stockholders may be able to determine all matters requiring stockholder approval.For example, these stockholders, acting together, may be able to control elections of directors, amendments of our organizational documents, or approval ofany merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our commonstock that you may believe are in your best interest as one of our stockholders.We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companieswill make our common stock less attractive to investors.We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we continue tobe an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies thatare not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Actof 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements andexemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any 78Table of Contentsgolden parachute payments not previously approved. We could be an emerging growth company for up to approximately five years (December 31, 2018),although circumstances could cause us to lose that status earlier, including if the market value of our common stock held by non-affiliates exceeds$700.0 million as of any June 30 before that time or if we have total annual gross revenue of $1.0 billion or more during any fiscal year before that time, inwhich cases we would no longer be an emerging growth company as of the following December 31 or, if we issue more than $1.0 billion in non-convertibledebt during any three-year period before that time, we would cease to be an emerging growth company immediately. Even after we no longer qualify as anemerging growth company, we may still qualify as a “smaller reporting company” which would allow us to take advantage of many of the same exemptionsfrom disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act andreduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find ourcommon stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a lessactive trading market for our common stock and our stock price may be more volatile.Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards applyto private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will besubject to the same new or revised accounting standards as other public companies that are not emerging growth companies.Actual or potential sales of our common stock by our employees, including our executive officers, pursuant to pre-arranged stock trading planscould cause our stock price to fall or prevent it from increasing for numerous reasons, and actual or potential sales by such persons could beviewed negatively by other investors.In accordance with the guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, and our policies regarding stocktransactions, a number of our employees, including executive officers, have adopted and may continue to adopt stock trading plans pursuant to which theyhave arranged to sell shares of our common stock from time to time in the future. Generally, sales under such plans by our executive officers and directorsrequire public filings. Actual or potential sales of our common stock by such persons could cause the price of our common stock to fall or prevent it fromincreasing for numerous reasons. For example, a substantial number of shares of our common stock becoming available (or being perceived to becomeavailable) for sale in the public market could cause the market price of our common stock to fall or prevent it from increasing. Also, actual or potential salesby such persons could be viewed negatively by other investors.Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, couldresult in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.Additional capital will be needed in the future to continue our planned operations. To the extent we raise additional capital by issuing equity securities,our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactionsat prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than onetransaction, investors may be materially diluted by subsequent sales. These sales may also result in material dilution to our existing stockholders, and newinvestors could gain rights superior to our existing stockholders.Pursuant to our 2013 Stock Option and Incentive Plan, or the 2013 Plan, our management is authorized to grant stock options and other equity-basedawards to our employees, directors and consultants. The number of shares available for future grant under the 2013 Plan automatically increases each year byup to 4% of all shares of our capital stock outstanding as of December 31 of the prior calendar year, subject to the ability of our board of directors orcompensation committee to take action to reduce the size of the increase in any given year. Currently, we plan to register the increased number of sharesavailable for issuance under the 2013 Plan each 79Table of Contentsyear. If our board of directors or compensation committee elects to increase the number of shares available for future grant by the maximum amount each year,our stockholders may experience additional dilution, which could cause our stock price to fall.We could be subject to securities class action litigation.In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This riskis especially relevant for us because pharmaceutical companies have experienced significant stock price volatility in recent years. If we face such litigation, itcould result in substantial costs and a diversion of management’s attention and resources, which could harm our business.We have broad discretion in the use of the net proceeds we received from our initial public offering and may not use them effectively.Our management has broad discretion in the application of the net proceeds from our initial public offering, and you will not have the opportunity aspart of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that willdetermine our use of the net proceeds from our initial public offering, their ultimate use may vary substantially from their currently intended use. The failureby our management to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds from our initial publicoffering in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders.Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.Under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” generally defined as a greaterthan 50% change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards, orNOLs, and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited. We believe we may have triggered an“ownership change” limitation. We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As a result, ifwe earn net taxable income, our ability to use our pre-change net operating loss carryforwards to offset U.S. federal taxable income may be subject tolimitations, which could potentially result in increased future tax liability to us. In addition, at the state level, there may be periods during which the use ofNOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for thedevelopment, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return tostockholders will therefore be limited to the appreciation of their stock.Provisions in our amended and restated certificate of incorporation and by-laws, as well as provisions of Delaware law, could make it moredifficult for a third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders or remove our currentmanagement.Our amended and restated certificate of incorporation, amended and restated by-laws and Delaware law contain provisions that may have the effect ofdelaying or preventing a change in control of us or changes in our management. Our amended and restated certificate of incorporation and by-laws, includeprovisions that: • authorize “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting,liquidation, dividend and other rights superior to our common stock; 80Table of Contents • create a classified board of directors whose members serve staggered three-year terms; • specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, our chiefexecutive officer or our president; • prohibit stockholder action by written consent; • establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposednominations of persons for election to our board of directors; • provide that our directors may be removed only for cause; • provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum; • specify that no stockholder is permitted to cumulate votes at any election of directors; • expressly authorize our board of directors to modify, alter or repeal our amended and restated by-laws; and • require supermajority votes of the holders of our common stock to amend specified provisions of our amended and restated certificate ofincorporation and amended and restated by-laws.These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, whichlimits the ability of stockholders owning in excess of 15% of our outstanding voting stock to merge or combine with us.Any provision of our amended and restated certificate of incorporation or amended and restated by-laws or Delaware law that has the effect of delayingor deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could alsoaffect the price that some investors are willing to pay for our common stock.Provisions in our collaboration agreement with Celgene Corporation may prevent or delay a change in control.Our collaboration agreement with Celgene Corporation provides that during the initial three-year term of the collaboration and, if extended, during thefirst extension term of the collaboration which is two years, in the event that we engage in a change in control transaction, including for such purposes a mergeror consolidation of bluebird bio or the sale of all or substantially all of our assets, or if another person or entity or group of persons or entities acquires at least50% of our voting capital stock, then Celgene has the right, but not the obligation, to terminate the collaboration agreement and obtain perpetual, non-terminable, worldwide, exclusive, fully paid-up licenses to all, but not less than all, of the product candidates previously identified under the collaborationagreement. We refer to this right to acquire such licenses as the call option.Under the call option, the product candidates to which Celgene would have the right to acquire fully paid-up licenses include any product candidatepreviously licensed out of the collaboration during the term of the collaboration, any product candidate for which we have exercised our right to co-develop andco-promote the product candidate within the United States, any product candidate for which Celgene previously declined its option to obtain a license and anyproduct candidate for which at least in vivo efficacy studies have been initiated or authorized by the joint steering committee for the collaboration. Thepurchase price for such fully paid-up licenses would be determined pursuant to a binding arbitration process and would be paid on or about theconsummation of the change of control transaction with our acquiror. The call option will lapse at the end of the three-year term of the collaboration, unlessextended, in which case it will lapse at the end of the first extension term, which is two years, even if the collaboration is extended further. 81Table of ContentsIn addition, during the initial three-year term of the collaboration, but not during any extension of the collaboration agreement, in the event that we engagein a change in control transaction described above and Celgene exercises the call option described above, then, in addition to the right to acquire the fully paid-up licenses described above, Celgene would also have the right to obtain a perpetual, non-terminable, worldwide, exclusive license to our intellectual property todevelop one or more CAR T cell products targeting one or more oncology associated target antigens identified by Celgene following the third anniversary of thecollaboration agreement. There is no limit to the number of oncology associated target antigens Celgene may select under this license. Upon commercializationof any such product candidate so licensed by Celgene, Celgene would be obligated to pay us a specified milestone payment upon regulatory approval and apercentage of net sales as a royalty. We refer to this license agreement to develop one or more CAR T cell products targeting one or more oncology associatedtarget antigens as the target antigen license. The right to acquire a target antigen license will lapse after the initial three-year term of the collaboration, even if thecollaboration is extended.The call option and the right to acquire a target antigen license may have the effect of delaying or preventing a change in control transaction involving us,or may reduce the number of companies interested in acquiring us. If Celgene were to exercise the call option, it would gain exclusive development andmarketing rights to the product candidates developed under the collaboration agreement, including any product for which we previously exercised our co-development and co-promotion rights. Were this to happen, our successor would not receive a royalty on net sales of any of the products out-licensed inconnection with the call option, nor would it realize any value it may otherwise ascribe to our right to co-develop and co-promote within the United States anyproducts developed during the collaboration. Moreover, if such event were to occur during the first three years of the collaboration, Celgene would alsoeffectively have the exclusive right to develop and market an unlimited number of additional CAR T cell products using our gene therapy platform, whether ornot these products were first identified or developed during the course of the collaboration, which product candidates would target a list of oncology associatedtarget antigens that would not be known at the time we close our change in control transaction. This license could potentially give Celgene rights to our genetherapy platform for CAR T cell product candidates in the event we are acquired prior to the third anniversary of the collaboration.These provisions could have the effect of delaying or preventing a change in control transaction involving bluebird bio, or could reduce the number ofcompanies interested in acquiring us, in particular during the first three years of the collaboration. This risk may become particularly acute in the event eitherof our lead product candidates, Lenti-D or LentiGlobin, suffer material setbacks or delays in their clinical advancement, as a result of which the long-termstrategic value potential acquirors may ascribe to us could increasingly be attributable to the potential long-term value of any CAR T cell products we developunder the collaboration.Item 1B. Unresolved Staff CommentsNot applicable.Item 2. PropertiesOur corporate headquarters are located in Cambridge, Massachusetts. Our current leased facility encompasses approximately 43,600 square feet ofoffice, research and development and laboratory space, located at 150 Second Street, Cambridge, Massachusetts. The nine-year lease commenced onJanuary 1, 2014. We have the option to extend this lease by an additional five years. We also lease our former corporate headquarters in Cambridge,Massachusetts, which expires on March 31, 2015. We believe that our existing facilities are adequate for our current needs. As additional space is needed inthe future, we believe that suitable space will be available in the required locations on commercially reasonable terms. 82Table of ContentsItem 3. Legal ProceedingsIn the ordinary course of business, we are from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating tointellectual property, commercial arrangements and other matters. While the outcome of these proceedings and claims cannot be predicted with certainty, as ofDecember 31, 2013, we were not party to any legal or arbitration proceedings that may have, or have had in the recent past, significant effects on our financialposition or profitability. No governmental proceedings are pending or, to our knowledge, contemplated against us. We are not a party to any materialproceedings in which any director, member of senior management or affiliate of ours is either a party adverse to us or our subsidiaries or has a material interestadverse to us or our subsidiaries.Item 4. Mine Safety DisclosuresNot applicable. 83Table of ContentsPART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesOur common stock has been traded on the Nasdaq Global Select Market under the symbol “BLUE” since our initial public offering on June 19, 2013.Prior to this time, there was no public market for our common stock. The following table shows the high and low sale prices per share of our common stockas reported on the Nasdaq Global Select Market for the periods indicated: High Low Second Quarter 2013 (beginning June 19, 2013) $26.91 $24.97 Third Quarter 2013 $35.00 $24.43 Fourth Quarter 2013 $27.11 $17.53 On February 24, 2014, the last reported sale price for our common stock on the Nasdaq Global Select Market was $24.25 per share.Stock Performance GraphThe graph set forth below compares the cumulative total stockholder return on our common stock between June 19, 2013 (the date of our initial publicoffering) and December 31, 2013, with the cumulative total return of (a) the Nasdaq Biotechnology Index and (b) the Nasdaq Composite Index, over the sameperiod. This graph assumes the investment of $100 on June 19, 2013 in our common stock, the Nasdaq Biotechnology Index and the Nasdaq CompositeIndex and assumes the reinvestment of dividends, if any. The graph assumes our closing sales price on June 19, 2013 of $26.91 per share as the initial valueof our common stock and not the initial offering price to the public of $17.00 per share. 84Table of ContentsThe comparisons shown in the graph below are based upon historical data. We caution that the stock price performance shown in the graph below is notnecessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock. Information used in the graph was obtainedfrom the Nasdaq Stock Market LLC, a financial data provider and a source believed to be reliable. The Nasdaq Stock Market LLC is not responsible for anyerrors or omissions in such information. *$100 invested on June 19, 2013 in stock or indexHoldersAs of February 24, 2014, there were approximately 21 holders of record of our common stock. The actual number of stockholders is greater than thisnumber of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.DividendsWe have not paid any cash dividends on our common stock since inception and do not anticipate paying cash dividends in the foreseeable future.Securities authorized for issuance under equity compensation plansInformation about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report on Form 10-K.Use of Proceeds from Public Offering of Common StockOn June 24, 2013, we closed the sale of 6,832,352 shares of common stock to the public (inclusive of 891,176 shares of common stock sold by uspursuant to the full exercise of an overallotment option granted to the underwriters) at a price of $17.00 per share. The offer and sale of the shares in the IPOwas registered under the 85Table of ContentsSecurities Act pursuant to registration statements on Form S-1 (File No. 333-188605), which was filed with the SEC, on May 14, 2013 and amendedsubsequently and declared effective on June 18, 2013, and Form S-1MEF (File No. 333-189430), which was filed with the SEC on June 18, 2013 anddeclared effective on June 18, 2013. J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated acted as managing underwriters ofthe offering.We raised approximately $104.9 million in net proceeds after deducting underwriting discounts and commissions of approximately $8.1 million andother offering expenses of approximately $3.1 million. None of these expenses consisted of payments made by us to directors, officers or persons owning 10%or more of our common stock or to their associates, or to our affiliates. There has been no material change in the planned use of proceeds from our IPO asdescribed in our final prospectus filed with the SEC on June 19, 2013 pursuant to Rule 424. We invested the funds received in cash equivalents and othershort-term investments in accordance with our investment policy.Purchases of Equity Securities by the Issuer or Affiliated PurchasersThere were no repurchases of shares of common stock made during the year ended December 31, 2013.Item 6. Selected Financial DataThe following selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Conditionand Results of Operations”, the consolidated financial statements and related notes, and other financial information included in this Annual Report onForm 10-K.We derived the consolidated financial data for the years ended December 31, 2013, 2012 and 2011 and as of December 31, 2013 and 2012 from ourconsolidated financial statements, which are included elsewhere in this Annual Report on Form 10-K. Historical results are not necessarily indicative of theresults to be expected in future periods. Years Ended December 31, 2013 2012 2011 (in thousands, except per share amounts) Consolidated statements of operations data: Revenue: Collaboration revenue $19,792 $— $— Research and license fees 389 340 640 Grant revenue — — 242 Total revenue 20,181 340 882 Expenses: Research and development 31,002 17,210 11,409 General and administrative 14,126 6,846 4,615 Total operating expenses 45,128 24,056 16,024 Loss from operations (24,947) (23,716) (15,142) Other income (expense), net (374) 46 (456) Net loss $(25,321) $(23,670) $(15,598) Net loss per share applicable to common stockholders-basic and diluted $(2.02) $(13.79) $(171.59) Weighted-average number of common shares used in net loss per shareapplicable to common stockholders-basic and diluted 12,555 262 120 86Table of Contents As of December 31, 2013 2012 2011 (in thousands) Consolidated balance sheet data: Cash and cash equivalents $206,279 $67,011 $25,604 Working capital 177,113 63,156 27,087 Total assets 224,390 69,322 30,918 Preferred stock — 122,177 82,403 Common stock and additional paid-in capital 250,342 15,270 7,734 Total stockholders’ equity (deficit) 151,667 (55,747) (55,707) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following information should be read in conjunction with the consolidated financial statements and related notes thereto included in thisAnnual Report on Form 10-KExcept for the historical information contained herein, the matters discussed in this Annual Report on Form 10-K may be deemed to be forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the PrivateSecurities Litigation Reform Act of 1995 and other federal securities laws. In this Annual Report on Form 10-K, words such as “may,” “will,”“expect,” “anticipate,” “estimate,” “intend,” and similar expressions (as well as other words or expressions referencing future events, conditions orcircumstances) are intended to identify forward-looking statements.Our actual results and the timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in anyforward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results ofoperations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-lookingstatements contained in this Annual Report. In addition, even if our results of operations, financial condition and liquidity, and the development of theindustry in which we operate are consistent with the forward-looking statements contained in this Annual Report, they may not be predictive of resultsor developments in future periods.The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this AnnualReport on Form 10-K, including those risks identified under Item 1A. Risk Factors.We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made.We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflectany change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihoodthat actual results will differ from those set forth in the forward-looking statements.OverviewWe are a clinical-stage biotechnology company focused on transforming the lives of patients with severe genetic and orphan diseases using gene therapy.We believe that gene therapy has the potential to change the way these patients are treated by correcting the underlying genetic defect that is the cause of theirdisease, rather than offering solutions that only address their symptoms. We and our scientific collaborators have generated what we believe is human proof-of-concept data for our gene therapy platform in two underserved diseases, each of which has been granted orphan drug status by U.S. and European regulatoryauthorities. We are conducting a Phase II/III clinical study of our most advanced product candidate, Lenti-D, to evaluate its safety and efficacy in subjects withchildhood cerebral adrenoleukodystrophy, or CCALD, a rare, hereditary neurological disorder 87Table of Contentsaffecting young boys that is often fatal. We also are conducting Phase I/II clinical studies in both the United States and Europe of our next most advancedproduct candidate, LentiGlobin, to evaluate its safety and efficacy in subjects with ß-thalassemia major and, in the European clinical study, sickle celldisease, or SCD, which are hereditary blood disorders that often lead to severe anemia and shortened lifespans.Since our inception in 1992, we have devoted substantially all of our resources to our development efforts relating to our product candidates, includingactivities to manufacture product in compliance with good manufacturing practices, or GMP, preparing to conduct clinical studies of our product candidates,providing general and administrative support for these operations and protecting our intellectual property. We do not have any products approved for sale andhave not generated any revenue from product sales. We have funded our operations primarily through the private placement of preferred stock, common stock,convertible notes and warrants to purchase common stock.In March 2013, we entered into a strategic collaboration with Celgene Corporation, or Celgene, to discover, develop and commercialize novel, disease-altering gene therapies in oncology. This collaboration has an initial term of three years, and Celgene has made a $75.0 million up-front, non-refundable cashpayment to us as consideration for entering into the collaboration. During the year ended December 31, 2013, we recognized $19.8 million of revenueassociated with our collaboration with Celgene related to the research and development services performed.On June 3, 2013, our board of directors and our stockholders approved a one-for-18.967 reverse stock split of our outstanding common stock, whichwas effected on June 3, 2013. Our historical share and per share information have been retroactively adjusted to give effect to this reverse stock split. Shares ofcommon stock underlying outstanding stock options and other equity instruments were proportionately reduced and the respective exercise prices, ifapplicable, were proportionately increased in accordance with the terms of the agreements governing such securities.On June 24, 2013, we completed our initial public offering, or IPO, whereby we sold 6,832,352 shares of common stock (inclusive of 891,176 sharesof common stock sold by us pursuant to the full exercise of an overallotment option granted to the underwriters in connection with the offering) at a price of$17.00 per share. The shares began trading on the Nasdaq Global Select Market on June 19, 2013. The aggregate net proceeds received by us from the IPOwere $104.9 million, net of underwriting discounts and commissions and estimated offering expenses payable by us. Upon the closing of the IPO, alloutstanding shares of convertible preferred stock converted into 16,388,510 shares of common stock; and warrants exercisable for convertible preferred stockwere automatically converted into warrants exercisable for 337,952 shares of common stock, resulting in the reclassification of the related convertible preferredstock warrant liability of approximately $0.7 million to additional paid-in capital. Additionally, we are now authorized to issue 125,000,000 shares of commonstock and 5,000,000 shares of preferred stock.We have never been profitable and have incurred net losses in each year since inception. Our net loss was $25.3 million for the year ended December 31,2013, and our accumulated deficit was $98.7 million as of December 31, 2013. Substantially all our net losses resulted from costs incurred in connectionwith our research and development programs and from general and administrative costs associated with our operations. We expect to continue to incursignificant expenses and increasing operating losses for at least the next several years. We expect our expenses will increase substantially in connection with ourongoing and planned activities, as we: • conduct clinical studies for our Lenti-D and LentiGlobin product candidates; • continue our research and development efforts; • increase research and development related activities for the discovery and development of oncology product candidates in connection with ourstrategic collaboration with Celgene; • manufacture clinical study materials and develop large-scale manufacturing capabilities; 88Table of Contents • seek regulatory approval for our product candidates; • add personnel to support our product development and commercialization efforts; and • operate as a public company.We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for one ormore of our product candidates, which we expect will take a number of years and is subject to significant uncertainty. We have no commercial-scalemanufacturing facilities, and all of our manufacturing activities are contracted out to third parties. Additionally, we currently utilize third-party contractresearch organizations, or CROs, to carry out our clinical development activities; and we do not yet have a sales organization. If we obtain regulatory approvalfor any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing, anddistribution. Accordingly, we will seek to fund our operations through public or private equity or debt financings or other sources. However, we may be unableto raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such otherarrangements as and when needed would have a negative impact on our financial condition and our ability to develop our products.Financial operations overviewRevenueTo date, we have not generated any revenues from the sale of products. Our revenues have been derived from collaboration arrangements, research fees,license fees, and grant revenues.Collaboration revenue is generated exclusively from our collaboration arrangement with Celgene. The terms of this arrangement contain multipledeliverables, which include at inception: (i) discovery, research and development services, (ii) participation on the joint steering committee and(iii) participation on the patent committee. We recognize arrangement consideration allocated to each unit of accounting when all of the revenue recognitioncriteria in Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 605, Revenue Recognition, or ASC 605,are satisfied for that particular unit of accounting.Revenue from the Celgene arrangement associated with discovery, research and development services, joint steering committee services and patentcommittee services is recognized ratably over the associated period of performance, which is initially three years.Research and license fee revenue is primarily generated through license and research and development agreements with strategic partners and nonprofitorganizations for the development and commercialization of our product candidates. There are no performance, cancellation, termination, or refund provisionsin any of our arrangements that contain material financial consequences to us.Nonrefundable license fees are recognized as revenue upon delivery provided there are no undelivered elements in the arrangement. Research fees arerecognized as revenue over the period we perform the associated services or on a straight-line basis if the pattern of performance cannot be estimated.Our ability to generate product revenue and become profitable depends upon our ability to successfully commercialize products. We expect to incurlosses for the foreseeable future, and we expect these losses to increase as we continue our development of, and seek regulatory approvals for, our productcandidates and begin to commercialize any approved products. Because of the numerous risks and uncertainties associated with product development, we areunable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generaterevenues from the sale of our products, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuingbasis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations. 89Table of ContentsResearch and development expensesResearch and development expenses consist primarily of costs incurred for the development of our product candidates, which include: • employee-related expenses, including salaries, benefits, travel and stock-based compensation expense; • expenses incurred under agreements with CROs and investigative sites that will conduct our clinical studies; • costs of acquiring, developing, and manufacturing clinical study materials; • facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance, and othersupplies; and • costs associated with preclinical activities and regulatory operations.Research and development costs are expensed as incurred. Costs for certain development activities are recognized based on an evaluation of the progressto completion of specific tasks using information and data provided to us by our vendors and our clinical sites. We cannot determine with certainty theduration and completion costs of the current or future clinical studies of our product candidates or if, when, or to what extent we will generate revenues fromthe commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval forany of our product candidates. The duration, costs, and timing of clinical studies and development of our product candidates will depend on a variety offactors, including: • the scope, rate of progress, and expense of our ongoing as well as any additional clinical studies and other research and development activities; • future clinical study results; • uncertainties in clinical study enrollment rate; • significant and changing government regulation; and • the timing and receipt of any regulatory approvals.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 costsand timing associated with the development of that product candidate. For example, if the FDA, or another regulatory authority were to require us to conductclinical studies beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate or if we experiencesignificant delays in enrollment in any of our clinical studies, we could be required to expend significant additional financial resources and time on thecompletion of clinical development.From inception through December 31, 2013, we have incurred $95.5 million in research and development expenses. We plan to increase our researchand development expenses for the foreseeable future as we continue the development of our Lenti-D and LentiGlobin product candidates and conduct researchand development activities under our strategic collaboration with Celgene. Our research and development activities include the following: • We are conducting a Phase II/III clinical study to examine the feasibility, safety and efficacy of our Lenti-D product candidate in the treatment ofCCALD. In October 2013, we announced that the first subject had been treated in this study. • We are conducting a Phase I/II clinical study in France to study the feasibility, safety and efficacy of our LentiGlobin product candidate in thetreatment of subjects with ß-thalassemia major and severe SCD. In December 2013, we announced that the first subject had been treated in thisstudy. • We are conducting a Phase I/II clinical study in the United States to study the feasibility, safety and efficacy of our LentiGlobin product candidatein the treatment of subjects with ß-thalassemia major. • We will continue to manufacture clinical study materials in support of our clinical studies. 90Table of ContentsOur direct research and development expenses consist principally of external costs, such as start-up fees paid to investigators, consultants, centrallaboratories and CROs in connection with our clinical studies, and costs related to acquiring and manufacturing clinical study materials. We do not allocatepersonnel-related costs, costs associated with our general platform improvements, depreciation or other indirect costs to specific programs, as they aredeployed across multiple projects under development and, as such, are separately classified as personnel and other expenses in the table below: Year ended December 31, 2013 2012 2011 (in thousands) Lenti-D $4,396 $3,966 $2,900 LentiGlobin 8,490 5,259 1,416 Pre-clinical programs 783 — — Total direct research and development expenses 13,669 9,225 4,316 Employee- and contractor-related expenses 12,961 6,150 5,090 Platform-related lab expenses 1,067 727 717 Facility expenses 2,288 709 619 Other expenses 1,017 399 667 Personnel and other expenses 17,333 7,985 7,093 Total research and development expenses $31,002 $17,210 $11,409 General and administrative expensesGeneral and administrative expenses consist primarily of salaries and related costs for personnel, including stock-based compensation and travelexpenses for our employees in executive, operational, finance and human resource functions. Other general and administrative expenses include facility-relatedcosts and professional fees for directors, accounting and legal services and expenses associated with obtaining and maintaining patents.We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research anddevelopment and potential commercialization of our product candidates. We also anticipate increased expenses related to audit, legal, regulatory, and tax-relatedservices associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums, and investor relationscosts associated with being a public company. Additionally, if and when we believe a regulatory approval of the first product candidate appears likely, weanticipate an increase in payroll and related expenses as a result of our preparation for commercial operations, especially as it relates to the sales and marketingof our product candidates.Other income (expense), netOther income and expense consists primarily of interest income earned on cash and cash equivalents, the re-measurement gain or loss associated with thechange in the fair value of the preferred stock warrant liability, and foreign currency gain or loss. We use the Black-Scholes option pricing model to estimatethe fair value of the warrants.We base the estimates in the Black-Scholes option pricing model, in part, on subjective assumptions, including stock price volatility, risk-free interestrate, dividend yield, and the fair value of the preferred stock underlying the warrants. The re-measurement gain or loss associated with the change in the fairvalue of the preferred stock warrant liability each reporting period prior to becoming a public company is recognized as a component of other income (expense),net. 91Table of ContentsCritical accounting policies and significant judgments and estimatesOur management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have beenprepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates andjudgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements.On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses and stock-based compensation. We base ourestimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results ofwhich form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual resultsmay differ from these estimates under different assumptions or conditions.While our significant accounting policies are described in more detail in the notes to our financial statements appearing elsewhere in this annual report,we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our financial statements.Revenue recognitionWe have primarily generated revenue through collaboration arrangements, research arrangements and license arrangements with strategic partners andnonprofit organizations for the development and commercialization of product candidates. Additionally, we have generated revenue from research anddevelopment grant programs.We recognize revenue in accordance with ASC 605. Accordingly, revenue is recognized for each unit of accounting when all of the following criteria aremet: • Persuasive evidence of an arrangement exists • Delivery has occurred or services have been rendered • The seller’s price to the buyer is fixed or determinable • Collectability is reasonably assuredAmounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in our consolidated balance sheets. Amountsexpected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, current portion. Amounts notexpected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of current portion.Collaboration revenueAs of December 31, 2013, our collaboration revenue was generated exclusively from our collaboration arrangement with Celgene. The terms of thisarrangement contains multiple deliverables, which include at inception: (i) discovery, research and development services, (ii) participation on the joint steeringcommittee and (iii) participation on the patent committee. The collaboration arrangement also provides Celgene with the option to obtain a license to any productcandidates resulting from the collaboration. Moreover, Celgene has the option to extend the term of the collaboration arrangement, first for a period of two yearsand then for an additional period of one year. Additionally, we have the sole right to manufacture or have manufactured supplies of vectors and associatedpayloads manufactured for incorporation into the associated product candidate in the event a product candidate is licensed. Non-refundable payments to usunder this arrangement may include: (i) up-front research fees, (ii) product candidate license fees, (iii) extension term research fees, (iv) payments for themanufacture and supply of vectors and payloads, (v) payments based on the achievement of certain milestones 92Table of Contentsand (vi) royalties on product sales. Additionally, we may elect to share in the costs incurred from the development, commercialization and manufacture ofproduct candidates licensed by our collaborators and earn our share of the net profits or bear our share of the net losses generated from the sale of productcandidates licensed by our collaborators.We analyze multiple-element arrangements based on the guidance in FASB ASC Topic 605-25, Revenue Recognition-Multiple-ElementArrangements, or ASC 605-25. Pursuant to the guidance in ASC 605-25, we evaluate multiple-element arrangements to determine (1) the deliverablesincluded in the arrangement and (2) whether the individual deliverables represent separate units of accounting or whether they must be accounted for as acombined unit of accounting. This evaluation involves subjective determinations and requires us to make judgments about the individual deliverables andwhether such deliverables are separable from the other aspects of the contractual relationship. Deliverables are considered separate units of accounting providedthat: (i) the delivered item(s) has value to the customer on a standalone basis and (ii) if the arrangement includes a general right of return relative to the delivereditem(s), delivery or performance of the undelivered item(s) is considered probable and substantially in our control. In assessing whether an item has standalonevalue, we consider factors such as the research, manufacturing and commercialization capabilities of the collaboration partner and the availability of theassociated expertise in the general marketplace. In addition, we consider whether the collaboration partner can use the other deliverable(s) for their intendedpurpose without the receipt of the remaining element(s), whether the value of the deliverable is dependent on the undelivered item(s) and whether there are othervendors that can provide the undelivered element(s). The collaboration arrangement does not contain a general right of return relative to the delivered item(s).Arrangement consideration that is fixed or determinable is allocated among the separate units of accounting using the relative selling price method. Then,the applicable revenue recognition criteria in ASC 605 are applied to each of the separate units of accounting in determining the appropriate period and patternof recognition. We determine the selling price of a unit of accounting following the hierarchy of evidence prescribed by ASC 605-25. Accordingly, wedetermine the estimated selling price for units of accounting within each arrangement using vendor-specific objective evidence, or VSOE, of selling price, ifavailable, third-party evidence, or TPE, of selling price if VSOE is not available, or best estimate of selling price, or BESP, if neither VSOE nor TPE isavailable. We typically use BESP to estimate the selling price, since we generally do not have VSOE or TPE of selling price for our units of accounting.Determining the BESP for a unit of accounting requires significant judgment. In developing the BESP for a unit of accounting, we consider applicable marketconditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs. Wevalidate the BESP for units of accounting by evaluating whether changes in the key assumptions used to determine the BESP will have a significant effect onthe allocation of arrangement consideration between multiple units of accounting.Options are considered substantive if, at the inception of the arrangement, we are at risk as to whether the collaboration partner will choose to exercise theoption. Factors that we consider in evaluating whether an option is substantive include the overall objective of the arrangement, the benefit the collaboratormight obtain from the arrangement without exercising the option, the cost to exercise the option and the likelihood that the option will be exercised. Forarrangements under which an option is considered substantive, we do not consider the item underlying the option to be a deliverable at the inception of thearrangement and the associated option fees are not included in allocable arrangement consideration, assuming the option is not priced at a significant andincremental discount. Conversely, for arrangements under which an option is not considered substantive or if an option is priced at a significant andincremental discount, we would consider the item underlying the option to be a deliverable at the inception of the arrangement and a corresponding amountwould be included in allocable arrangement consideration. All of the options included in our collaboration arrangement have been determined to be substantive,and none of the options are priced at a significant and incremental discount.We recognize arrangement consideration allocated to each unit of accounting when all of the revenue recognition criteria in ASC 605 are satisfied for thatparticular unit of accounting. We will recognize as revenue 93Table of Contentsarrangement consideration attributed to licenses that have standalone value from the other deliverables to be provided in an arrangement upon delivery. We willrecognize as revenue arrangement consideration attributed to licenses that do not have standalone value from the other deliverables to be provided in anarrangement over our estimated performance period as the arrangement would be accounted for as a single unit of accounting.We recognize revenue from the Celgene arrangement associated with discovery, research and development services, joint steering committee services andpatent committee services ratably over the associated period of performance. If there is no discernible pattern of performance and/or objectively measurableperformance measures do not exist, then we recognize revenue under the arrangement on a straight-line basis over the period we are expect to complete ourperformance obligations. Conversely, if the pattern of performance in which the service is provided to the customer can be determined and objectivelymeasurable performance measures exist, then we recognize revenue under the arrangement using the proportional performance method. Revenue recognized islimited to the lesser of the cumulative amount of payments received or the cumulative amount of revenue earned, as determined using the straight-line methodor proportional performance method, as applicable, as of the period ending date.At the inception of an arrangement that includes milestone payments, we evaluate whether each milestone is substantive and at risk to both parties on thebasis of the contingent nature of the milestone. This evaluation includes an assessment of whether: (i) the consideration is commensurate with either ourperformance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from our performance toachieve the milestone, (ii) the consideration relates solely to past performance and (iii) the consideration is reasonable relative to all of the deliverables andpayment terms within the arrangement. We evaluate factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome toachieve the respective milestone and the level of effort and investment required to achieve the respective milestone in making this assessment. There isconsiderable judgment involved in determining whether a milestone satisfies all of the criteria required to conclude that a milestone is substantive. We haveconcluded that all of the clinical and regulatory milestones pursuant to its collaboration arrangement are substantive. Accordingly, in accordance with FASBASC Topic 605-28, Revenue Recognition-Milestone Method, revenue from clinical and regulatory milestone payments will be recognized in its entirety uponsuccessful accomplishment of the milestone, assuming all other revenue recognition criteria are met. Milestones that are not considered substantive would berecognized as revenue over the remaining period of performance, assuming all other revenue recognition criteria are met. Revenue from commercial milestonepayments will be accounted for as royalties and recorded as revenue upon achievement of the milestone, assuming all other revenue recognition criteria are met.We will recognize royalty revenue in the period of sale of the related product(s), based on the underlying contract terms, provided that the reported salesare reliably measurable and we have no remaining performance obligations, assuming all other revenue recognition criteria are met.Accrued research and development expensesAs part of the process of preparing our financial statements, we are required to estimate our accrued expenses. This process involves reviewing opencontracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level ofservice performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority ofour service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expensesas of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy ofour estimates with the service providers and make adjustments if necessary. Examples of estimated accrued research and development expenses include feespaid to: • CROs in connection with clinical studies; • investigative sites in connection with clinical studies; 94Table of Contents • vendors in connection with preclinical development activities; and • vendors related to product manufacturing, development and distribution of clinical supplies.We base our expenses related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple CROsthat conduct and manage clinical studies on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract andmay 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 aprepayment of the clinical expense. Payments under some of these contracts depend on factors such as the successful enrollment of subjects and thecompletion of clinical study milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to beexpended 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 prepaidaccordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing ofservices 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, there has been no material differences from our estimates to the amount actually incurred.Stock-based compensationStock-based awardsWe issue stock-based awards to employees and non-employees, generally in the form of stock options and restricted stock. We account for our stock-based awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation, or ASC 718. ASC 718 requires all stock-based paymentsto employees, including grants of employee stock options and modifications to existing stock options, to be recognized in the consolidated statements ofoperations and comprehensive loss based on their fair values. We account for stock-based awards to non-employees in accordance with FASB ASC Topic505-50, Equity-Based Payments to Non-Employees, which requires the fair value of the award to be remeasured at fair value as the award vests.Our stock-based awards are subject to either service or performance-based vesting conditions. Compensation expense related to awards to employees anddirectors with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated service period of theaward, which is generally the vesting term. Compensation expense related to awards to non-employees with service-based vesting conditions is recognized onthe then-current fair value at each financial reporting date prior to the measurement date over the associated service period of the award, which is generally thevesting term, using the accelerated attribution method. Compensation expense related to awards to employees with performance-based vesting conditions isrecognized based on the grant date fair value over the requisite service period using the accelerated attribution method to the extent achievement of theperformance condition is probable. Compensation expense related to awards to non-employees with performance-based vesting conditions is recognized basedon the then-current fair value at each financial reporting date prior to the measurement date over the requisite service period using the accelerated attributionmethod to the extent achievement of the performance condition is probable.Described below is the methodology we have utilized in measuring stock-based compensation expense. Following the consummation of our initial publicoffering, stock option and restricted stock values have been determined based on the quoted market price of our common stock.We estimate the fair value of our stock-based awards to employees and non-employees using the Black-Scholes option pricing model, which requires theinput of highly subjective assumptions, including (i) the expected volatility of our stock, (ii) the expected term of the award, (iii) the risk-free interest rate, and(iv) expected dividends. Due to the lack of a public market for the trading of our common stock and a lack of company specific historical and impliedvolatility data, we based our estimate of expected volatility on the 95Table of Contentshistorical volatility of a group of similar companies that are publicly traded. For these analyses, we select companies with comparable characteristics to oursincluding enterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected life of thestock-based awards. We compute the historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period ofthe calculated expected term of our stock-based awards. We will continue to apply this process until a sufficient amount of historical information regarding thevolatility of our own stock price becomes available. We estimate the expected life of our employee stock options using the “simplified” method, whereby, theexpected life equals the average of the vesting term and the original contractual term of the option. The risk-free interest rates for periods within the expected lifeof the option were based on the U.S. Treasury yield curve in effect during the period the options were granted.We are also required to estimate forfeitures at the time of grant, and revise those estimates in subsequent periods if actual forfeitures differ from itsestimates. We use historical data to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expectedto vest. To the extent that actual forfeitures differ from our estimates, the difference is recorded as a cumulative adjustment in the period the estimates wererevised. Stock-based compensation expense recognized in the financial statements is based on awards that are ultimately expected to vest.We have computed the fair value of employee and director stock options at date of grant using the following weighted-average assumptions: Year ended December 31, 2013 2012 2011 Expected volatility 82.0% 79.6% 83.0% Expected term (in years) 6.1 6.1 6.1 Risk-free interest rate 1.1% 1.0% 1.7% Expected dividend yield 0.0% 0.0% 0.0% Weighted average exercise price per share $8.59 $2.20 $2.09 Stock-based compensation totaled approximately $6.5 million for the year ended December 31, 2013 and $0.8 million for the year ended December 31,2012. As of December 31, 2013, we had $10.5 million of total unrecognized compensation expense, net of related forfeiture estimates, which is expected to berecognized over a weighted-average remaining vesting period of approximately 3.3 years. We expect the impact of our stock-based compensation expense forstock options and restricted stock granted to employees and non-employees to grow in future periods due to the potential increases in the value of our commonstock and headcount.Fair value of stock optionsPrior to our IPO, the estimated fair value of our common stock was determined contemporaneously by our board of directors based on valuationestimates provided by management and prepared in accordance with the framework of the American Institute of Certified Public Accountants’ TechnicalPractice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, or AICPA Practice Aid, as well as independent third-partyvaluations. Our contemporaneous valuations of our common stock were based on a number of objective and subjective factors, including external marketconditions affecting the biotechnology industry sector and the prices at which we sold shares of preferred stock, the superior rights and preferences ofsecurities senior to our common stock at the time of each grant and the likelihood of achieving a liquidity event such as an IPO. Consequently, after the IPO thefair value of the shares of common stock underlying the stock options is the closing price on the option grant date.Recently adopted accounting pronouncementsIn February 2013, the FASB issued guidance to provide information about the amounts reclassified out of accumulated other comprehensive income, orAOCI, by component. An entity is required to present, either on the 96Table of Contentsface of the financial statements or in the notes, significant amounts reclassified out of AOCI by the respective line items of net income, but only if the amountreclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to netincome, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. On January 1, 2013, we adopted thisstandard, which had no impact on our financial position or results of operations.Results of OperationsComparison of the years ended December 31, 2013 and 2012: Year ended December 31, 2013 2012 Changes (in thousands) Revenue: Collaboration revenue $19,792 $— $19,792 Research and license fees 389 340 49 Total revenue 20,181 340 19,841 Operating expenses: Research and development 31,002 17,210 13,792 General and administrative 14,126 6,846 7,280 Total operating expenses 45,128 24,056 21,072 Loss from operations (24,947) (23,716) 1,231 Other income (expense), net (374) 46 420 Net loss $(25,321) $(23,670) $1,651 Revenue. Total revenue was $20.2 million for the year ended December 31, 2013, compared to $0.3 million for the year ended December 31, 2012. Theincrease of $19.8 million was primarily due to the Celgene collaboration. In the year ended December 31, 2013, we recorded $19.8 million of the up-frontpayment related to research and development services from the Celgene collaboration, which was entered into in March 2013 and is expected to be recognizedon a straight-line basis through March 2016, and $0.4 million of research and license fees.Research and development expenses. Research and development expenses were $31.0 million for the year ended December 31, 2013, compared to$17.2 million for the year ended December 31, 2012. The increase of $13.8 million was primarily due to the increase in headcount and clinical trial relatedexpenses to support the advancement of our programs, including the new Celgene collaboration, and included the following increases in expenses: • Direct research and development expenses: • $0.7 million of materials production costs in preparation for and upon initiation of the Starbeam (formerly referred to as ALD-102),Northstar (formerly referred to as HGB-204) and HGB-205 clinical studies. • $2.1 million of clinical trial related costs related to initiation of clinical studies in 2013. • $0.5 million of costs for clinical and regulatory consultants to support regulatory filing and other clinical start-up activities. • $1.6 million of platform and direct project lab supplies related to increased headcount and scale up process development activities. 97Table of Contents • Personnel and other expenses: • $6.8 million of employee compensation and benefits to support increased development activities related to the three clinical studiesinitiated and in support of preclinical programs in 2013. The increased headcount resulted in an incremental $0.2 million of recruiting and$0.4 million of travel expense. • $1.6 million in facility-related expenses to accommodate increased lab headcount. • $0.3 million in accelerated depreciation due to the shortened expected useful life of assets relating to our former corporate headquarters.General and administrative expenses. General and administrative expenses were $14.1 million for the year ended December 31, 2013, compared to$6.8 million for the year ended December 31, 2012. The increase of $7.3 million was primarily due to the following increases in expenses: $4.3 million ofemployee-related costs to support our overall growth; $1.0 million of contractors and consultants expenses and $0.7 million of professional fees to support therequirements of being a public company; $0.5 million in general office expenses as a result of increased headcount; and $0.3 million in accelerateddepreciation due to the shortened expected useful life of assets relating to our former corporate headquarters.Other income (expense), net. Other income (expense), net, was $(0.4) million for the year ended December 31, 2013, compared to $0.05 million forthe year ended December 31, 2012. The decrease of $0.4 million was primarily due to the re-measurement of fair value of our convertible preferred stockwarrants and foreign currency gain.Comparison of the years ended December 31, 2012 and 2011: Year ended December 31, 2012 2011 Changes (in thousands) Revenue: Collaboration revenue $— $— $— Research and license fees 340 640 (300) Grant revenue — 242 (242) Total revenue 340 882 (542) Operating expenses: Research and development 17,210 11,409 5,801 General and administrative 6,846 4,615 2,231 Total operating expenses 24,056 16,024 8,032 Loss from operations (23,716) (15,142) (8,574) Other income (expense), net 46 (456) 502 Net loss $(23,670) $(15,598) $(8,072) Revenue. We recorded $0.3 million research fee revenue for the year ended December 31, 2012. For the year ended December 31, 2011, we recorded$0.9 million in revenue consisting of $0.3 million research fees, $0.3 million license fees and $0.2 million grant revenue (a tax incentive from theCommonwealth of Massachusetts).Research and development expenses. Research and development expenses were $17.2 million for the year ended December 31, 2012, compared to$11.4 million for the year ended December 31, 2011, an increase of $5.8 million. The increase was primarily due to: • $2.8 million increase for clinical supply manufacturing and drug product process development activities in preparation for the Starbeam,Northstar and HGB-205 clinical studies planned for 2013; 98Table of Contents • $1.1 million increase to employee and contractor-related expenses to support the increased development activities in 2012 in anticipation of thethree clinical studies planned for 2013; • $0.8 million increase in lab supplies, assay transfer and validation activities to support clinical supply and process development activities; • $0.7 million increase in consulting fees to support regulatory filing and other clinical start-up activities; and • $0.3 million increase in license and milestone fees paid to third parties.General and administrative expenses. General and administrative expenses were $6.8 million for the year ended December 31, 2012, compared to$4.6 million for the year ended December 31, 2011. The increase of $2.2 million was due primarily to an increase of $1.4 million in professional fees, $0.6million in employee and contractor-related expenses to support corporate operational and business development activities and $0.5 million in office and facilityexpenses, which was partially offset by a decrease in market study-related expenses.Other income (expense), net. Other income (expense), net, was $0.05 million for the year ended December 31, 2012, compared to $(0.5) million forthe year ended December 31, 2011, an increase of approximately $0.5 million. The increase was primarily due to revaluation of the redeemable convertiblepreferred stock warrants of $0.4 million and $0.1 million of currency losses.Liquidity and Capital ResourcesWe have incurred losses and cumulative negative cash flows from operations since our inception in April 1992, and as of December 31, 2013, we hadan accumulated deficit of $98.7 million. We anticipate that we will continue to incur losses for at least the next several years. We expect that our research anddevelopment and general and administrative expenses will continue to increase and, as a result, we will need additional capital to fund our operations, whichwe may raise through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements and othercollaborations, strategic alliances and licensing arrangements.We have funded our operations principally from the sale of common stock, preferred stock, convertible notes and warrants to purchase common stock.In March 2013, we entered into a strategic collaboration with Celgene to discover, develop and commercialize novel, disease-altering gene therapies in oncology.This collaboration has an initial term of three years, and Celgene has made a $75.0 million up-front, non-refundable cash payment to us as consideration forentering into the collaboration. In June 2013, we completed our IPO, which resulted in aggregate net proceeds to us of $104.9 million. As of December 31,2013, we had cash and cash equivalents of approximately $206.3 million. Cash in excess of immediate requirements is invested in accordance with ourinvestment policy, primarily with a view to liquidity and capital preservation. Currently, our funds are held in money market mutual funds consisting ofU.S. government-backed securities.Sources of LiquidityCash FlowsThe following table sets forth the primary sources and uses of cash for each of the periods below: Year ended December 31, 2013 2012 2011 (in thousands) Net cash provided by (used in): Operating activities $43,450 $(21,044) $(12,217) Investing activities (9,823) 2,599 (3,964) Financing activities 105,641 59,852 32,435 Net increase in cash and cash equivalents $139,268 $41,407 $16,254 99Table of ContentsCash Flows from Operating Activities. The net cash provided by operating activities was $43.5 million for the year ended December 31, 2013 andprimarily consisted of a net loss of $25.3 million adjusted for non-cash items including stock-based compensation of $6.5 million, depreciation andamortization of $0.9 million, re-measurement of warrants of $0.4 million and a net increase in operating assets and liabilities of $60.9 million. The significantitems in the increase in operating assets and liabilities include an increase in deferred revenue of $54.9 million due to the up-front payment related to theCelgene collaboration, an increase in deferred rent of $7.4 million related to leasehold improvements at our new corporate headquarters, and an increase inaccounts payable of $2.1 million, slightly offset by an increase in prepaid expenses and other assets of $4.2 million.The net cash used in operating activities was $21.0 million for the year ended December 31, 2012, and consisted primarily of a net loss of$23.7 million adjusted for non-cash items including stock-based compensation expense of $0.8 million and depreciation of $0.3 million and a net increase inoperating assets and liabilities of $1.5 million. The significant items in the change in operating assets and liabilities include an increase in accounts payable of$0.4 million and accrued expenses and other liabilities of $1.4 million and a decrease in prepaid expenses and current assets of $0.1 million, offset by adecrease in deferred revenue of $0.3 million.The net cash used in operating activities was $12.2 million for the year ended December 31, 2011, and consisted primarily of a net loss of $15.6million adjusted for non-cash items including stock-based compensation expense of $0.8 million, re-measurement of warrants of $0.4 million, anddepreciation of $0.2 million and a net increase in operating assets and liabilities of $1.9 million. The significant items in the change in operating assets andliabilities include increases in accounts payable of $0.9 million, accrued expenses and other liabilities of $0.4 million, and deferred revenues of $1.0 million,slightly offset by a decrease in prepaid expenses and other current assets of $0.3 million.Cash Flows from Investing Activities. Net cash used in investing activities for the year ended December 31, 2013 was $9.8 million and consistedprimarily of purchases of property and equipment of $8.7 million and the new $1.3 million cash-collateralized irrevocable standby letter of credit on the newbuilding lease that we signed in June 2013. The fixed asset purchases primarily consisted of leasehold improvements at our new corporate headquarters andpurchases of lab equipment for the additional lab space added during the first quarter of 2013 and lab equipment to support the start-up of the Celgeneprogram. The new $1.3 million letter of credit, naming the landlord as beneficiary, is reduced to $1.0 million, $0.8 million, and $0.6 million upon the rentcommencement date and the first and second anniversaries of the rent commencement date, respectively.Net cash provided by investing activities for the year ended December 31, 2012 was $2.6 million and consisted primarily of proceeds from the sale ofmarketable securities of $3.5 million slightly offset by purchases of property and equipment of $0.9 million. Net cash used in investing activities for the yearended December 31, 2011, was $4.0 million and was comprised primarily of purchases of marketable securities of $5.3 million, slightly offset by proceedsfrom the sale of marketable securities of $1.8 million and the purchases of property and equipment of $0.4 million.Cash Flows from Financing Activities: Net cash provided by financing activities for the year ended December 31, 2013 was $105.6 million and wasprimarily due to the issuance of 6,832,352 common stock related to our initial public offering that closed on June 24, 2013, for total proceeds of $104.9million, net of $11.2 million in issuance costs paid, the repayment of the non-recourse note collateralized by restricted stock of $0.3 million, and proceedsfrom the exercise of common stock options of $0.4 million.Net cash provided by financing activities for the year ended December 31, 2012 is the result of the sale of 120.4 million shares of our Series D preferredstock for net proceeds of $59.8 million. Net cash provided by financing activities for the year ended December 31, 2011 is the result of the issuance and saleof 39.9 million shares of our Series C preferred stock for net proceeds of $14.9 million, and the issuance and sale of 53.6 million shares of the secondtranche of our Series B preferred stock for net proceeds of $17.5 million for aggregate net proceeds of $32.4 million. 100Table of ContentsOperating Capital RequirementsTo date, we have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We do notexpect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize one of our current or futureproduct candidates. We anticipate that we will continue to generate losses for the foreseeable future; and we expect the losses to increase as we continue thedevelopment of and seek regulatory approvals for our product candidates and begin to commercialize any approved products. We are subject to all of the risksincident in the development of new gene therapy products; and we may encounter unforeseen expenses, difficulties, complications, delays and other unknownfactors that may adversely affect our business. We expect to incur additional costs associated with operating as a public company. We anticipate that we willneed substantial additional funding in connection with our continuing operations. We believe that our existing cash and cash equivalents as of December 31,2013 will be sufficient to fund our projected operating requirements through at least the end of 2015. However, we may require additional capital for the furtherdevelopment of our existing product candidates and may also need to raise additional funds sooner to pursue other development activities related to additionalproduct candidates.Until we can generate a sufficient amount of revenue from our products, if ever, we expect to finance future cash needs through public or private equityor debt offerings. Additional capital may not be available on reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or onterms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our productcandidates. If we raise additional funds through the issuance of additional debt or equity securities, it could result in dilution to our existing stockholders,increased fixed payment obligations and these securities may have rights senior to those of our common stock. If we incur indebtedness, we could becomesubject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt,limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conductour business. Any of these events could significantly harm our business, financial condition and prospects.Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement andinvolves risks and uncertainties; and actual results could vary as a result of a number of factors. We have based this estimate on assumptions that may proveto be wrong, and we could utilize our available capital resources sooner than we currently expect. Our future funding requirements, both near and long-term,will depend on many factors, including, but not limited to: • the initiation, progress, timing, costs and results of clinical studies for our products, including our Phase II/III Lenti-D study and our Phase I/IILentiGlobin studies; • the outcome, timing and cost of regulatory approvals by the FDA and comparable foreign regulatory authorities, including the potential for theFDA or comparable foreign regulatory authorities to require that we perform more studies than those that we currently expect; • the ability of our product candidates to progress through clinical development successfully; • the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; • our need to expand our research and development activities; • our need and ability to hire additional personnel; • our need to implement additional infrastructure and internal systems; • the effect of competing technological and market developments; and • the cost of establishing sales, marketing and distribution capabilities for any products for which we may receive regulatory approval. 101Table of ContentsIf we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, financialcondition and results of operations could be materially adversely affected.Contractual Obligations and CommitmentsThe following table summarizes our contractual obligations at December 31, 2013. Total Less than1 Year 1 to 3Years 3 to 5Years More than5 Years (in thousands) Operating lease obligations (1) $25,263 $2,094 $5,454 $5,560 $12,155 License costs (2) 726 81 229 416 — Total $25,989 $2,175 $5,683 $5,976 $12,155 (1)Includes the effect of the rent abatement on our 150 Second Street, Cambridge, Massachusetts lease.(2)License costs include annual license maintenance fee payments. We have not included annual license maintenance fees or minimum royalty paymentsafter December 31, 2018, as we cannot estimate if they will occur.We also have obligations to make future payments to third parties that become due and payable on the achievement of certain development, regulatoryand commercial milestones (such as the start of a clinical trial, filing of an NDA, approval by the FDA or product launch). We have not included thesecommitments on our balance sheet or in the table above because the achievement and timing of these milestones is not fixed and determinable. Thesecommitments include: • Under a license agreement with Inserm-Transfert pursuant to which we license certain patents for use in human adrenoleukodystrophy therapy,we will be required to make payments based upon development, regulatory and commercial milestones for any products covered by the in-licensedintellectual property. The maximum aggregate payments we may be obligated to pay for each of these milestone categories per product is €0.3, €0.2and €1.6 million, respectively. We will also be required to pay a royalty on net sales of products covered by the in-licensed intellectual property inthe low single digits. The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low singledigits. • Under a license agreement with Institut Pasteur pursuant to which we license certain patents for use in ex vivo gene therapy, we will be required tomake payments per product covered by the in-licensed intellectual property upon the achievement of development and regulatory milestones,depending on the indication and the method of treatment. The maximum aggregate payments we may be obligated to pay for each of these milestonecategories per product is €1.5 and €2.0 million, respectively. We will also be required to pay a royalty on net sales of products covered by the in-licensed intellectual property in the low single digits, which varies slightly depending on the indication of the product. We have the right tosublicense our rights under this agreement, and we will be required to pay a percentage of such license income varying from the low single digits tomid-double digits depending on the nature of the sublicense. Starting in 2016, we will be required to make an annual maintenance payment,which is creditable against royalty payments on a year-by-year basis. • Under a license agreement with the Board of Trustees of the Leland Stanford Junior University, or Stanford, pursuant to which we license theHEK293T cell line for use in gene therapy products, we are required to pay a royalty on net sales of products covered by the in-licensedintellectual property in the low single digits that varies with net sales. The royalty is reduced for each third-party license that requires payments byus with respect to a licensed product, provided that the royalty to Stanford is not less than a specified percentage that is less than one percent. Weare required to pay Stanford an annual maintenance fee based on net sales of licensed products, which is creditable against our royalty payments. 102Table of Contents • Under a license agreement with the Massachusetts Institute of Technology, or MIT, pursuant to which we license various patents, we will berequired to make a payment of $0.1 million based upon a regulatory filing milestone. We will also be required to pay a royalty on net sales ofproducts covered by the in-licensed intellectual property by us or our sublicensees. The royalty is in the low single digits and is reduced forroyalties payable to third parties, provided that the royalty to MIT is not less than a specified percentage that is less than one percent. We have theright to sublicense our rights under this agreement, and we will be required to pay a percentage of such license income varying from the mid-singledigits to low double digits. We are required to pay MIT an annual maintenance fee based on net sales of licensed products, which is creditableagainst our royalty payments. • Under a license agreement with Research Development Foundation pursuant to which we license patents that involve lentiviral vectors, we will berequired to make payments of $1.0 million based upon a regulatory milestone for each product covered by the in-licensed intellectual property. Wewill also be required to pay a royalty on net sales of products covered by the in-licensed intellectual property in the low single digits, which isreduced by half if during the ten year following first marketing approval the last valid claim within the licensed patent that covers the licensedproduct expires or ends.We enter into contracts in the normal course of business with CROs for preclinical research studies, research supplies and other services and productsfor operating purposes. These contracts generally provide for termination on notice, and therefore are cancelable contracts and not included in the table ofcontractual obligations and commitments.On June 3, 2013, we entered into a new nine-year building lease for approximately 43,600 square feet of space in Cambridge, Massachusetts,commencing on the earlier of the substantial completion of our build-out work or January 1, 2014. The lease has monthly lease payments of $0.2 million forthe first 12 months with annual rent escalations thereafter and provides a rent abatement of $0.2 million per month for the first six months. The total operatinglease obligation of the noncancellable term of this agreement is $24.2 million. In addition, the lease provides a contribution from the landlord towards the initialbuild-out of the space of up to $6.5 million. We have the option to extend this lease by an additional five years. In accordance with the lease, we entered into acash-collateralized irrevocable standby letter of credit in the amount of $1.3 million, naming the landlord as beneficiary. Our current building lease inCambridge, Massachusetts, expires on March 31, 2015. We relocated to the new space in December 2013 and ceased use of the facility during the first quarterof 2014.Off-Balance Sheet ArrangementsAs of December 31, 2013, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.Consulting services provided by Third Rock Ventures, LLCDuring the fiscal years ended December 31, 2012 and 2011, we incurred consulting fees to Third Rock Ventures, LLC in the amount of $0.1 and $0.4million, respectively. Third Rock Ventures, LLC is a management company that is party to a services agreement with Third Rock Ventures, L.P., thebeneficial owner of more than five percent of our voting securities. Robert I. Tepper, M.D., one of our directors, is a managing member of TRV GP, LLC,which is the general partner of Third Rock Ventures GP, L.P., the general partner of Third Rock Ventures, L.P. and a managing member of Third RockVentures, LLC. These consulting fees were paid to Third Rock Ventures, LLC in consideration of certain strategic and business operations consulting servicesprovided to us during this period by Third Rock Ventures, LLC by individuals other than Dr. Tepper. None of these consulting fees were paid directly orindirectly to Dr. Tepper. The consulting fees paid to Third Rock Ventures, LLC did not exceed five percent of the consolidated gross revenues of Third RockVentures, LLC during any of these fiscal years. We are not currently party to a consulting agreement with Third Rock Ventures, LLC and we do not expect toengage Third Rock Ventures, LLC for consulting services on a going forward basis. 103Table of ContentsItem 7A. Quantitative and Qualitative Disclosures about Market RisksWe are exposed to market risk related to changes in interest rates. As of December 31, 2013 and 2012, we had cash and cash equivalents of $206.3million and $67.0 million, respectively, primarily money market mutual funds consisting of U.S. government-backed securities. Our primary exposure tomarket risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term securities. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, an immediate 100 basis point change ininterest rates would not have a material effect on the fair market value of our portfolio.Item 8. Financial Statements and Supplementary DataThe financial statements required to be filed pursuant to this Item 8 are appended to this report. An index of those financial statements is found inItem 15.Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone.Item 9A. Controls and ProceduresEvaluation of Disclosure Controls and ProceduresOur management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of ourdisclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Securities Exchange Act of 1934, as amended (the “ExchangeAct”)), as of the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our principal executive officer and principalfinancial officer have concluded that as of such date, our disclosure controls and procedures were effective.Management’s Annual Report on Internal Control Over Financial ReportingThis Annual Report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or anattestation report of our registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies.Inherent Limitations of Internal ControlsOur management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or ourinternal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute,assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provideabsolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include therealities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can becircumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any systemof controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed inachieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree ofcompliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error orfraud may occur and not be detected. 104Table of ContentsChanges in Internal Control over Financial ReportingThere were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or arereasonably likely to materially affect, our internal control over financial reporting.Item 9B. Other InformationOur policy governing transactions in our securities by our directors, officers, and employees permits our officers, directors and certain other persons toenter into trading plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. We have been advised that certain of our officers(including Nick Leschly, President and Chief Executive Officer, Jeffrey Walsh, Chief Operating Officer, Mitchell Finer, Chief Scientific Officer, DavidDavidson, Chief Medical Officer, and Linda Bain, Vice President, Finance and Business Operations and Treasurer) have entered into trading plans coveringperiods after the date of this Annual Report on Form 10-K in accordance with Rule 10b5-1 and our policy governing transactions in our securities. Generally,under these trading plans, the individual relinquishes control over the transactions once the trading plan is put into place. Accordingly, sales under these plansmay occur at any time, including possibly before, simultaneously with, or immediately after significant events involving our company. We do not undertaketo report Rule 10b5-1 trading plans that may be adopted by any officers or directors in the future, or to report any modifications or termination of any publiclyannounced trading plan, except to the extent required by law. 105Table of ContentsPART IIIItem 10. Directors, Executive Officers, and Corporate GovernanceIncorporated by reference from the information in our Proxy Statement for our 2014 Annual Meeting of Stockholders, which we will file with the SECwithin 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates.Item 11. Executive CompensationIncorporated by reference from the information in our Proxy Statement for our 2014 Annual Meeting of Stockholders, which we will file with the SECwithin 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersIncorporated by reference from the information in our Proxy Statement for our 2014 Annual Meeting of Stockholders, which we will file with the SECwithin 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates.Item 13. Certain Relationships and Related Transactions and Director IndependenceIncorporated by reference from the information in our Proxy Statement for our 2014 Annual Meeting of Stockholders, which we will file with the SECwithin 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates.Item 14. Principal Accountant Fees and ServicesIncorporated by reference from the information in our Proxy Statement for our 2014 Annual Meeting of Stockholders, which we will file with the SECwithin 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates. 106Table of ContentsPART IVItem 15. Exhibits, Financial Statements and Schedules(a)(1) Financial Statements.The response to this portion of Item 15 is set forth under Item 8 above.(a)(2) Financial Statement Schedules.All schedules have been omitted because they are not required or because the required information is given in the Consolidated FinancialStatements or Notes thereto set forth under Item 8 above.(a)(3) Exhibits.See the Exhibit Index immediately following the signature page of this Annual Report on Form 10-K. The exhibits listed in the Exhibit Index beloware filed or incorporated by reference as part of this Annual Report on Form 10-K. 107Table of Contentsbluebird bio, Inc.Index to consolidated financial statements Pages Reports of independent registered public accounting firms F-2 Consolidated Balance Sheets F-4 Consolidated Statements of Operations and Comprehensive Loss F-5 Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) F-6 Consolidated Statements of Cash Flows F-9 Notes to consolidated financial statements F-10 F-1Table of ContentsReport of independent registered public accounting firmThe Board of Directors and Stockholders ofbluebird bio, Inc.We have audited the accompanying consolidated balance sheets of bluebird bio, Inc. as of December 31, 2013 and 2012, and the related consolidatedstatements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the two years in theperiod ended December 31, 2013. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinionon these financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were notengaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financialreporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates madeby management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of bluebird bio, Inc.at December 31, 2013 and 2012, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31,2013, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLPBoston, MassachusettsMarch 5, 2014 F-2Table of ContentsReport of independent registered public accounting firmThe Board of Directors ofbluebird bio, Inc. and SubsidiaryCambridge, MassachusettsWe have audited the accompanying consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ deficit,and cash flows of bluebird bio, Inc. for the year ended December 31, 2011. These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financial statements based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company isnot required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internalcontrol over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonablebasis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of the operations and cash flowsof bluebird bio, Inc. for the year ended December 31, 2011, in conformity with U.S. generally accepted accounting principles./s/ McGladrey LLPBoston, MassachusettsMarch 21, 2013 (June 3, 2013 for Reverse Stock Split paragraph in Note 2). F-3Table of Contentsbluebird bio, Inc.Consolidated Balance Sheets(in thousands, except per share data) December 31, 2013 2012 Assets Current assets: Cash and cash equivalents $206,279 $67,011 Deferred tax assets 693 — Prepaid expenses and other current assets 5,015 773 Total current assets 211,987 67,784 Property and equipment, net 10,920 1,288 Restricted cash and other non-current assets 1,483 250 Total assets $224,390 $69,322 Liabilities, convertible preferred stock, and stockholders’ equity (deficit) Current liabilities: Accounts payable $4,359 $2,173 Accrued expenses and other current liabilities 5,175 2,115 Deferred revenue, current portion 25,340 340 Total current liabilities 34,874 4,628 Warrant liability — 215 Deferred rent, net of current portion 6,740 46 Deferred revenue, net of current portion 30,208 340 Deferred tax liabilities 693 — Other non-current liabilities 208 — Total liabilities 72,723 5,229 Commitments and contingencies (Note 8) Series A-2 convertible preferred stock, $0.01 par value, 0 and 22,304 shares authorized; 0 and 22,304 issued andoutstanding at December 31, 2013 and 2012, respectively — 7,137 Series B convertible preferred stock, $0.01 par value, 0 and 115,779 shares authorized; 0 and 115,204 issued andoutstanding at December 31, 2013 and 2012, respectively — 40,321 Series C convertible preferred stock, $0.01 par value, 0 and 39,943 shares authorized; 0 and 39,943 issued andoutstanding at December 31, 2013 and 2012, respectively — 12,382 Series D convertible preferred stock, $0.01 par value, 0 and 120,409 shares authorized; 0 and 120,409 issued andoutstanding at December 31, 2013 and 2012, respectively — 60,000 Stockholders’ equity (deficit): Preferred stock $0.01 par value, 5,000 and 0 shares authorized at December 31, 2013 and 2012, respectively; 0 sharesissued and outstanding at December 31, 2013 and 2012 — — Series A-1 convertible preferred stock, $0.01 par value, 0 and 18,817 shares authorized; 0 and 12,981 issued andoutstanding at December 31, 2013 and 2012, respectively — 2,337 Common stock, $0.01 par value, 125,000 and 21,089 shares authorized; 23,940 and 309 shares issued and outstandingat December 31, 2013 and 2012, respectively 239 3 Additional paid-in capital 250,103 15,267 Accumulated deficit (98,675) (73,354) Total stockholders’ equity (deficit) 151,667 (55,747) Total liabilities, convertible preferred stock and stockholders’ equity (deficit) $224,390 $69,322 See accompanying notes to consolidated financial statements. F-4Table of Contentsbluebird bio, Inc.Consolidated Statements of Operations and Comprehensive Loss(in thousands, except per share data) Year ended December 31, 2013 2012 2011 Revenue: Collaboration revenue $19,792 $— $— Research and license fees 389 340 640 Grant revenue — — 242 Total revenue 20,181 340 882 Operating expenses: Research and development 31,002 17,210 11,409 General and administrative 14,126 6,846 4,615 Total operating expenses 45,128 24,056 16,024 Loss from operations (24,947) (23,716) (15,142) Other income (expense), net: Interest income 29 5 5 Foreign currency gains (losses) 37 13 (100) Re-measurement of warrants (440) 28 (361) Other income (expense), net (374) 46 (456) Net loss $(25,321) $(23,670) $(15,598) Other comprehensive income (loss): Foreign currency translation adjustment — — 72 Unrealized gains (losses) on marketable securities — (1) 1 Total other comprehensive income (loss) — (1) 73 Comprehensive loss $(25,321) $(23,671) $(15,525) Reconciliation of net loss to net loss applicable to common stockholders: Net loss $(25,321) $(23,670) $(15,598) Accretion and dividends on convertible preferred stock — (3,057) (4,993) Gain on extinguishment of convertible preferred stock — 23,114 — Net loss applicable to common stockholders $(25,321) $(3,613) $(20,591) Net loss per share applicable to common stockholders-basic and diluted: $(2.02) $(13.79) $(171.59) Weighted-average number of common shares used in net loss per share applicable to common stockholders-basic and diluted: 12,555 262 120 See accompanying notes to consolidated financial statements. F-5Table of Contentsbluebird bio, Inc.Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)(in thousands) Series A-1convertiblepreferred stock Series A-2convertiblepreferred stock Series Bconvertiblepreferred stock Series Cconvertiblepreferred stock Series Dconvertiblepreferred stock Series A-1convertiblepreferred stock Common stock Additionalpaid-incapital Accumulatedothercomprehensiveincome (loss) Accumulateddeficit Totalstockholders’equity(deficit) Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Balance at December 31, 2010 12,981 $8,760 22,304 $15,246 61,556 $21,000 — $— — $— — $— 83 $1 $11,832 $(72) $(47,844) $(36,083) Issuance of Series C PreferredStock, net of issuance costs — — — — — — 39,943 14,904 — — — — — — — — — — Issuance of Series B PreferredStock — — — — 53,648 17,500 — — — — — — — — — — — — Accretion and dividends onconvertible preferred stock — 457 591 2,995 — 950 — — — — (4,993) — — (4,993) Issuance of restricted stock — — — — — — — — — — — — 14 — 30 — — 30 Issuance of restricted stock inexchange for consultingservices — — — — — — — — — — — — 2 — 3 3 Vesting of restricted stock issuedin exchange for nonrecoursenote — — — — — — — — — — — — 96 1 (1) — — — Vesting of restricted stock — — — — — — — — — — — — 8 — — — — — Issuance of warrants forCommon Stock in exchangefor consulting services — — — — — — — — — — — — — — 102 — — 102 Exercise of stock options — — — — — — — — — — — — 2 — 1 — — 1 Foreign currency translationadjustment — — — — — — — — — — — — — — — 72 — 72 Unrealized gain on marketablesecurities — — — — — — — — — — — — — — — 1 — 1 Stock-based compensation — — — — — — — — — — — — — — 758 — — 758 Net loss — — — — — — — — — — — — — — — — (15,598) (15,598) Balance at December 31, 2011 12,981 $9,217 22,304 $15,837 115,204 $41,495 39,943 $15,854 — $— — $— 205 $2 7,732 $1 (63,442) $(55,707) F-6Table of Contentsbluebird bio, Inc.Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)(in thousands) Series A-1convertiblepreferred stock Series A-2convertiblepreferred stock Series Bconvertiblepreferred stock Series Cconvertiblepreferred stock Series Dconvertiblepreferred stock Series A-1convertiblepreferred stock Common stock Additionalpaid-incapital Accumulatedothercomprehensiveincome (loss) Accumulateddeficit Totalstockholders’equity(deficit) Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Balance at December 31,2011 12,981 $9,217 22,304 $15,837 115,204 $41,495 39,943 $15,854 — $— — $— 205 $2 7,732 $1 (63,442) $(55,707) Issuance of Series D PreferredStock, net of issuance costs — — — — — — — — 120,409 59,831 — — — — — — — — Accretion and dividends onconvertible preferred stock — 194 — 332 — 1,689 — 673 — 169 — — — — (3,057) — — (3,057) Gain on extinguishment ofconvertible preferred stock — (7,074) — (9,032) — (2,863) — (4,145) — — — — — — 9,356 — 13,758 23,114 Reclassification of Series A-1Preferred Stock (12,981) (2,337) — — — — — — — — 12,981 2,337 — — — — — 2,337 Reclassification of Series A-1Preferred Stock warrants — — — — — — — — — — — — — — 394 — — 394 Vesting of restricted stockissued in exchange fornonrecourse note — — — — — — — — — — — — 82 1 (1) — — — Vesting of restricted stock — — — — — — — — — — — — 12 — — — — — Exercise of stock options — — — — — — — — — — — — 10 — 21 — — 21 Realized gain on marketablesecurities — — — — — — — — — — — — — — — (1) — (1) Stock-based compensation — — — — — — — — — — — — — — 822 — — 822 Net loss — — — — — — — — — — — — — — — — (23,670) (23,670) Balance at December 31,2012 — $— 22,304 $7,137 115,204 $40,321 39,943 $12,382 120,409 $60,000 12,981 $2,337 309 $3 $15,267 $— $(73,354) $(55,747) F-7Table of Contentsbluebird bio, Inc.Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)(in thousands) Series A-1convertiblepreferred stock Series A-2convertiblepreferred stock Series Bconvertiblepreferred stock Series Cconvertiblepreferred stock Series Dconvertiblepreferred stock Series A-1convertiblepreferred stock Common stock Additionalpaid-incapital Accumulatedothercomprehensiveincome (loss) Accumulateddeficit Totalstockholders’equity(deficit) Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Balance at December 31,2012 — $— 22,304 $7,137 115,204 $40,321 39,943 $12,382 120,409 $60,000 12,981 $2,337 309 $3 $15,267 $— $(73,354) $(55,747) Vesting of restricted stockissued in exchange fornonrecourse note — — — — — — — — — — — — 41 — — — — — Vesting of restricted stock — — — — — — — — — — — — 45 — — — — — Proceeds from IPO, netof closing costs of$11,229 — — — — — — — — — — — — 6,832 69 104,852 — — 104,921 Conversion ofconvertible preferredstock into commonstock — — (22,304) (7,137) (115,204) (40,321) (39,943) (12,382) (120,409) (60,000) (12,981) (2,337) 16,389 164 122,014 — — 119,841 Reclassification ofwarrants to purchasepreferred stock tostockholders’ equity — — — — — — — — — — — — — — 655 — — 655 Repayment ofnonrecourse note — — — — — — — — — — — — — — 344 — — 344 Exercise of commonstock warrants — — — — — — — — — — — — 102 1 (1) — — — Exercise of stock options — — — — — — — — — — — — 222 2 481 — — 483 Stock-basedcompensation 6,491 — — 6,491 Net loss — — — — — — — — — — — — — — — — (25,321) (25,321) Balance at December 31,2013 — $— — $— — $— — $— — $— — $— 23,940 $239 $250,103 $— $(98,675) $151,667 See accompanying notes to consolidated financial statements. F-8Table of Contentsbluebird bio, Inc.Consolidated Statements of Cash Flows(in thousands) Year ended December 31, 2013 2012 2011 Operating activities Net loss $(25,321) $(23,670) $(15,598) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 941 301 225 Stock-based compensation expense 6,491 822 863 Re-measurement of warrants 440 (28) 361 Loss on disposal of equipment 9 10 — Changes in operating assets and liabilities: Prepaid expenses and other assets (4,214) 93 (337) Accounts payable 2,067 380 870 Accrued expenses and other liabilities 761 1,336 363 Deferred revenue 54,868 (340) 1,019 Deferred rent 7,408 52 17 Net cash provided by (used in) operating activities 43,450 (21,044) (12,217) Investing activities Restricted cash (1,153) (40) (35) Purchase of property and equipment (8,670) (867) (403) Purchase of marketable securities — — (5,276) Proceeds from sales or maturities of marketable securities — 3,506 1,750 Net cash (used in) provided by investing activities (9,823) 2,599 (3,964) Financing activities Proceeds from IPO, net of issuance costs 104,921 — — Proceeds from issuance of convertible preferred stock, net of issuance costs — 59,831 32,404 Repayment of nonrecourse note collaterized by restricted stock 344 — — Proceeds from sale of restricted stock, net of issuance costs — — 30 Proceeds from exercise of stock options 376 21 1 Net cash provided by financing activities 105,641 59,852 32,435 Increase in cash and cash equivalents 139,268 41,407 16,254 Cash and cash equivalents at beginning of period 67,011 25,604 9,350 Cash and cash equivalents at end of period $206,279 $67,011 $25,604 Non-cash investing and financing activities: Purchases of property and equipment included in accounts payable and accrued expenses $1,924 $— $— Accretion and dividends on convertible preferred stock $— $3,057 $4,993 Gain on extinguishment of convertible preferred stock $— $23,114 $— Reclassification of warrants to additional paid-in capital $655 $394 $— Reclassification of Series A-1 Preferred Stock to common stock $— $2,337 $— Receivable for option exercise proceeds $107 $— $— Conversion of preferred stock to common stock upon closing of IPO $122,178 $— $— See accompanying notes to consolidated financial statements. F-9Table of Contentsbluebird bio, Inc.Notes to Consolidated Financial Statements(In thousands, except per share data)1. Description of the businessbluebird bio, Inc. (the “Company”) was incorporated in Delaware on April 16, 1992, and is headquartered in Cambridge, Massachusetts. TheCompany was formed to develop, manufacture and market therapies to safely and effectively deliver genes useful in the treatment of serious human diseases.Since its inception, the Company has devoted substantially all of its resources to its development efforts relating to its product candidates, including activitiesto manufacture product in compliance with good manufacturing practices (“GMP”), preparing to conduct clinical studies of its product candidates, providinggeneral and administrative support for these operations and protecting its intellectual property.2. Summary of significant accounting policies and basis of presentationInitial public offeringOn June 24, 2013, the Company completed its initial public offering (“IPO”) whereby the Company sold 6,832 shares of common stock (inclusive of891 shares of common stock sold by the Company pursuant to the full exercise of an overallotment option granted to the underwriters in connection with theoffering) at a price of $17.00 per share. The shares began trading on the Nasdaq Global Select Market on June 19, 2013. The aggregate net proceeds receivedby the Company from the offering were $104,921, net of underwriting discounts and commissions and offering expenses payable by the Company. Upon theclosing of the IPO, all outstanding shares of convertible preferred stock converted into 16,389 shares of common stock; and warrants exercisable forconvertible preferred stock were automatically converted into warrants exercisable for 338 shares of common stock, resulting in the reclassification of therelated convertible preferred stock warrant liability of $655 to additional paid-in capital. Additionally, the Company is now authorized to issue 125,000shares of common stock and 5,000 shares of preferred stock.Basis of presentation and principles of consolidationThe accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, bluebird bio France,SARL and bluebird bio Securities Corporation. All intercompany balances and transactions have been eliminated in consolidation. These consolidatedfinancial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any referencein these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the AccountingStandards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).Reverse stock splitOn June 3, 2013, the board of directors and the stockholders of the Company approved a one-for-18.967 reverse stock split of the Company’soutstanding common stock, which was effected on June 3, 2013. The Company’s historical share and per share information have been retroactively adjustedto give effect to this reverse stock split. Shares of common stock underlying outstanding stock options and other equity instruments were proportionatelyreduced and the respective exercise prices, if applicable, were proportionately increased in accordance with the terms of the agreements governing suchsecurities.Foreign currency translationThe Company’s consolidated financial statements are prepared in U.S. dollars. Its foreign subsidiary uses the U.S. dollar as its functional currencyand maintains its records in the local currency. Nonmonetary assets and F-10Table of Contentsliabilities are re-measured at historical rates and monetary assets and liabilities are re-measured at exchange rates in effect at the end of the reporting period.Income statement accounts are re-measured at average exchange rates for the reporting period. The resulting gains or losses are included in foreign currencygains (losses) in the consolidated statements of operations and comprehensive loss.Use of estimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reportedamounts in the financial statements and accompanying notes. Actual results could materially differ from those estimates. Management considers many factorsin selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of thesefinancial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including: expectedbusiness and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends areexpected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomesand management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially fromthose estimated amounts used in the preparation of the financial statements. Estimates are used in the following areas, among others: stock-basedcompensation expense, liability-classified warrants, accrued expenses, revenue and income taxes.The Company utilized various valuation methodologies in accordance with the framework of the American Institute of Certified Public Accountants’Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of its common stock priorto becoming a public company. Each valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates andassumptions include a number of objective and subjective factors, including external market conditions affecting the biotechnology industry sector, the pricesat which the Company sold shares of preferred stock, the superior rights and preferences of securities senior to the common stock at the time and thelikelihood of achieving a liquidity event, such as an initial public offering or sale. Significant changes to the key assumptions used in the valuations couldresult in different fair values of common stock at each valuation date. Subsequent to becoming a public company, the Company uses the closing price of itscommon stock on the Nasdaq Global Select Market as the fair value of its common stock.Segment informationOperating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by thechief operating decision maker, or decision making group, in making decisions on how to allocate resources and assess performance. The Company views itsoperations and manages its business in one operating segment. All material long-lived assets of the Company reside in the United States.Cash and cash equivalentsThe Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents. Cashand cash equivalents include cash held in banks and money market accounts. Cash equivalents are reported at fair value.Concentrations of credit risk and off-balance sheet riskFinancial instruments that potentially subject the Company to concentrations of credit risk are primarily cash, cash equivalents and restricted cash. TheCompany maintains its cash equivalent balances in the form of money market accounts with financial institutions that management believes are creditworthy.The Company’s F-11Table of Contentsinvestment policy includes guidelines on the quality of the institutions and financial instruments and defines allowable investments that the Company believesminimizes the exposure to concentration of credit risk. The Company has no financial instruments with off-balance sheet risk of loss.Fair value of financial instrumentsThe Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used indetermining the reported fair values. FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), establishes a hierarchy of inputs used inmeasuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs beused when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained fromsources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants woulduse in pricing the asset or liability, and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to thevaluation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The three levels of the fairvalue hierarchy are described below:Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access atthe measurement date.Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs areobservable, either directly or indirectly.Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement andunobservable.To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requiresmore judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. Afinancial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.Items measured at fair value on a recurring basis include a warrant liability (Note 7). The carrying amounts of accounts payable and accrued expensesapproximate their fair values due to their short-term maturities.Property and equipmentProperty and equipment is stated at cost. Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed tooperations as incurred. Upon disposal, the related cost and accumulated depreciation is removed from the accounts and any resulting gain or loss is includedin the results of operations. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of the assets, which are asfollows: Asset Estimated useful lifeComputer equipment and software 3 yearsOffice and laboratory equipment 3 -5 yearsLeasehold improvements Shorter of the useful life or remaining lease termImpairment of long-lived assetsThe Company reviews long-lived assets when events or changes in circumstances indicate the carrying value of the assets may not be recoverable.Recoverability is measured by comparison of the book values of the F-12Table of Contentsassets to future net undiscounted cash flows that the assets are expected to generate. If such assets are considered to be impaired, the impairment to berecognized is measured by the amount by which the book value of the assets exceed their fair value, which is measured based on the projected discountedfuture net cash flows arising from the assets. No impairment losses have been recorded during the years ended December 31, 2013, 2012 and 2011.Warrants to purchase convertible preferred stockIn conjunction with various financing transactions, the Company issued warrants to purchase shares of the Company’s Series A-1 convertible preferredstock (“Series A-1 Preferred Stock”) and Series B convertible preferred stock (“Series B Preferred Stock”). Prior to July 23, 2012, the Company’s Series A-1Preferred Stock and Series B Preferred Stock were subject to a redemption provision that was outside of the Company’s control. Therefore, the associatedshares were presented as temporary equity. Consequently, the warrants to purchase shares of Series A-1 Preferred Stock and Series B Preferred Stock wereaccounted for as liabilities through July 23, 2012 and adjusted to fair value at the end of each reporting period. The fair value of the warrants classified asliabilities is estimated using the Black-Scholes option pricing model. The estimates in the Black-Scholes option pricing model are based, in part, on subjectiveassumptions, including, stock price volatility, term of the warrants, risk free interest rate, dividend yield, and fair value of the preferred stock underlying thewarrants. Such assumptions could differ materially in the future. The re-measurement gain or loss associated with the change in the fair value of the preferredstock warrant liability from the prior period is recognized as a component of other income (expense), net.On July 23, 2012, in connection with the sale of the Company’s Series D convertible preferred stock (“Series D Preferred Stock”) and the associatedmodifications to the rights, preferences and privileges of the then-existing series of preferred stock, the Series A-1 Preferred Stock was reclassified to permanentequity because the redemption rights were relinquished and no liquidation preferences were obtained. Additionally, the fair value of the warrants to purchaseshares of Series A-1 Preferred Stock as of July 23, 2012 were correspondingly reclassified to additional paid-in capital consistent with the treatment of theassociated shares of preferred stock. All other classes of preferred stock remained classified within temporary equity as of December 31, 2012, due to theirassociated liquidation preferences. Due to these remaining liquidating preferences, the warrants to purchase shares of Series B Preferred Stock remainedclassified within liabilities as of December 31, 2012.Upon closing of the IPO, all warrants exercisable for convertible preferred stock were automatically converted into warrants exercisable for commonstock, resulting in the reclassification of the related convertible preferred stock warrant liability to additional paid-in capital.Revenue recognitionThe Company has primarily generated revenue through collaboration arrangements, research arrangements and license arrangements with strategicpartners and nonprofit organizations for the development and commercialization of product candidates. Additionally, the Company has generated revenue fromresearch and development grant programs.The Company recognizes revenue in accordance with FASB ASC Topic 605, Revenue Recognition (“ASC 605”). Accordingly, revenue is recognized foreach unit of accounting when all of the following criteria are met: • Persuasive evidence of an arrangement exists • Delivery has occurred or services have been rendered • The seller’s price to the buyer is fixed or determinable • Collectability is reasonably assured F-13Table of ContentsAmounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the Company’s consolidated balance sheets.Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, current portion.Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of currentportion.Collaboration revenueAs of December 31, 2013, the Company’s collaboration revenue is generated exclusively from its collaboration arrangement with Celgene Corporation(“Celgene”). The terms of this arrangement contain multiple deliverables, which include at inception: (i) discovery, research and development services,(ii) participation on the joint steering committee and (iii) participation on the patent committee. The collaboration arrangement also provides Celgene with theoption to obtain a license to any product candidates resulting from the collaboration. Moreover, Celgene has the option to extend the term of the collaborationarrangement, first for a period of two years and then for an additional period of one year. Additionally, the Company has the sole right to manufacture or havemanufactured supplies of vectors and associated payloads manufactured for incorporation into the associated product candidate in the event a productcandidate is licensed. Non-refundable payments to the Company under this arrangement may include: (i) up-front research fees, (ii) product candidate licensefees, (iii) extension term research fees, (iv) payments for the manufacture and supply of vectors and payloads, (v) payments based on the achievement ofcertain milestones and (vi) royalties on product sales. Additionally, the Company may elect to share in the costs incurred from the development,commercialization and manufacture of product candidates licensed by its collaborators and earn its share of the net profits or bear its share of the net lossesgenerated from the sale of product candidates licensed by its collaborators.The Company analyzes multiple-element arrangements based on the guidance in FASB ASC Topic 605-25, Revenue Recognition-Multiple-ElementArrangements (“ASC 605-25”). Pursuant to the guidance in ASC 605-25, the Company evaluates multiple-element arrangements to determine (1) thedeliverables included in the arrangement and (2) whether the individual deliverables represent separate units of accounting or whether they must be accountedfor as a combined unit of accounting. This evaluation involves subjective determinations and requires management to make judgments about the individualdeliverables and whether such deliverables are separable from the other aspects of the contractual relationship. Deliverables are considered separate units ofaccounting provided that: (i) the delivered item(s) has value to the customer on a standalone basis and (ii) if the arrangement includes a general right of returnrelative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company. Inassessing whether an item has standalone value, the Company considers factors such as the research, manufacturing and commercialization capabilities of thecollaboration partner and the availability of the associated expertise in the general marketplace. In addition, the Company considers whether the collaborationpartner can use the other deliverable(s) for their intended purpose without the receipt of the remaining element(s), whether the value of the deliverable isdependent on the undelivered item(s) and whether there are other vendors that can provide the undelivered element(s). The Company’s collaborationarrangement does not contain a general right of return relative to the delivered item(s).Arrangement consideration that is fixed or determinable is allocated among the separate units of accounting using the relative selling price method. Then,the applicable revenue recognition criteria in ASC 605-25 are applied to each of the separate units of accounting in determining the appropriate period andpattern of recognition. The Company determines the selling price of a unit of accounting following the hierarchy of evidence prescribed by ASC 605-25.Accordingly, the Company determines the estimated selling price for units of accounting within each arrangement using vendor-specific objective evidence(“VSOE”) of selling price, if available, third-party evidence (“TPE”) of selling price if VSOE is not available, or best estimate of selling price (“BESP”) ifneither VSOE nor TPE is available. The Company typically uses BESP to estimate the selling price, since it generally does not have VSOE or TPE of sellingprice for its units of accounting. Determining the BESP for a unit of accounting requires significant judgment. In developing the BESP for a unit ofaccounting, the F-14Table of ContentsCompany considers applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreementwith the customer and estimated costs. The Company validates the BESP for units of accounting by evaluating whether changes in the key assumptions usedto determine the BESP will have a significant effect on the allocation of arrangement consideration between multiple units of accounting.Options are considered substantive if, at the inception of the arrangement, the Company is at risk as to whether the collaboration partner will choose toexercise the option. Factors that the Company considers in evaluating whether an option is substantive include the overall objective of the arrangement, thebenefit the collaborator might obtain from the arrangement without exercising the option, the cost to exercise the option and the likelihood that the option will beexercised. For arrangements under which an option is considered substantive, the Company does not consider the item underlying the option to be a deliverableat the inception of the arrangement and the associated option fees are not included in allocable arrangement consideration, assuming the option is not priced at asignificant and incremental discount. Conversely, for arrangements under which an option is not considered substantive or if an option is priced at asignificant and incremental discount, the Company would consider the item underlying the option to be a deliverable at the inception of the arrangement and acorresponding amount would be included in allocable arrangement consideration. All of the options included in the Company’s collaboration arrangement havebeen determined to be substantive, and none of the options are priced at a significant and incremental discount.The Company recognizes arrangement consideration allocated to each unit of accounting when all of the revenue recognition criteria in ASC 605-25 aresatisfied for that particular unit of accounting. The Company will recognize as revenue arrangement consideration attributed to licenses that have standalonevalue from the other deliverables to be provided in an arrangement upon delivery. The Company will recognize as revenue arrangement consideration attributedto licenses that do not have standalone value from the other deliverables to be provided in an arrangement over the Company’s estimated performance period asthe arrangement would be accounted for as a single unit of accounting.The Company recognizes revenue from the Celgene arrangement associated with discovery, research and development services, joint steering committeeservices and patent committee services ratably over the associated period of performance. If there is no discernible pattern of performance and/or objectivelymeasurable performance measures do not exist, then the Company recognizes revenue under the arrangement on a straight-line basis over the period theCompany is expected to complete its performance obligations. Conversely, if the pattern of performance in which the service is provided to the customer can bedetermined and objectively measurable performance measures exist, then the Company recognizes revenue under the arrangement using the proportionalperformance method. Revenue recognized is limited to the lesser of the cumulative amount of payments received or the cumulative amount of revenue earned, asdetermined using the straight-line method or proportional performance method, as applicable, as of the period ending date.At the inception of an arrangement that includes milestone payments, the Company evaluates whether each milestone is substantive and at risk to bothparties on the basis of the contingent nature of the milestone. This evaluation includes an assessment of whether: (i) the consideration is commensurate witheither the Company’s performance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resultingfrom the Company’s performance to achieve the milestone, (ii) the consideration relates solely to past performance and (iii) the consideration is reasonablerelative to all of the deliverables and payment terms within the arrangement. The Company evaluates factors such as the scientific, clinical, regulatory,commercial and other risks that must be overcome to achieve the respective milestone and the level of effort and investment required to achieve the respectivemilestone in making this assessment. There is considerable judgment involved in determining whether a milestone satisfies all of the criteria required toconclude that a milestone is substantive. The Company has concluded that all of the clinical and regulatory milestones pursuant to its collaborationarrangement are substantive. Accordingly, in accordance with FASB ASC Topic 605-28, Revenue Recognition-Milestone Method, revenue from clinical andregulatory milestone payments will be F-15Table of Contentsrecognized in its entirety upon successful accomplishment of the milestone, assuming all other revenue recognition criteria are met. Milestones that are notconsidered substantive would be recognized as revenue over the remaining period of performance, assuming all other revenue recognition criteria are met.Revenue from commercial milestone payments will be accounted for as royalties and recorded as revenue upon achievement of the milestone, assuming allother revenue recognition criteria are met.The Company will recognize royalty revenue in the period of sale of the related product(s), based on the underlying contract terms, provided that thereported sales are reliably measurable and the Company has no remaining performance obligations, assuming all other revenue recognition criteria are met.Research fees and license feesThe terms of the Company’s research agreements and license agreements include delivery of an intellectual property license or the performance ofresearch and development activities. The Company does not have any material research arrangements or license arrangements that contain multipledeliverables. The Company is compensated under research arrangements and license arrangements through nonrefundable up-front payments and futureroyalties on net product sales. Research fees are recognized as revenue on a straight-line basis over the period that the research services are expected to beperformed unless the Company’s pattern of performance can be determined to be other than straight-line, in which case, the Company uses the proportionalperformance method. Nonrefundable license fees are recognized as revenue upon delivery provided there are no undelivered elements in the arrangement.Grant revenueGrant revenue is primarily generated through research and development grant programs offered by federal, state, and local governments. The Companyevaluates the terms of the grant to assess the Company’s obligations and if the Company’s obligations are satisfied over time, revenue is recognized on astraight-line basis. In situations where the performance of the Company’s obligations has been satisfied when the grant is received, revenue is recognized uponreceipt of the grant. Certain grants contain refund provisions. The Company reviews those refund provisions to determine the likelihood of repayment. If thelikelihood of repayment of the grant is determined to be remote, the grant is recognized as revenue. If the probability of repayment is determined to be more thanremote, the Company records the grant as a liability, until such time that the grant requirements have been satisfied.Research and development expensesResearch and development costs are charged to expense as costs are incurred in performing research and development activities, including salaries andbenefits, facilities costs, overhead costs, clinical study and related clinical manufacturing costs, contract services and other related costs. Research anddevelopment costs, including up-front fees and milestones paid to collaborators, are also expensed as incurred. In circumstances where amounts have beenpaid in excess of costs incurred, the Company records a prepaid expense.Stock-based compensationThe Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation(“ASC 718”). ASC 718 requires all stock-based payments to employees, including grants of employee stock options and restricted stock and modifications toexisting stock options, to be recognized in the consolidated statements of operations and comprehensive loss based on their fair values. The Company uses theBlack-Scholes option pricing model to determine the fair value of options granted.Our stock-based awards are subject to either service or performance-based vesting conditions. Compensation expense related to awards to employees anddirectors with service-based vesting conditions is F-16Table of Contentsrecognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is generally the vesting term.Compensation expense related to awards to non-employees with service-based vesting conditions is recognized based on the then-current fair value at eachfinancial reporting date prior to the measurement date over the associated service period of the award, which is generally the vesting term, using the acceleratedattribution method. Compensation expense related to awards to employees with performance-based vesting conditions is recognized based on the grant date fairvalue over the requisite service period using the accelerated attribution method to the extent achievement of the performance condition is probable.Compensation expense related to awards to non-employees with performance-based vesting conditions is recognized based on the then-current fair value at eachfinancial reporting date prior to the measurement date over the requisite service period using the accelerated attribution method to the extent achievement of theperformance condition is probable.The Company expenses restricted stock awards to employees based on the fair value of the award on a straight-line basis over the associated serviceperiod of the award. Awards of restricted stock to non-employees are adjusted through share-based compensation expense at each reporting period end to reflectthe current fair value of such awards and expensed using an accelerated attribution model.The Company estimates the fair value of its option awards to employees and directors using the Black-Scholes option pricing model, which requires theinput of and subjective assumptions, including (i) the expected stock price volatility, (ii) the calculation of expected term of the award, (iii) the risk-free interestrate, and (iv) expected dividends. Due to the lack of company specific historical and implied volatility data of its common stock, the Company has based itsestimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. When selecting these public companies onwhich it has based its expected stock price volatility, the Company selected companies with comparable characteristics to it, including enterprise value, riskprofiles, position within the industry, and with historical share price information sufficient to meet the expected term of the stock-based awards. TheCompany computes historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculatedexpected term of the stock-based awards. The Company will continue to apply this process until a sufficient amount of historical information regarding thevolatility of its own stock price becomes available. The Company has estimated the expected term of its employee stock options using the “simplified” method,whereby, the expected term equals the arithmetic average of the vesting term and the original contractual term of the option due to its lack of sufficient historicaldata. The risk-free interest rates for periods within the expected term of the option are based on the U.S. Treasury securities with a maturity date commensuratewith the expected term of the associated award. The Company has never paid, and does not expect to pay dividends in the foreseeable future.The Company is also required to estimate forfeitures at the time of grant, and revise those estimates in subsequent periods if actual forfeitures differfrom its estimates. The Company uses historical data to estimate pre-vesting option forfeitures and records stock-based compensation expense only for thoseawards that are expected to vest. To the extent that actual forfeitures differ from the Company’s estimates, the differences are recorded as a cumulativeadjustment in the period the estimates were revised. Stock-based compensation expense recognized in the financial statements is based on awards that areultimately expected to vest.Consistent with the guidance in FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees, the fair value of each non-employee stockoption and warrant award is estimated at the date of grant using the Black-Scholes option pricing model with assumptions generally consistent with those usedfor employee stock options, with the exception of expected term, which is over the contractual life.Income taxesIncome taxes are recorded in accordance with FASB ASC Topic 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset andliability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in thefinancial F-17Table of Contentsstatements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets andliabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon theweight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Companyrecognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit willmore likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As ofDecember 31, 2013 and 2012, the Company does not have any significant uncertain tax positions.Net loss per shareBasic net income (loss) per share is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number ofcommon shares outstanding during the period. Diluted net income per share is calculated by dividing the net income attributable to common stockholders bythe weighted-average number of common equivalent shares outstanding for the period, including any dilutive effect from outstanding stock options, unvestedrestricted stock, and warrants using the treasury stock method.The Company follows the two-class method when computing net income (loss) per share in periods when issued shares that meet the definition ofparticipating securities are outstanding. The two-class method determines net income (loss) per share for each class of common and participating securitiesaccording to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to commonstockholders for the period to be allocated between common and participating securities based upon their respective rights to received dividends as if all incomefor the period had been distributed. Accordingly, in periods in which the Company reports a net loss attributable to common stockholders when participatingsecurities are outstanding, losses are not allocated to the participating securities.Comprehensive lossComprehensive loss is comprised of net loss and other comprehensive income or loss. Other comprehensive income or loss consists of unrealized gainsand losses on marketable securities and foreign currency translation adjustments.Subsequent eventsThe Company considers events or transactions that occur after the balance sheet date, but prior to the issuance of the financial statements to provideadditional evidence relative to certain estimates or to identify matters that require additional disclosure.Recently adopted accounting pronouncementsIn February 2013, the FASB issued guidance to provide information about the amounts reclassified out of accumulated other comprehensive income(“AOCI”) by component. An entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out ofAOCI by the respective line items of net income, but only if the amount reclassified is required to be reclassified in its entirety in the same reporting period. Foramounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additionaldetails about those amounts. On January 1, 2013 the Company adopted this standard, which had no impact on its financial position or results of operations. F-18Table of Contents3. Cash and cash equivalentsThe Company considers all highly liquid securities with original final maturities of three months or less from the date of purchase to be cashequivalents. As of December 31, 2013 and 2012, cash and cash equivalents are comprised of funds in cash and money market accounts.From time to time, the Company invests in marketable securities, which are classified as available-for-sale securities and are stated at fair value asdetermined by quoted market prices. As of December 31, 2013 and 2012, the Company did not hold any marketable securities.The following table presents the cash and cash equivalents carried at fair value in accordance with the hierarchy defined in Note 2: Description Total Quoted Prices inActive Markets(Level 1) Significant OtherObservable Inputs(Level 2) SignificantUnobservable Inputs(Level 3) December 31, 2013 Total cash and cash equivalents $206,279 $206,279 $— $— December 31, 2012 Total cash and cash equivalents $67,011 $67,011 $— $— 4. Property and equipment, netProperty and equipment, net, consists of the following: December 31, 2013 2012 Computer equipment and software $576 $199 Office equipment 780 148 Laboratory equipment 3,758 1,111 Leasehold improvements 7,260 357 Total property and equipment 12,374 1,815 Less accumulated depreciation and amortization (1,454) (527) Property and equipment, net $10,920 $1,288 Depreciation and amortization expense related to property and equipment was $941, $301 and $205 for the years ending December 31, 2013, 2012, and2011, respectively.5. Restricted cashAs of December 31, 2013 and 2012, the Company maintains letters of credit of $1,403 and $150, respectively, which are required to be collateralizedwith a bank account at a financial institution in accordance with our building lease agreements. Under the Company’s corporate credit card agreement, theCompany granted a security interest in an interest bearing deposit account of $100 as of December 31, 2012 to the financial institution issuing the credit cardsand the restriction was released during 2013. F-19Table of Contents6. Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities consist of the following: As of December 31, 2013 2012 Employee compensation $1,740 $911 Accrued goods and services 2,119 471 Accrued professional fees 305 688 Deferred rent, current portion 738 24 Other 273 21 $5,175 $2,115 7. WarrantsThe warrants outstanding consist of the following: As of December 31, 2013 2012 Warrants to purchase Common Stock 338 102 Warrants to purchase Series A-1 Preferred Stock — 5,835 Warrants to purchase Series B Preferred Stock — 575 338 6,512 As of December 31, 2012, the Company had outstanding warrants to purchase 6,512 shares of capital stock. Upon the closing of the Company’s IPOon June 24, 2013, all of the warrants exercisable for convertible preferred stock were automatically converted into warrants exercisable for 338 shares ofcommon stock, of which 308 and 30 are exercisable at $12.55 and $6.19 per share, respectively, and expire between November 16, 2015 and April 15,2019. Each warrant is exercisable on either a physical settlement or net share settlement basis. These warrants are outstanding as of December 31, 2013.During the year ended December 31, 2013, there were 102 warrants exercised and no cancellations or expirations.In conjunction with the automatic conversation all warrants exercisable for convertible preferred stock into warrants exercisable for common stock, areclassification of the related convertible preferred stock warrant liability to additional paid-in capital was made as warrants to purchase shares of commonstock are accounted for as equity instruments. The warrant liability was re-measured to fair value prior to reclassification to additional paid-in capital. As ofDecember 31, 2013, the Company had no outstanding warrant liability. The warrant liability measured at fair value as of December 31, 2012 is as follow: Description Total Quoted prices inactive markets(Level 1) Significant otherobservable inputs(Level 2) Significantunobservableinputs(Level 3) December 31, 2012 Warrant liability $215 $— $— $215 $215 $— $— $215 F-20Table of ContentsThe following table sets forth a summary of changes in the fair value of the Company’s preferred stock warrant liability which represents a recurringmeasurement that is classified within Level 3 of the fair value hierarchy wherein fair value is estimated using significant unobservable inputs: Year ended December 31, 2013* 2012 Beginning balance $215 $637 Change in fair value 440 (28) Reclassification to equity (655) (394) Ending balance $— $215 *These warrants were re-measured to fair value and then reclassified to additional paid-in capital on June 24, 2013.The fair value of each warrant to purchase shares of the Company’s Series A-1 Preferred Stock as of December 31, 2012 was estimated using theBlack-Scholes option pricing model with the following weighted-average assumptions: Year ended December 31,2012** Fair value of underlying instrument $0.18 Expected volatility 78.9% Expected term (in years) 4.98 Risk-free interest rate 0.6% Expected dividend yield 0.0% **Series A-1 warrants were re-measured to fair value and then reclassified to additional paid-in capital on July 23, 2012.The fair value of each warrant to purchase shares of the Company’s Series B Preferred Stock was estimated using the Black-Scholes option pricingmodel with the following weighted-average assumptions: Year ended December 31, 2013* 2012 Fair value of underlying instrument $0.95 $0.48 Expected volatility 82.0% 80.4% Expected term (in years) 5.93 6.29 Risk-free interest rate 1.1% 1.2% Expected dividend yield 0.0% 0.0% *Series B warrants were re-measured to fair value and then reclassified to additional paid-in capital on June 24, 2013.The Company estimated the fair value of its shares of Series B Preferred Stock as of December 31, 2012 and estimated the fair value of its shares ofSeries A-1 Preferred Stock as of July 23, 2012, using a hybrid approach based on a probability-weighted average of the expected return method and the optionpricing method and using the option-pricing method value and the guideline public company method under the market approach value as of December 31,2011.8. Commitments and contingenciesOn June 3, 2013, the Company entered into a new nine-year building lease for approximately 43,600 square feet of space in Cambridge, Massachusetts,commencing on the earlier of the substantial completion of the build-out work or January 1, 2014. The lease has monthly lease payments of $209 the first 12months with annual rent F-21Table of Contentsescalations thereafter and provides a rent abatement of $209 per month for the first six months. The Company has the option to extend this lease by anadditional five years. As the Company obtained access to the newly leased space on July 22, 2013 in order to begin the build-out, this is considered the leasecommencement date for accounting purposes, thus rent expense began on this date and will be recognized on a straight-line basis over the term of the lease. Inaddition, the lease provides a contribution from the landlord towards the initial build-out of the space of up to $6,538. The Company capitalizes the leaseholdimprovements as property and equipment and records the landlord incentive payments received as deferred rent and amortizes these amounts as reductions torent expense over the lease term. In accordance with the lease, the Company entered into a cash-collateralized irrevocable standby letter of credit in the amountof $1,253, naming the landlord as beneficiary. This letter of credit is reduced to $1,044, $835, and $627 upon the rent commencement date and the first andsecond anniversaries of the rent commencement date, respectively. The Company relocated into its new corporate headquarters in December 2013, however asof December 31, 2013 the Company was still using its former headquarters in order to prepare it for sublease and therefore had not yet met the cease-use date.The lease for the Company’s former headquarters, located at 840 Memorial Drive, Cambridge, Massachusetts, expires on March 31, 2015. In the event that asublease is signed, the rent abatement on the new lease may decrease.As of December 31, 2013, future minimum commitments under facility operating leases were as follows: Years ended December 31, Memorial DriveLease Second StreetLease Total LeaseCommitments 2014 $841 $1,253 $2,094 2015 213 2,582 2,795 2016 — 2,659 2,659 2017 — 2,739 2,739 2018 — 2,821 2,821 2019 and thereafter — 12,155 12,155 Total minimum lease payments $1,054 $24,209 $25,263 Rent expense is calculated on a straight-line basis over the term of the lease. Rent expense recognized under all operating leases, including additional rentcharges for utilities, parking, maintenance, and real estate taxes was $2,405, $815 and $638 for the years ended December 31, 2013, 2012 and 2011,respectively.The Company is party to various agreements, principally relating to licensed technology, that require future payments relating to milestones not met atDecember 31, 2013 and December 31, 2012 or royalties on future sales of specified products.The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to the agreements, the Companyindemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’sbusiness partners or customers, in connection with any U.S. patent or any copyright or other intellectual property infringement claim by any third party withrespect to the Company’s products. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. Themaximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Companyhas never incurred costs to defend lawsuits or settle claims related to these indemnification agreements.9. Convertible Preferred StockUpon the closing of the IPO on June 24, 2013, all of the outstanding shares of the Company’s convertible preferred stock were converted into 16,389shares of its common stock. As of December 31, 2013, the Company does not have any convertible preferred stock issued or outstanding.As of December 31, 2012, the authorized capital stock of the Company included 317,252 shares of preferred stock, par value $0.01 per share, ofwhich: (i) 18,817 shares have been designated as Series A-1 Preferred Stock, (ii) 22,304 shares have been designated as Series A-2 convertible preferred stock(“Series A-2 Preferred Stock”), F-22Table of Contents(iii) 115,779 shares have been designated as Series B Preferred Stock, (iv) 39,943 shares have been designated as Series C convertible preferred stock(“Series C Preferred Stock”), and (iv) 120,409 shares have been designated as Series D convertible preferred stock (“Series D Preferred Stock”) and allcollectively “Preferred Stock.”Extinguishment of preferred stockIn connection with the issuance of the Series D Preferred Stock, the rights, preferences, and privileges for all classes of preferred stock then outstandingwere modified. More specifically, the redemption privileges were eliminated in their entirety for Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series BPreferred Stock, and Series C Preferred Stock. Additionally, the dividend rights changed from cumulative dividend rights to non-cumulative dividend rightsand all accrued, but unpaid dividends on the Company’s Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series B Preferred Stock, and Series CPreferred Stock as of July 23, 2012, were forfeited. Lastly, the liquidation preference for the Series B Preferred Stock was reduced from $0.6524 per share to$0.4893 per share.The Company has accounted for the amendment to the rights, preferences, and privileges of the preferred stock as an extinguishment of the old preferredstock and issuance of new preferred stock due to the significance of the modifications to the substantive contractual terms of the preferred stock and theassociated fundamental changes to the nature of the preferred stock. Accordingly, the Company recorded an aggregate gain of $23,114 within stockholders’deficit equal to the difference between the fair value of the new shares of preferred stock issued and the carrying amount of the old shares of preferred stockextinguished. The Company allocated $9,356 of the gain to additional paid-in capital to recover the amount of additional paid-in capital that had previouslybeen reduced by accreted dividends that were forfeited as part of the extinguishment, while the remaining $13,758 was recorded to accumulated deficit. Thegain on extinguishment is reflected in the calculation of net loss available to common stockholders in accordance with FASB ASC Topic 260, Earnings perShare. The fair value of the Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock was determinedusing a hybrid approach based on a probability-weighted average of the expected return method and the option pricing method.10. Common stock and preferred stockAs of December 31, 2012, the authorized capital stock of the Company included 21,089 shares of common stock, par value $0.01 per share. OnJanuary 16, 2013, the Company increased the authorized capital stock of the Company to 21,511. On June 18, 2013, the Company increased the authorizedcapital stock of the Company to 125,000 shares.Holders of common stock are entitled to one vote per share. Holders of common stock are entitled to receive dividends, if and when declared by theCompany’s Board of Directors, and to share ratably in the Company’s assets legally available for distribution to the Company’s shareholders in the event ofliquidation. Holders of common stock have no preemptive, subscription, redemption or conversion rights.The Company is authorized to issue 5,000 shares of preferred stock in one or more series and to fix the powers, designations, preferences and relativeparticipating option or other rights thereof, including dividend rights, conversion rights, voting rights, redemption terms, liquidation preferences and thenumber of shares constituting any series, without any further vote or action by the Company’s shareholders. As of December 31, 2013 and 2012, theCompany had no shares of preferred stock issued or outstanding. F-23Table of ContentsReserved for future issuanceThe Company has reserved for future issuance of common stock the following number of shares of common stock: Year endedDecember 31, 2013 Vesting of Restricted Stock 69 Options to purchase common stock 4,651 Warrants to purchase common stock 338 Employee Stock Purchase Plan 238 5,296 11. Significant agreementsCelgene CorporationSummary of the Collaboration AgreementOn March 19, 2013, the Company entered into a Master Collaboration Agreement (the “Collaboration Agreement”) with Celgene to discover, develop andcommercialize disease-altering gene therapies in oncology. The collaboration is focused on applying gene therapy technology to genetically modify a patient’sown T cells, known as chimeric antigen receptor, or CAR, T cells, to target and destroy cancer cells. Additionally, on March 19, 2013, the Company enteredinto a Platform Technology Sublicense Agreement (the “Sublicense Agreement”) with Celgene pursuant to which the Company obtained a sublicense to certainintellectual property from Celgene, originating under Celgene’s license from Baylor College of Medicine, for use in the collaboration.Under the terms of the Collaboration Agreement, the Company received a $75,000 up-front, non-refundable cash payment. The Company will beresponsible for conducting discovery, research and development activities through completion of Phase I clinical studies, if any, during the initial term of theagreement, or three years. The collaboration will be governed by a joint steering committee (“JSC”) formed by an equal number of representatives from theCompany and Celgene. The JSC will, among other activities, review the collaboration program, review and evaluate product candidates and approveregulatory plans. In addition to the JSC, the Collaboration Agreement provides that the Company and Celgene will each appoint representatives to establish apatent committee, which will be responsible for managing the intellectual property developed and used during the collaboration.Prior to expiration of the initial term of the Collaboration Agreement, Celgene has two options to extend the term, through March 19, 2019, with thepayment of significant extension fees. Separately, Celgene has an option to license an unlimited number of product candidates resulting from the collaborationduring a period commencing upon execution of the Collaboration Agreement and continuing through a specified period following the completion of Phase Iclinical studies for each individual product candidate. In the event such option is exercised, the Company would grant Celgene an exclusive worldwide licenseto develop and commercialize such product candidate. Upon exercise of the option to license a product candidate, Celgene is required to pay an option fee,which is subject to reduction if the Company elects to co-develop and co-promote such product candidate in the United States. For any product candidateslicensed by Celgene, the Company may be responsible, at Celgene’s election, to continue performing certain development activities contemplated as part of thecollaboration plan. If Celgene does not exercise its option with respect to a product candidate prior to the expiration of the applicable option period (each a“declined product candidate”), then the Company has the right to develop the product candidate outside the scope of the collaboration, subject to a Celgene opt-in right to obtain a license to that declined product candidate for significant additional cash consideration. The opt-in right exists through a specified periodfollowing the completion of a pivotal study for the specific declined product candidate and functions in the same manner as the option to license any otherproduct candidates resulting from the collaboration. F-24Table of ContentsIn addition, Celgene would be required to make certain milestone payments upon the achievement of specified clinical, regulatory and commercialevents. For each product candidate that is licensed by Celgene, the Company would be eligible to receive per product up to $20,000 in option fees, up to$10,000 in clinical milestone payments, up to $117,000 in regulatory milestone payments and up to $78,000 in commercial milestone payments. Clinicalmilestone payments are triggered upon initiation of a defined phase of clinical research for a product candidate. Regulatory milestone payments are triggeredupon approval to market a product candidate by the FDA or other global regulatory authorities. Commercial milestone payments are triggered upon the firstcommercial sale of an approved pharmaceutical product and when an approved pharmaceutical product reaches certain defined levels of net sales by thelicensee or receives approval to be marketed by certain global regulatory authorities in a specified number of countries outside of the United States. In addition,to the extent any of the product candidates licensed by Celgene are commercialized, the Company would be entitled to receive tiered royalty payments rangingfrom the mid-single digits to mid-teens based on a percentage of net sales. Royalty payments are subject to certain reductions, including for any royaltypayments required to be made by Celgene to acquire patent rights, with an aggregate minimum floor. The Company is not eligible to receive either milestonepayments or royalty payments unless and until Celgene exercises its option to license a product candidate resulting from the collaboration whereupon theparties will execute a license agreement, the terms of which are included as part of the collaboration arrangement.Additionally, the Company may elect to co-develop and co-promote product candidates licensed by Celgene. If the Company elects to co-develop and co-promote a product candidate, then the parties would share equally in all costs incurred relating to the development, commercialization and manufacture of theproduct candidate within the United States and share equally in the profits generated by such product candidate in the United States. Additionally, if theCompany elects to co-develop and co-promote a product candidate, then the option fees, milestones and royalties would decrease compared to those describedabove. Under this scenario, the Company would receive per product up to $10,000 in option fees, up to $10,000 in clinical milestone payments and outside ofthe United States, up to $54,000 in regulatory milestone payments and up to $36,000 in commercial milestone payments. Clinical milestone payments aretriggered upon initiation of a defined phase of clinical research for a product candidate. Regulatory milestone payments are triggered upon approval to market aproduct candidate by global regulatory authorities. Commercial milestone payments are triggered when an approved pharmaceutical product reaches certaindefined levels of net sales by the licensee or receives approval to be marketed by certain global regulatory authorities in a specified number of countries outsidethe United States. In addition, to the extent any of the product candidates licensed by Celgene and co-developed and co-promoted by the Company arecommercialized, the Company would be entitled to receive tiered royalty payments ranging from the mid-single digits to mid-teens based on a percentage of netsales from sales generated outside of the United States. Royalty payments are subject to certain reductions, including for any royalty payments required to bemade by Celgene to acquire patent rights, with an aggregate minimum floor. The Company is not eligible to receive profit share payments, milestone paymentsor royalty payments unless and until Celgene exercises its option to license a product candidate resulting from the collaboration whereupon the parties willexecute a co-development, co-promote and profit share agreement, the terms of which are included as part of the collaboration arrangement.In the event Celgene elects to license a product candidate discovered and developed as part of the Collaboration Agreement, Celgene would be solelyresponsible for all costs and expenses of manufacturing and supplying any product candidates. Subject to customary back-up supply rights granted toCelgene, the Company has the sole right to manufacture or have manufactured supplies of vectors and associated payloads manufactured for incorporationinto the associated product candidate. Celgene would reimburse the Company for the costs incurred to manufacture and supply such vectors and associatedpayloads, plus a modest mark-up. The Company is not obligated to manufacture or have manufactured supplies of vectors and associated payloads forincorporation into an optioned product candidate unless and until Celgene exercises its option to license a product candidate resulting from the collaborationwhereupon the parties will execute a separate manufacturing and supply agreement. F-25Table of ContentsThe Collaboration Agreement may be terminated by either the Company or Celgene, upon written notice, in the event of the other party’s uncuredmaterial breach. Celgene may terminate the Collaboration Agreement for any reason upon written notice to the Company. If the Collaboration Agreement isterminated, rights to product candidates in development at the time of such termination will be allocated to the parties through a mechanism included in theCollaboration Agreement. In addition, if Celgene terminates the Collaboration Agreement as a result of a breach by the Company, then any then-existing co-development and co-promotion agreement will be automatically terminated and replaced with a license agreement for such product candidate and any amountspayable by Celgene under any then-existing product license agreements will be reduced.Call OptionDuring the initial three-year term of the collaboration and, if extended, during the first two-year extension term of the collaboration, in the event that theCompany engages in a change in control transaction, including for such purposes a merger or consolidation of the Company or the sale of all or substantiallyall of the Company’s assets, or if another person or entity or group of persons or entities acquires at least 50% of the Company’s voting capital stock, thenCelgene has the right, but not the obligation, to terminate the Collaboration Agreement and obtain perpetual, non-terminable, worldwide, exclusive, fully paid-up licenses to all, but not less than all, of the product candidates previously identified under the Collaboration Agreement (the “Call Option”). Under the CallOption, the product candidates to which Celgene would have the right to acquire licenses include any product candidate previously licensed out of thecollaboration during the term of the collaboration, any product candidate for which the Company has exercised the right to co-develop and co-promote withinthe United States, any product candidate for which Celgene previously declined its option to obtain a license and any product candidate for which at least invivo efficacy studies have been initiated or authorized by the JSC. The purchase price for such licenses would be based on the fair value of these rightsreceived and obligations assumed determined pursuant to a binding arbitration process.In addition, during the initial three-year term of the collaboration, but not during any extension term, in the event that Celgene exercises the Call Option,in addition to the right to acquire the fully paid-up licenses described above, Celgene would obtain a perpetual, non-terminable, worldwide, exclusive license tothe Company’s intellectual property to develop one or more CAR T cell products targeting one or more oncology associated target antigens for the remainder ofthe initial collaboration term. Following the initial collaboration term, the license to the Company’s intellectual property is limited to target antigens identified byCelgene promptly following the initial collaboration term for which Celgene reasonably intends to develop CAR T cell products. There is no limit to the numberof oncology-related target antigens Celgene may select under this license. Upon commercialization of any such product candidate so licensed by Celgene,Celgene would be obligated to pay the Company a specified milestone payment upon regulatory approval and a percentage of net sales as a royalty.The Company has concluded that the value of the Call Option is immaterial based primarily on the probability that the Call Option would becomeexercisable.Accounting AnalysisThe Company’s arrangement with Celgene contains the following deliverables: (i) discovery, research and development services, (ii) participation on theJSC and (iii) participation on the patent committee. The Company has determined that the options to extend the term of the agreement and the options to licenseproduct candidates, including those related to Celgene’s opt-in right for a declined product candidate, are substantive options. Celgene is not contractuallyobligated to exercise the options. Additionally, as a result of the uncertain outcome of the discovery, research and development activities, the Company is atrisk with regard to whether Celgene will exercise the options. Moreover, the Company has determined that the options are not priced at a significant andincremental discount. Accordingly, the options are not considered deliverables at the inception of the arrangement and the associated option fees are notincluded in allocable arrangement consideration. The Company has determined that the potential obligation to manufacture or have manufactured supplies ofvectors F-26Table of Contentsand associated payloads for incorporation into an optioned product candidate is contingent upon Celgene exercising its option to license a product candidateresulting from the collaboration. Therefore, consistent with the treatment of the options to license product candidates, the Company’s potential obligation undera manufacturing and supply agreement is not considered a deliverable at the inception of the arrangement and the associated fees are not included in allocablearrangement consideration.The Company has concluded that each of the three deliverables identified at the inception of the arrangement (discovery, research and developmentservices, participation on the JSC and participation on the patent committee) has standalone value from the other undelivered elements. Additionally, theCollaboration Agreement does not include return rights related to the initial collaboration term. Accordingly, each deliverable qualifies as a separate unit ofaccounting.The Company has identified the allocable arrangement consideration as the $75,000 up-front payment. The Company determined that each of theidentified deliverables have the same period of performance (the three year initial term) and have the same pattern of revenue recognition, ratably over the periodof performance. As a result, the $75,000 arrangement consideration will be recognized over the three year initial term.The Company has evaluated all of the milestones that may be received in connection with Celgene’s option to license a product candidate resulting fromthe collaboration. In evaluating if a milestone is substantive, the Company assesses whether: (i) the consideration is commensurate with either the Company’sperformance to achieve the milestone or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the Company’sperformance to achieve the milestone, (ii) the consideration relates solely to past performance and (iii) the consideration is reasonable relative to all of thedeliverables and payment terms within the arrangement. All clinical and regulatory milestones are considered substantive on the basis of the contingent natureof the milestone, specifically reviewing factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve themilestone as well as the level of effort and investment required. Accordingly, such amounts will be recognized as revenue in full in the period in which theassociated milestone is achieved, assuming all other revenue recognition criteria are met. All commercial milestones will be accounted for in the same manner asroyalties and recorded as revenue upon achievement of the milestone, assuming all other revenue recognition criteria are met.During the year ended December 31, 2013, the Company recognized $19,792 of revenue associated with its collaboration with Celgene related to therecognition of discovery, research and development services. As of December 31, 2013, there is $55,208 of deferred revenue related to the Company’scollaboration with Celgene which is classified as current or long-term in the accompanying balance sheet based on the contractual term of the arrangement.Association Française contre les MyopathiesIn January 2011, the Company entered into a research funding agreement with the Association Française contre les Myopathies (“AFM”), a nonprofitorganization dedicated to curing rare neuromuscular diseases and providing treatments to reduce the associated disabilities of such diseases. As part of theagreement, AFM funded the Company 1,000 Euros to be used to advance the Company’s research, process development, manufacturing, preclinicaldevelopment, and clinical development in gene therapy for beta-hemoglobinopathies in ß-thalassemia and/or in Sickle Cell Disease.The funding, or a portion thereof depending on timing, shall be repaid to AFM upon any of the following events: (i) upon out-licensing or sale of theprogram, (ii) upon obtaining the first product authorization for the market, or (iii) upon sale of the Company, provided that the development is active at thetime of such sale. The agreement is for a period of four years. The Company believes that repayment of the funds paid under the agreement is remote at thedate of the agreement, December 31, 2013 or December 31, 2012. The Company recognizes the revenue under this arrangement on a straight-line basis over theterm of the agreement. The Company will reassess the probability of repayment at the end of each reporting period. F-27Table of ContentsMassachusetts life science centerIn October 2011, the Company was awarded a $242 tax incentive from the Massachusetts Life Sciences Center as part of the Life Sciences TaxIncentive Program. The program was established in 2008 to incentivize life science companies to create new sustained jobs in Massachusetts. If the Companydoes not meet and maintain its job creation commitment for at least five years, the total amount awarded may be recovered by the Massachusetts Department ofRevenue. The Company recognized this award as grant revenue in 2011, as the Company had satisfied its job creation commitments and the Company’s long-range hiring plan was significantly in excess of the requirement. The Company concluded that the likelihood of refund was remote.12. Stock-based compensationOn June 3, 2013, the Company’s board of directors adopted its 2013 Stock Option and Incentive Plan (“2013 Plan”), which was subsequently approvedby its stockholders and became effective upon the closing of the Company’s initial public offering on June 24, 2013. The 2013 Plan replaces the 2010 StockOption and Grant Plan (“2010 Plan”).The 2013 Plan allows for the granting of incentive stock options, non-qualified stock options, and restricted stock awards to the Company’s employees,members of the board of directors, and consultants of the Company. The Company initially reserved 955 shares of its common stock for the issuance ofawards under the 2013 Plan. The 2013 Plan provides that the number of shares reserved and available for issuance under the 2013 Plan will automaticallyincrease each January 1, beginning on January 1, 2014, by four percent of the outstanding number of shares of common stock on the immediately precedingDecember 31 or such lesser number of shares as determined by the Company’s compensation committee.Any options or awards outstanding under the Company’s previous stock option plans, including both the 2010 Plan and the Second Amended andRestated 2002 Employee, Director and Consultant Stock Plan (“2002 Plan”), at the time of adoption of the 2013 Plan remain outstanding and effective. Theshares of common stock underlying any awards that are forfeited, canceled, repurchased, expire or are otherwise terminated (other than by exercise) under the2002 Plan and 2010 Plan are added to the shares of common stock available for issuance under the 2013 Plan. As of December 31, 2013, the total number ofcommon stock that may be issued under all equity award plans is 693.Stock-based compensation expenseThe Company recognized stock-based compensation expense totaling $6,491, $822 and $758 during the years ended December 31, 2013, 2012 and2011, respectively. Share-based compensation expense recognized by award type is as follows: Year ended December 31, 2013 2012 2011 Stock options $6,399 $742 $574 Warrants — — 102 Restricted stock awards 92 80 82 $6,491 $822 $758 F-28Table of ContentsThe fair value of each option issued to employees was estimated at the date of grant using the Black-Scholes option pricing model with the followingweighted-average assumptions: Year ended December 31, 2013 2012 2011 Expected volatility 82.0% 79.6% 83.0% Expected term (in years) 6.1 6.1 6.1 Risk-free interest rate 1.1% 1.0% 1.7% Expected dividend yield 0.0% 0.0% 0.0% The intrinsic value of options exercised during the years ended December 31, 2013, 2012, and 2011, was $3,931, $17, $1, respectively.The weighted-average fair values of options granted during 2013, 2012 and 2011 was $7.36, $1.51, and $1.48, respectively.The aggregate fair value of restricted stock awards that vested during the years ended December 31, 2013, 2012 and 2011, based on the estimated fairvalue of the underlying stock on the day of vesting was $1,548, $97 and $116, respectively.As of December 31, 2013, there was $10,517 of unrecognized compensation expense related to unvested stock options and restricted stock awards thatis expected to be recognized over a weighted-average period of 3.3 years.Restricted common stockA summary of the Company’s restricted stock activity and related information is as follows: Shares Weighted-averagegrant date fair value Unvested balance at December 31, 2012 155 $0.95 Granted — — Vested (86) $0.95 Forfeited — — Unvested balance at December 31, 2013 69 $0.95 Stock optionsThe following table summarizes the stock option activity under the Plan: Shares Weighted-averageexercise priceper share Weighted-averagecontractuallife (in years) Aggregateintrinsicvalue(a) Outstanding at December 31, 2012 2,201 $2.09 Granted 2,021 8.26 Exercised (222) 2.18 Canceled or forfeited (42) 4.48 Outstanding at December 31, 2013 3,958 $5.21 8.4 $63,137 Exercisable at December 31, 2013 1,307 $2.22 7.4 $24,517 Vested and expected to vest at December 31, 2013 3,905 $5.21 8.4 $62,294 (a)The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the estimated fair value of thecommon stock for the options that were in the money at December 31, 2013. F-29Table of ContentsWarrantsDuring the year ended December 31, 2011, the Company issued warrants to purchase an aggregate of 50 shares of common stock. The awards weregranted in exchange for consulting services provided by a non-employee pursuant to standalone award agreements that are independent of an equity incentiveplan. The warrants vested immediately and are exercisable for ten years from the date of issuance. The Company determined the fair value of the warrantsusing the Black-Scholes option pricing model. The aggregate fair value of the warrants was recognized in full on the date of grant. The Company recognized$102 of share-based compensation expense associated with the warrants issued during the year ended December 31, 2011.Note receivableIn November 2010, the Company received a non-recourse note from its Chief Executive Officer (“CEO”) in exchange for the purchase of 329 shares ofrestricted stock. Interest accrued on the note on an annual basis at a rate of four percent. In May 2013, prior to the initial filing of the registration statement inconnection with the Company’s IPO, the CEO repaid the note in full plus all accrued interest. The Company recorded stock-based compensation expense inconnection with this restricted stock award of $63 for each of the three years ended December 31, 2013.Employee Stock Purchase PlanOn June 3, 2013, the Company’s board of directors adopted its 2013 Employee Stock Purchase Plan (“2013 ESPP”), which was subsequently approvedby its stockholders and became effective upon the closing of the Company’s IPO on June 24, 2013. The 2013 ESPP authorizes the initial issuance of up to atotal of 238 shares of the Company’s common stock to participating employees. As of December 31, 2013, the first offering under the 2013 ESPP had notoccurred.13. 401(k) Savings planIn 1997, the Company established a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code (“the 401(k) Plan”). The401(k) Plan covers all employees who meet defined minimum age and service requirements, and allows participants to defer a portion of their annualcompensation on a pretax basis. The Company has not made any contributions to the 401(k) Plan for the three years ended December 31, 2013.14. Income taxesFor the years ended December 31, 2013, 2012 and 2011, the Company did not record a current or deferred income tax expense or benefit.The components of loss before income taxes were as follows: Year ended December 31, 2013 2012 2011 U.S. $(26,018) $(23,700) $(15,300) Foreign 697 30 (298) Total $(25,321) $(23,670) $(15,598) F-30Table of ContentsDeferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. Thesignificant components of the Company’s deferred tax assets are comprised of the following: Year ended December 31, 2013 2012 Deferred tax assets: U.S. net operating loss carryforwards $11,010 $24,044 Foreign net operating loss carryforwards 659 587 Tax credit carryforwards 3,638 1,910 Capitalized research and development expenses, net 1,837 2,334 Deferred revenue 21,830 267 Accruals and other 4,177 289 Total deferred tax assets 43,151 29,431 Fixed assets (2,596) — Less valuation allowance (40,555) (29,431) Net deferred taxes $— $— The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on the Company’s historyof operating losses, the Company has concluded that it is more likely than not that the benefit of its deferred tax assets will not be realized. Accordingly, theCompany has provided a full valuation allowance for deferred tax assets as of December 31, 2013 and 2012. The valuation allowance increased approximately$11,124 during the year ended December 31, 2013, due primarily to net operating losses. The Company has allocated its valuation allowance in accordancewith the provisions of ASC 740, which resulted in a current deferred tax asset of $693 and a long term deferred tax liability of $693.A reconciliation of income tax expense computed at the statutory federal income tax rate to income taxes as reflected in the financial statements is asfollows: Year ended December 31, 2013 2012 2011 Federal income tax expense at statutory rate 34.0% 34.0% 34.0% State income tax, net of federal benefit 4.5% 4.4% 5.0% Permanent differences (0.6%) (0.8%) (1.3%) Research and development credit 6.0% 0.8% 3.4% Other 0.0% 0.6% (0.6%) Change in valuation allowance (43.9%) (39.0%) (40.5%) Effective income tax rate 0.0% 0.0% 0.0% As of December 31, 2013, 2012 and 2011, the Company had U.S. federal net operating loss carryforwards of approximately $30,310, $62,600 and$42,400, respectively, which may be available to offset future income tax liabilities and expire at various dates through 2033. As of December 31, 2013, 2012and 2011, the Company also had U.S. state net operating loss carryforwards of approximately $13,287, $52,300 and $31,300, respectively, which may beavailable to offset future income tax liabilities and expire at various dates through 2033. At December 31, 2013, 2012 and 2011, the Company also hadapproximately $1,977, $1,800, and $1,800, respectively, of foreign net operating loss carryforwards which may be available to offset future income taxliabilities; these carryforwards do not expire. As a result of the up-front payment pursuant to the Company’s collaboration agreement with Celgene, theCompany expects that it will use approximately $35,400 of its federal and state net operating loss carryforwards.As of December 31, 2013, 2012 and 2011, the Company had federal research and development tax credit carryforwards of approximately $2,685,$1,300 and $1,000, respectively, available to reduce future tax liabilities F-31Table of Contentswhich expire at various dates through 2032. As of December 31, 2013, 2012 and 2011, the Company had state credit carryforwards of approximately $1,443,$900 and $400, respectively, available to reduce future tax liabilities which expire at various dates through 2027.Under the provisions of the Internal Revenue Code, the net operating loss and tax credit carryforwards are subject to review and possible adjustment bythe Internal Revenue Service and state tax authorities. Net operating loss and tax credit carryforwards may become subject to an annual limitation in the eventof certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50 percent, as defined under Sections382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can be utilizedannually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediatelyprior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has completed severalfinancings since its inception which it believes has resulted in a change in control as defined by Sections 382 and 383 of the Internal Revenue Code.The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2013, 2012 and 2011,the Company had no accrued interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s consolidatedstatements of operations and comprehensive loss.For all years through December 31, 2013, the Company generated research credits but has not conducted a study to document the qualified activities.This study may result in an adjustment to the Company’s research and development credit carryforwards; however, until a study is completed and anyadjustment is known, no amounts are being presented as an uncertain tax position for these two years. A full valuation allowance has been provided againstthe Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the deferred tax assetestablished for the research and development credit carryforwards and the valuation allowance.The Company or one of its subsidiaries files income tax returns in the United States, and various state and foreign jurisdictions. The federal, state andforeign income tax returns are generally subject to tax examinations for the tax years ended December 31, 2010 through December 31, 2013. To the extent theCompany has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal RevenueService, state or foreign tax authorities to the extent utilized in a future period.15. Net loss per shareThe following common stock equivalents were excluded from the calculation of diluted net loss per share for the periods indicated because includingthem would have had an anti-dilutive effect: Year ended December 31, 2013 2012 2011 Outstanding stock options 3,958 2,201 1,529 Warrants 338 440 440 Unvested restricted stock 69 155 249 Preferred stock — 16,389 10,041 4,365 19,185 12,259 F-32Table of Contents16. Selected Quarterly Financial Data (Unaudited)The following table contains quarterly financial information for 2013 and 2012. The Company believes that the following information reflects all normalrecurring adjustments necessary for a fair statement of the information for the periods presented. The operating results for any quarter are not necessarilyindicative of results for any future period. 2013 First Quarter SecondQuarter Third Quarter FourthQuarter Total Total revenue $1,127 $6,334 $6,385 $6,335 $20,181 Total operating expenses 7,608 10,528 12,542 14,450 45,128 Loss from operations (6,481) (4,194) (6,157) (8,115) (24,947) Net loss (6,544) (4,583) (6,113) (8,081) (25,321) Net loss per share applicable to common stockholders—basic and diluted $(19.94) $(2.13) $(0.26) $(0.34) $(2.02) 2012 First Quarter SecondQuarter Third Quarter FourthQuarter Total Total revenue $85 $85 $85 $85 $340 Total operating expenses 5,221 4,685 5,109 9,041 24,056 Loss from operations (5,136) (4,600) (5,024) (8,956) (23,716) Net loss (5,068) (4,563) (5,041) (8,998) (23,670) Net (loss) income applicable to common stockholders—basic (6,353) (5,848) 315 (3,724) (3,613) Net (loss) income applicable to common stockholders—diluted (6,353) (5,848) 632 (3,724) (3,613) Net (loss) income per share applicable to common stockholders—basic $(28.49) $(23.21) $1.15 $(12.50) $(13.79) Net (loss) income per share applicable to common stockholders—diluted $(28.49) $(23.21) $1.14 $(12.50) $(13.79) During the quarter ended September 30, 2012, the Company recorded a gain related to extinguishment of preferred stock, which resulted in net incomeapplicable to common stockholders, as participating securities were outstanding.17. Subsequent eventsDuring the first quarter of 2014, the Company ceased use of its former corporate headquarters at 840 Memorial Drive, Cambridge, Massachusetts. Totalremaining minimum lease payments as of December 31, 2013 were $1,054. F-33Table of ContentsSIGNATURESPursuant 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 itsbehalf by the undersigned, thereunto duly authorized. bluebird bio, Inc.By: /s/ Nick Leschly Nick Leschly President, Chief Executive Officer and DirectorSIGNATURES AND POWER OF ATTORNEYWe, the undersigned directors and officers of bluebird bio, Inc. (the “Company”), hereby severally constitute and appoint Nick Leschly and Jeffrey T.Walsh, and each of them singly, our true and lawful attorneys, with full power to them, and to each of them singly, to sign for us and in our names in thecapacities indicated below, any and all amendments to this Annual Report on Form 10-K, and to file or cause to be filed the same, with all exhibits thereto andother documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys, and each of them, full power andauthority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes aseach of us might or could do in person, and hereby ratifying and confirming all that said attorneys, and each of them, or their substitute or substitutes, shalldo or cause to be done by virtue of this Power of Attorney.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Name Title Date/s/ Nick Leschly Nick Leschly President, Chief Executive Officer and Director(Principal Executive Officer) March 5, 2014/s/ Jeffrey T. Walsh Jeffrey T. Walsh Chief Operating Officer and Secretary(Principal Financial Officer) March 5, 2014/s/ Linda C. Bain Linda C. Bain Vice President, Finance and Business Operations and Treasurer(Principal Accounting Officer) March 5, 2014/s/ Robert I. Tepper, M.D. Robert I. Tepper, M.D. Director March 5, 2014/s/ Steven Gillis, Ph.D. Steven Gillis, Ph.D. Director March 5, 2014/s/ Daniel S. Lynch Daniel S. Lynch Director March 5, 2014/s/ James Mandell, M.D. James Mandell, M.D. Director March 5, 2014/s/ John M. Maraganore, Ph.D. John M. Maraganore, Ph.D. Director March 5, 2014/s/ Wendy L. Dixon, Ph.D. Wendy L. Dixon, Ph.D. Director March 5, 2014/s/ David P. Schenkein, M.D. David P. Schenkein, M.D. Director March 5, 2014Table of ContentsExhibit Index Incorporated by ReferenceExhibitNumber Exhibit Title Form File no. Exhibit Filing Date 3.1 Amended and Restated Certificate of Incorporation of the Registrant 8-K 001-35966 3.1 June 24, 2013 3.2 Amended and Restated By-laws of the Registrant 8-K 001-35966 3.2 June 24, 2013 4.1 Specimen Common Stock Certificate S-1/A 333-188605 4.1 June 4, 2013 4.2 Form of Common Stock Warrant S-1/A 333-188605 4.2 May 14, 2013 4.3 Form of Series A-1 Preferred Stock Warrant S-1/A 333-188605 4.3 May 14, 2013 4.4 Form of Series B Preferred Stock Warrant S-1/A 333-188605 4.4 May 14, 2013 10.1 Second Amended and Restated 2002 Employee, Director and Consultant Plan, asamended, and forms of award agreement thereunder S-1/A 333-188605 10.1 May 14, 2013 10.2 2010 Stock Option and Grant Plan, as amended, and forms of award agreementthereunder S-1/A 333-188605 10.2 May 14, 2013 10.3 2013 Stock Option and Incentive Plan and forms of award agreement thereunder S-1/A 333-188605 10.3 June 4, 2013 10.4 Form of Indemnification Agreement between the Registrant and each of its ExecutiveOfficers and Directors S-1/A 333-188605 10.4 May 14, 2013 10.5 Amended and Restated Lease Agreement, dated May 18, 2007, by and between theRegistrant and Rivertech Associates II, LLC, as amended 10-Q 001-35966 10.1 November 14, 2013 10.6† Patent License Agreement, dated December 11, 1996, by and between the Registrant(formerly known as Genetix Pharmaceuticals Inc., successor-in-interest to InnogenePharmaceuticals Inc.) and Massachusetts Institute of Technology, as amended S-1/A 333-188605 10.6 May 14, 2013 10.7† Patent and Know-How License Agreement No. 07554F30, dated May 14, 2009, by andbetween the Registrant (formerly known as Genetix Pharmaceuticals Inc.) and INSERM-TRANSFERT, as amended S-1/A 333-188605 10.7 May 14, 2013 10.8† License Agreement, dated September 13, 2011, by and between the Registrant andInstitut Pasteur, as amended S-1/A 333-188605 10.8 May 14, 2013 10.9† License Agreement, dated December 7, 2011, by and between the Registrant andResearch Development Foundation S-1/A 333-188605 10.9 May 14, 2013 10.10† Novation Agreement, dated April 2, 2012, by and between the Registrant and TheBoard of Trustees of the Leland Stanford Junior University S-1/A 333-188605 10.10 May 14, 2013 10.11† Master Collaboration Agreement by and between the Registrant and CelgeneCorporation, dated March 19, 2013 S-1/A 333-188605 10.11 May 14, 2013 10.12 Amended and Restated Employment Agreement by and between the Registrant and NickLeschly S-1/A 333-188605 10.12 June 4, 2013 10.13 Amended and Restated Employment Agreement by and between the Registrant andJeffrey T. Walsh S-1/A 333-188605 10.13 June 4, 2013Table of Contents Incorporated by ReferenceExhibitNumber Exhibit Title Form File no. Exhibit Filing Date 10.14 Amended and Restated Employment Agreement by and between the Registrant andMitch Finer S-1/A 333-188605 10.14 June 4, 2013 10.15 Amended and Restated Employment Agreement by and between the Registrant andDavid M. Davidson, M.D. S-1/A 333-188605 10.15 June 4, 2013 10.16 Offer Letter, dated September 27, 2011 by and between the Registrant and LindaBain S-1/A 333-188605 10.16 June 4, 2013 10.17 2013 Employee Stock Purchase Plan S-1/A 333-188605 10.17 June 4, 2013 10.18 Executive Cash Incentive Bonus Plan S-1/A 333-188605 10.18 May 14, 2013 10.19 Lease, dated June 3, 2013, by and between the Registrant and 150 Second Street,LLC, as amended — — — Filed herewith 10.20† Amendment No. 3 to License Agreement, dated September 10, 2013, by andbetween the Registrant and Institut Pasteur 10-Q 001-35966 10.2 November 14, 2013 21.1 Subsidiaries of the Registrant S-1/A 333-188605 21.1 May 14, 2013 23.1 Consent of Ernst & Young LLP — — — Filed herewith 23.2 Consent of McGladrey LLP — — — Filed herewith 24.1 Power of Attorney (included on signature page). — — — Furnished herewith 31.1 Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302of the Sarbanes-Oxley Act of 2002. — — — Filed herewith 31.2 Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302of the Sarbanes-Oxley Act of 2002. — — — Filed herewith 32.1 Certification of Principal Executive Officer and Principal Financial Officer pursuantto 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. — — — Furnished herewith101.INS†† XBRL Instance Document — — — Furnished herewith101.SCH†† XBRL Taxonomy Extension Schema — — — Furnished herewith101.CAL†† XBRL Taxonomy Extension Calculation Linkbase — — — Furnished herewith101.DEF†† XBRL Taxonomy Extension Definition Linkbase — — — Furnished herewith101.LAB†† XBRL Taxonomy Extension Label Linkbase — — — Furnished herewith101.PRE†† XBRL Taxonomy Extension Presentation Linkbase — — — Furnished herewith †Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment and this exhibit has been submittedseparately to the SEC.††XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of registration statement or prospectus for purposes ofSection 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, andis not otherwise subject to liability under the Sections.Exhibit 10.19FIRST AMENDMENT TO LEASETHIS FIRST AMENDMENT TO LEASE (“Amendment”) dated as of November 15, 2013 by and between 150 Second Street, LLC, a Delawarelimited liability company (“Landlord”), and Bluebird Bio, Inc., a Delaware corporation (“Tenant”).Preliminary StatementLandlord and Tenant entered into the Lease, dated as of June 3, 2013, regarding the premises containing approximately 43,586 rentable square feetcomprising the entire third floor of the building located at 150 Second Street, Cambridge, Massachusetts (“Lease”).Landlord and Tenant wish to amend the Lease to acknowledge and memorialize the following: (A)Tenant has installed a gas pressure booster to support Tenant’s emergency generator located on the roof of the Building. Tenant has also installedan uninterruptible power supply device to support Tenant’s generator in the event of a power failure. Tenant has requested permission to connectTenant’s gas pressure booster to the base building generator as a secondary source of power supply in the event of a power failure. Landlord iswilling to allow such connection upon the terms and conditions set forth in this Amendment. (B)Tenant has requested permission to install Tenant’s Dry Cooler units in the screened-in penthouse area of the Building. Landlord is willing toallow such installation upon the terms and conditions set forth in this Amendment. (C)Tenant wishes to cause a vivarium to be installed in Tenant’s Shared Space located on the first floor of the Building, and not within the Premisesas originally intended. Landlord is willing to approve such request upon the terms and conditions set forth in this Amendment.NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein and in the Lease, Landlord and Tenant hereby agreeas follows:1. Base Building Generator. Tenant acknowledges that Landlord has no obligation under the Lease to provide an emergency generator or emergencyback-up power to Tenant. Notwithstanding the foregoing, Landlord hereby agrees to allow Tenant to cause Tenant’s gas pressure booster to be connected toLandlord’s base building standby emergency generator panel subject to the applicable requirements set forth in the Lease and the following terms andconditions: (a)All installation and connection work and use of the base building generator shall be performed at Tenant’s cost and in compliance with allapplicable Legal Requirements. (b)Tenant acknowledges that neither Landlord nor any consultant, employee or agent of Landlord has made any representation or warranty regardingthe specifications of the base building generator or the suitability or sufficiency thereof for Tenant’s use. (c)Tenant hereby waives any Claims against Landlord arising from any interruption of service or failure of the base building generator to operateproperly from any cause whatsoever. No such interruption or failure shall result in eviction or constructive eviction of Tenant, termination of thisLease or the abatement of Rent. Tenant hereby indemnifies Landlord from and against any and all Claims arising in connection Tenant’s use ofthe base building generator as a supplemental power source for Tenant’s purposes unless caused solely by Landlord’s negligence or willfulmisconduct. (d)If at any time during the Term, Landlord reasonably determines, that Tenant’s connection to and use of the base building generator violates anyapplicable Legal Requirement or insurance requirement, voids any warranty or otherwise adversely affects the Building or any other tenant, thenTenant shall, upon reasonable notice from Landlord attempt to correct such violation or issue. If Tenant is unable to do so, Tenant shalldiscontinue use of the base building generator and shall restore the equipment or connections to the original condition or configuration reasonablewear and tear excepted. (e)No further alterations or connections to the base building generator shall be made or permitted without Landlord’s consent. (f)Once installed, the gas pressure booster shall not be removed by Tenant at any time during the Term. Upon the expiration or earlier termination ofthe Lease, Tenant’s ownership interest in the gas pressure booster shall transfer to Landlord without charge, and Tenant agrees that it will notremove the gas pressure booster from the Premises.2. Dry Cooler Units. Tenant may cause its dry cooler units and any appurtenant equipment for the cooling of Tenant’s Liebert units (collectively, “DryCooler Units”) to be installed within the screened-in penthouse area of the Building in the location shown on the sketch plan attached hereto as Exhibit A. Theinstallation and use of the Dry Cooler Units are subject to the requirements set forth in the Lease and the following terms and conditions: (a)Notwithstanding any provision to the contrary contained in the Lease, Tenant shall remove the Dry Cooler Units upon the expiration or earliertermination of the Lease, restore the applicable area and repair any damage related to the removal of such equipment at Tenant’s cost. (b)The Landlord shall retain the right to cause the Dry Cooler Units to be relocated to another location within the property reasonably acceptable toTenant at the Landlord’s cost provided that such relocation would not materially adversely affect the performance of the Dry Cooler Units. 2 (c)Tenant shall not modify the initial tenant improvements or propose any future alterations that would use more air handling capacity than 56,350CFM.3. Vivarium. Tenant may cause a vivarium to be installed and used in Tenant’s allocated Shared Space located on the first floor of the Building near theloading dock, as shown on the plan attached to this Amendment as Exhibit B, subject to the applicable provisions of the Lease and the following terms andconditions: (a)No construction work shall commence until Landlord approve the final plans and specifications pertaining to the work; (b)Tenant’s installation and use of the vivarium shall comply with all applicable Legal Requirements and shall not, in Landlord’s reasonablejudgment, adversely affect the use and enjoyment of the other occupants of the Building; (c)Landlord shall not have any obligation to make any improvements or alterations to the Shared Space to prepare such space for Tenant’s proposeduse; (d)Tenant, at its sole expense, shall keep Tenant’s Shared Space clean and in good condition; (e)Landlord shall not be required to provide any services to the Shared Space; and (f)Upon the expiration or earlier termination of the Lease, Tenant shall restore the applicable area and repair any damage related to the removal of thevivarium.4. Ratification. Except only as expressly amended hereby, the Lease shall continue in full force and effect as heretofore. This Amendment sets forth theentire agreement of the parties with respect to the subject matter as of the date hereof and no prior agreement, letters, representations, warranties, promises orunderstandings pertaining to any such matters shall be effective for any such purpose.5. Defined Terms. All capitalized terms in this Amendment shall have the same meaning as in the Lease, unless otherwise defined herein:6. Bind and Inure. This document shall become effective and binding only upon the execution and delivery of this Amendment by Landlord andTenant.7. Counterparts. This Amendment may be executed in any number of counterparts, provided each of the parties hereto executes at least one counterpart;each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. ThisAmendment may be executed and delivered by facsimile or other electronic transmission, and such signatures shall have the same force and effect as originals. 3WITNESS the execution hereof as an instrument under seal as of the day first above written. LANDLORD:150 SECOND STREET, LLC,a Delaware limited liability companyBy: /s/ Shawn Hurley Shawn Hurley, ManagerBy: /s/ Mats Johannson Mats Johansson, ManagerTENANT:BLUEBIRD BIO, INC.,a Delaware corporationBy: /s/ Jeffrey T. WalshName: Jeffrey T. WalshTitle: COO 4EXHIBIT APlan Showing Location of Dry Cooler UnitsEXHIBIT BPlan Showing Location of VivariumpgsTENANT ESTOPPEL CERTIFICATE 150 SECOND STREET, LLCc/o Skanska USA Commercial Development253 Summer StreetBoston, MA 02110Attention: Shawn Hurley ARE-MA Region No. 50, LLC385 E. Colorado Boulevard, Suite 299Pasadena, CA 91101Attention: Corporate SecretaryLadies and Gentlemen:By lease dated as of June 3, 2013 (the “Lease”), the undersigned (“Tenant”) has leased from 150 SECOND STREET, LLC, a Delaware limited liabilitycompany, or its predecessors in interest (“Landlord”) the premises located at 150 Second Street, Cambridge,. Massachusetts which is more particularlydescribed in the Lease. Landlord, as owner of the property (the “Property”) of which the leased premises are a part, intends to sell the Property to ARE-MARegion No. 50, LLC, a Delaware limited liability company (“Purchaser”) who, as a condition to the purchase of the Property, has required this tenant estoppelcertificate.In consideration of Purchaser’s agreement to . purchase the Property and for other good and valuable consideration, the receipt and sufficiency of which ishereby acknowledged, Tenant agrees and certifies to Landlord and to Purchaser as of the date hereof as follows:1. Attached hereto as Exhibit 1 is a true, correct and complete copy of the Lease, including the following amendments, modifications, supplements,guarantees and restatements thereof, which together represent all of the amendments, modifications, supplements, guarantees and restatements thereof: FirstAmendment to Lease of even date herewith (If none, please state “None.”) The Lease constitutes the complete agreement between Landlord and Tenant for theleased premises and the Property, except as modified by the Lease amendments noted above (if any), has not been modified, altered or amended.2. The leased premises contain 43,586 rentable square feet. Tenant is entitled to use 1,646 square feet of Storage Space located in the basement of theBuilding. Tenant is entitled to use Tenant’s Share of 4,847 square feet of Shared Space located on the first floor, basement and penthouse of the Building.Tenant’s Share is 35.38%.3. The leased premises and possession thereof are accepted; the Lease is in full force and effect. The Lease Commencement Date will be January 1, 2014and the Base Term expires on the last day of the 108 month after the Lease Commencement Date occurs.4. As of the date hereof, Tenant claims no present charge, lien or claim of offset against rent after the Rent Commencement Date.5. The Rent Commencement Date is anticipated to occur on July 1, 2014. Rent will not be paid more than one month in advance. As of the RentCommencement Date, Base Rent will be $208,849.58 per month and is due on the first of each month. A security deposit in the amount of $1,253,097.48has been paid to Landlord in the form of a letter of credit (a copy of which is attached). Rent in respect of Tenant’s Share of the Storage Space will be$2,469.00 per month based on $18.00 per square foot.6. There are no existing defaults by reason of any act or omission of the Landlord except as follows: NONE. (If none, please state “None.”)7. As of the date of this Certificate, to the best of Tenant’s knowledge, Landlord has performed all obligations required of Landlord pursuant to theLease; no offsets, counterclaims, or defenses of Tenant under the Lease exist against Landlord; and no events have occurred that, with the passage of time orthe giving of notice, would constitute a basis for offsets, counterclaims, or defenses against Landlord, except as follows: NONE. (If none, please state“None.”) Landlord has no outstanding obligations under the Lease (including tenant improvements or tenant improvement allowances), except as follows:Funding the balance of the Landlord’s Contribution. As of the date hereof, the unfunded amount of the Landlord’s Contribution is $4,365,127.54.8. Tenant has no option, right of first refusal or other right to purchase the Property or any portion thereof, or any interest therein pursuant to the termsof the Lease or contained in any other document or agreement (written or oral) whatsoever. The only interest of Tenant in the Property is that of a tenantpursuant to the terms of the Lease. Tenant hereby waives any option, right of first refusal or other right to purchase the Property or any portion thereof orinterest therein that is contained in the Lease or any other document or agreement, if any.9. Tenant has not sublet or assigned the leased premises or the Lease or any portion thereof to any sublessee or assignee. The address for notices to besent to Tenant is as set forth in the Lease.10. There is not pending or, to the knowledge of Tenant, threatened against or contemplated by the Tenant, any petition in bankruptcy, whethervoluntary or otherwise, any assignment for the benefit of creditors, or any petition seeking reorganization or arrangement under the federal bankruptcy laws orthose of any state.11. Tenant has committed to the use of twenty eight (28) parking spaces in the garage and fifteen (15) surface parking spaces on the parking lot at 29Charles Street for the year commencing as of the Lease Commencement Date.All capitalized terms used herein shall have the same meaning as in the Lease, unless otherwise defined herein. 2This certificate may be relied upon by Landlord, Purchaser, and their respective successors and assigns. TENANT:BLUEBIRD BIO, INC.By: /s/ Jeffrey T. WalshName: Jeffrey T. WalshTitle: Chief Operating OfficerDate: November 15, 2013 3LEASEBetween150 SECOND STREET, LLCas Landlord,andBLUEBIRD BIO, INC.as Tenant,For Premises located at:150 Second StreetCambridge, MassachusettsTABLE OF CONTENTS ARTICLE 1 BASIC LEASE PROVISIONS; DEFINITIONS 1 1.1 Basic Lease Provisions. 1 1.2 Definitions. 5 ARTICLE 2 PREMISES; APPURTENANT RIGHTS; RESERVATIONS 8 2.1 Lease of Premises 8 2.2 Appurtenant Rights 9 2.3 Landlord Reservations. 10 ARTICLE 3 DELIVERY OF PREMISES; ACCEPTANCE 10 3.1 Delivery of Premises; Acceptance of Premises 10 3.2 Acknowledgment of Lease Commencement Date. 10 ARTICLE 4 RENT 11 4.1 Base Rent 11 4.2 Base Rent Abatement Period 11 4.3 Additional Rent 13 4.4 Intentionally Omitted 14 4.5 Operating Expense Payments 14 4.6 Taxes 17 ARTICLE 5 CONDITION OF PREMISES; CONSTRUCTION 18 5.1 Base Building Work 18 5.2 Tenant’s Work 18 5.3 Intentionally Deleted. 20 5.4 Landlord’s Contribution 20 ARTICLE 6 USE 22 6.1 Use 22 ARTICLE 7 PARKING 22 7.1 Parking 22 ARTICLE 8 UTILITIES; SERVICES 24 8.1 Utilities; Services. 24 8.2 Shafts and Risers. 24 8.3 Rooftop Premises. 25 8.4 Access. 26 ARTICLE 9 ALTERATIONS 26 9.1 Alterations and Tenant’s Property 26 ARTICLE 10 REPAIRS AND MAINTENANCE 28 10.1 Landlord’s Repairs 28 10.2 Tenant’s Repairs 29 iARTICLE 11 MECHANIC’S LIENS 29 11.1 Mechanic’s Liens 29 ARTICLE 12 INDEMNIFICATION 30 12.1 Indemnification 30 ARTICLE 13 INSURANCE 30 13.1 Insurance 30 ARTICLE 14 RESTORATION 32 14.1 Restoration 32 ARTICLE 15 CONDEMNATION 33 15.1 Condemnation 33 ARTICLE 16 EVENTS OF DEFAULT 34 16.1 Events of Default 34 16.2 Landlord’s Remedies. 35 ARTICLE 17 ASSIGNMENT AND SUBLETTING 37 17.1 General Prohibition 37 17.2 Permitted Transfers 37 17.3 Additional Conditions 39 17.4 No Release of Tenant, Sharing of Excess Rents 40 17.5 No Waiver 40 17.6 Prior Conduct of Proposed Transferee 40 ARTICLE 18 ESTOPPEL CERTIFICATE 40 18.1 Estoppel Certificate 40 ARTICLE 19 SUBORDINATION 41 19.1 Subordination 41 ARTICLE 20 SURRENDER 41 20.1 Surrender 41 ARTICLE 21 ENVIRONMENTAL REQUIREMENTS 43 21.1 Prohibition/Compliance/Indemnity 43 21.2 Business 44 21.3 Tenant Representation and Warranty 44 21.4 Testing 44 21.5 Control Areas 45 21.6 Intentionally Deleted 45 21.7 Tenant’s Obligations 45 21.8 Definitions 45 ARTICLE 22 TENANT’S REMEDIES/LIMITATION OF LIABILITY 46 22.1 Tenant’s Remedies/Limitation of Liability 46 22.2 Limitation on Landlord’s Liability 46 iiARTICLE 23 INSPECTION AND ACCESS 47 23.1 Inspection and Access 47 ARTICLE 24 SIGNAGE 48 24.1 Signs; Exterior Appearance 48 ARTICLE 25 HOLDING OVER 48 25.1 Holding Over 48 ARTICLE 26 WAIVER OF JURY TRIAL 49 26.1 Waiver of Jury Trial 49 ARTICLE 27 SECURITY DEPOSIT 49 27.1 Security Deposit. 49 ARTICLE 28 RIGHT TO EXTEND TERM 50 28.1 Extension Rights 50 28.2 Arbitration 51 28.3 Rights Personal 51 28.4 Exceptions 52 28.5 No Extensions 52 28.6 Termination 52 ARTICLE 29 RIGHT OF FIRST OFFER 52 29.1 Tenant’s Right of First Offer 52 ARTICLE 30 MISCELLANEOUS 53 30.1 Notices 53 30.2 Joint and Several Liability 53 30.3 Financial Information 53 30.4 Recordation 54 30.5 Interpretation 54 30.6 Not Binding Until Executed 54 30.7 Limitations on Interest 54 30.8 Choice of Law 54 30.9 Time 54 30.10 OFAC 55 30.11 Incorporation by Reference 55 30.12 Entire Agreement 55 30.13 No Accord and Satisfaction 55 30.14 Hazardous Activities 55 30.15 REIT/UBTI 55 30.16 Quiet Enjoyment 56 30.17 Prorations 56 30.18 Rules and Regulations 56 30.19 Security 56 iii30.20 Force Majeure 57 30.21 Brokers 57 30.22 Severability 57 ivLEASE AGREEMENTTHIS LEASE AGREEMENT (this “Lease”) is made as of the 3 day of June, 2013 (“Effective Date”), between 150 SECOND STREET, LLC, aDelaware limited liability company (“Landlord”), and BLUEBIRD BIO, INC., a Delaware corporation (“Tenant”).ARTICLE 1BASIC LEASE PROVISIONS; DEFINITIONS 1.1Basic Lease Provisions. Landlord: 150 Second Street, LLC, a Delaware limited liability companyLandlord’s Address: c/o Skanska USA Commercial Development Inc.253 Summer StreetBoston, MA 02210Attn: Charles LeatherbeeTenant: Bluebird Bio, Inc., a Delaware corporationTenant’s Original Address: 840 Memorial Drive Cambridge, MA 02139Address: 150 Second Street, Cambridge, MassachusettsPremises: That portion of the Project known as Suite 300, containing 43,586 rentable square feet, comprising the entire thirdfloor of the Building, including the Shared Space allocated to Tenant for Tenant’s mechanical, PH and lab relatedstorage located in the penthouse, first floor and lower level of the Building as shown on Exhibit A.Project: The real property on which the building (the “Building”) in which the Premises are located at 150 Second Street,Cambridge, Massachusetts, together with all improvements thereon and appurtenances thereto as described on ExhibitB.Base Rent: $57.50 per rentable square foot of the Premises per annum with annual escalations as set forth in the following table: rdPeriod Rate per RSF Annual Base Rent Monthly BaseRent Months 1(from Lease Commencement Date) through 12* $57.50 $2,506,195.00 $208,849.58 Months 13 through 24* $59.23 $2,581,598.78 $215,133.23 Months 25 through 36 $61.00 $2,658,746.00 $221,562.17 Months 37 through 48 $62.83 $2,738,508.38 $228,209.03 Months 49 through 60 $64.72 $2,820,885.92 $235,073.83 Months 61 through 72 $66.66 $2,905,442.76 $242,120.23 Months 73 through 84 $68.66 $2,992,614.76 $249,384.56 Months 85 through 96 $70.72 $3,082,401.92 $256,866.83 Months 97 through 108 $72.84 $3,174,804.24 $264,567.02 *Notwithstanding anything in this Section of the Lease to the contrary, Tenant shall be entitled to an abatement of Base Rent in the amount of$208,849.58 per month for six (6) consecutive full calendar months of the Base Term beginning on the Lease Commencement Date, subject to theterms and conditions set forth in Section 4.2. Rent Commencement Date: The date following the Lease Commencement Date on which the full amount of the Rent Abatement has been fullyapplied to the Base Rent under this Lease subject to the terms and conditions set forth in Section 4.2.Rentable Area of Premises: 43,586 rentable square feetRentable Area of Project: 123,210 square feetTenant’s Share of OperatingExpenses: 35.38%Lease Commencement Date: The earlier of: (i) the Substantial Completion of Tenant’s Work (as set forth in Section 5.4) and Tenant’s occupancy ofthe Premises for purposes of conducting Tenant’s business operations; or (ii) January 1, 2014. 2Base Term: Beginning on the Lease Commencement Date and ending on the last day of the one hundred eighth (108) monththereafter.Extension Term: One option for five (5) years as set forth in Section 28.Landlord’s Contribution: Subject to Section 5.4 below, $150 per RSF of the Premises calculated to equal $6,537,900 based on Premisescontaining 43,586 RSF plus up to an additional $4,358.60 ($.10 per RSF) for out of pocket costs incurred inpreparing the initial test fit of the Premises.Permitted Use: General office, research and development, laboratory and other related uses, including the use of a vivarium,consistent with the character of the Project and otherwise in compliance with the provisions of Section 6 hereof.Wiring and ACH Instructions for RentPayment: Bank: Bank of AmericaAccount Name: 150 Second Street LLCAccount Number: 4427702408ACH Routing /ABA Number: 111000012Wire Routing /ABA Number: 026009593Bank Address:Mail Code: GA1-006-09-10 Atlanta Plaza Building 600 Peachtree St NE Atlanta, GA 30308-2265Parking: As set forth in Section 7.Security Deposit: $1,253,097.48 subject to the terms and conditions set forth in Section 27.General Liability Insurance: $2,000,000.00 per occurrence/$3,000,000.00 aggregate (combined single limit) for property damage, bodily injuryand death.Right of First Offer: As set forth in Section 29.Landlord’s Notice Address: c/o Skanska USA Commercial Development Inc.253 Summer StreetBoston, MA 02210Attn: Charles Leatherbee 3thTenant’s Notice Address: Prior to the Lease Commencement Date: 840 Memorial DriveCambridge, MA 02139Attention: Linda Bain After the Lease Commencement Date: 150 Second StreetCambridge, MA 02139Attention: Linda BainBrokers: Jones Lang LaSalle and Colliers International New England LLCThe following Exhibits and Addenda are attached hereto and incorporated herein by this reference:EXHIBIT A - PLAN OF PREMISES, STORAGE SPACES AND SHARED SPACESEXHIBIT B - DESCRIPTION OF PROJECTEXHIBIT C - ACKNOWLEDGMENT OF LEASE COMMENCEMENT DATEEXHIBIT D - RENT CERTIFICATEEXHIBIT E - BASE BUILDING SPECIFICATIONSEXHIBIT F - LANDLORD TENANT MATRIXEXHIBIT G - TENANT’S CONCEPT PLANEXHIBIT H - TENANT DESIGN AND CONSTRUCTION GUIDELINESEXHIBIT I - PARKING PLANEXHIBIT J - RULES AND REGULATIONS 4 1.2Definitions.“Abated Base Rent” shall have the meaning set forth in Section 4.2 hereof.“ADA” shall mean the Americans With Disabilities Act, 42 U.S.C. § 12101, et seq., together with the regulations promulgated pursuant thereto.“Additional Rent” shall have the meaning set forth in Section 4.3 hereof.“AIA” shall mean the American Institute of Architects.“Alterations” shall have the meaning set forth in Section 9.1 hereof.“Annual Estimate” shall have the meaning set forth in Section 4.4 hereof.“Annual Statement” shall have the meaning set forth in Section 4.4 hereof.“Arbitrator” shall mean any person appointed by or on behalf of either party or appointed pursuant to the provisions hereof and: (i) shall be (A) amember of the American Institute of Real Estate Appraisers with not less than 10 years of experience in the appraisal of improved office and high tech and lifesciences laboratory real estate in the greater Boston, Massachusetts metropolitan area, or (B) a licensed commercial real estate broker with not less than 15years experience representing landlords and/or tenants in the leasing of high tech or life sciences laboratory space in the greater Boston, Massachusettsmetropolitan area, (ii) devoting substantially all of their time to professional appraisal or brokerage work, as applicable, at the time of appointment and (iii) bein all respects impartial and disinterested.“Assignment Date” shall have the meaning set forth in Section 17.2 hereof.“Assignment Notice” shall have the meaning set forth in Section 17.2 hereof.“Assignment Termination” shall have the meaning set forth in Section 17.2 hereof.“Base Rent” shall have the meaning set forth in Section 1.1 hereof.“Base Rent Abatement Period” shall have the meaning set forth in Section 4.2 hereof.“Base Term” shall have the meaning set forth in Section 1.1 hereof.“Business Day” shall mean any day other than (a) a Saturday or Sunday and (b) any Federal holiday or (c) a day on which banks are not open forbusiness generally in the Commonwealth of Massachusetts.“Broker” shall have the meaning set forth in Section 1.1 hereof.“Building Systems” shall mean the structural, exterior, parking and other Common Areas of the Project, including HVAC, plumbing, fire sprinklers,electrical, elevators and all other building systems serving the Premises and other portions of the Project. 5“Claims” shall have the meaning set forth in Section 6.1 hereof.“Common Areas” shall mean the portions of the Project which are for the non-exclusive use of tenants of the Project.“Default Rate” shall mean an annual rate equal to the lesser of 12% per annum or the highest rate permitted by law.“Default” shall have the meaning set forth in Section 16.1 hereof.“Environmental Claims” shall have the meaning set forth in Section 21.1.“Environmental Requirements” shall have the meaning set forth in Section 21.8 hereof.“Excess Rent” shall have the meaning set forth in Section 17.4 hereof.“Expense Information” shall have the meaning set forth in Section 4.4 hereof.“Extension Proposal” shall have the meaning set forth in Section 28.2 hereof.“Extension Right” shall have the meaning set forth in Section 28.1 hereof.“Extension Term” shall have the meaning set forth in Section 28.1 hereof.“Force Majeure” shall have the meaning set forth in Section 30.20 hereof.“Governmental Authority” shall have the meaning set forth in Section 4.6 hereof.“Haz Mat Documents” shall have the meaning set forth in Section 21.2 hereof.“Hazardous Materials Clearances” shall have the meaning set forth in Section 14.1 hereof.“Hazardous Materials List” shall have the meaning set forth in Section 21.2 hereof.“Hazardous Materials” shall have the meaning set forth in Section 21.8 hereof.“Holder” shall have the meaning set forth in Section 19.1 hereof.“Independent Review” shall have the meaning set forth in Section 4.4 hereof.“Installations” shall have the meaning set forth in Section 9.1 hereof.“Landlord’s Work” shall have the meaning set forth in Section 5.1 hereof.“Legal Requirement(s)” shall mean all laws, orders, judgments, ordinances, regulations, codes, directives, permits, licenses, covenants andrestrictions now or hereafter applicable to the Project, and to the use and occupancy thereof, including, without limitation, the ADA. 6“Letter of Credit” shall have the meaning set forth in Section 27.1 hereof.“Market Rate” shall have the meaning set forth in Section 28.1 hereof.“Maximum Restoration Period” shall have the meaning set forth in Section 14.1 hereof.“Memorial Drive Lease” shall have the meaning set forth in Section 4.2 hereof.“Memorial Drive Rent Savings Event” shall have the meaning set forth in Section 4.2 hereof.“Mortgage” shall have the meaning set forth in Section 19.1 hereof.“OFAC” shall mean the Office of Foreign Assets Control of the U.S. Department of Treasury.“OFAC Rules” shall mean the rules of OFAC and any statute, executive order, or regulation relating thereto.“Operating Expenses” shall have the meaning set forth in Section 4.4 hereof.“Permitted Assignment” shall have the meaning set forth in Section 17.2 hereof.“Permitted Use” shall have the meaning set forth in Section 1.1 hereof.“Premises” shall have the meaning set forth in Section 1.1 hereof.“Proceeding for Relief” shall have the meaning set forth in Section 16.1(f) hereof.“Project” shall have the meaning set forth in Section 1.1 hereof.“Related Parties” shall have the meaning set forth in Section 13.1 hereof.“Removable Installations” shall have the meaning set forth in Section 9.1 hereof.“Rent” shall mean Base Rent, Tenant’s Share of Operating Expenses and all other amounts payable by Tenant to Landlord hereunder.“Rent Abatement” shall have the meaning set forth in Section 4.2 hereof.“Rent Abatement Conditions” shall have the meaning set forth in Section 4.2 hereof.“Rentable Area of the Premises” shall have the meaning set forth in Section 1.1 hereof.“Rentable Area of the Project” shall have the meaning set forth in Section 1.1 hereof.“Rent Adjustment Percentage” shall mean three percent (3%).“Rent Certificate” shall have the meaning set forth in Section 4.2 hereof. 7“Security Deposit” shall have the meaning set forth in Section 27.1 hereof.“Substantial Completion” or “Substantially Complete” shall have the meaning set forth in Section 5.4.“Surrender Plan” shall have the meaning set forth in Section 20.1 hereof.“Taking” and “Taken” shall have the meaning set forth in Section 15.1 hereof.“Taxes” shall have the meaning set forth in Section 4.5 hereof.“Tenant HazMat Operations” shall have the meaning set forth in Section 20.1 hereof.“Tenant Parties” shall have the meaning set forth in Section 10.1 hereof.“Tenant’s Property” shall have the meaning set forth in Section 9.1 hereof.“Tenant’s Share of Operating Expenses” shall have the meaning set forth in Section 1.1 hereof.“Tenant’s Share” shall mean the percentage set forth in the Basic Lease Provisions as Tenant’s Share as reasonably adjusted by Landlord for changesin the physical size of the Premises or the Project occurring thereafter.“Tenant’s Work” shall have the meaning set forth in Section 5.2.“Utilities” shall have the meaning set forth in Section 8.1 hereof.“Restoration Period” shall have the meaning set forth in Section 14.1 hereof.ARTICLE 2PREMISES; APPURTENANT RIGHTS; RESERVATIONS2.1 Lease of Premises. Upon and subject to all of the terms and conditions hereof, Landlord hereby leases the Premises to Tenant and Tenant herebyleases the Premises from Landlord.Excepted and excluded from the Premises and the Common Areas (as defined below) are the ceiling, floor, perimeter walls and exterior windows (exceptthe inner surface of each thereof), and any space in the Premises used for shafts, stacks, pipes, conduits, fan rooms, ducts, electric or other utilities, sinks orother Building facilities, but the entry doors to the Premises are a part thereof, together with related glass and finish work. Landlord shall have the right toplace in the Premises interior sun control devices, utility lines, cables and wiring, equipment, stacks, pipes, conduits, ducts and the like, provided that anysuch installations shall be located above the ceiling or within the walls (except for the interior sun control devices which shall be located in or near thewindows) and shall not otherwise materially interfere with Tenant’s use, or materially reduce the rentable square footage of the Premises. 82.2 Appurtenant Rights. Subject to the matters set forth in the following paragraph, Tenant shall have, as appurtenant to the Premises, the non-exclusive right to use, and permit its invitees to use in common with Landlord and others, the following areas of the Property (collectively, the “CommonAreas”) (i) public or common lobbies, hallways, stairways, elevators (including but not limited to freight elevators) and common walkways necessary foraccess to the Building and the Premises, and if the portion of the Premises on any floor includes less than the entire floor, any common toilets, any corridorsrequired for access to the Premises and any elevator lobby of such floor; and (ii) the access roads, driveways, parking areas (as the same may be designated ormodified by Landlord from time to time), loading areas, pedestrian sidewalks, landscaped areas, trash enclosures (including but not limited to dumpstersmaintained on the premises by Landlord), if any, and other areas or facilities, if any, which are located in or on the Property and designated by Landlord fromtime to time for the non-exclusive use of tenants and other occupants of the Building.Landlord has designated certain areas located on the penthouse, ground level and garage level of the Building for Storage Space and Shared Space, asshown on the plan attached hereto as Exhibit A, for use by the tenants of the Building. Tenant shall be allocated Tenant’s Share of the Storage Space andShared Space, the location and use of which shall be reasonably determined by Landlord and Tenant subject to applicable Legal Requirements, circulationrequirements and Landlord’s reasonable requirements and conditions (including, without limitation, consideration for the utility of the unused portions of theStorage Space and Shared Space by other tenants of the Building). The Storage Space and Shared Space shall be leased to Tenant on all of the terms andconditions of this Lease which are applicable to the Premises except as follows: (i) the rent for Tenant’s Share of the Storage Space shall be the then applicablemarket rate (currently $18.00 per RSF); (ii) Landlord shall not have any obligation to make any improvements or alterations to the Storage Space and SharedSpace to prepare such space for Tenant’s use; (iii) Tenant shall use Tenant’s Share of the Storage Space and Shared Space solely for the storage or use ofTenant’s property or equipment and for no other purpose and in accordance with all applicable Legal Requirements; (iv) Tenant, at its sole expense, shall keepTenant’s Share of the Storage Space and Shared Space clean and in good condition; and (vi) Landlord shall not be required to provide any services for theStorage Space and Shared Space. Notwithstanding the foregoing, as of the Effective Date, Tenant shall be deemed to have elected to lease the entire amount ofStorage Space allocated to Tenant at the rate of $18.00 per RSF (gross) for the Term. If Tenant subsequently elects to surrender any or all of such StorageSpace to Landlord, Landlord may offer the surrendered Storage Space to other tenants in the Building and Tenant’s right to lease such surrendered StorageSpace thereafter will be subject to availability at such future time and Tenant’s payment at the then applicable market rental rate.Notwithstanding any provision herein to the contrary, Tenant’s rights under this Lease shall always be subject to (a) reservations, restrictions,easements and encumbrances of record, as amended from time to time, (b) such reasonable rules and regulations from time to time established by Landlordwith respect to the Property pursuant to Section 30.18 (the “Rules and Regulations”), and (c) Landlord’s reservations set forth in Section 2.3 below orelsewhere in this Lease. 92.3 Landlord Reservations. Notwithstanding any provision herein to the contrary, Landlord reserves the right to: (i) grant, modify and terminateeasements and other encumbrances so long as the same do not materially and adversely interfere with the Permitted Use by Tenant, (ii) designate and changefrom time to time areas and facilities so to be used; provided however, that Landlord shall be responsible for any costs incurred in moving any of Tenant’spersonnel, furniture, fixtures or equipment, (iii) make additions to the Building, (iv) construct other buildings and improvements at the Property, (v) post “ForSale” and “For Lease” signs on the Property at any time during the Term, and (vi) change the name and street address of the Building (provided, in suchevent, Landlord shall reimburse Tenant for its costs to implement such changes). Landlord reserves the right, at any time and from time to time, to make suchchanges, alterations, additions, improvements, repairs or replacements in or to the Project (including the Premises but, with respect to the Premises, only forpurposes of repairs, maintenance, replacements and other rights expressly reserved to Landlord herein) and the fixtures and equipment therein, as well as in orto the street entrances and/or the Common Areas, as it may reasonably deem necessary or desirable, provided, however, that there be no material obstruction ormodification of access to, or material interference with the use or enjoyment of, the Premises or parking spaces by Tenant. Subject to the foregoing, providedreasonable prior written notice is given to Tenant and Tenant’s access to the Premises is not prohibited, Landlord shall have the right to temporarily close all,or any portion, of the Common Areas for the purpose of making repairs or changes thereto.ARTICLE 3DELIVERY OF PREMISES; ACCEPTANCE3.1 Delivery of Premises; Acceptance of Premises. Landlord shall deliver the Premises to Tenant upon the Effective Date provided that Tenant hasdelivered the Security Deposit to Landlord and complied with the requirements of Article 13. Except as set forth in this Section 3.1 and Section 5.1(a), ifapplicable: (i) Tenant shall accept the Premises in their condition as of the time of delivery, subject to all applicable Legal Requirements (as defined in Article 6hereof); (ii) Landlord shall have no obligation for any defects in the Premises; and (iii) Tenant’s taking possession of the Premises shall be conclusive evidencethat Tenant accepts the Premises with Landlord’s Work completed pursuant to Section 5.1(a).Tenant agrees and acknowledges that, except as otherwise set forth in this Lease, neither Landlord nor any agent of Landlord has made anyrepresentation or warranty with respect to the condition of all or any portion of the Premises or the Project, and/or the suitability of the Premises or the Projectfor the conduct of Tenant’s business, and Tenant waives any implied warranty that the Premises or the Project are suitable for the Permitted Use.Notwithstanding the foregoing, Landlord represents to its knowledge that general office, research and development and laboratory uses are permitted usespertaining to the Building under the Zoning Ordinance of the City of Cambridge. This Lease constitutes the complete agreement of Landlord and Tenant withrespect to the subject matter hereof and supersedes any and all prior representations, inducements, promises, agreements, understandings and negotiationswhich are not contained herein. Landlord in executing this Lease does so in reliance upon Tenant’s representations, warranties, acknowledgments andagreements contained herein.3.2 Acknowledgment of Lease Commencement Date. Upon request of Landlord, Tenant shall execute and deliver a written acknowledgment of theLease Commencement Date, Rent Commencement Date and the expiration date of the Term when such dates are established in accordance with therequirements of this Lease substantially in the form of the “Acknowledgement 10of Lease Commencement Date” attached to this Lease as Exhibit C; provided, however, Tenant’s failure to execute and deliver such acknowledgment shall notaffect Landlord’s rights hereunder. The “Term” of this Lease shall be the Base Term, as defined above on the first page of this Lease and, if applicable, theExtension Term which Tenant may elect pursuant to Article 28 hereof.ARTICLE 4RENT4.1 Base Rent. The first month’s Base Rent shall be due and payable on the Lease Commencement Date and the Security Deposit shall be due andpayable on delivery of an executed copy of this Lease to Landlord. Tenant shall pay to Landlord in advance, without demand, abatement, deduction or set-off,equal monthly installments of Base Rent on or before the first day of each calendar month during the Term hereof, in lawful money of the United States ofAmerica, at the office of Landlord for payment of Rent set forth above, or to such other person or at such other place as Landlord may from time to timedesignate in writing. Payments of Base Rent for any fractional calendar month shall be prorated. The obligation of Tenant to pay Base Rent and other sums toLandlord and the obligations of Landlord under this Lease are independent obligations. Tenant shall have no right at any time to abate, reduce, or set-off anyRent (as defined in Section 1.2) due hereunder except for any abatement, reduction or set-off as may be expressly provided in this Lease.4.2 Base Rent Abatement Period. Notwithstanding anything in this Section of the Lease to the contrary, so long as Tenant is not in Default (asdefined in Section 16.1) under this Lease, Tenant shall be entitled to an abatement of Base Rent in the amount of $208,849.58 per month for six(6) consecutive full calendar months of the Base Term beginning on the Lease Commencement Date (“Rent Abatement”). The period during which theforegoing Base Rent abatement rights are in effect shall be referred to as the “Base Rent Abatement Period” and the amount of Base Rent permitted to beabated shall be referred to as the “Abated Base Rent”. During the Base Rent Abatement Period, only Base Rent shall be abated as provided in this Section,and all Additional Rent and other costs and charges specified in this Lease shall remain as due and payable pursuant to the provisions of this Lease.As an inducement to Tenant’s entering into this Lease, Landlord offers the Rent Abatement in order to offset Tenant’s rent obligation under its currentlease pertaining to the premises located at 840 Memorial Drive, Cambridge, Massachusetts (“Memorial Drive Lease”), a true, accurate and complete copy ofwhich Tenant shall provide to Landlord prior to the Effective Date of this Lease. Accordingly, Landlord and Tenant agree that if Tenant’s out of pocket rentobligation under the Memorial Drive Lease is reduced or eliminated by virtue of entering into an assignment or sublease, termination agreement or suffering arecapture of such premises or other such means (each, a “Memorial Drive Rent Savings Event”), Landlord and Tenant shall split Tenant’s rent savingsunder the Memorial Drive Lease on a 60% to Landlord and 40% to Tenant basis after the deduction of reasonable documented transaction costs, including, butnot limited to legal and brokerage fees and tenant improvement allowances. 11In order to receive the Rent Abatement and to account for the occurrence of a Memorial Drive Rent Savings Event, Tenant shall comply with thefollowing requirements (collectively, the “Rent Abatement Conditions”): i.Upon the Lease Commencement Date and the first day of each successive month thereafter until the expiration or earlier termination of the term ofthe Memorial Drive Lease, Tenant shall deliver to Landlord a Rent Certificate substantially in the form attached hereto as Exhibit D (“RentCertificate”) whereby Tenant certifies to Landlord, among other things, the amount of Tenant’s actual out of pocket rent payment under theMemorial Drive Lease for the applicable monthly period. ii.Upon Landlord’s receipt of the Rent Certificate, Tenant’s obligation to pay the Base Rent for the applicable month shall abate.If the Rent Certificate indicates that a Memorial Drive Rent Savings Event has occurred, the amount of the Rent Abatement that may be applied to BaseRent hereunder shall be reduced by the portion of the rent savings allocated to Landlord as Tenant realizes the actual rent savings under the Memorial DriveLease. If a Memorial Drive Rent Savings Event has occurred and the amount of the rent savings under the Memorial Drive Lease is greater than the remainingamount of the Rent Abatement at such time, then Tenant shall pay Landlord, as additional rent, the rent savings allocated to Landlord amortized over theremainder of the stated term of the Memorial Drive Lease. The following examples illustrate three (but not all) possible scenarios that may arise in any givenmonth during the Base Rent Abatement Period under this Section:(a) No Memorial Drive Rent Savings Event Occurs Before the Expiration of the Base Rent Abatement Period: 1.Tenant submits a Rent Certificate to Landlord evidencing that no Memorial Drive Rent Savings Event has occurred. 2.Tenant pays the monthly base rent of approximately $35.290.60 to landlord under the Memorial Drive Lease. 3.The Monthly Base Rent of $208,849.58 due to Landlord pursuant to Section 1.1 hereof is abated.(b) Memorial Drive Rent Savings Event Occurs Before the Expiration of the Base Rent Abatement Period: 1.Tenant submits a Rent Certificate to Landlord evidencing that Tenant and the landlord under the Memorial Drive Lease have entered into alease termination agreement (i.e. a Memorial Drive Rent Savings Event) yielding a rent savings of $500,000 (after deduction of Tenant’sreasonable documented transaction costs). 2.Landlord’s share of the rent savings is $300,000 and Tenant’s share of the rent savings is $200,000. 3.Tenant pays the net monthly rent (or no monthly rent, as the case may be) due to landlord under the Memorial Drive Lease afteraccounting for the rent savings under the Memorial Drive Lease. 12 4.The amount of Rent Abatement that may be applied to Base Rent is reduced by $300,000 (the amount of Landlord’s share of the rentsavings). Therefore, Tenant pays Base Rent of $208,849.58 to Landlord plus additional rent of $91,150.42 ($208,849.58 +$91,150.42 = $300,000 rent savings due Landlord).(c) Memorial Drive Rent Savings Event Occurs After the Expiration of the Base Rent Abatement Period: 1.Tenant submits a Rent Certificate to Landlord evidencing that Tenant and the landlord under the Memorial Drive Lease have entered into alease termination agreement (i.e. a Memorial Drive Rent Savings Event) yielding a rent savings of $500,000 (after deduction of Tenant’sreasonable documented transaction costs). 2.Landlord’s share of the rent savings is $300,000 and Tenant’s share of the rent savings is $200,000. 3.Tenant pays the net monthly rent (or no monthly rent, as the case may be) due to landlord under the Memorial Drive Lease afteraccounting for the rent savings under the Memorial Drive Lease. 4.Assuming five months remaining in the term under the Memorial Drive Lease, the monthly amount of the Landlord’s share of the rentsavings amortized on a straight line basis over the unexpired portion of the term under the Memorial Drive Lease is $60,000 ($300,000 ÷ 5months). 5.Tenant pays the applicable monthly Rent to Landlord due under this Lease plus additional rent of $60,000 for five consecutive months.In the event of any inconsistency or conflict between the numeric examples provided above and the written provisions set forth in this Section, thewritten text shall govern.If Tenant fails to comply with the requirements set forth in this Section 4.2, Tenant shall be obligated to pay the applicable Base Rent. If a RentCertificate is inaccurate or if Tenant and Landlord have failed to properly account for a previously-occurring Memorial Drive Rent Savings Event, then Tenantshall be obligated to prepare and deliver a Rent Certificate addressing such inaccuracy or failure and shall pay to Landlord the Landlord’s share of anypreviously Abated Base Rent.4.3 Additional Rent. In addition to Base Rent, commencing on the Lease Commencement Date, Tenant agrees to pay to Landlord as additional rent (“Additional Rent”): (i) Tenant’s Share of “Operating Expenses” (as defined in Section 4.5), and (ii) any and all other amounts Tenant assumes or agrees topay to Landlord under the provisions of this Lease, including, without limitation, any and all other sums that may become due by reason of any default ofTenant or failure to comply with the agreements, terms, covenants and conditions of this Lease to be performed by Tenant, after any applicable notice and cureperiod. 134.4 Intentionally Omitted.4.5 Operating Expense Payments. Landlord shall deliver to Tenant a written estimate of Operating Expenses for each calendar year during the Term(the “Annual Estimate”) which may be revised by Landlord from time to time during such calendar year. During each month of the Term commencing onthe Lease Commencement Date, on the same date that Base Rent is due, Tenant shall pay Landlord an amount equal to 1/12th of Tenant’s Share of the AnnualEstimate. Payments for any fractional calendar month shall be prorated. If Landlord fails to give Tenant the Annual Estimate prior to the beginning of anycalendar year, Tenant shall continue to pay Operating Expenses in accordance with the previous Annual Estimate, until Tenant receives a new statement fromLandlord.The term “Operating Expenses” means all costs and expenses of any kind or description whatsoever incurred or accrued each calendar year byLandlord in operating, maintaining, repairing, and managing the Building and the Project including, without duplication, Taxes (as defined in Section 4.5),capital repairs and improvements (1) reasonably projected to reduce the amount of Operating Expenses payable by Tenant, or (2) required to comply with anyLegal Requirements that first become effective and applicable to the Project after the date of this Lease, amortized over-the useful life of such capital items asdetermined in accordance with generally accepted accounting principles, costs for transportation services for the benefit of the tenants of the Building and aproperty management fee at fair market rates not to exceed 3.0% of Base Rent, excluding only:(a) the original construction costs of the Project and renovation prior to the date of the Lease and costs of correcting defects in such originalconstruction or renovation (including Landlord’s Work);(b) capital expenses for the Project except as expressly permitted above;(c) interest, principal and other payments pursuant to a Mortgage (as defined in Section 19.1) debts of Landlord, ground rent, financing costsand amortization of funds borrowed by Landlord, whether secured or unsecured;(d) depreciation of the Project (except for capital improvements, the cost of which are includable in Operating Expenses);(e) advertising, promotional, legal and space planning expenses and leasing commissions and other costs and expenses incurred in procuring andleasing space to tenants for the Project, including any leasing office maintained in the Project, free rent and construction allowances for tenants;(f) legal and other expenses incurred in the negotiation or enforcement of leases;(g) completing, fixturing, improving, renovating, painting, redecorating or other work, which Landlord pays for or performs for other tenantswithin their premises, and costs of correcting defects in such work; 14(h) costs to be reimbursed by other tenants of the Project or Taxes to be paid directly by Tenant or other tenants of the Project, whether or notactually paid;(i) The cost of any work or services performed for any other property other than the Project, including, without limitation, salaries, wages,benefits and other compensation paid to employees of Landlord who are not assigned in whole or in part to the operation, management, maintenance or repairof the Project;(j) salaries, wages, benefits and other compensation paid to officers and executives of Landlord and administrative employees above the grade ofproperty manager or building supervisor and Landlord’s general overhead;(k) general organizational, administrative and overhead costs relating to maintaining Landlord‘s existence, either as a corporation, partnership, orother entity, including general corporate, legal and accounting expenses;(l) costs (including attorneys’ fees and costs of settlement, judgments and payments in lieu thereof) incurred in connection with disputes withtenants, other occupants, or prospective tenants, and costs and expenses, including legal fees, incurred in connection with negotiations or disputes withemployees, consultants, management agents, leasing agents, purchasers or mortgagees of the Building;(m) costs incurred by Landlord due to the violation by Landlord, its employees, agents or contractors or any tenant of the terms and conditions ofany lease of space in the Project or any Legal Requirement (as defined in Section 1.2);(n) penalties, fines or interest incurred as a result of Landlord‘s inability or failure to make payment of Taxes and/or to file any tax orinformational returns when due, or from Landlord’s failure to make any payment of Taxes required to be made by Landlord hereunder before delinquency;(o) overhead and profit increment paid to Landlord or to subsidiaries or affiliates of Landlord for goods and/or services in or to the Project to theextent the same exceeds the costs of such goods and/or services rendered by unaffiliated third parties on a competitive basis;(p) costs of Landlord’s charitable or political contributions, or of fine art maintained at the Project;(q) costs in connection with services (including electricity), items or other benefits of a type which are not standard for the Project and which arenot available to Tenant without specific charges therefor, but which are provided to another tenant or occupant of the Project, whether or not such other tenantor occupant is specifically charged therefor by Landlord;(r) costs incurred in the sale or refinancing of the Project;(s) costs for remediation, abatement, removal or encapsulation of Hazardous Materials at the Project other than routine cleaning and maintenancewhich may involve the same; 15(t) net income taxes of Landlord or the owner of any interest in the Project, franchise, capital stock, gift, estate or inheritance taxes or any federal,state or local documentary taxes imposed against the Project or any portion thereof or interest therein; and(u) any expenses otherwise includable within Operating Expenses to the extent actually reimbursed by persons other than tenants of the Projectunder leases for space in the Project.Within 90 days after the end of each calendar year (or such longer period as may be reasonably required), Landlord shall furnish to Tenant a statement(an “Annual Statement”) showing in reasonable detail: (a) the total and Tenant’s Share of actual Operating Expenses for the previous calendar year, and(b) the total of Tenant’s payments in respect of Operating Expenses for such year. If Tenant’s Share of actual Operating Expenses for such year exceedsTenant’s payments of Operating Expenses for such year, the excess shall be due and payable by Tenant as Rent within 30 days after delivery of such AnnualStatement to Tenant. If Tenant’s payments of Operating Expenses for such year exceed Tenant’s Share of actual Operating Expenses for such year, the excessshall be credited against the next due amounts of Rent, provided that any overpayment shall be paid to Tenant within thirty (30) days if the Term has ended,provided that if Tenant is delinquent in its obligation to pay Base Rent or Additional Rent, Landlord shall pay the excess to Tenant after deducting all otheramounts due Landlord.The Annual Statement shall be final and binding upon Tenant unless Tenant, within 90 days after Tenant’s receipt thereof, shall contest any itemtherein by giving written notice to Landlord, specifying each item contested and the reason therefor. If, during such 90 day period, Tenant reasonably and ingood faith questions or contests the accuracy of Landlord’s statement of Tenant’s Share of Operating Expenses, provided that Tenant pays any amount due onthe Annual Statement if applicable, Landlord will provide Tenant with access to Landlord’s books and records relating to the operation of the Project and suchinformation as Landlord reasonably determines to be responsive to Tenant’s questions (the “Expense Information”). If Landlord and Tenant cannot agreeupon the amount of Tenant’s Share of Operating Expenses within thirty (30) days after Tenant’s review of such Expense Information, then Tenant shall havethe right to have an independent public accounting firm selected by Tenant, working pursuant to a fee arrangement other than a contingent fee (at Tenant’s solecost and expense) and approved by Landlord (which approval shall not be unreasonably withheld, conditioned or delayed), audit and/or review the ExpenseInformation for the year in question (the “Independent Review”). The results of any such Independent Review shall be binding on Landlord and Tenant. Ifthe Independent Review shows that the payments actually made by Tenant with respect to Operating Expenses for the calendar year in question exceededTenant’s Share of Operating Expenses for such calendar year, Landlord shall at Landlord’s option either (i) credit the excess amount to the next succeedinginstallments of estimated Operating Expenses or (ii) pay the excess to Tenant within 30 days after delivery of such statement, except that after the expiration orearlier termination of this Lease or if Tenant is delinquent in its obligation to pay Rent, Landlord shall pay the excess to Tenant after deducting all otheramounts due Landlord. If the Independent Review shows that Tenant’s payments with respect to Operating Expenses for such calendar year were less thanTenant’s Share of Operating Expenses for the calendar year, Tenant shall pay the deficiency to Landlord within 30 days after delivery of such statement. If theIndependent Review shows that Tenant has overpaid with respect to Operating Expenses stated in the Annual Statement or any adjustments made 16thereafter by more than 5% then Landlord shall reimburse Tenant for all costs incurred by Tenant for the Independent Review. Operating Expenses for thecalendar years in which Tenant’s obligation to share therein begins and ends shall be prorated. Notwithstanding anything set forth herein to the contrary, if theProject is not at least 95% occupied on average during any year of the Term, Tenant’s Share of Operating Expenses that vary according to occupancy of theProject for such year shall be computed as though the Project had been 95% occupied on average during such year.“Tenant’s Share” shall be the percentage set forth on the first page of this Lease as Tenant’s Share as reasonably adjusted by Landlord for changes inthe physical size of the Premises or the Project occurring thereafter. Landlord may equitably adjust Tenant’s Share for any item of expense or cost reimbursableby Tenant that relates to a repair, replacement, or service that benefits only the Premises or only a portion of the Project that includes the Premises, whichadjustment may be reviewed by Tenant as part of the Independent Review. Base Rent, Tenant’s Share of Operating Expenses and all other amounts payable byTenant to Landlord hereunder are collectively referred to herein as “Rent.”4.6 Taxes. Tenant shall pay, as part of Operating Expenses, all taxes, levies, fees, assessments and governmental charges of any kind, existing as ofthe Lease Commencement Date or thereafter enacted (collectively referred to as “Taxes”), imposed by any federal, state, regional, municipal, local or othergovernmental authority or agency, including, without limitation, quasi-public agencies (collectively, “Governmental Authority”) during the Term,including, without limitation, all Taxes: (i) imposed on or measured by or based, in whole or in part, on rent payable to (or gross receipts received by)Landlord under this Lease and/or from the rental by Landlord of the Project or any portion thereof, or (ii) based on the square footage, assessed value or othermeasure or evaluation of any kind of the Premises or the Project, or (iii) assessed or imposed by or on the operation or maintenance of any portion of thePremises or the Project, including parking, or (iv) assessed or imposed by, or at the direction of, or resulting from Legal Requirements, or interpretationsthereof, promulgated by any Governmental Authority, or (v) imposed as a license or other fee, charge, tax, or assessment on Landlord’s business oroccupation of leasing space in the Project. The prorated portion of any Taxes that are due and payable pertaining to periods prior to the Lease CommencementDate or after the expiration of the Term shall not be Tenant’s obligation to pay hereunder. Landlord may contest by appropriate legal proceedings the amount,validity, or application of any Taxes or liens securing Taxes. If a change in Taxes is obtained for any year of the Term during which Tenant paid Tenant’sShare of Taxes, then Taxes for that year will be retroactively adjusted and Landlord shall provide Tenant with a credit, if any, based on the adjustment. Taxesshall not include any net income taxes imposed on Landlord except to the extent such net income taxes are in substitution for any Taxes payable hereunder. Ifany such Tax is levied or assessed directly against Tenant, then Tenant shall be responsible for and shall pay the same at such times and in such manner asthe taxing authority shall require. Tenant shall pay, prior to delinquency, any and all Taxes levied or assessed against any personal property or trade fixturesplaced by Tenant in the Premises, whether levied or assessed against Landlord or Tenant. If any Taxes on Tenant’s personal property or trade fixtures arelevied against Landlord or Landlord’s property, or if the assessed valuation of the Project is expressly increased by the taxing authority by a value attributableto improvements in or alterations to the Premises, whether owned by Landlord or Tenant and whether or not affixed to the real property so as to become a partthereof, higher than the base valuation on which Landlord 17from time-to-time allocates Taxes to all tenants in the Project, Landlord shall have the right, but not the obligation, to pay such Taxes. Landlord’s determinationof any excess assessed valuation shall be binding and conclusive, absent manifest error. The amount of any such payment by Landlord shall constituteAdditional Rent due from Tenant to Landlord within thirty (30) days.ARTICLE 5CONDITION OF PREMISES; CONSTRUCTION5.1 Base Building Work.(a) Landlord shall deliver the Premises to Tenant upon the Effective Date with the work (“Landlord’s Work”) more particularly described in thebase building specifications attached hereto as Exhibit E (“Base Building Specifications”) completed. Landlord’s Work shall comply with the LegalRequirements and shall be consistent with Class A standards for laboratory and office space, and substantially in conformance with, and not materiallyinconsistent with, the Base Building Specifications. Landlord shall deliver the Premises to Tenant with all base building systems, including, but not limitedto, HVAC, electrical, life safety and plumbing systems in good working order, in compliance with applicable Legal Requirements and suitable for laboratorypurposes. The allocation of the responsibilities between the Landlord’s Work and Tenant’s Work is set forth on the Landlord/Tenant Matrix attached hereto asExhibit F (“Landlord/Tenant Matrix”).(b) Tenant agrees, except as otherwise provided herein to the contrary, (i) to accept possession of the Premises in the condition described in theBase Building Specifications and otherwise in “as is” condition, (ii) that neither Landlord nor Landlord’s agents have made any representations or warrantieswith respect to the Premises or the Building except as provided herein, and (iii) Landlord has no obligation to perform any work, supply any materials, incurany expense or make any alterations, additions or improvements to the Premises to prepare the Premises for Tenant’s use and occupancy except as providedherein.5.2 Tenant’s Work.(a) Tenant shall prepare, at its sole cost and expense (against which the Landlord’s Contribution may be applied), a set of design/developmentplans in substantial conformity with the concept plan approved by Landlord (subject to Landlord’s review of further details regarding access and maintenanceof the tel/data room and access, maintenance and ventilation issues in connection with components located on the third floor along the window line) andattached hereto as Exhibit G, Tenant Design and Construction Guidelines attached hereto as Exhibit H (“Tenant Design and Construction Guidelines”)and the allocation of responsibilities set forth in the Landlord/Tenant Matrix sufficient for Landlord to approve Tenant’s proposed design of the Premises (“Design/Development Plans”), and a full set of final permit-ready construction drawings (“Final Construction Drawings”) for the interior finish andlayout of the initial improvements (“Tenant’s Work”) which Tenant desires to have performed in the Premises. The Design/ Development Plans and the FinalConstruction Drawings are collectively referred to herein as the “Plans.” Provided that no Default has occurred and remains outstanding, Landlord shallreimburse Tenant up to $4,358.60 ($.10 per RSF) for out of pocket costs incurred in preparing the initial test fit of the Premises. 18(b) The Plans shall be submitted to Landlord, together with a construction budget setting forth the anticipated costs for the Tenant’s Work, andLandlord shall approve or disapprove of the Plans, which approval shall not be unreasonably withheld, conditioned or delayed, and Landlord shall respondin any event within fifteen (15) days of receiving them. No work shall be conducted by or on behalf of Tenant until the Final Construction Drawings havebeen approved for such work in writing by Landlord. At Tenant’s sole cost and expense (against which the Landlord’s Contribution may be applied), Tenantshall cause the Plans to be revised in a manner sufficient to remedy the Landlord’s objections and/or respond to the Landlord’s concerns and for such revisedPlans to be redelivered to Landlord, and Landlord shall approve or disapprove such portions of the Plans to which Landlord previously commented withinseven (7) Business Days following the date of resubmission. Landlord’s failure to timely respond to Tenant’s submitted Plans or revised Plans shall bedeemed to be approval thereof provided that upon submitting such plans, Tenant provides written notice to Landlord stating “IF LANDLORD FAILS TORESPOND TO THE ENCLOSED PLANS WITHIN 15 DAYS (OR 7 BUSINESS DAYS AS APPLICABLE), LANDLORD’S APPROVALSHALL BE DEEMED GIVEN PURSUANT TO SECTION 5.2(b) OF THE LEASE” in upper case boldface type in the top margin of such notice.Landlord’s approval is solely given for the benefit of Landlord and Tenant under this Section and neither Tenant nor any third party shall have the right torely upon Landlord’s approval of the Plans for any other purpose whatsoever.(c) Landlord shall not charge Tenant any coordination, overhead or contractor supervision fees in connection with Tenant’s Work; provided,however that Landlord shall be reimbursed from the Landlord’s Contribution for any third-party, out of pocket expenses incurred by Landlord in connectionwith the review and approval of Tenant’s Work.(d) The Plans shall be stamped by a Massachusetts registered architect and engineer, such architect and engineer and Tenant’s general contractorand subcontractors, being subject to Landlord’s prior approval, which shall not be unreasonably withheld, conditioned or delayed, and shall comply with theLegal Requirements and the requirements of the Tenant Design and Construction Guidelines. The final approved Plans shall be in a form satisfactory toappropriate governmental authorities responsible for issuing permits, approvals and licenses required for Tenant’s Work.(e) Tenant’s Work shall be completed in accordance with the Plans and no material changes to Tenant’s Work shall occur without Landlord’sapproval as set forth herein. All of the Tenant’s Work shall be performed in accordance with the requirements set forth in the Tenant Design and ConstructionGuidelines and completed in a first class workmanlike manner. Tenant shall be solely responsible for the effect of the Tenant’s Work on the Building’sstructure and systems, whether or not Landlord has consented to the Alterations, and shall reimburse Landlord on demand for any costs incurred byLandlord by reason of any faulty work done by Tenant or its contractors. All of Tenant’s Work shall be performed in such manner as to maintain harmoniouslabor relations and to minimize any material interference with Building operations or other construction work being performed within the Building.(f) Tenant shall use diligent efforts to keep the Project and Tenant’s leasehold interest therein free of any liens or claims of liens arising from actsor omissions of Tenant, or its subtenants, contractors or others claiming by, through or under Tenant, and shall discharge or bond 19any such liens within ten (10) Business Days following notice to Tenant of their filing. Before commencement of any work, upon Landlord’s request,Tenant’s contractor shall provide a payment, performance and lien indemnity bond required by Landlord. Tenant shall provide evidence of such insurance asLandlord may reasonably require, naming Landlord as an additional insured. Tenant shall indemnify Landlord and hold it harmless from and against anycost, claim, or liability arising from any work done by or at the direction of Tenant.(g) All alterations affixed to the Premises shall become part thereof and remain therein at the end of the Term unless otherwise agreed to byLandlord and Tenant. However, if Landlord gives Tenant a notice, at the time Landlord approves the Plans, to remove any alterations, Tenant shall do so andshall pay the cost of removal and any repair required by such removal.(h) All of Tenant’s personal property, trade fixtures, equipment, furniture, movable partitions, and any alterations not affixed to the Premisesshall remain Tenant’s property, removable at any time. If Tenant fails to remove any such materials at the end of the Term, Landlord may do so and storethem at Tenant’s expense, without liability to Tenant, and may sell them at public or private sale and apply the proceeds to any amounts due hereunder,including costs of removal, storage and sale.5.3 Intentionally Deleted.5.4 Landlord’s Contribution. (a) As an inducement to Tenant’s entering into this Lease, Landlord shall, subject to the terms set forth in this Section,provide to Tenant a special tenant improvement allowance for the actual costs incurred with respect to the design and hard construction costs pertaining toTenant’s Work up to a maximum aggregate amount of Six Million Five Hundred Thirty Seven Thousand Nine Hundred and 00/100 Dollars ($6,537,900.00)[$150.00 per RSF] less any past due expenses owed to Landlord by Tenant under this Lease (“Initial Allowance”).(b) Landlord shall pay to Tenant an amount not to exceed Landlord’s Contribution to the extent permitted pursuant to this Section, provided thatas of the date on which Landlord is required to make payment thereof pursuant to this Section: (i) this Lease is in full force and effect, and (ii) no Event ofDefault then exists. Tenant shall pay all costs of the Tenant’s Work in excess of Landlord’s Contribution. Before Tenant submits a requisition request for anyhard construction costs, Landlord agrees to fund up to fifty percent (50%) of Tenant’s early design fees from Landlord’s Contribution, with the balance ofsuch design fees to be funded on a dollar for dollar basis as the hard construction costs are funded. Thereafter, each funded requisition for Landlord’sContribution shall be applied first on account of any hard construction costs and labor directly related to the Tenant’s Work and materials delivered to theBuilding in connection with the Tenant’s Work, and then, second on account of any design fees. If, following the expiration of the six (6) month periodfollowing the completion of the Tenant’s Work and satisfaction of the conditions set forth in this Section, any amount of Landlord’s Contribution has not beenrequisitioned by Tenant, such remainder shall be retained by Landlord and Tenant shall have no further right to claim thereto. 20(c) Landlord shall make progress payments on account of Landlord’s Contribution to Tenant on a monthly basis, for the work performed duringthe previous month, less such retainage (“Retainage”) as is provided for in Tenant’s construction contract(s) and contracts for the purchase and delivery offurniture, fixtures and equipment, provided that such contracts shall require Retainage of not less than five percent (5%) of the total contract price (in theaggregate) (which 5% Retainage shall not be in addition to the amounts retained under such contracts).(d) Landlord shall pay Landlord’s Proportion (hereinafter defined) of the cost shown on each requisition submitted by Tenant to Landlord untilthe entirety of Landlord’s Contribution has been exhausted. “Landlord’s Proportion” shall be a fraction, the numerator of which is Landlord’s Contributionand the denominator of which is the total contract price for Tenant’s Work (as evidenced by reasonably detailed documentation delivered to Landlord with therequisition first submitted by Tenant).Landlord’s progress payments shall be made payable directly to Tenant or, upon Tenant’s written request, to Tenant’s general contractor, within thirty(30) days following the delivery to Landlord of requisitions therefor. Landlord shall have the right, upon reasonable advance notice to Tenant, to inspectTenant’s books and records relating to each requisition in order to verify the amount thereof. Tenant shall submit requisition(s) no more often than monthly.Each such requisition shall be executed by a duly authorized officer of Tenant, and shall be accompanied by (i) with the exception of the first requisition,copies of partial waivers of lien from all contractors, subcontractors, and material suppliers covering all work and materials which were the subject ofprevious progress payments by Landlord and Tenant, (ii) a certification from Tenant’s architect on a completed AIA Form G702, and (iii) a requisitioncertificate on a completed AIA Form G703. Landlord shall hold such Retainage and disburse the Retainage, or portions thereof as requisitioned by Tenant fromtime to time on account of subcontractors who have completed their respective portions of the job, upon submission by Tenant to Landlord of Tenant’srequisition therefor accompanied by all documentation required under the foregoing provisions of this Section, together with (A) proof of the satisfactorycompletion of all required inspections and issuance of any required approvals, permits and sign offs for the work of such subcontractor, or with respect to thework of the Tenant’s general contractor, the Tenant’s Work, by Governmental Authorities having jurisdiction thereover (including issuance of the Certificate ofOccupancy) (“Substantial Completion of Tenant’s Work”), and (B) issuance of final lien waivers by all contractors, subcontractors and materialsuppliers covering all of the Tenant’s Work or the portion thereof as applicable (which final lien waivers may be conditioned upon, or delivered concurrentwith, payment of such Retainage). If Tenant fails to pay to Tenant’s contractors the amounts paid by Landlord to Tenant in connection with any previousrequisition(s), Landlord shall thereafter have the right to have Landlord’s Contribution paid directly to Tenant’s contractors. In addition, concurrent with thefinal requisition for the Retainage, Tenant shall submit “as-built” plans and specifications for the Tenant’s Work. The right to receive Landlord’s Contributionis for the exclusive benefit of Tenant, and in no event shall such right be assigned to or be enforceable by or for the benefit of any third party, including anycontractor, subcontractor, materialman, laborer, architect, engineer, attorney or other person or entity (excepting only to a permitted assignee of this Leasepursuant to Article 17). 21ARTICLE 6USE6.1 Use. The Premises shall be used solely for the Permitted Use set forth in the basic lease provisions in Section 1.1 of this Lease, and in compliancewith all Legal Requirements now or hereafter applicable to the Premises, and to the use and occupancy thereof, including, without limitation, the AmericansWith Disabilities Act, 42 U.S.C. § 12101, et seq. (together with the regulations promulgated pursuant thereto, “ADA”). Tenant shall, upon 5 days’ writtennotice from Landlord, discontinue any use of the Premises which is declared by any Governmental Authority (as defined in Section 4.6) having jurisdiction tobe a violation of a Legal Requirement. Tenant will not use or permit the Premises to be used for any purpose or in any manner that would void Tenant’s orLandlord’s insurance, increase the insurance cost, or cause the disallowance of any sprinkler or other credits. Tenant shall reimburse Landlord promptlyupon demand for any additional premium charged for any such insurance policy by reason of Tenant’s failure to comply with the provisions of this Sectionor otherwise caused by Tenant’s use and/or occupancy of the Premises. Tenant will use the Premises in a careful, safe and proper manner and will not commitor permit waste, overload the floor or structure of the Premises, subject the Premises to use that would damage the Premises or obstruct or interfere with therights of Landlord or other tenants or occupants of the Project, including conducting or giving notice of any auction, liquidation, or going out of business saleon the Premises, or using or allowing the Premises to be used for any unlawful purpose. Tenant shall cause any equipment or machinery to be installed in thePremises so as to reasonably prevent sounds or vibrations from the Premises from extending into Common Areas, or other space in the Project. Tenant shallnot, without the prior written consent of Landlord use the Premises in any manner which will require ventilation, air exchange, heating, gas, steam, electricityor water beyond the capacity of the Project as set forth in this Lease.Tenant, at its sole expense, shall make any alterations or modifications to the interior or the exterior of the Premises or the Project that are required byLegal Requirements (including, without limitation, compliance of the Premises with the ADA) related to Tenant’s use or occupancy of the Premises.Notwithstanding any other provision herein to the contrary, Tenant shall be responsible for any and all demands, claims, liabilities, losses, costs, expenses,actions, causes of action, damages or judgments, and all reasonable expenses incurred in investigating or resisting the same (including, without limitation,reasonable attorneys’ fees, charges and disbursements and costs of suit) (collectively, “Claims”) arising out of or in connection with Legal Requirementsrelated to Tenant’s use or occupancy of the Premises, and Tenant shall indemnify, defend, hold and save Landlord harmless from and against any and allClaims arising out of or in connection with any failure of the Premises to comply with any Legal Requirement (to the extent that such Claims do not arise fromthe failure of Landlord’s Work to comply with any Legal Requirements).ARTICLE 7PARKING7.1 Parking. Subject to all matters of record, Force Majeure, a Taking and the exercise by Landlord of its rights hereunder, Tenant shall have the right,in common with other tenants of the Project to use Tenant’s pro rata share of the non-reserved parking spaces at the Project at the then-current prevailing rateequal to (a) .65 parking spaces per 1,000 rentable square feet of the Premises (or 28 spaces based on 43,586 RSF) for the parking spaces located in theBuilding garage 22at the current monthly fee of $225 per space, and (b) .35 parking spaces per 1,000 rentable square feet of the Premises (or 15 spaces based on 43,586 RSF)for surface parking spaces located on the adjacent lot at the current monthly fee of $175 per space, as such rates may vary from time to time to reflect currentfair market parking rates in East Cambridge and Kendall Square, as shown on the parking plan attached hereto as EXHIBIT I (“Parking Plan”). Subject toLandlord’s reasonable requirements or conditions and any applicable Legal Requirements and the rights of Foundation Medicine, Inc. and its successors andassigns (“Foundation Medicine”), Tenant may designate and mark (by virtue of signage reasonably approved by Landlord) at Tenant’s cost a portion ofTenant’s allocated parking spaces for visitor parking on a reserved basis in locations to be reasonably agreed upon by Landlord and Tenant.The parking spaces shall be subject to such reasonable rules and regulations as may be in effect for the use of the parking garage/areas from time to time(including, without limitation, Landlord’s right, without additional charge to Tenant above the prevailing fair market rate for parking spaces, to institute avalet or attendant-managed parking system) provided that access to the parking spaces by Tenant’s employees shall be on a 24/7 basis. Landlord shall not beliable to Tenant, and this Lease shall not be affected, if any parking rights of Tenant hereunder are impaired by Applicable Law. Notwithstanding anything tothe contrary contained herein, Landlord shall have the right to relocate the surface parking spaces to the following garages in order of priority: (1) theCambridgeSide Galleria Parking Garage located at 100 CambridgeSide Place in Cambridge; (2) the First Street Garage located on Spring Street in Cambridge;and (3) the common parking facility that serves the buildings located at 350 Kendall Street, 650 East Kendall Street, 675 West Kendall Street, 500 KendallStreet and 350 3 Street (Watermark Cambridge), each located in Cambridge. If parking spaces are not available in such garages, then Landlord shall have theright to relocate the surface parking spaces to an alternate public parking facility of comparable quality located no further than one third mile from the Projectand located within the City of Cambridge. Tenant shall be responsible for the actual fee for such offsite parking spaces which fee shall not to exceed thepublished parking rates for monthly parking for the respective parking garage from time to time and shall not include any mark-up of such fee by Landlordor the owner or operator of the parking garage.Within thirty (30) days after the Effective Date and each anniversary of the Lease Commencement Date, Tenant shall provide Landlord written notice ofthe number of parking spaces allocated to Tenant that Tenant is committed to using each year. If the number of parking spaces requested by Tenant is lessthan the 28 garage spaces and 15 surface spaces allocated to Tenant, then Landlord reserves the right to allocate the excess parking spaces to other occupantsin the Building on monthly basis. Upon sixty (60) days notice from Tenant, Landlord shall arrange for such reallocated parking spaces to be restored forTenant’s non-exclusive use.Tenant shall have no right to hypothecate or encumber the parking spaces, and shall not sublet, assign, or otherwise transfer the parking spaces otherthan to employees of Tenant occupying the Premises or to a permitted transferee pursuant to Section 17 of this Lease.Tenant shall, at Tenant’s sole expense, for so long as the Parking and Traffic Demand Management Plan dated April 2008 as approved by the City ofCambridge on April 28, 2008, including the conditions set forth in such approval (as amended from time to time, the “PTDM”), remains applicable to theProject, (i) offer to subsidize mass transit monthly passes for all of its 23rdemployees; (ii) implement a Commuter Choice Program; (iii) discourage single-occupant vehicle use by its employees; (iv) promote alternative modes oftransportation and use of alternative work hours; (v) meet with Landlord and/or its representatives no more than quarterly to discuss transportation programsand initiatives; (vi) participate in annual surveys monitoring transportation programs and initiatives; (vii) cooperate with Landlord in connection withtransportation programs and initiatives promulgated pursuant to the PTDM; (viii) provide alternative work programs (such as telecommuting, flex-time andcompressed work weeks) to its employees in order to reduce traffic impacts in Cambridge during peak commuter hours; and (ix) otherwise cooperate withLandlord in encouraging employees to seek alternate modes of transportation.ARTICLE 8UTILITIES; SERVICES8.1 Utilities; Services. Landlord shall provide, subject to the terms of this Section, hot and cold water for restrooms, drinking and office kitchenpurposes, sewer connection, heated and chilled water for the HVAC system serving the Premises, electricity in an amount at least equal to 12 watts per usablesquare foot, gas service for the HVAC system and water for sprinklers (collectively, “Utilities”) as more particularly set forth in the Base BuildingSpecifications. Landlord shall pay, as Operating Expenses or subject to Tenant’s reimbursement obligation, for all Utilities used on the Premises, allmaintenance charges for Utilities, and any storm sewer charges or other similar charges for Utilities imposed by any Governmental Authority or Utilityprovider, and any taxes, penalties, surcharges or similar charges thereon. Utilities will be separately metered or charged directly to Tenant by the provider asprovided in the Landlord/Tenant Matrix attached hereto as Exhibit F. Tenant shall pay directly to the Utility provider, prior to delinquency, any separatelymetered Utilities and services which may be furnished to Tenant or the Premises during the Term. Tenant shall pay, as part of Operating Expenses, its shareof all charges for jointly metered Utilities based upon consumption, as reasonably determined by Landlord. No interruption or failure of Utilities, from anycause whatsoever other than Landlord’s negligence or willful misconduct, shall result in eviction or constructive eviction of Tenant, termination of this Leaseor the abatement of Rent. Tenant agrees to limit use of water and sewer with respect to Common Areas to normal restroom use. Tenant shall supply its owncleaning and rubbish removal service. Landlord at Landlord’s cost shall supply a dumpster or compactor at the loading dock for Tenant’s use for the disposalof non-hazardous, non-controlled substances.8.2 Shafts and Risers. During the Term, Landlord grants to Tenant a non-exclusive license to use a portion (reasonably specified by Landlord basedon Tenant’s Plans and generally based on Tenant’s Share) of the Building risers and other Building communications pathways reasonably designated byLandlord (“Communications Pathways”) for the installation, maintenance, operation, replacement and/or removal at Tenant’s sole expense of certain cables,conduits, innerducts and connecting hardware approved by Landlord (any such cables, conduits, innerducts and connecting hardware installed within theCommunications Pathways, as the same may be modified, altered or replaced during the Term, are collectively referred to herein as the “ConnectingCables”). Any such approvals shall be granted, and installation performed, in accordance with the terms of Section 11 below. With respect to each cableplaced in the Communications Pathways from and after the Execution Date, Tenant shall label such cable (at the floor of the Building where the cableoriginates and the floor where such cable terminates and at 24each access point in between at which such cable is pulled) with identification information as reasonably required by Landlord which shall be consistent withcommercial practice in the Cambridge/Kendall Square submarket. Landlord makes no warranties or representations to Tenant as to the suitability of theCommunications Pathways for the installation and operation of the Connecting Cables and Tenant hereby accepts the same in their as is, where is conditionwith all faults on the date hereof, provided, however, Landlord shall ensure that such Communications Pathways are dry and free of interference fromelectrical cables and other base building devices likely to interfere with the operation of such Connecting Cables. In the event that at any time during the Term,Landlord reasonably determines, that the operation and/or periodic testing of the Connecting Cables interferes with the operation of the Building or the businessoperations of any of the occupants of the Building, then Tenant shall, upon reasonable notice from Landlord attempt to correct such interference in accordancewith commercially reasonable approaches. Tenant is expressly forbidden to serve other tenants or occupants of the Building, to serve any locations outside theBuilding, or to resell any communications services without the prior written consent of Landlord, which consent may be granted in Landlord’s sole discretion.Upon the expiration or earlier termination of this license, Tenant shall remove the Connecting Cables from the Communications Pathways and restore anydamage to the Building related to the removal of the Connecting Cables caused by Tenant, which obligations shall survive the expiration or earlier terminationof this Lease. In addition, Landlord may, upon reasonable prior written notice (which notice shall not be required in the event of an emergency), suspend thislicense and/or relocate the Connecting Cables in the event of any repair or construction affecting the Communications Pathways, provided, however, prior tomaking any such repair or construction, Landlord shall ensure that Tenant has an alternative means of communicating in a manner consistent with theoperation and standards of the Connecting Cables at the time of such license suspension and at Landlord’s sole cost and expense. After the completion of suchrepair and/or construction, this license shall be reinstated with such reasonable modifications as Landlord may require and for which Landlord shallreimburse Tenant to ensure consistency with the new use of the Communications Pathways. Subject to earlier termination pursuant to the provisions of thisSection, this license shall be coterminous with the Lease.8.3 Rooftop Premises. During the Term, Tenant shall have the right to use a portion of the rooftop of the Building reasonably designated by Landlord(the “Rooftop Premises”) at no additional rental cost for the installation of HVAC equipment, antennas, satellite dishes or other communications device andcertain mechanical devices necessary for the operation of Tenant’s business in the Premises, all of which shall have been approved by Landlord (any devicesand/or equipment installed within the Rooftop Premises, as the same may be modified, altered or replaced during the Term, is collectively referred to herein as“Tenant’s Rooftop Equipment”). Landlord’s approval of such devices and/or equipment shall not be unreasonably withheld, conditioned or delayedprovided Tenant demonstrates to Landlord’s reasonable satisfaction that the proposed devices and/or equipment (i) do not interfere with any base buildingequipment operated by Landlord on the roof; (ii) will not affect the structural integrity of the Building or void the warranty for the roof or the roof membrane;(iii) shall be adequately screened so as to minimize the visibility of such devices and/or equipment; and (iv) shall be adequately sound-proofed to meet allrequirements of Legal Requirements. Tenant shall not install or operate Tenant’s Rooftop Equipment until Tenant has obtained and submitted to Landlordcopies of all required governmental permits, licenses, and authorizations necessary for the installation and operation thereof. In addition, Tenant shall complywith all reasonable construction rules and regulations 25promulgated by Landlord in connection with the installation, maintenance and operation of Tenant’s Rooftop Equipment. Landlord shall provide reasonableutility service (at Tenant’s reasonable cost) to the Rooftop Premises or to Tenant’s Rooftop Equipment. Tenant shall be responsible for the cost of repairing andmaintaining Tenant’s Rooftop Equipment in good order, condition and repair and for the cost of repairing any damage to the Building, or the cost of anynecessary improvements to the Building, caused by or as a result of the installation, replacement and/or removal of Tenant’s Rooftop Equipment. Landlordmakes no warranties or representations to Tenant as to the suitability of the Rooftop Premises for the installation and operation of Tenant’s Rooftop Equipment.Tenant shall use Landlord’s roof contractor (if such roof is under warranty by such contractor) or another contractor reasonably acceptable to Landlord forany work impacting the roof or roof membrane. If Tenant’s Rooftop Equipment damages the roof (other than ordinary wear and tear damage or damage arisingfrom extraordinary events of a nature not controllable by Tenant such as high winds, fire, electrical storms and the like) or invalidates or adversely affects anywarranty, Tenant shall be fully responsible for the cost of repairs directly related and limited to the damage caused by Tenant’s Rooftop Equipment (and anysubsequent repairs to the roof to the extent that any warranty is invalidated or adversely affected). Except as set forth in the next sentence, Landlord shall elect,at the time of Landlord’s approval thereof, either to require Tenant to convey to Landlord, in consideration of Ten Dollars ($10.00), all of Tenant’s right, titleand interest in and to all or any portion of Tenant’s Rooftop Equipment or to remove such Tenant’s Rooftop Equipment or a portion thereof at the expiration orsooner termination of the Term. Notwithstanding the foregoing, unless this Lease has been terminated due to a Default by Tenant, Tenant may remove Tenant’ssatellite dishes and generators and equipment appurtenant thereto at the expiration of the Term at Tenant’s cost provided that Tenant complies with anyreasonable requirements or conditions imposed by Landlord and that Tenant remains responsible for the cost of repairs directly related and limited to thedamage caused by the removal of such equipment.8.4 Access. Subject to reasonable security procedures that Landlord may institute from time to time to prevent unauthorized access to the Building,Tenant shall have access to the Premises, the Rooftop Premises, the Building garage and surface lot, the freight elevator and freight loading dock, and anyother appurtenant areas, twenty-four (24) hours per day, seven (7) days per week. A security card will be issued to all permitted Building occupants. Anaccess card will be required for access to the Building between the hours of 6:00 p.m. and 7:00 a.m. on weekdays and 24 hours a day on weekends. Landlordshall install a card key access system on the elevators providing Tenant with the ability to lock off any full floors that it occupies.ARTICLE 9ALTERATIONS9.1 Alterations and Tenant’s Property. Any alterations, additions, or improvements made to the Premises by or on behalf of Tenant, includingadditional locks or bolts of any kind or nature upon any doors or windows in the Premises, but excluding installation, removal or realignment of furnituresystems (other than removal of furniture systems owned or paid for by Landlord) not involving any modifications to the structure or connections (other thanby ordinary plugs or jacks) to Building Systems (as defined in Section 10.1) (“Alterations”), shall be subject to Landlord’s prior written consent, whichmay be given or withheld in Landlord’s sole discretion if any such Alteration affects the structure or Building Systems and shall not be otherwiseunreasonably withheld, conditioned or delayed. If Landlord approves any Alterations, Landlord 26may impose such reasonable conditions on Tenant in connection with the commencement, performance and completion of such Alterations as Landlord maydeem appropriate in Landlord’s sole and absolute discretion. However, Landlord’s consent shall not be required for any Alterations that (a) are not visible fromthe exterior of the Building; (b) will not adversely affect the Building Systems or structural elements; and (c) either are of a cosmetic nature such as painting,wallpapering, hanging pictures and installing carpeting, or cost less than $50,000 in any one instance. Any request for approval shall be in writing, deliverednot less than 15 Business Days in advance of any proposed construction, and accompanied by plans, specifications, bid proposals, work contracts andsuch other information concerning the nature and cost of the alterations as may be reasonably requested by Landlord, including the identities and mailingaddresses of all persons performing work or supplying materials. Landlord’s right to review plans and specifications and to monitor construction shall besolely for its own benefit, and Landlord shall have no duty to ensure that such plans and specifications or construction comply with applicable LegalRequirements. Tenant shall cause, at its sole cost and expense, all Alterations to comply with insurance requirements and with Legal Requirements and shallimplement at its sole cost and expense any alteration or modification required by Legal Requirements as a result of any Alterations. Landlord shall not chargeTenant any coordination, overhead or contractor supervision fees in connection with the Alterations; provided, however that Landlord shall be reimbursed forany reasonable third-party, out of pocket expenses incurred by Landlord in connection with the review and approval of the Alterations. Before Tenant beginsany Alteration, Landlord may post on and about the Premises notices of non-responsibility pursuant to applicable law. Tenant shall reimburse Landlord for,and indemnify and hold Landlord harmless from, any expense incurred by Landlord by reason of faulty work done by Tenant or its contractors, delayscaused by such work, or inadequate cleanup. The construction of Tenant’s Work shall be governed by the provisions contained in Section 5.2, and not theprovisions of this Article 9.Upon Landlord’s request, Tenant shall furnish security or make other arrangements satisfactory to Landlord to assure payment for the completion of allAlterations work free and clear of liens, and shall provide (and cause each contractor or subcontractor to provide) certificates of insurance for workers’compensation and other coverage in amounts and from an insurance company satisfactory to Landlord protecting Landlord against liability for personalinjury or property damage during construction. Upon completion of any Alterations, Tenant shall deliver to Landlord: (i) sworn statements setting forth thenames of all contractors and subcontractors who did the work and final lien waivers from all such contractors and subcontractors; and (ii) “as built” plansfor any such Alteration.Except for Removable Installations (as hereinafter defined), all Installations (as hereinafter defined) shall be and shall remain the property of Landlordduring the Term and following the expiration or earlier termination of the Term, shall not be removed by Tenant at any time during the Term, and shall remainupon and be surrendered with the Premises as a part thereof. Notwithstanding the foregoing, Landlord may, at the time its approval of any such Installation isrequested, notify Tenant that Landlord requires that Tenant remove such Installation upon the expiration or earlier termination of the Term, in which eventTenant shall remove such Installation in accordance with the immediately succeeding sentence. Upon the expiration or earlier termination of the Term, Tenantshall remove (i) Connecting Cable as required in Section 8.2, (ii) any Installations for which Landlord has given Tenant notice of removal in accordance withthe immediately preceding sentence, and (iii) all of Tenant’s Property (as hereinafter defined), and 27Tenant shall restore and repair any damage caused by or occasioned as a result of such removal, including, without limitation, capping off all suchconnections behind the walls of the Premises and repairing any holes. During any restoration period beyond the expiration or earlier termination of the Term,Tenant shall pay Rent to Landlord as provided herein as if said space were otherwise occupied by Tenant. Landlord hereby waives any lien or other interest inany of Tenant’s Property and Removable Installations and shall confirm such waiver in a form reasonably acceptable to Landlord and Tenant provided thatLandlord shall be paid for Landlord’s reasonable out of pocket expenses in connection with the waiver process.For purposes of this Lease, (x) “Removable Installations” means any Installations that Tenant desires to have removed from the Premises at theexpiration or earlier termination of the Term which Landlord agrees in writing may be removed by Tenant, (y) “Tenant’s Property” means RemovableInstallations and, other than Installations, any personal property or equipment of Tenant that may be removed without material damage to the Premises, and(z) “Installations” means all property of any kind paid for by Landlord, all Alterations, all fixtures, and all partitions, hardware, built-in machinery, built-incasework and cabinets and other similar additions, equipment, property and improvements built into the Premises so as to become an integral part of thePremises, including, without limitation, fume hoods which penetrate the roof or plenum area, built-in cold rooms, built-in warm rooms, walk-in cold rooms,walk-in warm rooms, deionized water systems, glass washing equipment, autoclaves, chillers, built-in plumbing, electrical and mechanical equipment andsystems, and any power generator and transfer switch.ARTICLE 10REPAIRS AND MAINTENANCE10.1 Landlord’s Repairs. Landlord, as an Operating Expense subject to the provisions of Section 4.5 hereof, shall maintain all of the structural,exterior, parking and other Common Areas of the Project, including roof, HVAC, plumbing, fire sprinklers, elevators and all other building systems servingthe Premises and other portions of the Project (“Building Systems”), in good repair, comparable to other first class lab research buildings in the KendallSquare area and in compliance with all applicable Legal Requirements, reasonable wear and tear and uninsured losses and damages and damage caused byTenant, or by any of Tenant’s agents, servants, employees, invitees and contractors (collectively, “Tenant Parties”) excluded. Losses and damages causedby Tenant or any Tenant Party shall be repaired by Landlord, to the extent not covered by insurance, at Tenant’s sole cost and expense. Landlord reserves theright to stop Building Systems services when necessary (i) by reason of accident or emergency, or (ii) for planned repairs, alterations or improvements, whichare, in the judgment of Landlord, desirable or necessary to be made, until said repairs, alterations or improvements shall have been completed. Landlord shallhave no responsibility or liability for failure to supply Building Systems services during any such period of interruption; provided, however, that Landlordshall, except in case of emergency, give Tenant 24 hours advance notice of any planned stoppage of Building Systems services for routine maintenance,repairs, alterations or improvements. Tenant shall promptly give Landlord written notice of any repair required by Landlord pursuant to this Section, afterwhich Landlord shall make a commercially reasonable effort to effect such repair. Landlord shall not be liable for any failure to make any repairs or toperform any maintenance unless such failure shall persist for an unreasonable time after Tenant’s written notice of the need for such repairs or maintenancebut in no event not later than thirty (30) days after receipt of such notice, or such longer time as is 28reasonably necessary if more than 30 days are reasonably required to complete such repairs so long as Landlord commences such repairs within such 30 dayperiod and thereafter diligently attempts to complete the same. Tenant waives its rights under any state or local law to terminate this Lease or to make suchrepairs at Landlord’s expense and agrees that the parties’ respective rights with respect to such matters shall be solely as set forth herein. Repairs required asthe result of fire, earthquake, flood, vandalism, war, or similar cause of damage or destruction shall be controlled by Section 14.1.10.2 Tenant’s Repairs. Subject to Section 10.1 hereof, Tenant, at its expense, shall repair, replace and maintain in good condition all portions of thePremises, including, without limitation, entries, doors, ceilings, interior windows, interior walls, and the interior side of demising walls, reasonable wear andtear and damage by fire or other casualty excepted. Such repair and replacement may include capital expenditures and repairs whose benefit may extendbeyond the Term. Should Tenant fail to make any such repair or replacement or fail to maintain the Premises, Landlord shall give Tenant notice of suchfailure. If Tenant fails to commence cure of such failure within 30 days of Landlord’s notice, and thereafter diligently prosecute such cure to completion,Landlord may perform such work and shall be reimbursed by Tenant within 30 days after demand therefor; provided, however, that if such failure by Tenantcreates or could create an emergency, Landlord may immediately commence cure of such failure and shall thereafter be entitled to recover the costs of such curefrom Tenant. Subject to Articles 13 and 14, Tenant shall bear the full uninsured cost of any repair or replacement to any part of the Project that results fromdamage caused by Tenant or any Tenant Party and any repair that benefits only the Premises.ARTICLE 11MECHANIC’S LIENS11.1 Mechanic’s Liens. Tenant shall discharge, by bond or otherwise, any mechanic’s lien filed against the Premises or against the Project for workclaimed to have been done for, or materials claimed to have been furnished to, Tenant within 10 Business Days after written notice of the filing thereof, atTenant’s sole cost and shall otherwise keep the Premises and the Project free from any liens arising out of work performed, materials furnished or obligationsincurred by Tenant. Should Tenant fail to discharge any lien described herein, Landlord shall have the right, but not the obligation, to pay such claim or posta bond or otherwise provide security to eliminate the lien as a claim against title to the Project and the cost thereof shall be immediately due from Tenant asAdditional Rent. If Tenant shall lease or finance the acquisition of office equipment, furnishings, or other personal property of a removable nature utilized byTenant in the operation of Tenant’s business, Tenant warrants that any Uniform Commercial Code Financing Statement filed as a matter of public record byany lessor or creditor of Tenant will upon its face or by exhibit thereto indicate that such Financing Statement is applicable only to removable personal propertyof Tenant located within the Premises. In no event shall the address of the Project be furnished on the statement without qualifying language as to applicabilityof the lien only to removable personal property, located in an identified suite held by Tenant. 29ARTICLE 12INDEMNIFICATION12.1 Indemnification. Tenant hereby indemnifies and agrees to defend, save and hold Landlord harmless from and against any and all demands,claims, liabilities, losses, costs, expenses, actions, causes of action, damages or judgments, and all reasonable expenses incurred in investigating or resistingthe same (including, without limitation, reasonable attorneys’ fees, charges and disbursements and costs of suit) (collectively, “Claims”) for injury or deathto persons or damage to property (a) occurring within the Premises, or (b) occurring outside of the Premises and caused by the negligence or willful misconductof Tenant, or (c) arising from a breach or default by Tenant in the performance of any of its obligations hereunder, in all cases unless caused solely by thewillful misconduct or negligence of Landlord or Landlord’s agents, servants, employees, and contractors. Landlord shall not be liable to Tenant for, andTenant assumes all risk of damage to, personal property (including, without limitation, loss of records kept within the Premises), unless caused solely by thewillful misconduct or negligence of Landlord or Landlord’s agents, servants, employees, and contractors, but subject to waiver of claims and subrogationprovisions of Article 13. Tenant further hereby irrevocably waives any and all Claims for injury to Tenant’s business or loss of income relating to any suchdamage or destruction of personal property (including, without limitation, any loss of records). Landlord shall not be liable for any damages arising from anyact, omission or neglect of any tenant in the Project or of any other third party.The provisions of this Section 12.1 shall survive the expiration or earlier termination of this Lease.ARTICLE 13INSURANCE13.1 Insurance. (a) Tenant shall not conduct or permit to be conducted any activity, or place any equipment in or about the Premises or the Buildingwhich will in any way increase the rate of fire insurance or other insurance on the Building pertaining to the Permitted Use in compliance with the terms of theLease provided that the Hazardous Materials List (defined in Section 21.2) does not change. If any increase in the rate of fire insurance or other insurance isstated by any insurance company to be due to any activity or equipment of Tenant in or about the Premises or the Building, such statement shall be conclusiveevidence that the increase in such rate is due to such activity or equipment and, as a result thereof, Tenant shall be liable for the amount of such increase.Tenant shall reimburse Landlord for such amount upon written demand from Landlord and such sum shall be considered additional rent payable hereunder.(b) Landlord shall insure the Building, other than Tenant’s Work and Alterations (including improvements and betterments which shall beTenant’s obligation to insure), against loss due to fire and other casualties included in standard extended coverage insurance policies in an amount equal toninety percent (90%) of the replacement cost thereof (with a waiver of co-insurance), exclusive of architectural and engineering fees, excavations, footings andfoundations. Throughout the Lease Term, Landlord shall maintain commercial general liability insurance (written on an occurrence basis) covering theProject. Such insurance shall need not cover (a) Tenant’s furniture, fixtures, equipment or other personal property of Tenant on the Premises, or (b) anyportion of the Tenant’s Work. 30(c) Commencing on the Lease Commencement Date and throughout the Lease Term, Tenant shall obtain and maintain (1) commercial generalliability insurance (written on an occurrence basis) including coverage provided in the current Insurance Services Office commercial general liability policyform insuring the indemnification obligations assumed by Tenant under this lease to the extent they are insurable, premises and operations coverage,containing an endorsement for personal injury, (2) all-risk property insurance, or its equivalent (with flood and earthquake coverage at Tenant’s option),(3) business interruption insurance (in an amount not less than the Base Rent and Additional Rent then in effect during any year), (4) comprehensiveautomobile liability insurance (covering any automobiles owned or operated by Tenant, if any), (5) worker’s compensation insurance, (6) during all periodsalcoholic beverages are dispensed or sold by Tenant at the Building or the Premises, liquor liability insurance or host liquor liability insurance as the case maybe, (7) employer’s liability insurance, and (8) such additional insurance relating to Tenant’s use and storage of Hazardous Materials as may be necessary tocomply with any requirement of any Governmental Authority. Such commercial general liability insurance shall be in an amount (which may include umbrellaliability insurance) of no less than Two Million Dollars ($2,000,000) combined single limit per occurrence with a Three Million Dollar ($3,000,000) annualaggregate. Such property insurance shall be in an amount not less than that required to replace all of Tenant’s Work and Alterations (including improvementsand betterments) and all other contents of the Tenant on the Premises (including, without limitation, Tenant’s trade fixtures, decorations, furnishings,equipment and personal property). Such automobile liability insurance shall be in an amount not less than One Million Dollars ($1,000,000) for eachaccident. Such worker’s compensation insurance shall carry minimum limits as defined by the law of the jurisdiction in which the Building is located (as thesame may be amended from time to time). Such employer’s liability insurance shall be in an amount not less than Five Hundred Thousand Dollars($500,000) for each accident, Five Hundred Thousand Dollars ($500,000) disease-policy limit, and Five Hundred Thousand Dollars ($500,000) disease-eachemployee.(d) All such insurance required of Tenant under this Section shall: (1) be issued by a company that is licensed to do business in the jurisdictionin which the Building is located and that has a rating equal to or exceeding A:VII from Best’s Insurance Guide; (2) in the case of the commercial generalliability insurance, name as additional insureds, the Landlord and the Landlord’s managing agent of the Building and if required by Landlord’s lender, theholder of any mortgage will be added as additional insured upon request by Landlord; (3) in the case of the all-risk property insurance and businessinterruption insurance, provide that the insurer thereunder waives all right of recovery by way of subrogation against Landlord, its partners, employees andmortgage holder where required in writing prior to a loss, in connection with any loss or damage covered by Tenant’s property policy; (4) be reasonablyacceptable in form and content to Landlord if not on customary industry form and content; (5) be primary and noncontributory; (6) to the extent obtainable,tenant’s insurer will endeavor to provide to Landlord, 30 days prior written notice of cancellation (with an exception of 10 days for non-payment of premium);however Tenant agrees to provide notice to Landlord as soon as they are aware of such cancellation from their carriers; and (7) not contain any deductibleprovision that is not commercially reasonable unless such provision is first approved in writing by Landlord (provided that Tenant’s deductible of $25,000 asof the Effective Date is deemed approved). Landlord may, from time to time, require Tenant to obtain additional insurance if such request is reasonable andcustomary with insurance requirements of other similar tenants in the same geographic region, or if Landlord’s Lender requires a change to comply with loanrequirements. Tenant shall provide certificates of insurance evidencing all required coverage prior to commencement of Tenant’s Work and annually during theterm of the lease prior to each policy expiration. Tenant shall also agree to provide full copies of actual policies upon written request from Landlord. Landlordmay defer commencement of the Tenant’s Work pending delivery of evidence of insurance. 31(e) Tenant hereby waives and releases Landlord and the holder of any mortgage from any and all liabilities, claims and losses for damage toproperty for which Landlord is or may otherwise be held liable to the extent Tenant either is required to maintain property insurance pursuant to this Articlewith respect to the property so damaged, or receives insurance proceeds on account thereof. Landlord hereby waives and releases Tenant from any and allliabilities, claims and losses for damage to property for which Tenant is or may be otherwise held liable to the extent Landlord either is required to maintainproperty insurance pursuant to this Article with respect to the property so damaged, or receives insurance proceeds on account thereof. In the case of the all-risk property insurance, both parties shall secure waiver of subrogation endorsements from their respective insurance carriers as to the other party.ARTICLE 14RESTORATION14.1 Restoration. If, at any time during the Term, the Project or the Premises are damaged or destroyed by a fire or other insured casualty, Landlordshall notify Tenant within 30 days after discovery of such damage as to the amount of time Landlord reasonably estimates it will take to restore the Project orthe Premises, as applicable (the “Restoration Period”). If the Restoration Period is reasonably estimated to exceed 9 months (the “Maximum RestorationPeriod”), Landlord may, in such notice, elect to terminate this Lease as of the date that is 45 days after the date of discovery of such damage or destruction. IfLandlord, in such notice, does not elect to terminate this Lease, and the restoration will exceed the Maximum Restoration period, Tenant may terminate thisLease by providing Landlord with notice of such election to terminate this Lease within five (5) Business Days of Tenant’s receipt of such notice. UnlessLandlord or Tenant, as the case may be, so elects to terminate this Lease, Landlord shall, subject to receipt of sufficient insurance proceeds (with anydeductible to be treated as a current Operating Expense), promptly restore the Premises (including Landlord’s Work and Tenant’s Work, but excluding theimprovements installed by Tenant or by Landlord and paid for by Tenant), subject to delays arising from the collection of insurance proceeds, from ForceMajeure events or as needed to obtain any license, clearance or other authorization of any kind required to enter into and restore the Premises issued by anyGovernmental Authority having jurisdiction over the use, storage, handling, treatment, generation, release, disposal, removal or remediation of HazardousMaterials in, on or about the Premises (collectively referred to herein as “Hazardous Materials Clearances”); provided, however, that if repair orrestoration of the Premises is not substantially complete as of the end of the Maximum Restoration Period or, if longer, the Restoration Period, Landlord may,in its sole and absolute discretion, elect not to proceed with such repair and restoration, in which event Landlord shall be relieved of its obligation to makesuch repairs or restoration and this Lease shall terminate as of the date that is 75 days after the later of: (i) discovery of such damage or destruction, or (ii) thedate all required Hazardous Materials Clearances are obtained, but Landlord shall retain any Rent paid and the right to any Rent payable by Tenant prior tosuch election by Landlord. 32Tenant, at its expense, shall promptly perform, subject to delays arising from the collection of insurance proceeds, from Force Majeure (as defined inSection 30.20) events or to obtain Hazardous Material Clearances, all repairs or restoration not required to be done by Landlord and shall promptly re-enter thePremises and commence doing business in accordance with this Lease.Notwithstanding the foregoing, either party may terminate this Lease if the Premises are damaged during the last year of the Term and Landlordreasonably estimates that it will take more than two months to repair such damage, or if insurance proceeds are not available for such restoration. Rent shall beabated from the date all required Hazardous Material Clearances are obtained until the Premises are repaired and restored, in the proportion which the area ofthe Premises, if any, which is not usable by Tenant bears to the total area of the Premises, unless Landlord provides Tenant with other space during the periodof repair that is suitable for the temporary conduct of Tenant’s business. Such abatement shall be the sole remedy of Tenant, and except as provided in thisSection, Tenant waives any right to terminate the Lease by reason of damage or casualty loss.The provisions of this Lease, including this Section, constitute an express agreement between Landlord and Tenant with respect to any and all damageto, or destruction of, all or any part of the Premises, or any other portion of the Project, and any statute or regulation which is now or may hereafter be in effectshall have no application to this Lease or any damage or destruction to all or any part of the Premises or any other portion of the Project, the parties heretoexpressly agreeing that this Section sets forth their entire understanding and agreement with respect to such matters.ARTICLE 15CONDEMNATION15.1 Condemnation. If the whole or any material part of the Premises or the Project is taken for any public or quasi-public use under governmentallaw, ordinance, or regulation, or by right of eminent domain, or by private purchase in lieu thereof (a “Taking” or “Taken”), and the Taking would inLandlord’s reasonable judgment, either prevent or materially interfere with Tenant’s use of the Premises or materially interfere with or impair Landlord’sownership or operation of the Project, then upon written notice by Landlord this Lease shall terminate and Rent shall be apportioned as of said date. Inaddition, if a Taking of the whole or any material part of the Premises or the Project would in the reasonable judgment of Tenant either prevent or materiallyinterfere with Tenant’s use of the Premises, Tenant shall have the right to terminate this Lease by written notice to Landlord within thirty (30) days of the datethat Landlord’s title has been divested of such property. If part of the Premises shall be Taken, and this Lease is not terminated as provided above, Landlordshall promptly restore the Premises and the Project as nearly as is commercially reasonable under the circumstances to their condition prior to such partialTaking and the rentable square footage of the Building, the rentable square footage of the Premises, Tenant’s Share of Operating Expenses and the Rent payablehereunder during the unexpired Term shall be reduced to such extent as may be fair and reasonable under the circumstances. Upon any such Taking,Landlord shall be entitled to receive the entire price or award from any such Taking without any payment to Tenant, and Tenant hereby assigns to LandlordTenant’s interest, if any, in such award. Tenant shall have the right, to the extent that same shall not diminish Landlord’s award, to make a separate claimagainst the condemning authority (but not Landlord) for such 33compensation as may be separately awarded or recoverable by Tenant for moving expenses and damage to Tenant’s trade fixtures, if a separate award for suchitems is made to Tenant. Tenant hereby waives any and all rights it might otherwise have pursuant to any provision of state law to terminate this Lease upon apartial Taking of the Premises or the Project.ARTICLE 16EVENTS OF DEFAULT16.1 Events of Default. Each of the following events shall be a default (“Default”) by Tenant under this Lease:(a) Payment Defaults. Tenant shall fail to pay any installment of Rent or any other payment hereunder when due and such default shallcontinue for more than five (5) Business Days after written notice from Landlord.(b) Insurance. Any insurance required to be maintained by Tenant pursuant to this Lease shall be canceled or terminated or shall expire or shallbe reduced or materially changed, or Landlord shall receive a notice of nonrenewal of any such insurance and Tenant shall fail to replace such insurance atleast 20 days before the expiration of the current coverage.(c) Abandonment. Tenant shall no longer conduct any of its business operations in the Premises.(d) Improper Transfer. Tenant shall assign, sublease or otherwise transfer all or any portion of Tenant’s interest in this Lease or the Premisesexcept as expressly permitted herein, or Tenant’s interest in this Lease shall be attached, executed upon, or otherwise judicially seized and such action is notreleased within 90 days of the action.(e) Liens. Tenant shall fail to discharge or otherwise obtain the release of any lien placed upon the Premises in violation of this Lease within 15days after written notice from Landlord.(f) Insolvency Events. Tenant or any guarantor or surety of Tenant’s obligations hereunder shall: (A) make a general assignment for the benefit ofcreditors; (B) commence any case, proceeding or other action seeking to have an order for relief entered on its behalf as a debtor or to adjudicate it a bankruptor insolvent, or seeking reorganization, arrangement, adjustment, liquidation, dissolution or composition of it or its debts or seeking appointment of a receiver,trustee, custodian or other similar official for it or for all or of any substantial part of its property (collectively a “Proceeding for Relief”); (C) become thesubject of any Proceeding for Relief which is not dismissed within 90 days of its filing or entry; or (D) die or suffer a legal disability (if Tenant, guarantor, orsurety is an individual) or be dissolved or otherwise fail to maintain its legal existence (if Tenant, guarantor or surety is a corporation, partnership or otherentity).(g) Estoppel Certificate or Subordination Agreement. Tenant fails to execute any document required from Tenant under Article 18 or 19within 5 Business Days after a second notice requesting such document. 34(h) Other Defaults. Tenant shall fail to comply with any provision of this Lease other than those specifically referred to in this Section, and,except as otherwise expressly provided herein, such failure shall continue for a period of 30 days after written notice thereof from Landlord to Tenant.Any notice given pursuant to this Section hereof shall: (i) specify the alleged default, (ii) demand that Tenant cure such default, (iii) be in lieu of, andnot in addition to, or shall be deemed to be, any notice required under any provision of applicable law, and (iv) not be deemed a forfeiture or a termination ofthis Lease unless Landlord elects otherwise in such notice; provided that if the nature of Tenant’s default pursuant to this Section is such that it cannot becured by the payment of money and reasonably requires more than 30 days to cure, then Tenant shall not be deemed to be in default if Tenant commencessuch cure within said 30 day period and thereafter diligently prosecutes the same to completion; provided, however, that such cure shall be completed no laterthan 90 days from the date of Landlord’s notice.16.2 Landlord’s Remedies.(a) Payment By Landlord; Interest. Upon a Default by Tenant hereunder, Landlord may, without waiving or releasing any obligation ofTenant hereunder, make such payment or perform such act. All sums so paid or incurred by Landlord, together with interest thereon, from the date suchsums were paid or incurred, at the Default Rate, shall be payable to Landlord on demand as Additional Rent.(b) Late Payment Rent. Late payment by Tenant to Landlord of Rent and other sums due will cause Landlord to incur costs not contemplatedby this Lease, the exact amount of which will be extremely difficult and impracticable to ascertain. Such costs include, but are not limited to, processing andaccounting charges and late charges which may be imposed on Landlord under any Mortgage covering the Premises. Therefore, if any installment of Rent duefrom Tenant is not received by Landlord within 5 days after the date such payment is due, Tenant shall pay to Landlord an additional sum equal to 5% of theoverdue Rent as a late charge. The parties agree that this late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of latepayment by Tenant. In addition to the late charge, Rent not paid when due shall bear interest at the Default Rate from the 5th day after the date due until paid.(c) Remedies. Upon the occurrence of a Default, Landlord, at its option, without further notice or demand to Tenant, shall have in addition to allother rights and remedies provided in this Lease, at law or in equity, the option to pursue any one or more of the following remedies, each and all of whichshall be cumulative and nonexclusive, without any notice or demand whatsoever.(i) Terminate this Lease, or at Landlord’s option, Tenant’s right to possession only, in which event Tenant shall immediately surrender thePremises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearagesin rent, enter upon and take possession of the Premises in compliance with applicable Legal Requirements and expel or remove Tenant and any otherperson who may be occupying the Premises or any part thereof, without being liable for prosecution or any claim for damages therefor unless suchprocess is accomplished by Landlord in violation of applicable Legal Requirements; 35(ii) Upon any termination of this Lease, whether pursuant to the foregoing subsection (i) or otherwise, Landlord may recover from Tenantthe following:(A) The worth at the time of award of any unpaid Rent which has been earned at the time of such termination; plus(B) The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination untilthe time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus(C) The worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of awardexceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus(D) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform itsobligations under this Lease or which in the ordinary course of things would be likely to result therefrom, specifically including, but notlimited to, brokerage commissions and advertising expenses incurred, expenses of remodeling the Premises or any portion thereof for anew tenant, whether for the same or a different use, and any special concessions made to obtain a new tenant; and(E) At Landlord’s election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time byapplicable law.As used in the foregoing subsection (c)(ii) (A) and (B), the “worth at the time of award” shall be computed by allowing interest at the DefaultRate. As used in subsection (c)(ii)(C) above, the “worth at the time of award” shall be computed by discounting such amount at the discount rate ofthe Federal Reserve Bank of Boston at the time of award plus 1%.(iii) Landlord may continue this Lease in effect after Tenant’s Default and recover Rent as it becomes due (Landlord and Tenant herebyagreeing that Tenant has the right to sublet or assign hereunder, subject only to reasonable limitations). Accordingly, if Landlord does not elect toterminate this Lease following a Default by Tenant, Landlord may, from time to time, without terminating this Lease, enforce all of its rights andremedies hereunder, including the right to recover all Rent as it becomes due. 36(iv) Intentionally Deleted.(v) Independent of the exercise of any other remedy of Landlord hereunder or under applicable law, upon the occurrence of a monetaryDefault or Default pertaining to Tenant’s failure to comply with the requirements of Article 21, Landlord may conduct an environmental test of thePremises as generally described in Section 21.4 hereof, at Tenant’s expense.Notwithstanding anything to the contrary contained herein, in no event shall Tenant ever be liable to Landlord for any special, indirect, consequential orpunitive damages under this Lease except as may arise in connection with Tenant’s holding over of the Premises as set forth in Article 25.(d) Effect of Exercise. Exercise by Landlord of any remedies hereunder or otherwise available shall not be deemed to be an acceptance ofsurrender of the Premises and/or a termination of this Lease by Landlord, it being understood that such surrender and/or termination can be effected only bythe express written agreement of Landlord and Tenant. Any law, usage, or custom to the contrary notwithstanding, Landlord shall have the right at all times toenforce the provisions of this Lease in strict accordance with the terms hereof; and the failure of Landlord at any time to enforce its rights under this Leasestrictly in accordance with same shall not be construed as having created a custom in any way or manner contrary to the specific terms, provisions, andcovenants of this Lease or as having modified the same and shall not be deemed a waiver of Landlord’s right to enforce one or more of its rights in connectionwith any subsequent default. A receipt by Landlord of Rent or other payment with knowledge of the breach of any covenant hereof shall not be deemed awaiver of such breach, and no waiver by Landlord of any provision of this Lease shall be deemed to have been made unless expressed in writing and signedby Landlord. To the greatest extent permitted by law, Tenant waives all right of redemption in case Tenant shall be dispossessed by a judgment or by warrantof any court or judge. Any reletting of the Premises or any portion thereof shall be on such terms and conditions as Landlord in its sole discretion maydetermine. Landlord shall not be liable for, nor shall Tenant’s obligations hereunder be diminished because of, Landlord’s failure to relet the Premises or collectrent due in respect of such reletting or otherwise to mitigate any damages arising by reason of Tenant’s Default.ARTICLE 17ASSIGNMENT AND SUBLETTING17.1 General Prohibition. Without Landlord’s prior written consent which shall not be unreasonably withheld, conditioned or delayed subject to andon the conditions described in this Section, Tenant shall not, directly or indirectly, voluntarily or by operation of law, assign this Lease or sublease thePremises or any part thereof or mortgage, pledge, or hypothecate its leasehold interest or grant any concession or license within the Premises, and any attemptto do any of the foregoing shall be void and of no effect.17.2 Permitted Transfers. If Tenant desires to assign, sublease, hypothecate or otherwise transfer this Lease or sublet the Premises other thanpursuant to a Permitted Assignment (as defined below), then at least 15 Business Days, but not more than 45 Business Days, before the date Tenant desiresthe assignment or sublease to be effective (the “Assignment Date”), Tenant shall give Landlord a notice (the “Assignment Notice”) containing suchinformation about the 37proposed assignee or sublessee, including the proposed use of the Premises and any Hazardous Materials proposed to be used, stored handled, treated,generated in or released or disposed of from the Premises, the Assignment Date, any relationship between Tenant and the proposed assignee or sublessee, andall material terms and conditions of the proposed assignment or sublease, including a copy of any proposed assignment or sublease in its final form, and suchother information as Landlord may deem reasonably necessary or appropriate to its consideration whether to grant its consent. Landlord may, by givingwritten notice to Tenant within 10 Business Days after receipt of the Assignment Notice: (i) grant such consent, or (ii) refuse such consent, in its reasonablediscretion; or (iii) terminate this Lease with respect to the space described in the Assignment Notice as of the Assignment Date (an “AssignmentTermination”). Among other reasons, it shall be reasonable for Landlord to withhold its consent in any of these instances: (1) the proposed assignee orsubtenant is a governmental agency; (2) in Landlord’s reasonable judgment, the use of the Premises by the proposed assignee or subtenant would entail anyAlterations that would substantially lessen the value of the leasehold improvements in the Premises, or would require substantially increased services byLandlord; (3) in Landlord’s reasonable judgment, the proposed assignee or subtenant lacks the creditworthiness to support the financial obligations it willincur under the proposed assignment (4) in Landlord’s reasonable judgment, the business of the proposed assignee or subtenant is inconsistent with the typeand quality of the nature of the Building; (5) the use of the Premises by the proposed assignee or subtenant will violate any applicable Legal Requirement;(6) Landlord has experienced previous defaults by or is in litigation with the proposed assignee or subtenant; or (7) the proposed assignee or subtenant is anexisting tenant in the Building and Landlord has, or within a reasonable time frame will have, vacant space of comparable size, or a prospective tenant withwhom Landlord has been in negotiations within the previous six (6) months; or (8) if the assignment or subletting concerns more than 50% of the Premises,the net worth (as determined in accordance with generally accepted accounting principles) of the proposed assignee or subtenant is less than $10,000,000. IfLandlord delivers notice of its election to exercise an Assignment Termination, Tenant shall have the right to withdraw such Assignment Notice by writtennotice to Landlord of such election within 5 Business Days after Landlord’s notice electing to exercise the Assignment Termination. If Tenant withdraws suchAssignment Notice, this Lease shall continue in full force and effect. If Tenant does not withdraw such Assignment Notice, this Lease, and the term and estateherein granted, shall terminate as of the Assignment Date with respect to the space described in such Assignment Notice. No failure of Landlord to exercise anysuch option to terminate this Lease, or to deliver a timely notice in response to the Assignment Notice, shall be deemed to be Landlord’s consent to the proposedassignment, sublease or other transfer. Tenant shall reimburse Landlord for its reasonable, out of pocket costs in connection with its consideration of anyAssignment Notice and/or its preparation or review of any consent documents (provided that such expenses shall not exceed $5,000 in any one instance withrespect to the approval of any assignments or sublets unless such assignment or sublease does not occur in the ordinary course of business (e.g. is inconnection with a bankruptcy or reorganization of tenant), involves additional documentation beyond Landlord’s customary form of consent or significantnegotiation of the same, or Landlord provides unusual or extraordinary services in connection therewith).Notwithstanding the foregoing, Landlord’s consent to an assignment of this Lease or a subletting of any portion of the Premises to any entity controlling,controlled by or under common control with Tenant (a “Control Permitted Assignment”) shall not be required, provided that Landlord shall have the right toapprove the form of any such sublease or assignment. In addition, 38Tenant shall have the right to assign this Lease, upon prior written notice to Landlord but without obtaining Landlord’s prior written consent, to a corporationor other entity which is a successor-in-interest to Tenant, by way of merger, consolidation or corporate reorganization, or by the purchase of all or substantiallyall of the assets or the ownership interests of Tenant provided that (i) such merger or consolidation, or such acquisition or assumption, as the case may be, isfor a good business purpose and not principally for the purpose of transferring the Lease, and (ii) the net worth (as determined in accordance with generallyaccepted accounting principles (“GAAP”)) of the assignee is not less than the greater of the net worth (as determined in accordance with GAAP) of Tenant asof the date of this Lease or the date of Tenant’s most current quarterly or annual financial statements, and (iii) such assignee shall agree in writing to assumeall of the terms, covenants and conditions of this Lease arising after the effective date of the assignment (a “Corporate Permitted Assignment”). ControlPermitted Assignments and Corporate Permitted Assignments are hereinafter referred to as “Permitted Assignments.”Notwithstanding anything to the contrary in this Article, Tenant shall have the right to obtain financing from investors (including venture capitalfunding and corporate partners) which invest in private companies or undergo a public offering which results in a change in control of Tenant without suchchange of control constituting an assignment under this Section requiring Landlord consent, provided that (i) Tenant notifies Landlord in writing of thefinancing prior to the closing of the financing (or, if prohibited from so notifying Landlord by Legal Requirements or other contractual confidentialityobligations, then promptly thereafter), and (ii) provided that in no event shall such financing result in a change in use of the Premises from the usecontemplated by Tenant at the commencement of the Term.17.3 Additional Conditions. As a condition to any such assignment or subletting, whether or not Landlord’s consent is required, Landlord mayrequire:(i) that any assignee or subtenant agree, in writing at the time of such assignment or subletting, that if Landlord gives such party notice thatTenant is in Default under this Lease, such party shall thereafter make all payments otherwise due Tenant directly to Landlord, which payments will bereceived by Landlord without any liability except to credit such payment against those due under the Lease, and any such third party shall agree to attorn toLandlord or its successors and assigns should this Lease be terminated for any reason; provided, however, in no event shall Landlord or its successors orassigns be obligated to accept such attornment; and(ii) A list of Hazardous Materials, certified by the proposed assignee or sublessee to be true and correct, which the proposed assignee or sublesseeintends to use, store, handle, treat, generate in or release or dispose of from the Premises, together with copies of all documents relating to such use, storage,handling, treatment, generation, release or disposal of Hazardous Materials by the proposed assignee or subtenant in the Premises or on the Project, prior to theproposed assignment or subletting, including, without limitation: permits; approvals; reports and correspondence; storage and management plans; plansrelating to the installation of any storage tanks to be installed in or under the Project (provided, said installation of tanks shall only be permitted after Landlordhas given its written consent to do so, which consent may be withheld in Landlord’s sole and absolute discretion); and all closure plans or any otherdocuments required by any and all federal, state and local Governmental Authorities for any storage tanks 39installed in, on or under the Project for the closure of any such tanks. Neither Tenant nor any such proposed assignee or subtenant is required, however, toprovide Landlord with any portion(s) of the such documents containing information of a proprietary nature which, in and of themselves, do not contain areference to any Hazardous Materials or hazardous activities.17.4 No Release of Tenant, Sharing of Excess Rents. Notwithstanding any assignment or subletting, Tenant shall at all times remain fully andprimarily responsible and liable for the payment of Rent and for compliance with all of Tenant’s other obligations under this Lease. If the Rent due and payableby a sublessee or assignee (or a combination of the rental payable under such sublease or assignment plus any bonus or other consideration therefor or incidentthereto in any form) exceeds the sum of the rental payable under this Lease, (excluding however, any Rent payable under this Section) and actual andreasonable brokerage fees, legal costs and any design or construction fees directly related to and required pursuant to the terms of any such sublease and anyunamortized tenant improvement expenses paid by Tenant in excess of Landlord’s Contribution) (“Excess Rent”), then Tenant shall be bound and obligated topay Landlord as Additional Rent hereunder 50% of such Excess Rent within 10 days following receipt thereof by Tenant. If Tenant shall sublet the Premises orany part thereof, Tenant hereby immediately and irrevocably assigns to Landlord, as security for Tenant’s obligations under this Lease, all rent from anysuch subletting, and Landlord as assignee and as attorney-in-fact for Tenant, or a receiver for Tenant appointed on Landlord’s application, may collect suchrent and apply it toward Tenant’s obligations under this Lease; except that, until the occurrence of a Default, Tenant shall have the right to collect and retainsuch rent.17.5 No Waiver. The consent by Landlord to an assignment or subletting shall not relieve Tenant or any assignees of this Lease or any sublessees ofthe Premises from obtaining the consent of Landlord to any further assignment or subletting nor shall it release Tenant or any assignee or sublessee of Tenantfrom full and primary liability under the Lease. The acceptance of Rent hereunder, or the acceptance of performance of any other term, covenant, or conditionthereof, from any other person or entity shall not be deemed to be a waiver of any of the provisions of this Lease or a consent to any subletting, assignment orother transfer of the Premises.17.6 Prior Conduct of Proposed Transferee. Notwithstanding any other provision of this Section, if the proposed assignee or sublessee hasoperations in the Commonwealth of Massachusetts that are or have been subject to an enforcement order issued by any Governmental Authority and suchoperations are substantially comparable to the operations proposed by the assignee or sublessee for the Premises in connection with the use, storage, handling,treatment, generation, release or disposal of Hazardous Materials (including, without limitation, any order related to the failure to make a required reporting toany Governmental Authority) pertaining to a use similar to the Permitted Use, Landlord shall have the absolute right to refuse to consent to any assignment orsubletting to any such party.ARTICLE 18ESTOPPEL CERTIFICATE18.1 Estoppel Certificate. Tenant shall, within 10 Business Days of written notice from Landlord, execute, acknowledge and deliver a statement toLandlord, or any prospective purchaser or lender, in writing (i) certifying that this Lease is unmodified and in full force and effect (or, if 40modified, stating the nature of such modification and certifying that this Lease as so modified is in full force and effect) and the dates to which the rental andother charges are paid in advance, if any, (ii) acknowledging whether or not any uncured defaults exist on the part of Landlord hereunder, or specifying suchdefaults if any are claimed, and (iii) setting forth such further information with respect to the status of this Lease or the Premises as may be requested thereon.Any such statement may be relied upon by any prospective purchaser or encumbrancer of all or any portion of the real property of which the Premises are apart. Tenant’s failure to deliver such statement within such time shall, at the option of Landlord, constitute a Default under this Lease, and, in any event,shall be conclusive upon Tenant that the Lease is in full force and effect and without modification except as may be represented by Landlord in any certificateprepared by Landlord and delivered to Tenant for execution. Landlord shall, within 10 Business Days of written notice from Tenant, execute, acknowledgeand deliver a comparable statement to Tenant.ARTICLE 19SUBORDINATION19.1 Subordination. This Lease and Tenant’s interest and rights hereunder are hereby made and shall be subject and subordinate at all times to the lienof any Mortgage now existing or hereafter created on or against the Project or the Premises, and all amendments, restatements, renewals, modifications,consolidations, refinancing, assignments and extensions thereof, provided that the Holder of such Mortgage delivers to Tenant a subordination, non-disturbance and attornment agreement on such holder’s standard and customary form provided that such holder is an institutional lender or investor. Tenantagrees, at the election of the Holder of any such Mortgage, to attorn to any such Holder. Notwithstanding the foregoing, any such Holder may at any timesubordinate its Mortgage to this Lease, without Tenant’s consent, by notice in writing to Tenant, and thereupon this Lease shall be deemed prior to suchMortgage without regard to their respective dates of execution, delivery or recording and in that event such Holder shall have the same rights with respect to thisLease as though this Lease had been executed prior to the execution, delivery and recording of such Mortgage and had been assigned to such Holder. The term“Mortgage” whenever used in this Lease shall be deemed to include deeds of trust, security assignments and any other encumbrances, and any reference tothe “Holder” of a Mortgage shall be deemed to include the beneficiary under a deed of trust.ARTICLE 20SURRENDER20.1 Surrender. Upon the expiration of the Term or earlier termination of Tenant’s right of possession, Tenant shall surrender the Premises to Landlordin the condition the Premises are required to be maintained during the Term, along with any Alterations or Installations permitted by Landlord to remain in thePremises pursuant to the provisions of this Lease, free of Hazardous Materials brought upon, kept, used, stored, handled, treated, generated in, or released ordisposed of from, the Premises by Tenant or any Tenant Party or subtenant (collectively, “Tenant HazMat Operations”) and released of all HazardousMaterials Clearances, broom clean, ordinary wear and tear and casualty loss and condemnation covered by Sections 14 and 15 excepted. At least 3 monthsprior to the surrender of the Premises, Tenant shall deliver to Landlord a narrative description of the actions proposed (or required by any GovernmentalAuthority) to be taken by Tenant in order to surrender the Premises (including any Installations permitted by Landlord to 41remain in the Premises) at the expiration or earlier termination of the Term, free from any residual impact from the Tenant HazMat Operations and otherwisereleased for unrestricted use and occupancy (the “Surrender Plan”). Such Surrender Plan shall be accompanied by a current listing of (i) all HazardousMaterials licenses and permits held by or on behalf of any Tenant Party with respect to the Premises, and (ii) all Hazardous Materials used, stored, handled,treated, generated, released or disposed of from the Premises, and shall be subject to the review and approval of Landlord’s environmental consultant. Inconnection with the review and approval of the Surrender Plan, upon the request of Landlord, Tenant shall deliver to Landlord or its consultant suchadditional non-proprietary information concerning Tenant HazMat Operations as Landlord shall request. On or before such surrender, Tenant shall deliver toLandlord evidence that the approved Surrender Plan shall have been satisfactorily completed and Landlord shall have the right, subject to reimbursement atTenant’s expense as set forth below, to cause Landlord’s environmental consultant to inspect the Premises and perform such additional procedures as may bedeemed reasonably necessary to confirm that the Premises are, as of the effective date of such surrender or early termination of the Lease, free from anyresidual impact from Tenant HazMat Operations. Tenant shall reimburse Landlord, as Additional Rent, for the actual out-of pocket expense incurred byLandlord for Landlord’s environmental consultant to review and approve the Surrender Plan and to visit the Premises and verify satisfactory completion of thesame, which cost shall not exceed $5,000. Landlord shall have the unrestricted right to deliver such Surrender Plan and any report by Landlord’senvironmental consultant with respect to the surrender of the Premises to third parties.If Tenant shall fail to prepare or submit a Surrender Plan approved by Landlord, or if Tenant shall fail to complete the approved Surrender Plan, or ifsuch Surrender Plan, whether or not approved by Landlord, shall fail to adequately address any residual effect of Tenant HazMat Operations in, on or aboutthe Premises, Landlord shall have the right to take such actions as Landlord may deem reasonable or appropriate to assure that the Premises and the Project aresurrendered free from any residual impact from Tenant HazMat Operations, the cost of which actions shall be reimbursed by Tenant as Additional Rent,without regard to the limitation set forth in the first paragraph of this Section.Tenant shall immediately return to Landlord all keys and/or access cards to parking, the Project, restrooms or all or any portion of the Premisesfurnished to or otherwise procured by Tenant. If any such access card or key is lost, Tenant shall pay to Landlord, at Landlord’s election, either the cost ofreplacing such lost access card or key or the cost of reprogramming the access security system in which such access card was used or changing the lock orlocks opened by such lost key. Any Tenant’s Property, Alterations and property not so removed by Tenant as permitted or required herein shall be deemedabandoned and may be stored, removed, and disposed of by Landlord at Tenant’s expense, and Tenant waives all claims against Landlord for any damagesresulting from Landlord’s retention and/or disposition of such property. All obligations of Tenant hereunder not fully performed as of the termination of theTerm, including the obligations of Tenant under Article 21 hereof, shall survive the expiration or earlier termination of the Term, including, without limitation,indemnity obligations, payment obligations with respect to Rent and obligations concerning the condition and repair of the Premises. 42ARTICLE 21ENVIRONMENTAL REQUIREMENTS21.1 Prohibition/Compliance/Indemnity. Tenant shall not cause or permit any Hazardous Materials (as hereinafter defined) to be brought upon, kept,used, stored, handled, treated, generated in or about, or released or disposed of from, the Premises or the Project in violation of applicable EnvironmentalRequirements (as hereinafter defined) by Tenant or any Tenant Party or subtenant. If Tenant breaches the obligation stated in the preceding sentence, or if thepresence of Hazardous Materials in the Premises is caused or permitted by Tenant or any Tenant Party during the Term or any holding over results incontamination of the Premises, the Project or any adjacent property, or if contamination of the Premises, the Project or any adjacent property by HazardousMaterials brought into, kept, used, stored, handled, treated, generated in or about, or released or disposed of from, the Premises by Tenant or any TenantParty or subtenant otherwise occurs during the Term or any holding over, Tenant hereby indemnifies and shall defend and hold Landlord, its officers,directors, employees, agents and contractors harmless from any and all actions (including, without limitation, remedial or enforcement actions of any kind,administrative or judicial proceedings, and orders or judgments arising out of or resulting therefrom), costs, claims, damages (including, without limitation,punitive damages and damages based upon diminution in value of the Premises or the Project, or the loss of, or restriction on, use of the Premises or anyportion of the Project), expenses (including, without limitation, attorneys’, consultants’ and experts’ fees, court costs and amounts paid in settlement of anyclaims or actions), fines, forfeitures or other civil, administrative or criminal penalties, injunctive or other relief (whether or not based upon personal injury,property damage, or contamination of, or adverse effects upon, the environment, water tables or natural resources), liabilities or losses (collectively,“Environmental Claims”) which arise during or after the Term as a result of such contamination. This indemnification of Landlord by Tenant includes,without limitation, costs incurred in connection with any investigation of site conditions or any cleanup, treatment, remedial, removal, or restoration workrequired by any federal, state or local Governmental Authority because of Hazardous Materials present in the air, soil or ground water above, on, or under thePremises. Without limiting the foregoing, if the presence of any Hazardous Materials on the Premises, the Project or any adjacent property caused or permittedby Tenant or any Tenant Party results in any contamination of the Premises, the Project or any adjacent property, Tenant shall promptly take all actions at itssole expense and in accordance with applicable Environmental Requirements as are necessary to return the Premises, the Project or any adjacent property to thecondition existing prior to the time of such contamination, provided that Landlord’s approval of such action shall first be obtained, which approval shall notunreasonably be withheld so long as such actions would not potentially have any material adverse long-term or short-term effect on the Premises or the Project.Notwithstanding anything to the contrary contained in this Section 20, Tenant shall not be responsible for, and the indemnification and hold harmlessobligation set forth in this paragraph shall not apply to (i) contamination in the Premises which existed in the Premises prior to the Commencement Date, or(ii) the presence of any Hazardous Materials in the Premises which migrated from outside of the Premises into the Premises, or (iii) contamination caused byLandlord or any Landlord Party. 4321.2 Business. Landlord acknowledges that it is not the intent of this Section to prohibit Tenant from using the Premises for the Permitted Use. Tenantmay operate its business according to prudent industry practices so long as the use or presence of Hazardous Materials is strictly and properly monitoredaccording to all then applicable Environmental Requirements. As a material inducement to Landlord to allow Tenant to use Hazardous Materials in connectionwith its business, Tenant agrees to deliver to Landlord prior to the Lease Commencement Date a list identifying each type of Hazardous Materials to be broughtupon, kept, used, stored, handled, treated, generated on, or released or disposed of from, the Premises and setting forth any and all governmental approvals orpermits required in connection with the presence, use, storage, handling, treatment, generation, release or disposal of such Hazardous Materials on or from thePremises (“Hazardous Materials List”). Tenant shall deliver to Landlord an updated Hazardous Materials List at least once a year and shall also deliver anupdated list before any new Hazardous Material is brought onto, kept, used, stored, handled, treated, generated on, or released or disposed of from, thePremises. Tenant shall deliver to Landlord true and correct copies of the following documents (the “Haz Mat Documents”) relating to the use, storage,handling, treatment, generation, release or disposal of Hazardous Materials prior to the Lease Commencement Date, or if unavailable at that time, concurrentwith the receipt from or submission to a Governmental Authority: permits; approvals; reports and correspondence; storage and management plans, notice ofviolations of any Legal Requirements; plans relating to the installation of any storage tanks to be installed in the Project (provided, said installation of tanksshall only be permitted in compliance with the applicable Legal Requirements and subject to any reasonable conditions or requirements imposed by Landlord);all closure plans or any other documents required by any and all federal, state and local Governmental Authorities for any storage tanks installed in, on orunder the Project for the closure of any such tanks; and a Surrender Plan (to the extent surrender in accordance with Article 20 cannot be accomplished in 3months). Tenant is not required, however, to provide Landlord with any portion(s) of the Haz Mat Documents containing information of a proprietary naturewhich, in and of themselves, do not contain a reference to any Hazardous Materials or hazardous activities. It is not the intent of this Section to provideLandlord with information which could be detrimental to Tenant’s business should such information become possessed by Tenant’s competitors.21.3 Tenant Representation and Warranty. Tenant hereby represents and warrants to Landlord that (i) neither Tenant nor any of its legalpredecessors has been required by any prior landlord, lender or Governmental Authority at any time to take remedial action in connection with HazardousMaterials contaminating a property which contamination was permitted by Tenant of such predecessor or resulted from Tenant’s or such predecessor’s actionor use of the property in question, and (ii) Tenant is not subject to any enforcement order issued by any Governmental Authority in connection with the use,storage, handling, treatment, generation, release or disposal of Hazardous Materials (including, without limitation, any order related to the failure to make arequired reporting to any Governmental Authority). If Landlord determines that this representation and warranty was not true as of the date of this lease,Landlord shall have the right to terminate this Lease in Landlord’s sole and absolute discretion.21.4 Testing. If any Governmental Authority requires testing to determine whether any contamination of the Premises or the Project has occurred as aresult of Tenant’s use, then Landlord shall have the right to conduct such testing at Tenant’s expense. If Tenant conducts its own tests of the Premises usingthird party contractors and test procedures acceptable to Landlord (and such Governmental Authority), which tests are certified to Landlord (and suchGovernmental Authority), Landlord shall accept such tests in lieu of the tests to be paid for by Tenant. In 44addition, at any time, and from time to time, prior to the expiration or earlier termination of the Term, Landlord shall have the right to conduct appropriate testsof the Premises and the Project to determine if contamination has occurred as a result of Tenant’s use of the Premises. In connection with such testing, upon therequest of Landlord, Tenant shall deliver to Landlord or its consultant such non-proprietary information concerning the use of Hazardous Materials in orabout the Premises by Tenant or any Tenant Party. If contamination has occurred for which Tenant is liable under this Section, Tenant shall pay all costs toconduct such tests. If no such contamination is found, Landlord shall pay the costs of such tests (which shall not constitute an Operating Expense). Landlordshall provide Tenant with a copy of all third party, non-confidential reports and tests of the Premises made by or on behalf of Landlord during the Termwithout representation or warranty and subject to a confidentiality agreement. Tenant shall, at its sole cost and expense, promptly and satisfactorily remediateany environmental conditions identified by such testing for which Tenant is responsible hereunder in accordance with all Environmental Requirements.Landlord’s receipt of or satisfaction with any environmental assessment in no way waives any rights which Landlord may have against Tenant.21.5 Control Areas. Tenant shall be allowed to utilize up to its pro rata share of the Hazardous Materials inventory within any control area or zone(located within the Premises), as designated by the applicable building code, for chemical use or storage. As used in the preceding sentence, Tenant’s pro ratashare of any control areas or zones located within the Premises shall be determined based on the rentable square footage that Tenant leases within the applicablecontrol area or zone. For purposes of example only, if a control area or zone contains 10,000 rentable square feet and 2,000 rentable square feet of a tenant’spremises are located within such control area or zone (while such premises as a whole contains 5,000 rentable square feet), the applicable tenant’s pro ratashare of such control area would be 20%.21.6 Intentionally Deleted.21.7 Tenant’s Obligations. Tenant’s obligations under this Section shall survive the expiration or earlier termination of the Lease. any period of timeafter the expiration or earlier termination of this Lease required by Tenant or Landlord to complete the removal from the Premises of any Hazardous Materials(including, without limitation, the release and termination of any licenses or permits restricting the use of the Premises and the completion of the approvedSurrender Plan), Tenant shall continue to pay the full Rent in accordance with this Lease for any portion of the Premises not relet by Landlord in Landlord’ssole discretion, which Rent shall be prorated daily.21.8 Definitions. As used herein, the term “Environmental Requirements” means all applicable present and future statutes, regulations, ordinances,rules, codes, judgments, orders or other similar enactments of any Governmental Authority regulating or relating to health, safety, or environmental conditionson, under, or about the Premises or the Project, or the environment, including without limitation, the following: the Comprehensive Environmental Response,Compensation and Liability Act; the Resource Conservation and Recovery Act; and all state and local counterparts thereto, and any regulations or policiespromulgated or issued thereunder. As used herein, the term “Hazardous Materials” means and includes any substance, material, waste, pollutant, orcontaminant listed or defined as hazardous or toxic (other than reasonable amounts of routine cleaning products), or regulated by reason of its impact orpotential impact on humans, 45animals and/or the environment under any Environmental Requirements, asbestos and petroleum, including crude oil or any fraction thereof, natural gasliquids, liquefied natural gas, or synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas). As defined in Environmental Requirements,Tenant is and shall be deemed to be the “operator” of Tenant’s “facility” and the “owner” of all Hazardous Materials brought on the Premises by Tenant orany Tenant Party, and the wastes, by-products, or residues generated, resulting, or produced therefrom.ARTICLE 22TENANT’S REMEDIES/LIMITATION OF LIABILITY22.1 Tenant’s Remedies/Limitation of Liability. Landlord shall not be in default hereunder unless Landlord fails to perform any of its obligationshereunder within 30 days after written notice from Tenant specifying such failure (unless such performance will, due to the nature of the obligation, require aperiod of time in excess of 30 days, then after such period of time as is reasonably necessary, provided that Landlord shall diligently and continuously pursuesuch cure). Upon any default by Landlord, Tenant shall give notice by registered or certified mail to any Holder of a Mortgage covering the Premises and toany landlord of any lease of property in or on which the Premises are located and Tenant shall offer such Holder and/or landlord a reasonable opportunity tocure the default, including time to obtain possession of the Project by power of sale or a judicial action if such should prove necessary to effect a cure;provided Landlord shall have furnished in advance to Tenant in writing the names and addresses of all such persons who are to receive such notices. Allobligations of Landlord hereunder shall be construed as covenants, not conditions; and, except as may be otherwise expressly provided in this Lease, Tenantmay not terminate this Lease for breach of Landlord’s obligations hereunder.All obligations of Landlord under this Lease arising or accruing during the period of such Landlord’s ownership of the Premises, and not thereafter, willbe binding upon Landlord. The term “Landlord” in this Lease shall mean only the owner for the time being of the Premises. Upon the transfer by such ownerof its interest in the Premises, such owner shall thereupon be released and discharged from all obligations of Landlord thereafter accruing, but such obligationsshall be binding during the Term upon each new owner for the duration of such owner’s ownership.22.2 Limitation on Landlord’s Liability. NOTWITHSTANDING ANYTHING SET FORTH HEREIN OR IN ANY OTHER AGREEMENTBETWEEN LANDLORD AND TENANT TO THE CONTRARY: (A) EXCEPT TO THE EXTENT ARISING AS A RESULT OF THE NEGLIGENCEOR WILLFUL MISCONDUCT OF LANDLORD OR ANY LANDLORD PARTY, LANDLORD SHALL NOT BE LIABLE TO TENANT OR ANYOTHER PERSON FOR (AND TENANT AND EACH SUCH OTHER PERSON ASSUME ALL RISK OF) LOSS, DAMAGE OR INJURY, TO:TENANT’S PERSONAL PROPERTY OF EVERY KIND AND DESCRIPTION, INCLUDING, WITHOUT LIMITATION TRADE FIXTURES,EQUIPMENT, INVENTORY, SCIENTIFIC RESEARCH, SCIENTIFIC EXPERIMENTS, LABORATORY ANIMALS, PRODUCT, SPECIMENS,SAMPLES, AND/OR SCIENTIFIC, BUSINESS, ACCOUNTING AND OTHER RECORDS OF EVERY KIND AND DESCRIPTION KEPT AT THEPREMISES AND ANY AND ALL INCOME DERIVED OR DERIVABLE THEREFROM; (B) THERE SHALL BE NO PERSONAL RECOURSE TOLANDLORD FOR ANY ACT OR OCCURRENCE IN, ON OR ABOUT THE PREMISES OR ARISING IN ANY WAY UNDER THIS LEASE OR ANYOTHER 46AGREEMENT BETWEEN LANDLORD AND TENANT WITH RESPECT TO THE SUBJECT MATTER HEREOF AND ANY LIABILITY OFLANDLORD HEREUNDER SHALL BE STRICTLY LIMITED SOLELY TO LANDLORD’S INTEREST IN THE PROJECT OR ANY PROCEEDSFROM SALE OR CONDEMNATION THEREOF AND ANY INSURANCE PROCEEDS PAYABLE IN RESPECT OF LANDLORD’S INTEREST INTHE PROJECT OR IN CONNECTION WITH ANY SUCH LOSS; AND (C) IN NO EVENT SHALL ANY PERSONAL LIABILITY BE ASSERTEDAGAINST LANDLORD IN CONNECTION WITH THIS LEASE NOR SHALL ANY RECOURSE BE HAD TO ANY OTHER PROPERTY ORASSETS OF LANDLORD OR ANY OF LANDLORD’S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR CONTRACTORS. UNDER NOCIRCUMSTANCES SHALL LANDLORD OR ANY OF LANDLORD’S OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR CONTRACTORSBE LIABLE FOR INJURY TO TENANT’S BUSINESS OR FOR ANY LOSS OF INCOME OR PROFIT THEREFROM. NOTWITHSTANDINGANYTHING TO THE CONTRARY CONTAINED HEREIN, IN NO EVENT SHALL LANDLORD EVER BE LIABLE TO TENANT FOR ANYSPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES UNDER THIS LEASEARTICLE 23INSPECTION AND ACCESS23.1 Inspection and Access. Landlord and its agents, representatives, and contractors may enter the Premises during business hours on not less than48 hours advance written notice (except in the case of emergencies in which case no such notice shall be required and such entry may be at any time) for thepurpose of making such repairs as may be required or permitted pursuant to the Lease, inspecting the Premises, showing the Premises to prospectivepurchasers or lenders and, during the last year of the Term, to prospective tenants, and at any time during the Term for any other business purpose.Notwithstanding the foregoing, Landlord acknowledges that the Premises may contain confidential proprietary information and research and laboratoryexperiments. Accordingly, Tenant may elect to have a Tenant representative accompany any such tours with prospective purchasers, tenants or lenders. IfTenant does not so elect to have a representative accompany the tour within 24 hours after receiving Landlord’s notice, Tenant shall be deemed to have waiversuch right.Landlord may grant easements, make public dedications, designate Common Areas and create restrictions pertaining to the Project, provided that nosuch easement, dedication, designation or restriction materially, adversely affects Tenant’s use or occupancy of the Premises for the Permitted Use. AtLandlord’s request, Tenant shall execute such instruments as may be necessary for such easements, dedications or restrictions. Tenant shall at all times,except in the case of emergencies, have the right to escort Landlord or its agents, representatives, contractors or guests while the same are in the Premises,provided such escort does not materially and adversely affect Landlord’s access rights hereunder 47ARTICLE 24SIGNAGE24.1 Signs; Exterior Appearance. Tenant shall not, without the prior written consent of Landlord, which may be granted or withheld in Landlord’ssole but reasonable discretion: (i) attach any awnings, exterior lights, decorations, balloons, flags, pennants, banners, painting or other projection to anyoutside wall of the Project, (ii) use any curtains, blinds, shades or screens other than Landlord’s standard window coverings, (iii) coat or otherwise sunscreenthe interior or exterior of any windows, (iv) place any bottles, parcels, or other articles on the window sills, (v) place any equipment, furniture or other items ofpersonal property on any exterior balcony, or (vi) paint, affix or exhibit on any part of the Premises or the Project any signs, notices, window or door lettering,placards, decorations, or advertising media of any type which can be viewed from the exterior of the Building. Landlord shall provide at Landlord’s expensebuilding standard signage in the lobby and at Tenant’s entrance. Notwithstanding the foregoing, if Tenant occupies the entire floor, Tenant may install atTenant’s expense Tenant’s signage in the elevator lobby in a size and location to be determined and subject to Landlord’s approval which will not beunreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, provided that Tenant occupies at least the entire third floor, and subject to therights of Foundation Medicine, Tenant shall have a non-exclusive right to install at Tenant’s expense exterior signage on the Building façade in a location andwith a design, size and operation subject to Landlord’s approval which shall not be unreasonably conditioned, withheld or delayed, and subject to theapplicable Legal Requirements of the City of Cambridge. Tenant shall be responsible for all costs relating to the permitting, installation and maintenance of thesignage. Tenant shall remove any such signage, and repair any damage caused by such removal, prior to the expiration or earlier termination of this Lease.ARTICLE 25HOLDING OVER25.1 Holding Over. If, with Landlord’s express written consent, Tenant retains possession of the Premises after the termination of the Term, (i) unlessotherwise agreed in such written consent, such possession shall be subject to immediate termination by Landlord at any time, (ii) all of the other terms andprovisions of this Lease shall remain in full force and effect (excluding any expansion or renewal option or other similar right or option) during such holdoverperiod, (iii) Tenant shall continue to pay Base Rent in the amount payable upon the date of the expiration or earlier termination of this Lease, and (iv) all otherpayments shall continue under the terms of this Lease. If Tenant remains in possession of the Premises after the expiration or earlier termination of the Termwithout the express written consent of Landlord, Tenant shall become a tenant at sufferance upon the terms of this Lease except that the monthly rental shall beequal to 150% of Base Rent in effect during the last 30 days of the Term, plus all other Additional Rent hereunder, and Tenant shall be responsible for alldamages suffered by Landlord resulting from or occasioned by Tenant’s holding over, including consequential damages. No holding over by Tenant, whetherwith or without consent of Landlord, shall operate to extend this Lease except as otherwise expressly provided, and this Section shall not be construed asconsent for Tenant to retain possession of the Premises. Acceptance by Landlord of Rent after the expiration of the Term or earlier termination of this Leaseshall not result in a renewal or reinstatement of this Lease. 48ARTICLE 26WAIVER OF JURY TRIAL26.1 Waiver of Jury Trial. TO THE EXTENT PERMITTED BY LAW, TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL BYJURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE,BETWEEN LANDLORD AND TENANT ARISING OUT OF THIS LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENTEXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.ARTICLE 27SECURITY DEPOSIT27.1 Security Deposit. Tenant shall deposit with Landlord, upon delivery of an executed copy of this Lease to Landlord, a security deposit (the“Security Deposit”) for the performance of all of Tenant’s obligations hereunder in the amount set forth in Section 1.1 of this Lease, which Security Depositshall be in the form of an unconditional and irrevocable letter of credit (the “Letter of Credit”): (i) in form and substance satisfactory to Landlord,(ii) naming Landlord as beneficiary, (iii) expressly allowing Landlord to draw upon it at any time from time to time by delivering to the issuer notice thatLandlord is entitled to draw thereunder, (iv) issued by an FDIC-insured financial institution satisfactory to Landlord, (v) redeemable by presentation of a sightdraft in the state of Landlord’s choice, and (vi) transferable without fee or cost to Landlord. If Tenant does not provide Landlord with a substitute Letter ofCredit complying with all of the requirements hereof at least 10 days before the stated expiration date of any then current Letter of Credit, Landlord shall havethe right to draw the full amount of the current Letter of Credit and hold the funds drawn in cash without obligation for interest thereon as the Security Deposit.The Letter of Credit shall be held by Landlord as security for the performance of Tenant’s obligations under this Lease. The Letter of Credit is not an advancerental deposit or a measure of Landlord’s damages in case of Tenant’s default. Upon each occurrence of a Default (as defined in Section 16.1), Landlord maydraw all or any part of the Letter of Credit to pay delinquent payments due under this Lease, future rent damages, and the cost of any damage, injury, expenseor liability caused by such Default, without prejudice to any other remedy provided herein or provided by law. Landlord’s right to use the Letter of Creditunder this Section includes the right to use the Letter of Credit to pay future rent damages following the termination of this Lease pursuant to Section 16.2below. Upon any use of all or any portion of the Letter of Credit, Tenant shall on demand deliver a new Letter of Credit or amend the existing Letter of Credit torestore the Letter of Credit to the amount set forth on Page 1 of this Lease. Tenant hereby waives the provisions of any law, now or hereafter in force whichprovide that Landlord may claim from a security deposit only those sums reasonably necessary to remedy defaults in the payment of Rent, to repair damagecaused by Tenant or to clean the Premises, it being agreed that Landlord may, in addition, claim those sums reasonably necessary to compensate Landlord forany other loss or damage, foreseeable or unforeseeable, caused by the Default of Tenant. Upon bankruptcy or other debtor-creditor proceedings against Tenant,the Letter of Credit shall be deemed to be applied first to the payment of Rent and other charges due Landlord for periods prior to the filing of such proceedings.The Letter of Credit, or any balance thereof (i.e., after deducting therefrom all amounts to which Landlord is entitled under the provisions of this Lease), shallbe returned to Tenant (or, at Landlord’s option, to the last assignee of Tenant’s interest hereunder) within 90 days after the expiration or earlier termination ofthis Lease. 49Provided that no Default (as defined in Section 16.1) has occurred or event that with the passage of time, or the giving of notice, or both, wouldconstitute a Default has occurred that remains uncured, the amount of the Security Deposit shall be reduced to the following amounts: (i) $1,044,247.90effective as of the Rent Commencement Date; (ii) $835,398.32 effective as of the first anniversary of the Rent Commencement Date; and (iii) $626,548.74effective as of the second anniversary of the Rent Commencement Date. Within thirty (30) days following receipt of Tenant’s written request for the applicablereduction, any portion of the Security Deposit in excess of the respective reduced amounts shall, if held by Landlord in cash, be refunded to Tenant, withoutinterest, or Landlord shall agree to an appropriate replacement or amendment of the Letter of Credit in order to effect the applicable reduction.If Landlord transfers its interest in the Project or this Lease, Landlord shall either (a) transfer any Security Deposit then held by Landlord to a person orentity assuming Landlord’s obligations under this Section, or (b) return to Tenant any Security Deposit then held by Landlord and remaining after thedeductions permitted herein. Upon such transfer to such transferee or the return of the Security Deposit to Tenant, Landlord shall have no further obligationwith respect to the Security Deposit, and Tenant’s right to the return of the Security Deposit shall apply solely against Landlord’s transferee. The SecurityDeposit is not an advance rental deposit or a measure of Landlord’s damages in case of Tenant’s default. Landlord’s obligation respecting the Security Depositis that of a debtor, not a trustee, and no interest shall accrue thereon.ARTICLE 28RIGHT TO EXTEND TERM28.1 Extension Rights. Tenant shall have one right (an “Extension Right”) to extend the term of this Lease for five (5) years (an “Extension Term”)on the same terms and conditions as this Lease (other than with respect to Base Rent and the Landlord’s Work) by giving Landlord written notice of its electionto exercise the Extension Right no sooner than fifteen (15) months earlier than and at least 12 months prior to the expiration of the Base Term of the Lease.Upon the commencement of the Extension Term, Base Rent shall be equal to the Market Rate (as defined below). Base Rent shall thereafter be adjustedon each annual anniversary of the commencement of the Extension Term by multiplying the Base Rent payable immediately before such adjustment by theRent Adjustment Percentage and adding the resulting amount to the Base Rent payable immediately before such adjustment. As used herein, “Market Rate”shall mean the then market rental rate for space that includes laboratory and office space in the Cambridge, Massachusetts area of comparable age, quality,level of finish and proximity to amenities and public transportation as the Premises, as determined by Landlord and agreed to by Tenant. In addition,Landlord may impose a market rent for the parking rights provided hereunder.If, on or before the date which is 180 days prior to the expiration of the Base Term of this Lease, Tenant has not agreed with Landlord’s determination ofthe Market Rate during the Extension Term after negotiating in good faith, Tenant shall be deemed to have elected arbitration as described in this Article. Tenantacknowledges and agrees that, if Tenant has elected to exercise the Extension Right by delivering notice to Landlord as required in this Article, Tenant shallhave no right thereafter to rescind or elect not to extend the term of the Lease for the Extension Term. 5028.2 Arbitration. Within ten (10) days after Tenant’s notice to Landlord of its election (or deemed election) to arbitrate Market Rate, each party shalldeliver to the other a proposal containing the Market Rate that the submitting party believes to be correct (“Extension Proposal”). If either party fails to timelysubmit an Extension Proposal, the other party’s submitted proposal shall determine the Base Rent for the Extension Term. If both parties submit ExtensionProposals, then Landlord and Tenant shall meet within seven (7) days after delivery of the last Extension Proposal and make a good faith attempt to mutuallyappoint a single Arbitrator (and defined below) to determine the Market Rate. If Landlord and Tenant are unable to agree upon a single Arbitrator, then eachshall, by written notice delivered to the other within ten (10) days after the meeting, select an Arbitrator. If either party fails to timely give notice of its selectionfor an Arbitrator, the other party’s submitted proposal shall determine the Base Rent for the Extension Term. The two Arbitrators so appointed shall, withinfive (5) Business Days after their appointment, appoint a third Arbitrator. If the two Arbitrators so selected cannot agree on the selection of the third Arbitratorwithin the time above specified, then either party, on behalf of both parties, may request such appointment of such third Arbitrator by application to any statecourt of general jurisdiction in the jurisdiction in which the Premises are located, upon ten (10) days prior written notice to the other party of such intent.(a) The decision of the Arbitrator(s) shall be made within thirty (30) days after the appointment of a single Arbitrator or the third Arbitrator, asapplicable. The decision of the single Arbitrator shall be final and binding upon the parties. The average of the two closest Arbitrators in a three Arbitratorpanel shall be final and binding upon the parties. Each party shall pay the fees and expenses of the Arbitrator appointed by or on behalf of such party and thefees and expenses of the third Arbitrator shall be borne equally by both parties. If the Market Rate is not determined by the first day of the Extension Term,then Tenant shall pay Landlord Base Rent in an amount equal to the Base Rent in effect immediately prior to the Extension Term until such determination ismade. After the determination of the Market Rate, the parties shall make any necessary adjustments to such payments made by Tenant. Landlord and Tenantshall then execute an amendment recognizing the Market Rate for the Extension Term.(b) An “Arbitrator” shall be any person appointed by or on behalf of either party or appointed pursuant to the provisions hereof and: (i) shall be(A) a member of the American Institute of Real Estate Appraisers with not less than ten (10) years of experience in the appraisal of improved office and hightech and life sciences laboratory real estate in the greater Boston, Massachusetts metropolitan area, or (B) a licensed commercial real estate broker with not lessthan ten (10) years experience representing landlords and/or tenants in the leasing of high tech or life sciences space in Cambridge, Massachusetts, (ii) devotingsubstantially all of their time to professional appraisal or brokerage work, as applicable, at the time of appointment and (iii) be in all respects impartial anddisinterested.28.3 Rights Personal. The Extension Right is personal to Tenant and is not assignable without Landlord’s consent, which may be granted or withheldin Landlord’s sole discretion separate and apart from any consent by Landlord to an assignment of Tenant’s interest in the Lease. 5128.4 Exceptions. Notwithstanding anything set forth above to the contrary, at Landlord’s option, the Extension Right shall not be in effect and Tenantmay not exercise the Extension Right:(i) during any period of time that Tenant is in Default under any provision of this Lease; or(ii) if Tenant has been in Default under any provision of this Lease three or more times, whether or not the Defaults are cured, during the 12month period immediately prior to the date that Tenant intends to exercise the Extension Right, whether or not the Defaults are cured.28.5 No Extensions. The period of time within which the Extension Right may be exercised shall not be extended or enlarged by reason of Tenant’sinability to exercise the Extension Right.28.6 Termination. The Extension Right shall, at Landlord’s option, terminate and be of no further force or effect even after Tenant’s due and timelyexercise of the Extension Right, if, after such exercise, but prior to the commencement date of the Extension Term, (i) Tenant fails to timely cure any Default byTenant under this Lease; or (ii) Tenant has Defaulted three or more times during the period from the date of the exercise of the Extension Right to the date of thecommencement of the Extension Term, whether or not such Defaults are cured.ARTICLE 29RIGHT OF FIRST OFFER29.1 Tenant’s Right of First Offer. After the initial lease-up of the entire Building, Tenant shall have a one-time Right of First Offer to lease any space(“Offer Space”) in the Building subject to the right of Foundation Medicine after initial lease-up of the Building (and to the extent any space remains vacantafter September 1, 2015) and subject to the right of Landlord to extend or renew any then current lease (or enter into a new lease with the same tenant even if noextension or renewal rights are contained in the current lease) and subject to the following terms and conditions:(a) Landlord shall give notice (“Offer Notice”) to Tenant of the availability (or anticipated availability) of such space, setting forth the termsand conditions on which Landlord would lease such space to Tenant which terms shall include rent at the Market Rate. The term of the lease for theOffer Space shall be co-terminus with the Term for the Premises provided that there is at least five (5) years of unexpired Term remaining in the BaseTerm or Extension Term. Otherwise the term pertaining to the Offer Space shall be five (5) years unless a longer term is requested by Tenant. Tenantshall have the right, exercisable by notice to Landlord given on or before the tenth (10) Business Day after receipt of the Offer Notice to lease such spaceon the terms and conditions set forth in the Offer Notice. If Tenant shall not elect to lease such space within the ten (10) Business Day period, Landlordshall be free to lease such space at any time and on any terms and conditions; provided however, that if Landlord intends to lease the Offer Space at anamount equal to or less than 95% of the rent offered to Tenant in the Offer Notice or 52thLandlord fails to lease the Offer Space within the twelve (12) month period following Tenant’s failure to elect or election not to lease such Offer Space,Landlord shall again offer the Offer Space to Tenant pursuant to this Article 29 at such lower rent amount. The twelve (12) month deadline shall beextended as necessary if Landlord has commenced negotiations with a prospective tenant but not yet in good faith executed a lease during the twelve(12) month period.(b) The terms and provisions of Sections 28.3-28.6 shall be incorporated into this Section and pertain to Tenant’s option to exercise itsRight of First Offer as if originally stated herein.ARTICLE 30MISCELLANEOUS30.1 Notices. All notices or other communications between the parties shall be in writing and shall be deemed duly given upon delivery or refusal toaccept delivery by the addressee thereof if delivered in person, or upon actual receipt if delivered by reputable overnight guaranty courier, addressed and sent tothe parties at their addresses set forth above. Landlord and Tenant may from time to time by written notice to the other designate another address for receipt offuture notices.30.2 Joint and Several Liability. If and when included within the term “Tenant,” as used in this instrument, there is more than one person or entity,each shall be jointly and severally liable for the obligations of Tenant.30.3 Financial Information. Upon request from Landlord given not more than once in any twelve month period unless a Default shall have occurredand remain outstanding, Tenant shall furnish Landlord with true and complete copies of Tenant’s most recent annual financial statements and Tenant’s mostrecent unaudited quarterly financial statements, in form customarily prepared by Tenant. If Tenant becomes a “public company” and its financial informationis publicly available, then the foregoing delivery requirements of this Section shall not apply. Such financial information shall be provided subject to therequirement that Landlord agree to: (a) hold in confidence all such financial information and not disclose the financial information to third parties other thanLandlord’s affiliates, attorneys, lenders and consultants without the prior written consent of Tenant; (b) use the financial information solely in connection withthis Lease; (c) treat the financial information with the same degree of care it uses to protect its own but in no event with less than a reasonable degree of care;(d) reproduce the financial information solely to the extent necessary in connection with this Lease, with all such reproductions being considered confidential;and (e) disclose solely to its employees or consultants on a need-to-know basis; provided, however, that (i) any such employees and consultants are bound bywritten obligations of confidentiality at least as restrictive as those set forth in this Lease, and (ii) Landlord remains liable for the compliance of suchemployees and consultants with such obligations.Landlord will not have obligations of non-disclosure and non-use with respect to any portion of the financial information that Landlord can demonstrate,by clear and convincing evidence: (a) is generally known to the public at the time of disclosure or becomes generally known through no wrongful act on thepart of Landlord; (b) is in Landlord’s possession at the time of disclosure other than as a result of Landlord’s breach of any legal obligation; (c) becomes 53known to Landlord through disclosure by sources other than Tenant having the legal right to disclose such financial information; or (d) is independentlydeveloped by Landlord without reference to or reliance upon the financial information as evidenced by written records.If Landlord is required by a governmental authority or by order of a court of competent jurisdiction to disclose any of the financial information,Landlord will give Tenant prompt written notice thereof and Landlord shall take all reasonable and lawful actions to avoid or minimize the degree of suchdisclosure. Landlord will reasonably cooperate with Tenant in any efforts to seek a protective order.30.4 Recordation. Tenant agrees not to record this Lease, but upon request of either party, both parties shall execute and deliver a notice of this Lease inform appropriate for recording or registration, and if this Lease is terminated before the Term expires, an instrument in such form acknowledging the date oftermination.30.5 Interpretation. The normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not beemployed in the interpretation of this Lease or any exhibits or amendments hereto. Words of any gender used in this Lease shall be held and construed toinclude any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires. The captions inserted inthis Lease are for convenience only and in no way define, limit or otherwise describe the scope or intent of this Lease, or any provision hereof, or in any wayaffect the interpretation of this Lease.30.6 Not Binding Until Executed. The submission by Landlord to Tenant of this Lease shall have no binding force or effect, shall not constitute anoption for the leasing of the Premises, nor confer any right or impose any obligations upon either party until execution of this Lease by both parties.30.7 Limitations on Interest. It is expressly the intent of Landlord and Tenant at all times to comply with applicable law governing the maximum rateor amount of any interest payable on or in connection with this Lease. If applicable law is ever judicially interpreted so as to render usurious any interest calledfor under this Lease, or contracted for, charged, taken, reserved, or received with respect to this Lease, then it is Landlord’s and Tenant’s express intent thatall excess amounts theretofore collected by Landlord be credited on the applicable obligation (or, if the obligation has been or would thereby be paid in full,refunded to Tenant), and the provisions of this Lease immediately shall be deemed reformed and the amounts thereafter collectible hereunder reduced, withoutthe necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwisecalled for hereunder.30.8 Choice of Law. Construction and interpretation of this Lease shall be governed by the internal laws of the state in which the Premises are located,excluding any principles of conflicts of laws.30.9 Time. Time is of the essence as to the performance of Tenant’s obligations under this Lease. 5430.10 OFAC. Tenant, and all beneficial owners of Tenant, are currently (a) in compliance with and shall at all times during the Term of this Leaseremain in compliance with the regulations of the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of Treasury and any statute, executiveorder, or regulation relating thereto (collectively, the “OFAC Rules”), (b) not listed on, and shall not during the term of this Lease be listed on, the SpeciallyDesignated Nationals and Blocked Persons List maintained by OFAC and/or on any other similar list maintained by OFAC or other governmental authoritypursuant to any authorizing statute, executive order, or regulation, and (c) not a person or entity with whom a U.S. person is prohibited from conductingbusiness under the OFAC Rules.30.11 Incorporation by Reference. All exhibits and addenda attached hereto are hereby incorporated into this Lease and made a part hereof. If there isany conflict between such exhibits or addenda and the terms of this Lease, such exhibits or addenda shall control.30.12 Entire Agreement. This Lease, including the exhibits attached hereto, constitutes the entire agreement between Landlord and Tenant pertaining tothe subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, letters of intent, negotiations and discussions, whetheroral or written, of the parties, and there are no warranties, representations or other agreements, express or implied, made to either party by the other party inconnection with the subject matter hereof except as specifically set forth herein.30.13 No Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a lesser amount than the monthly installment of Base Rent or anyAdditional Rent will be other than on account of the earliest stipulated Base Rent and Additional Rent, nor will any endorsement or statement on any check orletter accompanying a check for payment of any Base Rent or Additional Rent be an accord and satisfaction. Landlord may accept such check or paymentwithout prejudice to Landlord’s right to recover the balance of such Rent or to pursue any other remedy provided in this Lease.30.14 Hazardous Activities. Notwithstanding any other provision of this Lease, Landlord, for itself and its employees, agents and contractors,reserves the right to refuse to perform any repairs or services in any portion of the Premises which, pursuant to Tenant’s routine safety guidelines, practices orcustom or prudent industry practices, require any form of protective clothing or equipment other than safety glasses. In any such case, Tenant shall contractwith parties who are acceptable to Landlord, in Landlord’s reasonable discretion, for all such repairs and services, and Landlord shall, to the extent required,equitably adjust Tenant’s Share of Operating Expenses in respect of such repairs or services to reflect that Landlord is not providing such repairs or servicesto Tenant.30.15 REIT/UBTI. The Landlord and the Tenant hereby agree that it is their intent that all minimum rent and all other additional rent and any otherrent and charges payable to the Landlord under this lease (hereinafter individually and collectively referred to in this Section as “Rent”) shall qualify as “rentsfrom real property” within the meaning of Sections 512(b)(3) and 856(d) of the Internal Revenue Code of 1986, as amended, (the “Code”) and the U.S.Department of the Treasury Regulations promulgated thereunder (the “Regulations”). In the event that (i) the Code or the Regulations, or interpretations thereofby the Internal Revenue Service contained in revenue rulings or other similar public pronouncements, shall be changed so that any Rent no longer so 55qualifies as “rent from real property” for purposes of either said Section 512(b)(3) or Section 856(d) or (ii) the Landlord, in its sole discretion, determines thatthere is any risk that all or part of any Rent shall not qualify as “rents from real property” for the purposes of either said Sections 512(b)(3) or 856(d), suchRent shall be adjusted in such manner as the Landlord may require so that it will so qualify; provided, however, that any adjustments required pursuant tothis Section shall be made so as to produce the equivalent (in economic terms) Rent as payable prior to such adjustment and shall not materially adverselyaffect the operations of Tenant in the Premises. The parties agree to execute such further commercially reasonable instrument as may reasonably be required bythe Landlord in order to give effect to the foregoing provisions of this Section.30.16 Quiet Enjoyment. So long as Tenant is not in Default under this Lease, Tenant shall, subject to the terms of this Lease, at all times during theTerm, have peaceful and quiet enjoyment of the Premises against any person claiming by, through or under Landlord.30.17 Prorations. All prorations required or permitted to be made hereunder shall be made on the basis of a 360 day year and 30 day months.30.18 Rules and Regulations. Tenant shall, at all times during the Term and any extension thereof, comply with all reasonable rules and regulations atany time or from time to time established by Landlord covering use of the Premises and the Project. The current rules and regulations are attached hereto asExhibit J. If there is any conflict between said rules and regulations and other provisions of this Lease, the terms and provisions of this Lease shall control.Furthermore, during the performance of Tenant’s Work, if there is any conflict between said rules and regulations and the Tenant Design and ConstructionGuidelines attached hereto as Exhibit H, the terms and provisions of the Tenant Design and Construction Guidelines shall control. Landlord shall not haveany liability or obligation for the breach of any rules or regulations by other tenants in the Project and shall not enforce such rules and regulations in adiscriminatory manner.30.19 Security. Landlord and Tenant acknowledge and agree that security devices and services, if any, while intended to deter crime may not in giveninstances prevent theft or other criminal acts and that Landlord is not providing any security services with respect to the Premises and that Tenant is notproviding any security services with respect to areas outside of the Premises. Tenant agrees that, except to the extent caused by the negligence or willfulmisconduct of Landlord or any Landlord Party, Landlord shall not be liable to Tenant for, and Tenant waives any claim against Landlord with respect to, anyloss by theft or any other damage suffered or incurred by Tenant in connection with any unauthorized entry into the Premises or any other breach of securitywith respect to the Premises. Tenant shall be entitled to install and maintain security devices and services as it deems appropriate within the Premises, andLandlord acknowledges that the scope of such security devices and services may include surveillance and monitoring of areas outside of the Premises providethat such devices do not affect the rights and use and enjoyment of other tenants in the Building. Tenant shall be solely responsible for the personal safety ofTenant’s officers, employees, agents, contractors, guests and invitees while any such person is in, on or about the Premises and/or the Project. Tenant shall atTenant’s cost obtain insurance coverage to the extent Tenant desires protection against such criminal acts. 5630.20 Force Majeure. Neither party shall be responsible or liable for delays in the performance of its obligations hereunder (other than monetaryobligations) when caused by, related to, or arising out of acts of God, sinkholes or subsidence, strikes, lockouts, or other labor disputes, embargoes,quarantines, weather, national, regional, or local disasters, calamities, or catastrophes, inability to obtain labor or materials (or reasonable substitutes therefor)at reasonable costs or failure of, or inability to obtain, utilities necessary for performance, governmental restrictions, orders, limitations, regulations, orcontrols, national emergencies, delay in issuance or revocation of permits, enemy or hostile governmental action, terrorism, insurrection, riots, civildisturbance or commotion, fire or other casualty, and other causes or events beyond the reasonable control of such party (“Force Majeure”).30.21 Brokers. Landlord and Tenant each represents and warrants that it has not dealt with any broker, agent or other person in connection with thistransaction and that no broker brought about this transaction, other than the Brokers listed in Section 1.1 hereof. Landlord and Tenant each hereby agree toindemnify and hold the other harmless from and against any claims by any broker, other than the Brokers named in Section 1.1, claiming a commission orother form of compensation by virtue of having dealt with Tenant or Landlord, as applicable, with regard to this leasing transaction. Landlord will beresponsible to pay the commissions due to the named Brokers pursuant to a separate agreement.30.22 Severability. If any clause or provision of this Lease is illegal, invalid or unenforceable under present or future laws, then and in that event, it isthe intention of the parties hereto that the remainder of this Lease shall not be affected thereby. It is also the intention of the parties to this Lease that in lieu ofeach clause or provision of this Lease that is illegal, invalid or unenforceable, there be added, as a part of this Lease, a clause or provision as similar in effectto such illegal, invalid or unenforceable clause or provision as shall be legal, valid and enforceable.[Signatures on next page] 57IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the day and year first above written. TENANT: BLUEBIRD BIO, INC.,a Delaware corporationBy: /s/ Nick LeschlyName: Nick LeschlyTitle: Chief Executive OfficerLANDLORD: 150 SECOND STREET, LLC,a Delaware limited liability companyBy: /s/ Shawn Hurley Shawn Hurley, ManagerBy: /s/ Mats Johansson Mats Johansson, Manager 58EXHIBIT A TO LEASEPLAN OF PREMISES, STORAGE SPACES AND SHARED SPACES(Attached) A-1     EXHIBIT B TO LEASEDESCRIPTION OF PROJECTThat certain parcel of land with the buildings thereon situated in Cambridge, Middlesex County, Massachusetts being bounded and described as follows:65 Bent Street, Cambridge, Massachusetts WESTERLY on Second Street, two hundred (200) feet; NORTHERLY on Charles Street, three hundred (300) feet; EASTERLY on land of owners unknown, two hundred (200) feet; SOUTHERLY on Bent Street, three hundred (300) feet.Containing 60,000 square feet of land, any or all of said measurements being more or less.Subject to that certain Ground Lease dated November 12, 2010 by and between Bent Associates Limited Partnership, a Massachusetts limited partnership, asground lessor, and 150 Second Street, LLC, a Delaware limited liability company, as ground lessee, notice of which Ground Lease is recorded with theMiddlesex County South District Registry of Deeds in Book 55812, Page 1.Being the same premises conveyed by Quitclaim Deed dated December 26, 1985 and recorded with said Deeds in Book 16676, Page 105. B-1EXHIBIT C TO LEASEACKNOWLEDGMENT OF LEASE COMMENCEMENT DATEThis ACKNOWLEDGMENT OF LEASE COMMENCEMENT DATE is made this day of , , between 150SECOND STREET, LLC, a Delaware limited liability company (“Landlord”), and , a corporation (“Tenant”), and is attachedto and made a part of the Lease dated , (the “Lease”), by and between Landlord and Tenant. Any initially capitalized terms used but notdefined herein shall have the meanings given them in the Lease.Landlord and Tenant hereby acknowledge and agree, for all purposes of the Lease, that the Lease Commencement Date of the Base Term of the Lease is , and the termination date of the Base Term of the Lease shall be midnight on , . The Rent Commencement Date is , . In case of a conflict between the terms of the Lease and the terms of this Acknowledgment of Commencement Date, thisAcknowledgment of Lease Commencement Date shall control for all purposes.IN WITNESS WHEREOF, Landlord and Tenant have executed this Acknowledgment of Lease Commencement Date to be effective on the date firstabove written. TENANT: ,a corporationBy: Its: LANDLORD: 150 SECOND STREET, LLC,a Delaware limited liability companyBy: Name: Title: C-1EXHIBIT D TO LEASERENT CERTIFICATE150 Second Street, LLCc/o Skanska USA Commercial Development Inc.253 Summer StreetBoston, MA 02210 Re:Lease dated as of by and between Rivertech Associates II, LLC (“Landlord”), and Bluebird Bio, Inc. (“Tenant”), pertaining to the floor consisting of rentable square feet of the building (collectively, the “Premises”) located at 840 Memorial Drive,Cambridge, Massachusetts (“Lease”).The undersigned hereby certifies, represents and warrants to 150 Second Street, LLC and its successors, assigns, affiliates and lenders (together, the“New Landlord”), as follows and acknowledges that this certification, representation and warranty are being relied upon by the New Landlord in connectionwith provisions of Section 4.2 of the Lease Agreement dated as of , 2013 by and between New Landlord and Tenant pertaining to certain premiseslocated at 150 Second Street, Cambridge, Massachusetts:1. Tenant has previously delivered a true, accurate and complete copy of the Lease to the New Landlord and there have been no amendments,modifications, side letters or other agreements relating to the Lease since such delivery. The Lease is in full force and effect.2. The term of the Lease expires on .3. Tenant has paid to Landlord the monthly fixed rent of $ and monthly additional rent for operating costs and taxes of $ dueunder the Lease through the period ended , 20__.6. Tenant is not entitled to, and has made no agreement(s) with Landlord concerning, free rent, partial rent, rebate of rent payments, credit or offset ordeduction in rent, or any other type of rental concession, including, without limitation, lease support payments, lease buy-outs, or rental concessionspertaining to any unfunded tenant improvement allowance.7. Tenant has neither assigned its interest under the Lease, by operation of law or otherwise, nor entered into any sublease, concession agreement orlicense pertaining to the Premises or any portion thereof.8. Tenant has no option to reduce the Premises or no right to terminate the Lease prior to the stated expiration date other than as specifically set forth inthe Lease with respect to casualty and condemnation. The Landlord has no right to recapture any portion of the Premises prior to the stated expiration date otherthan as specifically set forth in the Lease with respect to casualty and condemnation. D-19. [If a Memorial Drive Rent Savings Event has occurred, in lieu of Sections 4, 5 or 6 above, as the case may be, insert in substantially thefollowing form : Tenant has entered into a sublease pertaining to the Premises. The monthly base rent and escalations due to Landlord is $ for theperiod ended . The documented out of pocket transaction costs to Tenant in connection with the sublease is $ . The rent payable under thesublease is $ for the period ended .Or in the alternative, as the case may be: Tenant’s rent obligations under the Lease have terminated or been reduced by virtue of (forexample, lease termination agreement). The aggregate amount of rent savings under the Lease through the original expiration date of the term of the Lease is$ . The documented out of pocket transaction costs to Tenant in connection with the (lease termination agreement) is $ . ]Executed under seal as of the day of , 20 . BLUEBIRD BIO, INC.,a Delaware corporationBy: Name: Title: D-2EXHIBIT E TO LEASEBASE BUILDING SPECIFICATIONS E-1 3.5.13 Base-Building Core & Shell Definition150 Second Street – Cambridge, MA1. GENERALLandlord is to deliver building for Use Group B and S-2, using Type I-B Construction in accordance with 780 CMR Massachusetts State BuildingCode – 8 Edition. A.Basement Level – 12’-2” Floor-to-floor height. B.Ground Floor – 14’-8” Floor-to-floor height. C.Second Floor – 14’-8” Floor-to-floor height. D.Third Floor – 14’-8” Floor-to-floor height. E.Total area is approximately 123,210 RSF subject to final measurement. F.Structure designed to accommodate finish ceiling height of 9’-4” AFF. G.Slab to underside of beam dimension is 11’ typical with ability for utilities to be run though open webbed joists. H.General column spacing is 32’ x 45’. I.Building/Core and Shell Project designed to achieve LEED Gold Certification (NC).2. FOUNDATIONS AND SLAB-ON-GRADE A.Foundations consist of spread footings with a perimeter foundation wall. Basement slab consists of 5” reinforced concrete slab-on-grade. B.All foundation, slab-on-grade, and slabs-on-deck concrete will be controlled and tested in accordance with applicable building codes andstandards. Concrete compressive strengths will be as required to meet structural requirements, but no less than 4,000 psi. C.Concrete reinforcing steel conforms to ASTM 615. D.Welded wire mesh conforms to ASTM 185. E.Slab-on-grade designed for a 100 psf live load.3. STRUCTURE A.The structure has been designed with the following live loads: 1.Wind and seismic loads in accordance with State Building Code. 2.Tenant area floors – 100 psf. 3.Mechanical equipment rooms – 150 psf 4.Penthouse Roof –20 psf Minimum Live Load and in accordance with governing building codes, plus allowances for specific snowdrifting and equipment loads. B.The structure consists of an internally-braced steel frame supporting composite 3” metal deck with 4 / “ NW concrete fill at tenantfloors, reinforced with 6 x 6 W.W.F. E-2th 12 3.5.13 C.All steel is ASTM A36, A572 grade 50, A992 grade 50, A500 grade B, or as required. All shop and field-welded connections are weldedin accordance with AWS standards. Bolted field connections have been made with /” diameter A325 high-strength bolts, minimum. D.Floor deck at tenant floors consists of minimum 18 gauge steel or as engineered. All metal deck will conform to the Steel Deck Institute’sCode of Recommended Standard Practice. E.Composite steel floor deck concrete cover at floors have a minimum compressive strength of 4,000 psi and reinforced with welded wiremesh. F.Structure is fireproofed where required by the Commonwealth of Massachusetts Building Code. G.Fire exit stairs are standard steel pan stair assemblies with painted steel handrails and concrete treads. H.Miscellaneous iron items (elevator sill angles, ladders, railings, access platforms, stairs for accessing all equipment in compliance withOSHA and applicable codes, loose lintels, expansion plates, toilet partition support frames, etc.) are provided as needed.4. ROOFING AND WATERPROOFING A.Roofing system is a loose-laid, mechanically-fastened or fully adhered, single-ply membrane, TPO type similar to Carlisle. B.Roof insulation is extruded polystyrene board similar to Styrofoam by Dow, conforming to requirements of the Massachusetts StateEnergy Code and is acceptable for use with the roofing membrane specified. C.Roof accessories such as bonding adhesive, splicing cement, lap sealant, tape, water cut-off mastic, etc., are compatible with the roofingmembrane specified. Typical roof penetrations are flashed with material matching the roof system. D.Metal flashing has been provided and a perimeter coping/gravel stop is anodized extruded or painted brake-formed aluminum. E.Elevator pits are waterproofed as required. F.Compatible roof walkway pads by the roofing manufacturer have been provided for base building equipment access and servicing. G.Base building includes a prescribed method for exterior window. Equipment to be provided by property management personnel.5. EXTERIOR WALLS A.The Building is clad with a combination of cementitious fiberboard, strip windows, curtain wall and composite metal panels. All glass isnew energy efficient “low E” glass. E-3 34 3.5.13 B.Entrance doors are aluminum storefront doors. BOH doors are painted hollow metal. C.Loading dock exterior doors are electronically operated, high-cycle aluminum doors by Rytec or similar.6. INTERIOR FINISHES A.Main entrance floor finish is terrazzo flooring. Lobby walls are finished with a combination of wood paneling/glass/resin synthetic panelfeature wall and painted drywall and ceilings. B.Core Toilet floors are ceramic tile or similar. Marble thresholds are provided at door openings where ceramic tile abuts other floor finishes.All toilet room wet walls are covered with ceramic tile or similar up to ceiling. Paint is provided for the remaining walls. Toilet ceilings areacoustical tegular tile suspended ceilings with an exposed suspension grid, or drywall. Lavatory counters are polished granite or similarwith under mounted sinks. All toilet spaces throughout the building are of the same color and level of finish. Automatic flushometers andtouchless faucets have been installed on all lavoratories, water closets, and urinals. C.Door frames are hollow metal (cold-formed steel). Solid core, wood veneer doors are provided for common area amenities such as toiletrooms. Painted hollow metal doors are provided for Base Building service areas. All doors and hardware comply with regulations of theMassachusetts Architectural Access Board and The Americans with Disabilities Act. D.Landlord has provided the Base Building mechanical rooms, electrical rooms, telephone/data riser closets and janitorial closets in corearea on typical floors and ground floor. E.Inside face of typical exterior walls consists of the back of the façade cladding system with insulation, fireproofed as required by code. F.Lobby and Base Building interior lighting consists of architecturally specified efficient lighting. G.Typical stair finishes include concrete floors and treads, painted steel risers and rails, primed and painted drywall surfaces.7. SPECIALTIES & EQUIPMENT A.Building Directory’s will be provided by Base Building. Base Building will specify and install signage required by code, including Cityof Cambridge Inspectional Services and Fire Dept. for Base Building portion of construction. B.Metal toilet partitions are steel panels with brushed stainless steel finish, and floor-mounted. E-4 3.5.13 C.Toilet room accessories, brushed stainless steel, Bobrick Co., or equal: recessed paper towel dispenser; toilet paper holders; soapdispensers; grab bars.8. VERTICAL TRANSPORTATION A.Two (2) gearless, standard elevators based on the following quantities, speeds and capacity: One (1) 3,500 #, 200fpm passenger elevatorserving Basement through 3 floors and One (1) 4,000, 200fpm, double-sided combination service / passenger elevator serving Basementthrough penthouse floors. Interior cab finishes are similar in quality and context to ground floor lobby.9. PLUMBING A.Domestic water system supplied by dual metered service from public water mains. Piping is type “L” copper. Two (2) 125 gallon, gas-fired domestic water heaters are provide re-circulating hot water to accommodate core toilet rooms and tempered water risers. B.Stormwater is reclaimed from a portion of the roof; collected in an underground storage tank and reused for toilet and urinal flushing tosupplement potable water requirement. Overflow from tank and the remainder of the roof discharges to a storm infiltration system. C.Low pressure gas service provided to all base building equipment. Gas riser is sized with additional capacity to supply tenant providedgenerators. D.Typical toilet rooms on floors 1-3 have fixture count as required by code. All water closets and urinals are wall hung to facilitate floorcleaning. All fixtures are “low-flow” type, hands-free. Lavatory sinks are under mounted and have metered and motion sensor operatedfaucet controls with hot water flow restrictors. E.Showers are provided on the first floor. F.Non-potable cold water risers are provided to supply non-potable connection at each floor. G.Clear water waste receivers aree provided at each floor to accept RO reject water, condensate and similar clean water. This water can alsobe collected in the above-mentioned tank for reuse. 10.FIRE PROTECTION SYSTEM A.Fire protection is fed from a 6” service from the public water main. An in-line, vertical fire pump feeds two (2) 6” combined standpipes,to provide pressure for the sprinkler system. B.Hose connections for Fire Department use will be provided as required by code for base building only. Piping will be black steel pipeschedule 10 for pipe 2/” and larger and schedule 40 for pipe 2” and smaller. All piping, valves and equipment is UL-Listed and labeled.Tamper switches are provided on all control valves. E-5rd 12 3.5.13 C.Automatic sprinkler system is supplied from the combination sprinkler/standpipe risers in each stair. The sprinkler systems on eachfloor is connected to the riser in each stair. All occupied space in the building is fully sprinklered using upright sprinkler heads, at adensity in accordance with code. Sprinkler coverage is designed for light hazard protection in core and common areas, ordinary hazardgroup 1 protection in mechanical and storage areas, and up to ordinary hazard group 2 in tenant lab areas. 11.HEATING, VENTILATING AND AIR CONDITIONING A.The cooling system includes a chilled water plan consisting of three (3) 300-ton water-cooled centrifugal chillers, associated pumps, anddistribution to two (2) custom manufactured variable volume air handling units with a nominal capacity of 82,000CFM. Heat is rejectedto the atmosphere by two (2) 625-ton cooling towers equipped with whisper quiet fans. B.Heating is provided by hot water risers fed from four (4) 2,700-MBH gas-fired, condensing boilers. Valved branch lines on the hot waterrisers is provided to each floor for tenant use. C.Laboratory exhaust is provided by two (2) 82,000 CFM variable volume exhaust air handlers with energy recovery systems to transferheat from the exhaust to the outside air entering the building. D.Space is provided for additional tenant dedicated air handlers, exhaust air handlers, cooling towers, boilers and chillers. E.Tenant supplemental cooling capacity is provided by secondary condenser water risers connected to the building’s cooling towers by 140ton plate and frame heat exchanger providing approximately 45 tons of cooling to each floor. F.Garage exhaust is equipped with a total capacity of 20,600CFM exhaust control with carbon monoxide sensors and VFD control. G.The Building Automation System is equipped with Direct Digital Control (DDC). The DDC system incorporates a complete graphicsinterface package to monitor and control all HVAC systems. The system is expandable to include all tenant systems and equipment. H.One 660 gallon double wall fuel storage tank is provided to feed the life-safety emergency generator in the mechanical penthouse. G.Toilet areas have exhaust air systems maintaining an exhaust rate of 75CFM/fixture. H.Base building provides infrastructure for approximately 75 degrees Fahrenheit, dry bulb at 55% relative humidity during the coolingseason and approximately 70 degrees Fahrenheit during the heating season; both based on ASHRAE design conditions of the City ofBoston.OUTDOOR DESIGN CONDITIONS ( ASHRAE 1%) A. Summer: 91 F dry bulb 88 degrees Farhrenheit dry bulb, 73 degree Farhrenheit wet bulbB. Winter: 6 degrees Fahrenheit Dry Bulb E-6 3.5.13 INDOOR DESIGN CONDITIONS A. Summer: 74 F dry bulb 50 % RHB. Winter: 72 F dry bulb 20% RHVENTILATIONMinimum Outside Air: In accordance with the Massachusetts State Building Code, 8th Edition Anticipated occupancy: 7 people per 1000sf for office 50 people per 1000sf for conference roomVentilation Rate: 1.7 CFM/sq ftINTERNAL HEAT GAIN Occupants: 108sf/person (useable sf)Lighting 1.0 watts/useable sfPower 7 watts/useable sf G.Outside air for ventilation is provided by four ventilation riser ducts stubbed into 1 location on each floor in accordance with currentcodes and ASHRAE standards. Ventilation and exhaust airflows for Tenant needs shall be designed by Tenant designers. Available floorexterior static pressure allowance shall be 0.75”wc. I.Base Building mechanical equipment is provided with necessary acoustical vibration isolation as recommended by an independentacoustical consultant to achieve a Sound Transmission Class in accordance with code. 12.ELECTRICAL A.Base building service is a metered 3,000-amp 277/480V 3-phase, 4 wire electric service B.Each tenant floor is served by a separately unmetered 800-amp 277/480V 3-phase, 4 wire electric service capable of providing 12w/sf oftenant floor power C.Spare capacity is provided at the building switchgear for additional electric service as required. D.A 250 KW, diesel engine generator to accommodate base building life safety requirements is provided. E.One telephone/data closet per floor is provided in base building for tenant installed risers and distribution cabling, consisting of three(3) riser sleeves at 5” each F.A fully addressable code compliant fire alarm system is installed with sufficient power supplies and infrastructure capacity at the headend for the future tenant tie-in. The tenant is responsible for electronic release devices and locking mechanisms at stair tower egress doorsif the tenant intends to use stairwells for inter-floor travel. The tenant is to supply, install and coordinate all fire alarm notification andinitiating devices within the tenant space connected to base building systems. Base Building egress stairwell doors will be passage type,unlocked. G.Fire alarm system includes a City of Cambridge Master Box, all front end equipment, common area ADA notification and alarm initiatingdevices, elevator E-7 3.5.13 recall, and terminal boxes on each floor for connection of tenant fire alarm and notification devices to the base building system. The firealarm terminal cabinets shall be located in the electrical closets. H.Base building security system provides building perimeter security with card readers and CATV. Tenant security system is to be designedby the tenant for its specific needs. Tenant will be responsible for system design, distribution wiring and installing all the cameras, accesscontrol, and related appurtenances as part of TI.—END— E-8EXHIBIT F TO LEASELANDLORD TENANT MATRIX F-1Skanska Commercial Development Inc150 Second Street5.15.13Allocation of Responsibility Between Landlord and Tenant Work ELEMENT DESCRIPTION BASEBUILDINGWORK TENANTWORKSITE IMPROVEMENTS: Entrance Plaza, perimeter sidewalks, street trees, street lights and furniture inaccordance with the Approved Project. X Telephone conduit from outside building into basement floor telephone room. X Cable/Data conduit from outside building into basement telephone room X Electrical Service to building X Gas Service to building for base building and tenant systems X Domestic sanitary sewer connection to street X Lab waste sanitary sewer connection from tenant pH room in basement floor tobuilding drain. X Domestic and fire protection water service to building. X F-2CODE COMPLIANCE: Building construction in accordance with requirements of Massachusetts StateBuilding Code, 8th edition (as amended, restated, or superseded as applicable) X XSTRUCTURE: Floor systems capable of supporting a live / partition load of 100 lbs. psf on allfloors X 14’8” Floor to floor heights, 12’ floor to floor height in B1 X Floor construction to accommodate 100lbs/sf on floors 1 through 3. Penthousefloor construction to accommodate 150lbs/sf X Structural modifications to increase floor live load capacity X Structural modifications to accommodate tenant specific openings including butnot limited to shafts, risers, and interconnecting stairs X Framed openings for base building supply air and tenant exhaust shafts X All catwalks and dunnage required to support and enable access to Base Buildingmechanical equipment. X All structural modifications, dunnage, catwalks and other requirements necessaryto support and enable access to Tenant equipment in Penthouse X F-3 Miscellaneous metal items such as brackets or supports and concretehousekeeping pads required for tenant supplied equipment X Structural assemblies requiring fire-proofing to be sprayed with cementitiousfireproofing system X XBUILDING ENVELOPE: Environmentally responsible sustainable building design that achieves LEEDGold Certification. X Facade of aluminum and glass window wall, cementitious rain screen and metalpanels, with thermally insulated glass including light-gauge metal stud back-upwith insulation where required X Overhead coiling doors at loading dock and at parking garage entry X Acoustic roof screen to conceal tenant exhaust fans and standby generators X Architecturally integrated, enclosed mechanical penthouse with space for tenantmechanical equipment. X Any modifications to façade, penthouse or screen wall system necessary toaccommodate tenant requirements, provided that any such modifications must beapproved by Landlord. XROOFING: TPO system with walking pads to all base building mechanical equipment. X F-4 Roofing penetrations for tenant equipment or systems, to be made in accordancewith roofing manufacturer’s details and warranty requirements X Walking pads to tenant special mechanical equipment. XCOMMON AREAS: Entrance lobby with finishes that include stone, tile & carpet flooring, wood orstone wall accents, drywall and suspended ceilings and appropriate accentlighting. X Finished egress stairways and corridors as required for occupant circulation andemergency egress X Men’s and Women’s shower rooms located near first floor bathrooms X Exterior loading area with two truck bays with access and space for one rubbishdumpster X Loading Dock Lift (if required) X Ground floor recycling room X Basement level parking area X Bike racks located in basement X Finished basement floor main electrical service rooms, water and fire pump room X Finished toilet rooms, janitor closets, telephone and electric closets, and egressstairways serving each floor. X F-5 Construction of code-required corridor system on each floor, including doorpackages, ready for Tenant finish if tenant occupies entire floor. X Construction of and finish for common corridors and elevator lobbies on multi-tenant floors. X Rooftop mechanical penthouse and screened roof area for base buildingmechanical equipment. Rooftop expansion space allocated for tenant mechanicalequipment in designated locations within the screen wall. X Doors and frames at common areas: hollow metal frames; hollow metal doors atservice areas, solid core wood doors at other areas, and lever hardware X Doors, frames, and hardware to tenant areas XELEVATORS One gearless passenger elevator with 3,500 lb. capacity X One gearless combination freight/passenger elevator with 4,000lb capacity X Dedicated shaft way for third elevator X Third Elevator if required XWINDOW TREATMENT: Supply and installation of building standard blinds for all windows X Modifications to window wall system approved by Landlord X F-6 Signage, lighting and other brand identity treatments approved by Landlord XTENANT AREAS: Construction of and finishes for corridors and elevator lobbies for single tenanted floors X Light gauge framing, insulation & vapor barrier on inside face of exterior walls. X Interior wall furring and sills (if applicable) and drywall finish at perimeter walls. X Interior drywall soffit at perimeter of building with blocking for building standard windowtreatments. X Partitions, ceilings, flooring, painting, doors, millwork and all related finishes for office andlaboratory build out within Tenant premises XHVAC: Processed condenser water system capable of providing 45 Tons per floor at 2.4 GMP per Ton perFloor X (2) Condenser Water Supply and Return Distribution Risers connected to a plate/frame heatexchanger with 2-/” valves capped on floors 1 through 3 for tenant distribution and 1 /” valvescapped in the basement on the east side of the building. X Condenser Water on-floor distribution X F-7 12 12 Central Chilled Water Plant sized to provide cooling with 100% outside air at 1.7CFM per usable sf X Allotted space for future 150ton chiller to accommodate expansion of system to 2CFM per usable sf X Processed Chilled Water system capable of providing 45 Tons per floor with energy recovery takeninto account X Plate and Frame heat exchanger, associated piping and pumps to connect chilled water riser toexisting chillers and/or future 150ton chiller X (2) Processed Chilled Water Supply and Return Distribution Risers X Processed Chilled Water Supply and Return riser connection in penthouse to tenant provided chiller(if required) X Excess Capacity in base building chiller plant to provide chilled water to each floor (capacity subjectto chilled water on floor use) X Tenant Chiller for Tenant Process Chilled Water X Penthouse air handling units capable of providing 1.7 CFM per usable sf. Vertical supply ductssized to accommodate 2.0CFM stubbed out in (2) locations per floor X Additional AHU to exceed 1.7CFM/sf of supply X F-8 General laboratory exhaust fans capable of exhausting 1.7 CFM per usable sf. Vertical exhaust ductssized to accommodate 2.0CFM stubbed out in (2) locations per floor X Additional laboratory exhaust fans to exceed 1.7CFM/sf of exhaust X All on-floor supply and exhaust distribution in tenant spaces X Central Heating Plant consisting of condensing boilers supplying hot water to AHU’s and other shelland core heating elements. X Allotted space for future condensing boiler X Future boiler and associated piping and pumps to accommodate expansion of system to 2CFM perusable sf X (2) Hot water supply and return distribution risers with 2-/” valves capped on floors 1 through 3for tenant distribution. 1 /” riser drops to basement level on the East side of the building. X All hot water supply and return on-floor distribution for tenant use X Any additional mechanical equipment and/or any modifications to Base Building equipment toincrease the mechanical capacity of the building. X F-9 12 12 Ductwork, VAV boxes, registers and controls for HVAC in lobby spaces and core areas, includingtoilet exhaust system. X Supply and exhaust air distribution within the tenant space including all medium pressure and lowpressure ducts, diffusers, registers, grilles, terminal volume control boxes, VAV boxes, fan poweredunits, reheat coils, baseboard radiation and hot water piping. X Toilet and/or shower ventilation requirements for additional tenant locker rooms and restrooms asrequired. X Central DDC computerized energy management system for applicable core and shell system withexpansion capacity for tenant fit out systems. X Temperature controls within tenant space, and links to base building system. X Dedicated kitchen exhaust system X All components of tenant exhaust systems, including fume hoods, floor distribution ductwork,specialty high corrosive system ducts and dedicated exhaust fans, controls, equipment dunnage andsound attenuation. X Dedicated air handler, additional cooling, additional heating and associated ductwork, equipmentand controls if required for a Tenant Animal Care Facility. X F-10 Specialized tenant systems and equipment including supplemental or spot cooling, steam boilers,dedicated rated exhaust for H2 or H3 storage rooms, air and vacuum systems and all related HVACequipment. X Additional sound attenuation necessary to ensure tenant’s equipment complies with local noiseregulations. X Carbon Monoxide Monitored garage exhaust system X Fuel oil storage tank, transfer pumps and distribution piping for Base Building life safety emergencygenerator X Fuel oil system tenant provided stand-by generator. X BTU Meters connected to BAS for hot, condenser, and processed chilled water at floor connections X Air monitoring flow stations connected to BAS for exhaust X Air monitoring flow stations connected to BAS for supply (at Floor take-offs or at terminal units ifrequired by tenant) XGAS: Gas service capable of providing low-pressure (10” w.g. ) service. X Gas piping for Base Building equipment. X F-11 6” Gas service brought to tenant non-roofed penthouse for tenant provided generator capable ofproviding 8000 cfh (tenant premises to dictate allocation) X Gas Sub-meter for tenant use X Gas connection to tenant generator X Any and all tenant required gas service and distribution for on-floor use XPLUMBING: Domestic water service, with back-flow prevention and duplex booster. X (2) Gas Fed Boilers providing hot water to restrooms and tempered water risers X Hot water supply and return risers and distribution to restrooms X Core and Restroom plumbing and fixtures to meet code requirements X (1) 4” Domestic Cold water riser with 1” connections valved and capped on floors 1 through 3 X Water Sub-meter and on-floor distribution of domestic cold water X Hot water plumbing including heaters, boilers, distribution and associated equipment for tenant use X (2) 2” Tempered Water Risers valved and capped on floors 1 through 3 providing 70-90 degree water X Tempered Water Sub-meter and on-floor distribution for tenant use X F-12 (2) 3” Nonpotable Water risers fed from 2 booster pumps stubbed out on floors 1 through 3 X Nonpotable Water submeter and on-floor distribution X Installation of Tenant’s non-potable/potable water heaters. X Tenant metering, sub metering, distribution and backflow prevention at laboratory connections. X Waste and vent risers for tenant non-lab waste X Connection to non-lab waste and vent X Shaft Space for lab waste and vent risers X Lab waste and vent risers for tenant use X Domestic sanitary sewer, storm, and water to/from city X Roof and canopy storm drains X Production and distribution of clean steam including fuel source. X Steam generator, fuel source, floor by floor humidification associated steam piping and reducingstations. X All non-base building plumbing including kitchen, cafeteria and specialized equipment. X F-13 Reserved, allocated space in basement for tenant’s acid neutralization system X Acid waste neutralization equipment, lifting stations and laboratory waste lines includingdistribution, pumps, and risers. X Manifolds, piping, floor drains, equipment and other requirements for laboratory gases, compressedair, vacuum systems and RO/DI water systems. Distributed vertical utility chases are provided. X Waste stacks to receive base building and tenant clear water wastes (e.g., a.c. condensate, RO reject). X ELECTRICAL: Base building electric metered by Nstar at main switchboard X Tenant electric metered by Nstar on tenant floor X Tenant submeter for any specialized and/or processed loads (data center, etc.) X Life safety lighting and other “Legally Required” emergency power systems. X Automatic transfer switch for emergency and egress lighting X X Building electrical service to provide two 3,000 Ampere 480/277 Volt, 3 phase, 4 wire via mainswitchboards in main electrical room. X F-14 Allocation of approximately 12 watts/sf for tenant distribution with 15 watts/sf for lab area and 5watts/sf for office area based on 70%/30% lab to office ratio% office X (2) 4” Conduits from unmetered switchboard in basement to 800AMP unmetered wireway X Conductor from basement switchboard to 800 AMP wireway in each floor’s electric room X CT cabinet, utility meter, high voltage, low voltage and distribution for tenant power X All power for any and all systems within tenant space X Lighting & receptacles serving core areas. X Building Exterior lighting package. X Exterior and Interior Tenant Signage lighting package X Diesel fuel life safety generator to provide emergency power for MA code-required egress lighting, firealarm systems, common area emergency egress lighting and exit signs, capacity to serve emergencyegress and exit lighting in tenant areas and lab exhaust fans. X Emergency Transfer switch(s) capable of providing power to code required emergency equipment. X F-15 Back-up generator and systems, including transfer switch, distribution, controls and associatedappurtenances X Emergency egress and exit lighting in core areas. X Emergency egress and exit lighting fixtures in tenant area, connected to Base Building life safetyemergency generator. XFIRE PROTECTION: Sprinkler service entrance including fire department connection, alarm valve, backflow protectionand standpipe in each stair. X Fire Pump and all related controls X Core and stair area sprinkler heads and piping. X Flow control valve station in stair at each floor. X Primary sprinkler distribution on each floor. X All run outs, drops, heads and related equipment within tenant premises. X All run outs, drops, heads and related equipment within unleased and unoccupied space within thebuilding as required to obtain a building occupancy permit. X Special extinguishing systems. X Fire Extinguisher Cabinets in core area with appropriate Fire Extinguisher X F-16 Fire Extinguisher Cabinets in tenant area (building standard) with appropriate Fire Extinguisher X Additional hose connection in fit-up spaces to meet 150 foot distance requirements of Cambridge FireDepartment. XFIRE ALARM: Base building expandable addressable fire alarm system that meets all code requirements. X Detection and annunciation devices (i.e. horns and strobes) in core areas and stair entries. X Detection, annunciation and all wiring in tenant areas and as required to tie into base buildingsystem. XTELECOMMUNICATIONS Main Distribution Frame (MDF) telephone room, core riser closets on each floor with sleeves throughslab. X (4) 4” Conduits from City Service Ductbank into main tel/data closet in basement X Primary POS and distribution into tenant space X Telephone and data wiring, conduits and outlets for Tenant areas from core closets. X Audio-visual connections and systems for Tenant areas. X Any special equipment needed to provide specific requirements for tenants telephone equipment. X F-17SECURITY: (Base) Building security network system for monitoring and access control. X Card access at Building main entries, service doors, and traveling cable for security in elevators. X Card access in elevator cabs if required X Electric door hardware and wiring on interior emergency egress doors in Stair #1 only. X Electric door hardware and wiring on interior emergency egress does in Stair #2 X Card access and/or alarm systems into or within Tenant’s premises. Emergency egress doors must betied into Base Building Fire Alarm system. X CCTV DVR surveillance in basement and at ground floor entries X SIGNAGE: Building and site exterior address, directional, and any common identity signage to owner standards. X Building common area interior signage. X Signage within tenant’s space. X Exterior Signage subject to Landlord Approval X F-18EXHIBIT G TO LEASETENANT’S CONCEPT PLAN G-1 EXHIBIT H TO LEASETENANT DESIGN AND CONSTRUCTION GUIDELINES H-1 H-2 Table of Contents Section I: Rules & Procedures for Tenant Contractors H-4 Section II: Insurance Requirements for Tenant Contractors H-12 Section III: Close-Out Requirements for Tenant Contractors H-16 Section IV: Tenant Improvement Standards H-18 Section V: LEED Guidelines H-22 Part A: Introduction and General Information H-23 Part B: LEED-CS and LEED-CI Certification H-25 1. Sustainable Sites (SS) H-25 2. Water Efficiency (WE) H-33 3. Energy and Atmosphere (EA) H-35 4. Materials and Resources (MR) H-38 5. Indoor Environmental Quality (IEQ) H-42 6. Innovation in Design (ID) H-49 Appendix A: Reference Material H-50 H-3 H-4 Section I: Rules & Procedures for Tenant ContractorsIntroductionThe following requirements apply only to Tenant’s contractors and have been developed to ensure that modifications or improvements to the building and/orbuilding systems and equipment are completed to building standards while maintaining a level of safety consistent with industry standards. The review oftenant plans and/or specifications by Landlord and its insurers, consultants or other representatives, does not imply that any plans so reviewed comply withapplicable laws, ordinances, codes, standards or regulations. Nor does Landlord’s review or approvals imply that any work is to be performed at Landlord’sexpense.Landlord has the explicit right to remove from the project any person who does not comply with these rules after one day’s notice.Part A: General 1.No work will be performed until the Landlord has received two (2) sets of signed and sealed drawings and specifications and has given writtenapproval. 2.All modifications to the building or to the building systems and equipment must comply with state, federal and local codes and ordinances. 3.Prior to the work commencing, a building permit must be obtained and displayed and a certificate of insurance from the contractor must be furnished tothe Landlord naming the as additional insureds all parties specified in the Lease. 4.At the completion of the work, the Leasehold Contractor shall furnish to the Landlord two (2) hard copies of redlined “as builts” as installed by theLeasehold Contractor and one (1) complete CADD.DWG disk file showing the final architectural and engineering drawings. 5.The contractor must notify the Landlord of all work scheduled and must provide the Landlord with a list of all personnel working in the building. 6.The contractor must furnish the Landlord with a list of all subcontractors including emergency phone and/or pager numbers prior to commencing thework. 7.The contractor must provide an on-site project superintendent at all times that construction work is underway. This supervisor must be knowledgeableof the project’s scope of work and have adequate on-site reference materials including plans, specifications and MSDS information on all materials usedin the performance of the work. H-5 8.All workers must be dressed appropriately (appropriate dress will include hard hat, appropriate foot ware, etc.) to meet building safety standards thathave been provided to Tenant in writing. Shirts must be worn at all times. No shorts are permitted. 9.All carts must be furnished with pneumatic tires and rubber bumpers. 10.Smoking is not allowed in the building. 11.The use of radios is prohibited. 12.Prior to the start of work, all blinds must be raised and bagged, all windowsills and other base building components must be adequately protected andthe protection must be maintained. Workers must not stand on windowsills or other building components. 13.Any work that requires access to another tenant’s space must first be coordinated through the Landlord. 14.Dumping of construction debris into building drains, mop sinks, trash dumpsters, etc. is strictly prohibited. If this does occur, the contractor shall becharged 200% of the cost of clearing any drain, including administrative time, where evidence of this is found. 15.Base building restrooms within the construction area will be available for use by the contractor unless landlord dedicates an alternate location.Contractor shall be responsible for any damage to the restrooms and for cleaning and stocking during construction. All other base building restroomsshall be locked and are not to be used by construction personnel. 16.Use of the building stairwells for moving construction materials and construction personnel shall be limited to the stairwell designated by Landlord. Nomaterial may be brought through the Building lobby. Any damage done to the stairwell (rails, doors and frames, sheetrock, ceilings etc.) shall berepaired by the Tenant contractor at its sole expense to the satisfaction to the Landlord. 17.The contractor shall repair all construction disturbed by the new tenant work or damaged by the contractor’s or subcontractor’s personnel. 18.After initial occupancy of the building, no work will be performed from 8:00 am to 8:00 pm Monday through Friday and 9:00 am to 4:00 pm Saturdaythat will disturb or inconvenience any existing tenants in the building (e.g. core drilling, shooting track, noxious odors, etc.). The Landlord mustpreapprove any work that entails noise, vibration or noxious odors. 19.All structural revisions, including but not limited to penetrations of slabs, are to be reviewed by Landlord’s engineer. 20.Any roof related work must be performed by the roofing contractor designated by the Landlord. H-6 21.The contractor shall immediately report all accidents to the Landlord in writing after first notifying the Landlord by telephone. 22.Landlord shall provide the name of the manufacturer of lockset and key cores for compatibility with building master keying system.Part B: Life Safety 1.Contractor shall furnish Landlord one set of sprinkler shop drawings and hydraulic calculations for approval by the Landlord’s insurance companyonce they are completed by subcontractor and ready for submittal to the Fire Marshall. Once approved by the Fire Marshall, the contractor shall furnishLandlord one set of the approved sprinkler shop drawings. 2.Contractor will not disconnect, tamper with, delete, obstruct, relocate, or expand any life safety equipment, except as indicated on drawings approvedby the Landlord. Contractor shall not interfere with or delay any other inspections scheduled prior to Contractors inspections or testing. 3.The contractor must take necessary precautions to prevent accidental fire alarms. Any fees or costs charged to the Landlord by the local fire departmentthat arise from accidental fire alarms caused by the contractor will be paid by the contractor. The Landlord strongly suggests that, during any work thatincreases the likelihood of an accidental fire alarm such as demolition or sprinkler work, a person approved by the Landlord be designated to “watch”the fire alarm panel. 4.Any unit or device temporarily incapacitated will be red-tagged “Out of Service” and the Landlord will be alerted prior to the temporary outage. 5.The base building fire alarm system shall monitor all tenant installed special fire extinguisher/alarm detection systems. The connections to the basebuilding fire alarm system will be at the tenant’s expense. To the extent the Premises are occupied, or same is otherwise required under LegalRequirements, fire “watch” shall also be provided by tenant contractor during any period fire alarm system is placed out of service for work orconnection to base building. 6.All Tenant installed fire alarm initiation and notification devices that connect with the base building fire alarm system shall match the base buildingsystem and be approved by the Landlord. 7.All connections to the building’s existing fire alarm system are to be made only by the subcontractor specified by the Landlord. 8.All fire alarm testing will be scheduled at least 72 hours in advance with the Landlord and other contractors and must occur after normal businesshours if the building is occupied. H-7 9.Combustible and hazardous materials are not allowed to be stored in the building without prior written approval of the Landlord. Material safety datasheets on all materials to be stored in the building must be kept on site and a copy submitted to the Landlord. 10.Dust protection of smoke detectors must be installed and removed each day (if operational). Dust protection is required during construction to avoidfalse fire alarms and damaging of detector system. Filter media must be installed over all return air paths to any equipment rooms prior to demolition.The media must be maintained during construction and removed at substantial completion. 11.The building is to be fully protected by automatic sprinkler systems in accordance with Landlord’s standards and specifications. 12.All sprinkler systems and equipment are to be designed and installed in accordance with the current standards of the National Fire ProtectionAssociation. 13.All equipment, devices and materials used in the installation must be listed by UL and FM Approved. 14.Connections to the base building sprinkler system/standpipe riser shall be provided with a control valve and water flow alarm device. Sprinkler systemcontrol valves shall be UL Listed and FM Approved, clockwise closing, indicating valves with supervisory switches. 15.All corrective work to the fire alarm system due to the contractor’s work shall be charged to the contractor. 16.All fire alarm wiring in public areas (outside of Tenant demising walls) shall be in rigid conduit.Part C: Parking – Loading Dock 1.Contractors, subcontractors and their personnel will not use the loading dock area for parking without first obtaining permission from the Landlord 24hours in advance to assure dock availability. Unauthorized vehicles will be ticketed and towed. 2.Use of the loading dock for deliveries/trash removal must be scheduled through the Landlord. 3.Material that does not fit into the service elevator must be delivered through a window opening. The contractor will be required to properly remove andreplace the glass and to adequately protect the window framing with prior approval from the Landlord. 4.Any instance that requires the removal and replacement of exterior glass, must be approved by Landlord and performed by Landlord approvedcontractor. H-8 Part D: Utilities 1.Utilities (i.e. electric, gas, water, telephone/cable) must not be cut off or interrupted without 48 hour notice and written permission of the Landlord.Part E: Security 1.The contractor will be responsible for controlling any keys or access cards furnished by the Landlord and will return them to the Landlord. 2.The contractor will be responsible for locking any secure area made available to the contractor whenever that area is unattended. 3.Contractors may be required to wear identification badges, in which case the badges will be issued by the Landlord to the contractor.Part F: Elevators 1.No passenger elevators will be used to move construction material or construction personnel. 2.The passenger/service elevator can be used to move construction personnel at any time during the day, provided the elevator doors are not held open. Theservice elevator can not be used to move construction materials into the building during building operating hours between the hours of 8:00 am and 8:00p.m. unless approved in writing by Landlord. All other usage must be scheduled with the Landlord with at least 48 hours notice. 3.Any costs to repair damage to the elevators including dust or dirt in machine rooms or shaft or costs for service calls resulting from the contractor’soperations will be charged to the contractor. 4.Any work on the elevators, call buttons and signal lanterns must be approved by Landlord and coordinated with building management.Part G: Cleaning 1.The contractor will remove all trash and debris daily or as often as necessary to maintain cleanliness in the building. The building trash compactors orcontainers are not to be used for construction debris. 2.Walk-off mats or other protection must be provided at door entrances where work is being performed. H-9 3.Carpeting shall be protected by plastic runners or hardboard as necessary to maintain cleanliness and to protect carpets from damage. 4.Tile, terrazzo and wood floors shall be protected from damage as necessary. 5.Contractor will furnish a vacuum(s) with a supply of clean bags and an operator to facilitate ongoing clean-up. 6.Trash removal will be scheduled and coordinated with the Landlord and undertaken only through the service elevator. 7.Contractors must remove all food cartons and related debris from the work area on a daily basis. 8.Driveway and street cleaning by Contractor will be required when Contractor’s work has created mud or debris.Part H: Mechanical and Electrical Work 1.Before any new electrical or mechanical equipment is installed in the building, the contractor must submit a copy of the manufacturer’s data sheetsalong with complete shop drawings and submittals to the Landlord for approval. 2.Any installation or modification to building HVAC or electrical systems must be first submitted to the Landlord for review. This includes base buildingsystems as well as supplemental units and/or exhaust systems. 3.The mechanical and electrical plans must be prepared by a licensed engineer and engineer and must show size and location of all supply and returngrilles. We may require that the Landlord’s MEP engineer review the MEP drawings. In that event the tenant will pay for the cost of this review. We willnotify the tenant prior to engaging the Landlord’s engineer. 4.Contractors modifying ductwork, air grilles, VAV boxes, etc., must balance the air and water systems as necessary. All air balancing is to be done in thepresence of the Landlord. Two copies of all balance reports shall be submitted to Landlord for review and approval. 5.Any domestic or condenser water connections made to the building’s piping system, must include a high quality isolation valve, (brass bodied gate orball-type) and adequate system drain valves. If the system piping is of a different material a dielectric union must be installed. All valves and equipmentmust be easily accessible; access doors are required in drywall or other fixed construction. 6.Exhaust fans from cooking areas may not discharge into a return ceiling plenum. Such fans will be ducted to the outside via exhaust shafts or otherroutes as approved by the Landlord. H-10 7.Where independent tenant-owned air conditioning units are installed, an electric submeter with a output that is compatible with the base buildingmanagement system must be used or a flat rate electricity charge will be paid by the Tenant based on anticipated consumption. 8.The installation of tenant equipment (except emergency lighting per code) on the base building emergency power supply systems is not permitted. Tenantmay seek Landlord review and approval for special circumstances. 9.Any existing mechanical or electrical systems and their controls that are to remain shall be properly commissioned. That is, at the beginning of the jobthe systems will be turned over to the contractor in working condition by the Landlord. Before beginning any work, the contractor should inspect themechanical or electrical systems and their controls to ensure their working condition. The contractor should advise the Landlord of any noteddeficiencies. At the end of the job, the contractor will be responsible for the proper operation of the mechanical and electrical systems. If the contractorfails to note any deficiencies at the outset of the job, the contractor will, nevertheless, be required to correct the problems before the Landlord accepts thesystem. 10.All circuit breaker panels must be clearly and accurately identified with typed labels. 11.Tenant shall properly protect any of its mechanical equipment with prefilters, dust covers etc. prior to start of work, and shall not disturb any similarprefilters and covers covering base building mechanical equipment. Protection shall be removed and equipment wiped down at completion. 12.Energy management and building control work is to be performed by Landlord’s designated subcontractor. 13.Tenant installed equipment that supplements existing base building equipment such as VAV boxes, fire alarm devices, control work etc., shall beidentical to the existing base building equipment to facilitate warranty and maintenance operations. 14.All concealed equipment shall be located with necessary accessibility for maintenance and repair. 15.Contractor shall contract Landlord 48 hours in advance for Landlord wall and ceiling close-in inspectors. 16.No flexible conduit installed in the electrical closets. All runs inside the closet must be electrical metallic tubing (EMT). H-11 H-12 Section II: Insurance Requirements for Tenant ContractorsIntroductionTenant’s Contractors shall procure and maintain for the duration of the contract insurance against claims for injuries to persons or damages to property whichmay arise from or in connection with the performance of the work hereunder by the contractor, his agents, representatives, employees, or subcontractors. Thecost of such insurance shall be included in the contractor’s bid, unless otherwise specified.Part A: Minimum Scope of InsuranceCoverage shall be at least as broad as: 1.Insurance Services Office “occurrence” form CG 00 01 (ed. 10/93) covering commercial general liability or its equivalent. 2.Insurance Services Office form CA 00 01 (ed. 6/92) covering automobile liability, coverage must apply to all owned, non-owned and hired vehicles. 3.Workers compensation insurance as required by labor code of the jurisdiction in which the Building is located, and employers liability insurance.Part B: Minimum Limits of InsuranceContractor shall maintain limits no less than: 1.Commercial general liability: $1,000,000 combined single limit per occurrence for death, bodily injury and property damage. Minimum $2,000,000aggregate. (The general aggregate limit shall apply separately to this project/location or the general aggregate shall be twice the required limit.). 2.Automobile liability: $1,000,000 per person/$2,000,000 per accident for death, bodily injury and property damage. 3.Workers compensation and employers liability: Workers compensation limits as required by the labor code of the jurisdiction in which the Building islocated and employers liability limits of $1,000,000 per accident. 4.Umbrella Liability: $5,000,000 per occurrence and $5,000,000 aggregate (The aggregate limit shall apply separately to this project/location).Part C: Coverages 1.General Liability and Automobile Liability Coverage(a) The managing agent of the Building, the holder of any mortgage, and their respective officers and employees are to be covered as additionalinsureds as H-13 respects: liability arising out of activities performed by or on behalf of the contractor; products and completed operations of the contractor; premises owned,leased, or used by the contractor; or automobiles owned, leased, hired, or borrowed by the contractor.The coverage shall contain no special limitations on the scope of protection afforded.(b) The contractor’s insurance coverage shall be primary insurance as respects the Landlord, its officers, officials, and employees. Any otherinsurance or self-insurance maintained by the Landlord, its officers, officials, and employees shall be excess of and not contribute with the contractor’sinsurance.(c) Any failure to comply with reporting provisions of the policies shall not affect coverage provided to the agency, its officers, officials, andemployees.(d) The contractor’s insurance shall apply separately to each insured against whom claim is made or suit is brought except with respect to thelimits of the insurer’s liability.The insurer shall agree to waive all rights of subrogation against the Landlord, its officers, officials, and employees for losses arising from workperformed by the contractor for the Landlord.Part D: All CoveragesEach insurance policy required by this clause shall be endorsed to state that coverage shall not be suspended, voided, canceled by either party, reduced incoverage or in limits except after 30 days’ prior written notice by certified mail, return receipt requested, has been given to the city.Part E: Acceptability of InsurersInsurance is to be placed with insurers licensed to do business in the jurisdiction in which the Building is located, that have been approved in advance by theLandlord, with a Best’s rating of no less than A:XI unless specific approval has been granted by the Landlord.Part F: Verification of CoverageContractor shall furnish the Landlord with certificates of insurance evidencing the coverages required by this Article. The certificates for each insurance policyare to be signed by a person authorized by that insurer to bind coverage on its behalf. The certificates are to be on ACORD Form 27 and/or ACORD Form 25-S, or other forms H-14 that are similarly binding on insurers, which forms are to be received and approved by the Landlord before work commences. In addition, the Landlord shallrequire an endorsement naming the Landlord, the managing agent of the Building, the holder of any mortgage and their respective officers and employees asadditional insureds or loss-payees (whichever is applicable). The Landlord reserves the right to require Tenant to deliver complete, certified copies of allrequired insurance policies, at any time.Part G: SubcontractorsContractors shall include all subcontractors as insureds under their policies or shall furnish separate certificates for each subcontractor in the form describedin clause E above. All coverage for subcontractors shall be subject to all of the requirements stated herein. Commercial general liability coverage shall includeindependent contractors coverage, and the contractor shall be responsible for assuring that all subcontractors are properly insured. H-15 H-16 Section III: Close-Out Requirements for Tenant ContractorsThe following are required from the general contractor prior to final payment being made: 1.Two complete sets of all Operations and Maintenance Manuals bound in notebooks with an index, as specified in the project manuals. 2.Two sets of blackline prints and one(1) CADD.DWG disk file including architectural, structural, plumbing, fire protection, elevator, mechanical, andelectrical drawings. The as-built drawings must include modifications made to the specifications, schedules and details and all changes initiated byrequests for information and field orders. 3.Copies of all building permits and certificates of occupancy, or occupancy permits. 4.Final Releases of Liens from the general contractor and all subcontractors. 5.One copy of all warranties bound in notebooks with a corresponding warranty log. 6.One complete set of all approved submittals and shop drawings and a copy of the final submittal log. 7.A complete list of all persons, including names, addresses, phone numbers and contact persons that will be providing warranty service during thewarranty periods. 8.One copy of NEBB certified air and water balancing reports. 9.When the general contractor considers the work to be ready for final acceptance, written certification from the general contractor shall be submittedstating the following: (a)Work has been completed in accordance with the contract documents and Tenant Plans; (b)All punch list items and other deficiencies identified by the Certificate of Substantial Completion have been corrected; (c)Work has been inspected for compliance with the contract documents and Tenant Plans; (d)All mechanical and electrical equipment and systems have been tested in the presence of the Landlord’s representative and are operational. H-17 H-18 1.0 Ceiling1.1 All tile and grid shall be standard white, Class A fire rated, and contain recycled content.1.2 Perimeter Soffit detail shall be constructed as follows: 2.0 Wall FinishesSuggested Guidelines2.1 All partitions shall be finished with paint and standard base unless alternate is proposed. (a)Standard resilient wall base shall be 2 /” high. Cove base shall be used at all resilient or exposed flooring. Straight base shall be used at allcarpeted flooring. H-19 12 3.0 Doors/HardwareSuggested Guidelines3.1 Suite Entry – Glass Double Doors. Doors shall be 3’x8’, /” frameless glass with polished edges and top and bottom rails. Hardware shallinclude vertical pull bar with back to back mounting through door, a recessed and concealed header, and door closer. Standard hardware to bebrushed stainless steel.3.2 Corridor Wood Doors. Doors shall be 3’x8’. Doors shall be flush, solid-core, paint-grade wood door with aluminum frame assembly. Doorsshall have mortised locksets and be equipped with a recessed, concealed header and door closer. Standard hardware to be brushed stainless steel.3.3 Interior Wood Doors. Doors shall be 3’x8’. Doors shall be flush, solid-core, paint-grade wood door with aluminum frame assembly. Doors shallhave butt hinges, cylindrical locksets and be equipped with a surface mounted door closer. Standard hardware to be brushed stainless steel.4.0 LightingSuggested GuidelinesUse of indirect pendant mounted ambient lighting system to reflect off high ceiling is preferred, with a design work surface illumination level of 25 – 30foot-candles.Use of LED lighting is recommended for task lighting;Use light colored ceiling materials to reflect indirect lighting5.0 PartitionsSuggested GuidelineUse low partitions (below 42”) to promote better lighting/day lighting and allow views to perimeter whenever possible H-20 12 In an attempt to maximize natural day lighting the use of light shelves and reflective ceiling materials is encouraged to bounce light deep within thebuilding.6.0 Suite Entry SignageSubject to Article 24 of the Lease.7.0 Window BlindsIn accordance with landlord specified treatments.8.0 FlooringCarpet and vinyl flooring adhesive to be low VOC.9.0 HVAC9.1 See Building Shell Definition9.2 Subject to Landlord approval, Tenant may elect to install supplemental HVAC systems. All supplemental HVAC systems shall be sub metered.Supplemental HVAC is not included in the turnkey cost – and would be paid for by Tenant.10.0 Telephone/Data10.1 Pull string and trim ring at locations determined by Tenant. Entire cable plant will be contracted for directly between the Tenant and their vendor.10.2 All necessary communications equipment is the responsibility of the Tenant and shall be located completely with Tenant space.11.0 General Plumbing Requirements H-21 H-22 Part A: Introduction and General InformationWhy Green?Buildings in the United States consume over 80% of the total electricity and more than 30% of total energy used annually. Buildings also utilize significantamounts of fresh water during both construction and occupancy. Material waste during construction accounts for up to 53% of landfill waste, depending onlocation. A well designed, sustainable building works to reduce impact on the environment while garnering financial and health-related benefits for the Ownerand Tenants.Currently, people spend over 90% of their time in buildings – much of that time at work. One benefit of a green building for occupants is the more comfortableand controllable environment designed into sustainable buildings. The impact of such an attribute can be manifested in increased employee retention andproductivity.United States Green Building Council and LEEDThe United States Green Building Council (USGBC) is a nonprofit organization committed to expanding sustainability in the built environment. Its missionis to transform the way buildings and communities are designed, built and operated, enabling an environmentally and socially responsible, healthy, andprosperous environment that improves the quality of life. LEED (Leadership in Energy and Environmental Design) is a voluntary, consensus-based nationalrating system for developing high-performance, sustainable buildings.Developed by the USGBC, LEED addresses all building types and emphasizes state- of-the-art strategies for sustainable site development, water savings,energy efficiency, materials and resource selection, and indoor environmental quality. LEED is a voluntary rating system for green building design andconstruction that provides immediate and measurable results for building owners and occupants.Opportunities for TenantsTenants at 150 Second have a remarkable opportunity to help lead the shift to sustainability in buildings, and in the process define a new kind of workplace.By locating in a LEED Gold building, tenants will benefit from a high performance building with excellent indoor air quality and ample daylight and views.These and other elements combine to create a healthier workplace and improve the indoor environment for all H-23 employees. In addition, 150 Second has set a higher standard with high-performance technologies that use less energy, consume less water, and leave a smallerfootprint on the city’s resources. Some of the building’s innovative features will be noticed at once: low flow plumbing fixtures and the zero irrigation raingarden. Others, such as energy-saving base building mechanical systems will exist behind the scenes, quietly but significantly setting the building apart fromits neighbors.The LEED Guidelines that follow summarize the measures that Skanska has taken to achieve LEED Gold certification for 150 Second. These guidelines areintended to help tenants understand and take full advantage of the high-performance features of the building, and to provide guidance in ways that tenants canreinforce these featuresin their own workplaces.Skanska set a goal of achieving LEED Gold for the base building at 150 Second using LEED for Core and Shell (LEED-CS) version 2009. We can onlydesign and build the building, however. It is up to our tenants to fit it out and operate it in an environmentally friendly way. To do this, we recommend you usethe LEED for Commercial Interiors (LEED-CI) rating system. The intent of LEED-CI is to assist in the creation of high-performance, healthy, durable,affordable and environmentally sound commercial interiors. Together LEED-CS and LEED-CI address the commercial office real estate market for bothdevelopers and tenants enabling significant benefits through improved indoor air quality, maximized day lighting and lower energy costs. A copy of the LEED-CI 2009 Scorecard and link to the Rating System are included in Appendix A for reference by tenants who wish to explore more information on timing anddetailed strategies. H-24 Project Data Floor Area: 123,210 rentable square feet (total)Occupancy Group: Group S-2, Low Hazard Storage (Parking Garage) Group B, (30%) and Lab areas (70%)Construction Type: IBBuilding Address: 150 Second StreetCambridge, MA 02141Part B: LEED-CD and LEED-CI CertificationBase Building Certification at 150 SecondThe LEED Guidelines that follow summarize the measures Skanska has undertaken to achieve LEED certification under the LEED for Core and Shell(LEED-CS) rating system. It is intended to help tenants understand and take full advantage of the high-performance features of the building, and to provideguidance to assist tenants in reinforcing these features in their own workplaces. It will also provide tenants with guidance and information on achievement ofLEED for Commercial Interiors (LEED-CI).Sustainable Sites (SS)The LEED requirements for the Sustainable Sites category are predominantly base-building responsibilities. A tenant applying for LEED for CommercialInteriors (LEED-CI) certification automatically gains five credits simply by choosing to be a tenant in the LEED-CS building at 150 Second.SSp1: Erosion and Sedimentation ControlIntent Reduce pollution from construction activities by controlling soil erosion, water-way sedimentation and airborne dust generation.LEED-CS This prerequisite is normally required as a routine part of the site design and city entitlement process. 150 Second complied with the requirementsof this prerequisite H-25 by developing and adhering to a Stormwater Pollution Prevention Plan as required by the United States Environmental Protection Agency. Tenants benefit byknowing that the construction process of the LEED-CS building had minimal negative impact on the local environment in terms of loss of soil, sedimentationof local storm-sewer systems, and localized air pollution.LEED-CI No related LEED-CI credit.SSc1: Site SelectionIntent Avoid development of inappropriate sites and reduce the environmental impact from the location of a building on the site.LEED-CS 150 Second meets all of the stated criteria for this credit. By developing in a dense, urban neighborhood, urban sprawl is reduced, as is thepressure to develop in environmentally sensitive areas. The LEED-CS building did not develop on prime farmland, within a flood plain, near wetland areas,on land protected for endangered species, or on former public parkland. Location by the tenant in 150 Second helps to preserve these valuable environmentalresources.LEED-CI No related LEED-CI credit. Tenants attempting LEED-CI at 150 Second will earn five points for locating in a LEED-CS building. This isassociated with LEED-CI SSc1: Site Selection.SSc2: Development Density and Community ConnectivityIntent Channel development to urban areas with existing infrastructure to protect greenfields, and persevere habitat and natural resources.LEED-CS 150 Second is located on a previously developed site, within one-half mile of a dense residential zone and within close pedestrian access to morethan ten basic community services. Pedestrians also have easy access to all community services. Tenants benefit from the close proximity of numerousservices such as restaurants, shopping, and groceries. The close proximity of neighborhood and community services help to reduce pollution caused by theuse of motor vehicles. 150 Second also meets the development density path of this credit. H-26 LEED-CI Tenants attempting LEED-CI at 150 Second will earn six LEED-CI points through SSc2: Development Density and Community Connectivity. SSc3: Brownfield RedevelopmentIntent Remediate and redevelop sites deemed as contaminated in order to restore the health of the site and avoid development of greenfield sites.LEED-CS 150 Second is located on a site that was previously contaminated. The site has been remediated. Remediation and redevelopment of brownfield sitesis a huge undertaking by a developer, and Skanska is proud to have redeveloped this site and make it suitable for living and working conditions.LEED-CI Brownfield redevelopment is covered under LEED-CI SSc1: Site Selection, where tenants earn five points for locating in a LEED-CS building.SSc4.1: Alternative Transportation-Public Transportation Access (LEED-CI SSc3.1)Intent Locate project near public transportation to reduce the number of vehicles on the road and to reduce land redevelopment for parking. H-27 LEED-CS 150 Second is located within one-quarter mile walking distance of the Lechmere T stop and multiple bus lines. Locating in close proximity to railand multiple bus lines is beneficial to tenants and their visitors because of the convenience of public transit access. This also reduces the need to drive cars tothe site, thereby reducing environmental impacts associated with pollution and development.LEED-CI Tenants attempting LEED-CI at 150 Second will earn six points meeting the credit requirements of SSc3.1: Alternative Transportation-PublicTransportation Access in the LEED-CI rating system.SSc4.2: Alternative Transportation – Bicycle Storage and Changing Rooms(LEED-CI SSc3.2)Intent Include bike racks and showering facilities to encourage building occupants to bike to the site, in an effort to reduce the number of vehicles on the roadand to reduce land development for parking.LEED-CS 150 Second provided 22 long-term and 8 exterior bike storage spaces for an estimated >8% of the assumed building users and provided 2 showerand changing rooms. This exceeds the requirement of racks for 3% of all building users and provided showering for an estimated 0.5% of full-time equivalent(FTE) occupantsLEED-CI Tenants attempting LEED-CI at 150 Second may be able to earn two points for LEED-CI SSc3.2: Alternative Transportation-Bicycle Storage andChanging Rooms. However, LEED-CI projects must provide bike racks for 5% of tenant occupants and showers for 0.5% of FTE. Tenants should verify thatthe bike racks and showers provided in the base building meet the required numbers for the tenant space. The base building provides sufficient bike storage tosatisfy the requirements for 600 total peak users and changing facilities for 400 total FTE’s. H-28 H-29 SSc4.3 Alternative Transportation – Low-Emitting and Fuel-Efficient VehiclesIntent Encourage the use of low-emitting and fuel-efficient (LE/FE) vehicles by providing preferred parking spaces for LE/FE vehicles.LEED-CS 150 Second will offer 5 preferred spaces for vehicles that meet the LEED definition of Low-Emitting and Fuel Efficient Vehicles.LEED-CI There is no related LEED-CI credit.SSc4.4: Alternative Transportation – Parking Capacity (LEED-CI SSc3.3)Intent Minimize parking spaces and provide preference to carpool and vanpool vehicles, in an effort to reduce the number of vehicles on the road and to reduceland development for parking.LEED-CS 150 Second minimized the total parking capacity to not exceed local zoning requirements but was not required to provide preferred parking forcarpools or vanpools to meet the credit requirements. Parking capacity was minimized in an effort to reduce land development.LEED-CI Tenants attempting LEED-CI at 150 Second may be able to earn two points for LEED-CI SSc3.3: Alternative Transportation – Parking Availability,which requires minimized parking for tenants and preferred parking for carpools and vanpools. Tenants in a LEED-CS building do not automatically meetthis credit and will have to determine the maximum number of parking spaces available to them and provide the preferred parking spaces. See the LEED-CIRating System for exact requirements.SSc5.1: Site Development – Protect or Restore HabitatIntent Conserve native habitat in an effort to promote biodiversity.LEED-CS 150 Second did not pursue this credit.LEED-CI There is no related LEED-CI credit.SSc5.2: Site Development – Maximize Open SpaceIntent Provide a high ratio of open space to development footprint to promote biodiversity. H-30 LEED-CS Although 150 Second did not pursue this LEED credit, the Project increased the amount of vegetated open space which provides tenants with addedamenities and park space.LEED-CI There is no related LEED-CI credit.SSc6.1: Stormwater Design – Quality ControlIntent Limit disruption of natural hydrology by reducing impervious cover, increasing onsite infiltration, and managing stormwater runoff quantities.LEED-CS 150 Second implemented a stormwater management plan that reduced the stormwater runoff by 25% compared to pre-development volumes.Tenants and the local community benefit from the stormwater management plan due to less stormwater runoff and less contamination entering localwaterways. Post development conditions show 44.92% reduction in 2 year, 24-hour design storm.LEED-CI Stormwater management is covered under LEED-CI SSc1: Site Selection, where tenants earn five points for locating in a LEED-CS building.SSc6.2: Stormwater Design – Quality ControlIntent Limit disruption of natural hydrology by reducing impervious cover, increasing on-site infiltration, and managing the quality of stormwater runoff.LEED-CS 150 Second has provided a new stormwater technology that captures and treats stormwater runoff from 90% of the annual rainfall and removes atleast 95.58% of total suspended solids. Tenants and the local community benefit from the stormwater management plan due to less stormwater runoff andless contamination entering local waterways.LEED-CI Stormwater management is covered under LEED-CI SSc1: Site Selection, where tenants earn five points for locating in a LEED-CS building.SSc7.1 Heat Island Effect – NonroofIntent Reduce heat island effect (thermal gradient differences between developed and undeveloped areas) to minimize impact on microclimate, and human andwildlife habitat. H-31 LEED-CS 150 Second has placed 84% of the total parking capacity under a white roof in an effort to reduce the heat island effect. By placing the majority ofparking spaces under one cover in a stacked parking garage, 150 Second is able to reduce the amount of asphalt required for the same number of parkingspaces and therefore minimize local heat island effects.LEED-CI The heat island effect is covered under LEED-CI SSc1: Site Selection, where tenants earn five points for locating in a LEED-CS building.SSc7.2: Heat Island Effect – RoofIntent Reduce heat island effect (thermal gradient differences between developed and undeveloped areas) to minimize impact on microclimate, and human andwildlife habitat.LEED-CS 150 Second installed a light colored roof which reduces the heat island effect. Tenants will benefit from more efficient operations of the HVACsystem in the building, which is passed on to the tenants in reduced energy costs.LEED-CI The heat island effect is covered under LEED-CI SSc1: Site Selection, where tenants earn five points for locating in a LEED-CS building.SSc8: Light Pollution ReductionIntent Reduce the impacts of lighting on nocturnal environments, reduce glare, and minimize light trespass from interior windows.LEED-CS 150 Second did not pursue this credit.LEED-CI Light pollution reduction is covered under LEED-CI SSc1: Site Selection, where tenants earn five points for locating in a LEED-CS building.SSc9: Tenant Design and Construction GuidelinesIntent Provide tenants with a descriptive tool that both educates and helps implement sustainable design and construction features in their tenant improvementbuild-out. H-32 LEED-CS Tenant Design and Construction Guidelines benefit the LEED-CS certified project for two important reasons. First, the Guidelines help tenantsdesign and build sustainable interiors and adopt green building practices; second, the Guidelines help in coordinating LEED-CI and LEED-CS certifications.These Guidelines are a tool to enable tenants of 150 Second to design and implement sustainable, green building interiors that will benefit the overall health andquality of life for building occupants.LEED-CI No related LEED-CI credit.Water Efficiency (WE)WEp1: Water Use Reduction – 20% Reduction and WEc3: Water Use ReductionIntent Maximize water efficiency within buildings to reduce the burden on municipal water supply and wastewater systems.LEED-CS 150 Second installed base building fixtures to achieve the prerequisite of20% water reduction but also earned additional points and achieved an overall water use reduction of 39% for showers, low-flush toilets and low-flush urinals.In total, these measures will reduce water consumption of the building by approximately250,000 gallons per year.LEED-CI Tenants attempting LEED-CI at 150 Second will also need to meet the 20% water use reduction prerequisite. This prerequisite addresses only toilets,urinals, lavatory faucets, prerinse spray valves and showerheads. 150 Second has ultra low-flow metering lavatories, low-flow showers, low-flow toilets andlow-flush urinals that tenants will be using and can take advantage of in compliance with LEED-CI. The tenant’s participation in this credit guideline couldfurther support reduction of water use.150 Second encourages tenants to employ water efficient fixtures in other areas of their space such as installing ultra flow faucets (0.5 gpm) inpantry/kitchenette laboratory and/or prerinse spray valves below the baseline. By employing similar strategies for the tenant space, the tenant has theopportunity to achieve up to 11 points for WEc1: Water Use Reduction within the LEED-CI rating system.Goals for Tenant Water Fixtures: • Low Flow Water Closets (1.28 gpf) – Already in core toilet rooms. H-33 • Pint Flush Urinals (0.125 gpf) – Already in core toilet rooms. • Ultra Low Flow Metering Lavatories (0.83 g/cycle) – Already in core toilet rooms. • Ultra Low Flow Kitchen and Janitorial Sinks (1.0 gpm) • Ultra Low Flow Shower Fixtures (1.5 gpm) – Already in core shower rooms. • Residential Dishwashers (Energy Star) • Commercial Dishwashers (1.0 gallons/rack) • Residential Clothes Washers [4.5 WF (gallons/ft/cycle)] • Commercial Clothes Washer [7.5 WF (gallons/ft/cycle)]WEc1: Water Efficient LandscapingIntent Reduce potable water consumption for irrigation through the use of high-efficient technologies and low-water consuming plantings.LEED-CS 150 Second installed limited turf grass and drought-resistant plants that require no permanent irrigation. These measures have resulted in a 100%potable water use reduction for irrigation.LEED-CI Water-efficient landscaping is covered under LEED-CI SSc1: Site Selection, where tenants earn five points for locating in a LEED-CS building.WEc2: Innovative Wastewater TechnologiesIntent Reduce wastewater generation and minimize the impact on municipal wastewater treatment plants.LEED-CS 150 Second installed an onsite rainwater storage system that treats water to tertiary standards. The treated rainwater is then reused for the toilets andurinals. This rainwater storage system reduces water use for toilets and urinals by 85%.LEED-CI Innovative wastewater technologies are covered under LEED-CI SSc1: Site Selection, where tenants earn five points for locating in a LEED-CSbuilding. H-3433 Energy and Atmosphere (EA)EAp1: Fundamental Commissioning and EAc3: Enhanced Commissioning(LEED-CI, EAc2: Enhanced Commissioning)IntentFundamental: To verify that the project’s energy-related systems are installed, calibrated and perform according to the owner’s project requirements,basis of design and construction documents. Benefits of commissioning include reduced energy use, lower operating costs, reduced contractor callbacks,better building documentation, improved occupant productivity and verification that the systems perform in accordance with the owner’s project requirements.Enhanced: To begin the commissioning process early in the design process and execute additional activities after systems performance verification iscompleted.LEED-CS 150 Second performed enhanced commissioning of all base building energy systems, including base building HVAC system and controls,domestic hot water, core and lobby lighting systems and controls and building management system. This process helped to assure all energy-related systemsare operating as intended.LEED-CI Tenants attempting LEED-CI at 150 Second are required to perform fundamental commissioning of their energy-related systems. Additionally,tenants can achieve five points if they elect to perform enhanced commissioning (EAc2).EAp2: Minimum Energy PerformanceIntent To establish the minimum level of energy efficiency for the proposed building and systems to reduce environmental and economic impacts associatedwith excessive energy use.LEED-CS 150 Second performed whole building energy simulation using ASHAE 90.1-2007 Appendix G and has met the requirements for energyperformance. 150 Second energy simulation demonstrated an improvement of 43% over ASHRAE 90.1-2007. The building envelope was designed to improveenergy efficiency and reduce the cost of energy for the entire building, these savings are passed on to the tenant.LEED-CI Minimum Energy Performance of the tenant space is a prerequisite in the LEED-CI rating system CAp2. Tenants attempting LEED-CI at 150Second are required to comply with the mandatory provisions and prescription requirements of ASHRAE 90.1-2007, as well as reduce connected lightingpower density by 10% from ASHRAE 90.1-2007 and install Energy Star appliances for at least 50% of eligible equipment. Tenants occupying space in 150Second will benefit from the energy efficiencies of the base building systems but will not be automatically guaranteed credit compliance. H-35 EAp3: Fundamental Refrigerant ManagementIntent To reduce stratospheric ozone depletion.LEED-CS 150 Second installed new HVAC systems which contained no Chlorofluorocarbon (CFC)-based refrigerants which thereby reduce the buildingsimpact on the ozone.LEED-CI Tenants attempting LEED-CI at 150 Second are required to comply with this prerequisite through either the purchase of new HVAC equipmentwhich contains no CFC-based refrigerants or upgrading of existing equipment which contains CFC-based refrigerants.EAc1: Optimize Energy PerformanceIntent To achieve increasing levels of energy performance beyond the prerequisite standard and to reduce environmental and economic impacts associated withexcessive energy use.LEED-CS 150 Second performed whole building energy simulation using ASHAE 90.1-2007 Appendix G and has met the requirements for energyperformance. 150 Second energy simulation demonstrated an improvement of 43% over ASHRAE 90.1-2007.LEED-CI Tenants attempting LEED-CI at 150 Second can earn points for further enhancing energy efficiency. These combined strategies will contributetoward further reductions in environmental and economic impacts for the project. Points are achievable across different areas of energy related systems asfollows:EAc1.1: Optimize Energy Performance – Lighting Power: Projects can achieve up to five points for further reductions in lighting power densitybelow ASHRAE 90.1-2007.Recommendations for Tenant Lighting Systems: • Display lighting: metal halide, fluorescent, or LED lamps rather than halogen. H-36 EAc1.2: Optimize Energy Performance – Lighting Controls: Projects that install lightning controls such as daylight and occupancy sensors canachieve up to three points in and contribute towards increased energy conservation.Recommendations for Tenant Lighting Controls: • Install daylight responsive controls in all regularly occupied spaces within 15 feet of windows and under skylights.EAc1.3: Optimize Energy Performance – HVAC: Through increased HVAC equipment efficiencies and appropriate zoning and controls, whichresult in HVAC performance above ASHRAE 90.1-2007, projects are eligible for up to 10 points.Recommendations for Tenant HVAC Systems: • High SEER condensing units – minimum 14 SEER. • Air source heat pump heating. • Electronically Controlled Motors (ECM) in fan coils. • Demand ventilation controls with CO2 sensors.EAc1.4: Optimize Energy Performance – Equipment and Applications: Selecting energy-efficient equipment and appliances, as qualified by EPA’sEnergy Star Program, can contribute up to 4 points.EAc2: On-Site Renewable EnergyIntent To encourage and recognize increasing levels of on-site renewable energy self-supply to reduce environmental and economic impacts associated withfossil fuel energy use.LEED-CD 150 Second did not pursue this credit.LEED-CI On-site renewable energy is covered under LEED-CI SSc1: Site Selection, where tenants earn five points for locating in a LEED-CS building.EAc5: Measurement and Verification (LEED-CI, EAc3)Intent To provide for the ongoing accountability of building energy consumption over time.LEED-CS 150 Second did not pursue this credit. H-37 LEED-CI Tenants attempting LEED-CI at 150 Second can earn points by providing ongoing accountability and optimization of their energy and waterconsumption over time. 150 Second has provided tenants a lease agreement in which energy costs are paid by the tenants and not included in the base rent,making the tenants eligible for three points in LEED-CI (EAc3-Measurement & Verification). Furthermore, the base building central monitoring system allowstenants the ability to easily install submetering devices within their space.EAc6: Green Power (LEED-CI, EAc4)Intent To encourage the development and use of grid-source, renewable energy technologies on a net-zero pollution basis.LEED-CS 150 Second did not pursue this credit.LEED-CI Tenants attempting LEED-CI at 150 Second can earn five points by engaging in a 2 year renewable energy contract through LEED-CI EAc4. Thecontract amount must be for at least 50% of the energy consumed in the tenant space for at least 8 kilowatt hours per square foot of tenant space.Materials and Resources (MR)MRp1: Storage and Collection of RecyclablesIntent Facilitate the reduction of waste generated by building occupants that is hauled to and disposed of in landfills.LEED-CS 150 Second provides a centrally located, easily accessible area for recycling of paper, cardboard, glass, plastics and metals, for the base buildingand tenant occupants. The recycling storage area is located at Room 119 near the loading dock.LEED-CI Tenants attempting LEED-CI at 150 Second are provided with an easily accessible dedicated area for tenants recycling (paper, corrugatedcardboard, glass, plastics and metals). This is a prerequisite in the LEED-CI rating system (MRp1) and LEED-CI projects will automatically earn thisprerequisite. Tenants are strongly encouraged to create a dedicated recycling area on each floor to facilitate efficient sorting and recycling of waste materials. H-38 MRc1.1: Tenant Space – Long-term Commitment (LEED-CI Only)Intent To encourage choices that conserve resources, reduce waste and the environmental impacts of tenants related to materials, manufacturing andtransportation.LEED-CS There is no related LEED-CS credit.LEED-CI Tenants attempting LEED-CI at 150 Second are encouraged to pursue a ten-year lease. Doing so will help earn LEED-CI MRc1.1.MRc1.2: Building Reuse – Maintain Interior Nonstructural ElementsIntent To reduce the environmental impact of new construction by salvaging old building stock.LEED-CS 150 Second did not pursue this credit.LEED-CI Tenants LEED-CI at 150 Second may earn a point for the interior salvage of the floors, walls and doors, as long as tenants preserve these elementsduring fit-out. Projects can up to two points for MRc1.2: Building Reuse-Maintain Interior Nonstructural Components for maintain 40% or 60% of interiorcomponents.MRc2: Construction Waste ManagementIntent Divert Construction and demolition debris from disposal in landfills and incinerators. Redirect recyclable recovered resources back to the manufacturingprocess. Redirect reusable materials to appropriate sites.LEED-CS 150 Second implemented a Construction Waste Management Plan that resulted in diverting over 95% of the project’s construction and demolitionwaste from being disposed in landfills.LEED-CI Tenants attempting LEED-CI at 150 Second can develop and implement their own construction waste management plan during the construction ofthe tenant space, and by recycling 50% or 75% of construction, demolition and packaging debris, tenants can qualify for up to two points for MRc2.1:Construction Waste Management. H-39 MRc3: Materials Reuse (LEED-CI, MR3.1)Intent To reduce the environmental impact of new construction by salvaging materials.LEED-CS 150 Second did not pursue this credit.LEED-CI Tenants attempting LEED-CI at 150 Second can earn up to two LEED-CI points under MRc3.1: Materials Reuse by using salvaged old doors andwindows to make interior partitions, and an additional credit for MRc3.2: Materials Reuse – Furniture and Furnishing for reusing furniture.MRc3.2: Materials Reuse – Furniture and Furnishing (LEED-CI Only)Intent To reduce the environmental impact of new construction by salvaging materials.LEED-CS There is no related LEED-CS credit.LEED-CI Tenants attempting LEED-CI at 150 Second can refurnish, reuse or salvage 30% of their total furniture cost to earn an additional LEED-CI point.MRc4: Recycled ContentIntent Increased demand for building products that incorporate recycled content materials, thereby reducing impacts resulting from extraction and processingof virgin materials.LEED-CS 150 Second specified the use of a minimum of 20% of building materials (by cost) as recycled materials, containing post-consumer or post-industrial recycled content.LEED-CI Tenants attempting LEED-CI at 150 Second can specify 10% – 20% of materials to have recycled content, out of the total amount of constructionmaterials and furnishings, the tenant can achieve two LEED points through MRc4: Recycled Content. Consider specifying products such as structural steel,gypsum board and concrete to have high-recycled content.MRc5: Regional MaterialsIntent Increase demand for building materials and products that are extracted and manufactured within the region, thereby supporting the use of indigenousresources and reducing the environmental impacts resulting from transportation. H-40 LEED-CS 150 Second specified the use of a minimum of 10% of building materials (by cost) to be regionally extracted and manufactured (within 500 miles ofthe site).LEED-CI Tenants attempting LEED-CI at 150 Second can specify 20% of the combined value of construction materials and furnishings to be manufacturedregionally (within 500 miles of the site) to earn a LEED-CI point for MRc5: Regional Materials. If 10% of those materials are also extracted, harvested orrecovered from within 500 miles of the project, tents earn an additional point under MRc5, Option 2.MRc6: Rapidly Renewable Materials (LEED-CI Only)Intent To reduce the environmental impact of finite raw materials that have long-cycles of growth.LEED-CS There is no related LEED-CS credit.LEED-CI Tenants attempting LEED-CI at 150 Second are encouraged to specify a minimum of 5% of the total value of all building materials from rapidlyrenewable sources to earn a LEED-CI point through MRc6: Rapidly Renewable Materials. Rapidly renewable materials are agricultural products, either fiber oranimal, which take ten years or less to grow or raise and then harvested in an ongoing and sustainable fashion. Bamboo, wool, carpets, cork, rubber,strawboard and wheatboard are all examples of rapidly renewable resources.MRc6: Certified Wood (LEED-CI, MRc7)Intent Encourage environmentally responsible forest management.LEED-CS 150 Second specified a minimum of 50% of wood-based products to be harvested in accordance with the Forest Stewardship Council’s (FSC)Principles and Criteria, for base building wood components. FSC certification means that the forest managers employed environmentally and sociallyresponsible forest management practices. FSC wood has been specified for base building finishes such as the lobby wall paneling and cabinetry.LEED-CI Tenants attempting LEED-CI at 150 Second are encouraged to specify certified wood for new wood products and materials for their space. Aminimum of 50% of certified wood used in the project is required to achieve a LEED-CI point throughMRc7: Certified Wood. H-41 Indoor Environmental Quality (IEQ)IEQp1: Minimum Indoor Air Quality PerformanceIntent To establish minimum indoor air quality (IAQ) performance to enhance indoor air quality in buildings, thus contributing to the comfort and well-beingof the occupants.LEED-CS 150 Second has met the requirements of Section 4 through 7 of ASHRAE Standard 62.1-2007, Ventilation for Acceptable Indoor Air Quality for thebase building, and goes beyond the ventilation rates required by the prerequisite to provide 30% more ventilation than required by the ASHRAE standard. Thebase building HVAC system supports this design by providing at least 20 cubic feet per minute of outside air per person, based on standard occupancydensities. The tenants from this by increased productivity.LEED-CI Tenants attempting LEED-CI at 150 Second are required to supply minimum levels of ventilation through compliance with ASHRAE 62.1-2007.Depending on the location of the tenant spaces, tenants may need to provide adequate ventilation for their spaces to meet LEED-CI IEQp1: Minimum IndoorAir Quality Performance. Some spaces in the tenant building will automatically comply, others will need to provide ventilation in their own spaces. Contactbuilding management for details on your tenant space.IEQp2: Environmental Tobacco Smoke ControlIntent To minimize exposure of building occupants, indoor surfaces and ventilation air distribution systems to environmental tobacco smoke (ETS).LEED-CS 150 Second has prohibited smoking inside the building, and prohibited smoking on the property from within 25 feet of entries, outdoor air intakesand operable windows.LEED-CI Tenants attempting LEED-CI at 150 Second will automatically comply with this prerequisite, through LEED-CI IEQp2: Environmental TobaccoSmoke Control, H-42 due to the building’s no smoking policy. Tenants are prohibited from smoking within the building and have ben provided designated smoking areas which areat least 25 feet away from building entries, outdoor air intakes and operable windows. Signage indicating that smoking is not allowed within 25 feet of the allentrances will be provided for the entire building.IEQc1: Outdoor Air Delivery MonitoringIntent To provide capacity for ventilation system monitoring to help promote occupant comfort and well-being.LEED-CS 150 Second has installed a permanent monitoring system to ensure that ventilation systems in all public spaces maintain design minimumrequirements. This has been accomplished through the incorporation of CO2 monitoring devices and outdoor airflow measurement devices within the basebuilding. Furthermore, the installed system in the base building is capable of being expanded to provide CO2 monitoring within the tenant spaces.LEED-CI Tenants attempting LEED-CI at 150 Second can achieve one point for installing permanent ventilation monitoring systems within their tenant space,through IEQc1: Outdoor Air Delivery Monitoring.IEQc2: Increased VentilationIntent To provide additional outdoor air ventilation to improve indoor air quality (IAQ) and promote occupant comfort, well-being and productivity.LEED-CS 150 Second has increased breathing zone outdoor air ventilation rates to all occupied spaces by at least 30% above the minimum rates required byASHRAE 62.1-2007 for the base building. Furthermore, the base building systems have provided tenants with the ability to achieve LEED-CI, IEQc2:Increased Ventilation within their space by providing increased ventilation for each zone.LEED-CI Tenants attempting LEED-CI at 150 Second can achieve one point, through LEED-CI IEQc2: Increased Ventilation, by providing additional airventilation through appropriate mechanical or natural ventilation design strategies. The base building has provided the ability to easily facilitate increasedventilation within the tenant space. H-43 IEQc3: Construction Indoor Air Quality Management Plan – During Construction(LEED-CI, IEQc3.1)Intent To reduce indoor air quality (IAQ) problems resulting from construction or renovation and promote the comfort and well-being of construction workersand building occupants.LEED-CS 150 Second has developed and implemented an IAQ management plan for the construction and pre-occupancy phases for the base building. As aresult, the base building has provided a healthy indoor environment for tenants as they commence occupancy in their space. Measures taken as part of theIAQ plan included enclosed space ventilation, protection of absorption materials from moisture damage, replacement of filters prior to occupancy, among otherrequirements from the Sheet Metal and Air Conditioning National Contractors Association (SMACNA) guidelines.LEED-CI Tenants attempting LEED-CI at 150 Second may achieve one point, through LEED-CI IEQc3.1: Construction IAQ Management Plan – DuringConstruction, for developing and implementing their own IAQ management plan for the construction and preoccupancy phases of the tenant space.IEQc3.2: Construction Indoor Air Quality Management Plan – Before OccupancyIntent To reduce indoor air quality (IAQ) problems resulting from construction or renovation to promote the comfort and well-being of construction workersand building occupants.LEED-CS There is no related LEED-CD credit.LEED-CI Tenants attempting LEED-CI at 150 Second may achieve one point by performing a building flush-out or air testing the tenant space to ensure ahealthy indoor environment.IEQc4.1: Low-Emitting Materials-Adhesives & SealantsIntent To reduce the quantity of indoor air contaminants that are odorous, irritating and/or harmful to the comfort and well-being of installers and occupants.LEED-CS 150 Second has complied with the applicable volatile organic compound (VOC) requirements for all adhesives and sealants installed within theweather barrier for the base building. As a result, the base building has provided a healthy indoor environment for tenants as they commence occupancy intheir space. H-44 LEED-CI Tenants attempting LEED-CI at 150 Second may achieve one point by ensuring that all adhesives and sealants installed within the tenant spacecomply with the applicable VOC limits.IEQc4.2: Low-Emitting Materials – Paints and CoatingsIntent To reduce the quantity of indoor air contaminants that are odorous, irritating and/or harmful to the comfort and well-being of installers and occupants.LEED-CS 150 Second has complied with the applicable volatile organic compound (VOC) requirements for all paints and coatings installed within theweather barrier for the base building. As a result, the base building has provided a healthy indoor environment for tenants as they commence occupancy intheir space.LEED-CI Tenants attempting LEED-CI at 150 Second may achieve one point by ensuring that all paints and coatings installed within the tenant space complywith the applicable VOC limits.IEQc4.3: Low-Emitting Materials – Flooring SystemsIntent To reduce the quantity of indoor air contaminants that are odorous, irritating and/or harmful to the comfort and well-being of installers and occupants.LEED-CS 150 Second has complied with the applicable standards for all flooring systems installed within the weather barrier for the base building. As aresult, the base building has provided a healthy indoor environment for tenants as they commence occupancy for their space.LEED-CI Tenants attempting LEED-CI at 150 Second may achieve one point by ensuring that all flooring systems installed within the tenant space complywith the applicable standards.IEQc4.4: Low-Emitting Materials – Composite Wood and Agrifiber ProductIntent To reduce the quantity of indoor air contaminant that are odorous, irritating and/ or harmful to the comfort and well-being of installers and occupants. H-45 LEED-CS All composite wood and agrifiber products used on the interior of 150 Second have contained no added urea-formaldehyde resins for the basebuilding. As a result, the base building has provided a healthy indoor environment for tenants as they commence occupancy in their space.LEED-CI Tenants attempting LEED-CI at 150 Second may achieve one point by ensuring that all composite wood and agrifiber products installed withintenant space contain no added urea-formaldehyde resins.IEQc4.5: Low-Emitting Materials – Systems Furniture and Seating (LEED-CI Only)Intent To reduce the quantity of indoor air contaminants that are odorous, irritating and/or harmful to the comfort and well-being of installers and occupants.LEED-CS No related LEED-CS credit.LEED CI Tenants attempting LEED-CI at 150 Second may achieve one point by ensuring that all systems furniture and seating installed within the tenantspace comply with the applicable standards.IEQc5: Indoor Chemical and Pollutant Source ControlIntent To minimize building occupant exposure to potentially hazardous particulates and chemical pollutants.LEED-CS 150 Second has complied with the applicable measures for indoor chemical and pollutant source control for the base building.LEED-CI Tenants attempting LEED-CI at 150 Second may achieve one point by minimizing and controlling the entry of pollutants into the tenant spacethrough the employment of all applicable requirements of LEED-CI IEQc5: Indoor Chemical and Pollutant Source Control. The base building has provided apermanent entryway system at all major entrances, sufficient exhaust and sealing of housekeeping and janitorial rooms, MERV-13 filtration on air handlingunits and closed containment systems for all hazardous liquid wastes. In addition, tenants are required to provide a 10-foot long entryway system for all mainentrances. H-46 IEQc6.1: Controllability of Systems – LightingIntent To provide a high level of lighting system control by individual occupants or groups in multi-occupant spaces (e.g., classrooms and conference areas)and promote their productivity, comfort and well-being.LEED-CS There is no related LEED-CS credit.LEED-CI Tenants attempting LEED-CI at 150 Second may achieve one point by providing individual lighting control for at least 90% of occupants of thetenant space and for all multi-occupant spaces.IEQc6: Controllability of Systems – Thermal Comfort (LEED-CI, IEQc6.2)Intent To provide a high level of thermal comfort control by individual occupants or groups in multi-occupant spaces (e.g. classrooms and conference areas)and promote their productivity, comfort and well-being.LEED-CS 150 Second did not pursue this credit.LEED-CI Tenants attempting LEED-CI at 150 Second may achieve one point by providing individual thermal comfort controls for at least 50% of occupantsof the tenant space and for all multi-occupant spaces.IEQc7: Thermal Comfort – Design (LEED-CI, IEQc7.1)Intent To provide a comfortable thermal environment that promotes occupant productivity and well-being.LEED-CS 150 Second has designed and installed the HVAC system and building envelope to meet the requirements of ASHRAE-55-2004 for the basebuilding. ASHRAE-55 requires the regulation of temperature and humidity levels within the building based on climate zone. The base building has providedthe ability for tenants to comply with the requirements of ASHRAE 55-2004 during build-out of their tenant space.LEED-CI Tenants attempting LEED CI at 150 Second will achieve one point by demonstrating that the HVAC system meets the requirements of ASHRAE-55-2004. H-47 IEQc7.2: Thermal Comfort – Verification (LEED-CI Only)Intent To provide for the assessment of building occupants’ comfort over time.LEED-CS There is no related LEED-CS credit.LEED-CI Tenants attempting LEED-CI at 150 Second can achieve one point by meeting the following requirements: • Achieving IEQc7.1 • Providing a permanent monitoring system and process for corrective action to ensure that building performance meets the desired comfort criteria. • Conduct a thermal comfort survey of tenant space occupants within 6-18 months after occupancy.IEQc8.1: Daylight and Views – DaylightIntent To provide occupants with a connection between indoor spaces and the outdoors through the introduction of daylight and views into the regularlyoccupied areas of the building.LEED-CS 150 Second did not pursue this credit.LEED-CI Tenants attempting LEED-CI at 150 Second will achieve one point by providing sufficient daylight to at least 75% of regularly spaces. To do sotenants must be sure that their fit-out does not compromise the daylight provided by the base building, new simulations may need to be run.IEQc8.2: Daylight and Views – ViewsIntent To provide occupants with a connection between indoor spaces and the outdoors through the introduction of daylight and views into the regularlyoccupied areas of the building.LEED-CS 150 Second has achieved direct views to the outdoor environment through vision glazing for 91% of regularly occupied areas. The calculation ofviews for tenant spaces was done using a feasible tenant layout per the default occupancy counts. H-48 LEED-CI Tenants attempting LEED-CI at 150 Second will achieve one point by providing direct views to the outdoor environment through vision glazing forat least 90% of regularly occupied areas. To do so tenants must be sure that their fit-out does not compromise the views provided by the base building. Tenantsshould consider using an open plan, desk partitions less than 42” in height in areas where views to the outside area possible, and glass partitions aroundcommon meeting areas.Innovation in Design (ID)IDc1: Innovation in DesignIntent To provide design teams and projects the opportunity to be awarded points for exceptional performance above the requirements set by LEED and todevelop innovation ideas in green building categories not specifically addressed by LEED.LEED-CS 150 Second has four points in the LEED ID category: • The base building has achieved exemplary performance under SSc4.1. • The base building has achieved exemplary performance under MRc2. • The base building has achieved exemplary performance under SSc2. • The base building participated in Pilot Credit 12 Reduced Automobile Dependence.LEED-CI Tenants attempting LEED-CI at 150 Second are encouraged to achieve all four ID credits through creative design and management of their built-outspace.IDc2: LEED Accredited ProfessionalIntent To support and encourage the design integration required by LEED green buildings and to streamline the application and certification process.LEED-CS 150 Second has accomplished this through the participation of many LEED Accredited Professionals on the design team and a sustainabilityconsultant. The use of a LEED-AP as a responsible member of the design team for the base building and any tenant improvements will help ensure that thedesign and material specifications for the project will properly address the established sustainable design criteria for the project.LEED-CI Tenants attempting LEED-CI at 150 Second are encouraged to include at least one principle participant on the project team, who has successfullycompleted the LEED Accredited Professional exam. Tenants can achieve one point for LEED-CI. H-49 Appendix A: Reference MaterialTenants should refer to the link below for a reference guide for the LEED 2009 for Commercial Interiors (LEED-CI) Rating System.http://www.usgbc.org/ShowFile.aspx?DocumentID=5543For reference, tenants should see to the LEED-CI 2009 Scorecard below. H-50 EXHIBIT I TO LEASEPARKING PLAN I-1 EXHIBIT J TO LEASERULES AND REGULATIONSTenant (and tenant employees and contractors) shall faithfully observe and comply with the following Rules & Regulations: 1.The sidewalks, entrances, service elevator lobby, corridors, stairwells, and fire exits of the building shall not be encumbered by any tenant or itsagents, employees, licensees or guests or shall be used for tenant’s premises provided that the stairwells may be so used. 2.All deliveries to and removals from the building of furniture, equipment and supplies shall be by way of the loading dock – a platform (deliveryentrance) located at the ground level of the building and accessible from the street and then only during such hours as may be prescribed by theowner’s representative (Monday through Friday, 7AM – 5PM). During such hours there shall be no separate charge to tenant for the normal use ofthe loading dock or freight elevator. Tenant shall be responsible for any loss, cost or damage suffered or incurred as a result of or arising fromdeliveries and/or removals after such hours. 3.The loading dock and service elevator are for pick ups and deliveries only. Due to limited space at the loading dock, there is a vehicle parkinglimit of thirty (30) minutes, provided other deliveries are waiting, unless special arrangements are made with the Property Management Office.Persons using service elevators will sign in at the security desk in the main lobby and be issued a floor pass. Each tenant will supply a list ofauthorized employees that require access to the freight elevators. 4.All incoming and outgoing shipments must be moved directly, by the delivery or pick up agent from the delivery entrance: such shipments willnot be held at the delivery entrance. Building operating personnel are not authorized to sign receipt for shipments to or from the building. 5.Furniture, equipment and supplies and other packaged materials and items requiring the use of a hand truck, pallet truck or other type of wheeledtransport, shall be moved only upon the service elevator. 6.All large deliveries, pick ups, moves and removal of demolition materials must be transported on the service elevator after hours, with priorapproval of the owner’s representative and at the expense of the tenant. The removal of demolition material and the delivery of sheet rock willrequire the smoke detectors in the freight elevators to be disabled. J-1 7.No hand truck, pallet truck or other type of wheeled transport shall be used in the lobbies, corridors or elevators of the building other than in theloading dock corridor to and including the freight elevator. 8.The owner’s representative reserves the right to inspect all items to be brought into the building and to exclude from the building all items whichviolate any provision of the rules and regulations or which may, in the reasonable judgment of the owner’s representative, constitute a hazard ordanger to the building, its equipment or occupants. 9.Any damage to the building or any part thereof caused by the moving in our out of the building of furniture, equipment, supplies, or other items,shall be repaired by the owner’s representative at the expense of the tenant responsible. 10.Tenant shall notify the property management office when safes or other heavy equipment, except in the ordinary course of tenant’s businessoperations in accordance with its permitted use, are to be taken in or out of the building, and such moving shall only be done after writtenpermission is obtained from the property management office on such conditions, as the property management office shall require. Additional costsrelated to the installation of such equipment, shall, as for elevator use or window removal, will be borne by tenant. 11.All construction and demolition work requires a written request to be approved by the property management office who will act reasonably inconnection therewith. Tenant and tenant’s contractor will be required to follow the 150 Second Street Tenant Improvement Rules and Regulationsthat is available upon request at the property management office. Upon completion of approved work, if applicable, Tenant must provide “As-Built” drawings in both CAD and black line form to the owner’s representative. 12.Access to the area above the ceiling must be scheduled and approved by the property management office. All ceiling tiles must be back in place bythe end of the working day. 13.The property management office reserves the right to control and operate the public portions of the building and the public facilities, as well as thefacilities furnished for the common use of the tenants, in such manner as they deem best for the benefit of the tenants. 14.The property management office reserves the right to exclude from the building, during non-business hours, all persons who do not present a validbuilding access photo id card that are not otherwise escorted by a Tenant representative. J-2 15.The property management office must be given advance written notification of any after-hour functions requiring access via loading dock orbuilding services. Tenant shall reimburse the owner’s representative for any third party out of pocket costs incurred in connection with theseservices. 16.No additional locks or bolts of any kind shall be placed upon any of the doors in any tenant’s premises and no lock on any door therein shall bechanged or altered in any respect without property management approval. In the case where tenant has equipment in the MEP rooms, card readersare to be installed by tenant, and a room access list provided to building management. 17.No acids, vapors, or other materials shall be discharged into non-designated waste lines, vents or flues of the building. The water wash closetsand other plumbing fixtures in or serving any tenant’s premises (not specifically designed for this purpose) shall not be used for any purposeother than that for which they were designed or constructed, and no sweeping shall be deposited therein. The property management office shallrepair any damage resulting to the same from misuse by a tenant, at the expense of the tenant. 18.If a tenant’s premises becomes infested with vermin, such tenant, at its sole cost and expense, unless it is clearly determined that the same hasbeen caused entirely by others, shall cause it premises to be exterminated by such exterminators as shall be approved by the property managementoffice at such times and to such extent as the property management office deems necessary. 19.No part of the tenant’s premises shall be occupied at any time as sleeping quarters and no part of the building shall be used for gambling or forany immoral or unlawful purposes or practices. No intoxicating liquor shall be sold in any part of the building unless allowed by the leaseagreement. 20.No animals or birds, bicycles, skate boards, in-line skater or other vehicles shall be allowed in the corridors, lobbies, elevators, sidewalks,walkways, gardens, or elsewhere in or around the building (provided that animals related to vivarium usage may be housed in the vivarium intenant’s premises and transported in the freight elevator). Bicycle storage is available at the designated areas in the garage and at the front entranceby the canopy. 21.Canvassing, soliciting or peddling in the building is prohibited and each tenant shall cooperate to prevent the same. 22.A building directory with the names of the tenants will be provided and maintained by the property management office. The property managementoffice at the tenant’s expense will make changes in the directory, within a reasonable time period after written notice from the tenant. J-3 23.Tenants may be requested to assign from their employees, personnel to perform specific tasks required by the building’s emergency evacuationplan. Person so assigned shall be made available from time to time for instructions by the building life safety director. 24.Access to building tele/com centers and closets will be provided by building security only. Anyone requesting access must have a valid id from thetelecommunication company that employs them or be listed on the approved access list that is maintained at the property management office.Tenant may elect to install a card reader and provide documentation of appropriate personnel training to allow authorization for room access. 25.Building maintenance will provide access to the building electric closets. Tenants will be required to notify the property management office byelectronic mail should a vendor require access. All tenant vendors must have a valid id from the company that employees them or be listed on theapproved access list that is maintained at the property management office. Tenant may elect to install a card reader and provide documentation ofappropriate personnel training to allow authorization for room access. 26.Portable electric heaters, fans or desktop heating appliances (coffee cup warmers) are not allowed inside any tenant spaces or common areas withinthe building, unless approved by the property management office. 27.Prior written approval, which shall be at the sole discretion of the property management office, must be obtained for installation of any windowshades, blinds, drapes or any other window treatment of any kind; provided however, the foregoing restriction shall not apply to any of suchitems that are installed as part of Tenant’s Work in conformity with the Plans. 28.Plumbing, fixtures and appliances shall be used only for the purpose for which constructed, no other unsuitable material shall be placed therein. 29.Owner and property management office shall have the right to prescribe the weight and position of heavy equipment or objects, which mayoverstress any portion of the floors of the premises. All damage done to the building by the improper placing of such heavy items will be repairedat the sole expense of the tenant. 30.No nails, hooks or screws shall be driven into or inserted in any part of the building except as approved by the property management office,permitted by tenant’s lease, or as reasonably necessary to permit tenant to hang pictures and other wall decorations or wall hangings (e.g.,whiteboards, corkboards, signs, shelves, etc.) within the premises. J-4 31.Tenant shall comply with all requirements necessary for the security of the premises, including the use or property removal passes for the removalof office equipment/packages, and use of security control cards for access to the building at all times. 32.Smoking is not permitted in the 150 Second Street common areas including exterior entrances, vestibules, corridors, restrooms, stairwells andparking garage. Additionally, smoking is not allowed within 25 feet of the front of the entrance of the building as well as the loading dockentrance. Tenant must comply with requests by the owner’s representative concerning informing their employees of items of importance to theowner. 33.All doors opening to public corridors shall be kept closed at all times except for normal ingress and egress to the premises, unless electricalholdbacks have been installed. 34.Owner reserves the right to close and keep locked all entrance and exit doors during hours when the building is closed. Access to the building maybe refused unless person seeking access has proper identification or has previously arranged a pass for access to the building. The owner and itsrepresentative shall in no case be liable for damages for any error with regard to the admission to or exclusion from the building of any person. Incase of invasion, mob, riot, public excitement or other commotion, owner reserves the right to prevent access to the building during thecontinuance of it by any means it deems appropriate for the safety and protection of life and property. 35.No furniture, freight, equipment or other bulky matter will be brought into or removed from the building or carried up or down in elevators, exceptupon prior notice to the property management office and in such manner, in such specific elevator, and between such hours as shall be reasonablydesignated by the owner; provided however, (i) the foregoing restrictions shall not apply to items brought into the building in connection withTenant’s Work, or (ii) for items delivered to the Premises on a recurring basis, such approval need only be obtained from Landlord once. Tenantshall provide the property management office with reasonable prior notice of the need to utilize the elevator for any such purpose, so as to provideowner with a reasonable period to schedule such use and to install such padding or take such other actions or prescribe such procedures as areappropriate to protect against damage to the elevators or other parts of the building. 36.Tenant shall not disturb, solicit or canvass any occupant of the building and shall cooperate with the owner or owner’s agent to prevent it. 37.The toilet rooms, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed andno foreign substance of any kind whatsoever shall be thrown therein. J-5 38.Tenant shall not use any method of heating or air conditioning other than that which is supplied by the owner without the prior written consent ofthe owner. 39.Cooking shall not be permitted or done by any tenant on the premises, nor shall the premises be used for the storage of merchandise for lodging offor any improper objectionable or immoral purposes. Notwithstanding the foregoing, laboratory approved equipment and microwave ovens and/orsmall toaster ovens may be used on the premises for heating food and brewing coffee, tea, hot chocolate and similar beverages, provided that suchuse is in accordance with applicable federal, state and city laws, codes, ordinances, rules and regulations, and does not cause odors which areobjectionable to owner and other tenants. 40.Owner will approve where and how telephone wires are to be introduced to the premises. No boring or cutting for wires shall be allowed without theconsent of the owner. The location of telephone, call boxes and other office equipment affixed to the premises shall be subject to the approval of theowner. 41.Tenant, it’s employees and agents shall not loiter in the entrances or corridors, nor in any way obstruct the sidewalks, lobby, halls, stairwells orelevators and shall use the same only as a means of ingress and egress for the premises. 42.Tenant shall store all trash and garbage within the interior of the premises. No material shall be placed in the trash boxes or receptacles if materialis of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in the Cityof Cambridge without violation of any law or ordinance governing such disposal. All trash, garbage and refuse disposal shall be made onlythrough entryways and elevators provided for such purposes at such times, as owner shall designate. Building has a compactor that is maintainedand operated by building management. 43.Tenant shall assume any and all responsibility for protecting the premises form theft, robbery and pilferage, which includes keeping doors lockedand other means of entry to the premises closed, when the premises are not occupied. 44.Owner may waive any one or more of these Rules and Regulations for the benefit of any particular tenant or tenants. This shall not prevent theowner from thereafter enforcing any such Rules and Regulations against any or all tenants of the building. J-6 45.No awnings or other projects shall be attached to the outside walls of the building without the prior written consent of the owner. No curtains,blinds, shades or screens shall be attached to or hung in, or used in connection with any window or door of the premises without prior writtenconsent of the owner. All electrical ceiling fixtures hung in offices or spaces along the perimeter of the building must be fluorescent and/or of aquality, type, design and bulb color approved by the owner. 46.Food vendors shall be allowed in the 150 Second Street building upon receipt of a written request from the tenant. The food vendor shall serviceonly the tenants that have a written request on file in the property management office. Under no circumstances shall the food vendor display theirproducts in a public or common area including corridors and elevator lobbies. Any failure to comply with this rule shall result in the immediatepermanent withdrawal of the vendor from 150 Second Street. 47.Tenant shall comply with any non smoking ordinances adopted by any applicable governmental authority. In addition, owner reserves the right todesignate in owner’s sole discretion, the only outside areas of the premises where smoking shall be permitted. 48.Owner and its agent have the right to evacuate 150 Second Street in the event of an emergency or catastrophe. 49.Provided such changes are not in conflict with the terms of this Lease and that Landlord provides prior written notice of such change, Owner andits agent reserves the right at any time to change or rescind any one or more of these Rule and Regulations or to make such other further reasonableRules and Regulations as in owner’s judgment may from time to time be necessary for the management, safety, care and cleanliness of thepremises and building, and for the preservation of good order therein, as well as for the convenience of other occupants and tenants. Owner shallnot be responsible to tenant or to any other person for the non-observance of the Rules and Regulations and tenant shall agree to abide by theserules as a condition of its occupancy of the premises. J-7EXHIBIT 23.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-189560) pertaining to the Second Amended and Restated 2002Employee, Director and Consultant Plan, 2010 Stock Option and Grant Plan, 2013 Stock Option and Incentive Plan, and 2013 Employee Stock PurchasePlan of bluebird bio, Inc. of our report dated March 5, 2014 with respect to the consolidated financial statements of bluebird bio, Inc. included in this AnnualReport (Form 10-K) for the year ended December 31, 2013./s/ Ernst & Young LLPBoston, MassachusettsMarch 5, 2014EXHIBIT 23.2Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in Registration Statement (File No. 333-189560) on Form S-8 of bluebird bio, Inc. of our report dated March 21,2013 (June 3, 2013 for Reverse Stock Split paragraph in Note 2), relating to our audit of the consolidated financial statements for the year ended December 31,2011, which appears in this Annual Report on Form 10-K of bluebird bio, Inc. for the year ended December 31, 2013./s/ McGladrey LLPBoston, MassachusettsMarch 5, 2014Exhibit 31.1CERTIFICATIONSI, Nick Leschly, certify that:1. I have reviewed this Annual Report on Form 10-K of bluebird bio, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;(b) (Paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313);(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: March 5, 2014 By: /s/ Nick Leschly Nick Leschly President and Chief Executive Officer (Principal Executive Officer)Exhibit 31.2CERTIFICATIONSI, Jeffrey T. Walsh, certify that:1. I have reviewed this Annual Report on Form 10-K of bluebird bio, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;(b) (Paragraph omitted pursuant to SEC Release Nos. 33-8238/34-47986 and 33-8392/34-49313);(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: March 5, 2014 By: /s/ Jeffrey T. Walsh Jeffrey T. Walsh Chief Operating Officer and Secretary (Principal Financial Officer)Exhibit 32.1CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report on Form 10-K of bluebird bio, Inc. (the “Company”) for the year ended December 31, 2013 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company hereby certifies, pursuant to 18U.S.C. Section 1350, that to his or her knowledge:(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 5, 2014 By: /s/ Nick Leschly Nick Leschly President and Chief Executive Officer (Principal Executive Officer)Date: March 5, 2014 By: /s/ Jeffrey T. Walsh Jeffrey T. Walsh Chief Operating Officer and Secretary (Principal Financial Officer)

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