bluebird bio Annual Report 2015

Plain-text annual report

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 OF 1934For the fiscal year ended December 31, 2015OR¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 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 StreetCambridge, 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 x No ¨Indicate 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 1934 during the preceding12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past90 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 File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit andpost 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, tothe best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-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. See the definitions of “largeaccelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ (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 as reported on the NasdaqGlobal Select Market on June 30, 2015, the last business day of the registrant’s most recently completed second quarter, was $6,054,326,404.As of February 18, 2016, there were 36,927,638 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 2016 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report onForm 10-K where indicated. Such Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which thisreport relates. Table of Contents PagePART I.Item 1. Business 1Item 1A. Risk Factors 37Item 1B. Unresolved Staff Comments 63Item 2. Properties 63Item 3. Legal Proceedings 64Item 4. Mine Safety Disclosures 64PART II. Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 65Item 6. Selected Financial Data 67Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 69Item 7A. Quantitative and Qualitative Disclosures about Market Risk 83Item 8. Financial Statements and Supplementary Data 83Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 83Item 9A. Controls and Procedures 83Item 9B. Other Information 85PART III. Item 10. Directors, Executive Officers and Corporate Governance 87Item 11. Executive Compensation 87Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 87Item 13. Certain Relationships and Related Transactions and Director Independence 87Item 14. Principal Accountant Fees and Services 87PART IV. Item 15. Exhibits and Financial Statement Schedules 88Signatures FORWARD-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.All statements 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,” “would,” or the negative of these words or other comparable terminology. These forward-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 and drug product manufacturing capabilities; ●the timing or likelihood of regulatory filings and approvals; ●the timing or success of 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 and licenses; ●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 bylaw, 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 markets forcertain 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 this industry,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. PART I Item 1. BusinessOverviewWe are a clinical-stage biotechnology company committed to developing potentially transformative gene therapies for severe genetic and rare diseasesand in the field of T cell-based immunotherapy. With our lentiviral-based gene therapies, T cell immunotherapy expertise and gene editing capabilities, wehave built an integrated product platform with broad potential application in severe genetic and rare diseases and in oncology. 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 offeringtreatments that only address their symptoms. Our gene therapy clinical programs include our LentiGlobin® product candidate to treat transfusion-dependentβ-thalassemia, or TDT, which we previously referred to as β-thalassemia major, and severe sickle cell disease, or severe SCD, and our Lenti-D™ productcandidate to treat cerebral adrenoleukodystrophy, or CALD, a rare hereditary neurological disorder that we previously referred to as childhood cerebraladrenoleukodystrophy, as patients affected with this disorder are often young boys. Our oncology programs are built upon our leadership in lentiviral genedelivery and T cell engineering, with a focus on developing novel T cell-based immunotherapies, including chimeric antigen receptor (CAR) and T cellreceptor (TCR) T cell therapies. Our lead oncology program, bb2121, is a CAR T cell product candidate targeting B-cell maturation antigen, or BCMA, inmultiple myeloma. We also have discovery research programs utilizing megaTALs/homing endonuclease gene editing technologies with the potential for useacross our pipeline.We are conducting three clinical studies of our LentiGlobin product candidate in a variety of rare, hereditary blood disorders that often lead to severeanemia and shortened lifespans: a global Phase I/II study, called the Northstar Study, for the treatment of TDT; a single-center Phase I/II study in France(HGB-205) for the treatment of TDT and severe SCD; and a Phase I study in the United States (HGB-206) for the treatment of severe SCD. Our LentiGlobinproduct candidate has been granted Orphan Drug status by the U.S. Food and Drug Administration, or FDA, and the European Medicines Agency, or EMA,for the treatment of both β-thalassemia and SCD. Our LentiGlobin product candidate was granted Fast-Track designation by the FDA for the treatment of β-thalassemia major in January 2013 and for the treatment of certain patients with severe SCD in May 2014. In January 2015, the FDA granted BreakthroughTherapy designation to our LentiGlobin product candidate for the treatment of transfusion-dependent patients with β-thalassemia major.We are conducting a Phase II/III clinical study, called the Starbeam Study, of our Lenti-D product candidate, to evaluate its safety and efficacy in pediatricand adolescent subjects with CALD. We are also conducting an observational study of subjects with CALD treated by allogeneic hematopoietic stem-celltransplant (ALD-103). Our Lenti-D product candidate has been granted Orphan Drug status by the FDA and the EMA for the treatment ofadrenoleukodystrophy. In February 2016, we initiated a Phase I clinical study in the United States (CRB-401) of our bb2121 product candidate for the treatment ofrelapsed/refractory multiple myeloma. bb2121 is the lead CAR T cell-based immunotherapy product candidate from our collaboration with CelgeneCorporation, or Celgene. The collaboration has focused on applying gene therapy technology to genetically modify a patient’s own T cells to target anddestroy cancer cells. T cells modified to express a CAR have been shown by academic and corporate researchers to have beneficial effects in human clinicaltrials for patients with a variety of lymphomas. We have licensed to Celgene the right to develop and commercialize our bb2121 product candidate followingthe completion of the ongoing Phase I clinical study, and we may exercise our option to co-develop and co-promote this product candidate. In June 2014, we acquired Precision Genome Engineering, Inc., or Pregenen, a privately-held biotechnology company headquartered in Seattle,Washington. Through the acquisition, we obtained rights to Pregenen’s gene editing technology platform and cell signaling technology, and have integratedthese technologies and research team and expanded our related discovery research efforts. We are focused on utilizing homing endonuclease and megaTALgene editing technologies in a variety of potential applications and disease areas, including for oncology and hematology. Homing endonucleases andMegaTALs are novel enzymes that provide a highly specific and efficient way to modify DNA sequences to silence, edit or insert genetic components topotentially treat a variety of diseases.Our gene therapy platform is based on viral vectors that utilize a modified, non-replicating version of the Human Immunodeficiency Virus Type 1, or HIV-1, that has been stripped of all of the components required for it to self-replicate and infect additional cells. HIV-1 is part of the lentivirus family of viruses,and we refer to our vectors as lentiviral vectors. Our lentiviral vectors are used to introduce a functional copy of a gene to the patient’s own isolated bloodstem cells, called hematopoietic stem cells, or HSCs, which reside in a patient’s bone marrow and are capable of differentiating into 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 take advantage of a lifetime of replication ofthe gene-modified HSCs. Additionally, we have developed a proprietary cell-based vector manufacturing process that is both reproducible and scalable. Webelieve our innovations in viral vector design and related manufacturing processes are important steps towards advancing the field of gene therapy and inrealizing its full potential on a commercial scale.1Utilizing our gene therapy platform, we are developing product candidates comprising the patient’s own gene-modified HSCs. Clinical proof-of-conceptalready exists for allogeneic hematopoietic stem cell transplant, or HSCT, an approach of treating a patient with HSCs contributed by a donor other than thepatient that contain the properly functioning copy of the gene whose mutation has caused the underlying disease. However, this approach has significantlimitations, including difficulties in finding appropriate genetically-matched donors and the risk of transplant-related rejection, graft-versus-host disease, orGVHD, and mortality, and is therefore typically only available on a limited basis. Our approach is intended to address the significant limitations ofallogeneic HSCT while utilizing existing stem cell transplant infrastructure and processes. Also, because our approach has the potential to drive sustainedexpression of the functional protein encoded by the gene insert after potentially a single-administration, we believe the value proposition offered by ourproduct candidates for patients, families, health care providers and payors would be significant.Although our initial focus for HSCs is in TDT, severe SCD and CALD, and for T cells is in oncology, we believe our gene therapy platform has broadtherapeutic potential in a variety of indications. We believe that our vectors can be used to introduce virtually any gene into a cell and have the potential tobe manufactured on a commercial scale reproducibly and reliably, as each new vector is produced using substantially the same process. We also takeadvantage of lentivirus’ ability to transduce HSCs more efficiently than other vectors, such as those derived from another virus used in gene therapyapproaches, called adeno-associated virus, or AAV, which gives us the potential to address diseases in a variety of cell lineages beyond those that are derivedfrom HSCs, such as microglia (useful for CALD), red blood cells (useful for ß-thalassemia and SCD), T cells (useful for cancer and immunology) and others.Our gene therapy platform and proprietary lentiviral vectorsOur gene therapy product candidates for severe genetic and rare diseases and in oncology are being developed based on a simple notion: to geneticallymodify a patient’s own cells to fundamentally correct or address the genetic basis underlying a disease. Although the notion of gene transfer to a patient’sown cells is simple, the processes of developing viral vectors capable of delivering the genetic material and inserting gene sequences safely into a patient’starget cells is highly technical and demands significant expertise, experience and know-how. Leveraging our extensive expertise in viral vector design andmanufacturing and transduction, we have developed a gene therapy platform that we believe is broadly applicable in a variety of indications with significantunmet medical need.The 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 genome. We have developedsignificant expertise in designing a particular type of vector delivery system employing a lentivirus for use in gene therapy and have also developed and in-licensed relevant intellectual property, including know-how, related to lentiviral vectors. Our lentiviral construct design includes only the minimal viralcomponents of HIV-1 required to enable the vector to undergo one round of replication within the cell during manufacturing and subsequently to enter thetarget 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 vectors based on viruses such as AAV, lentiviral vectors are capable of integrating the functional gene they carryinto the DNA of the target cell’s genome. As such, they are well-suited to introduce a sustained therapeutic effect in dividing cells because the genesequence introduced by the lentiviral vector will be replicated with the rest of the cell’s chromosomal DNA and subsequent dividing cells will alsocarry the newly inserted gene sequence. Other vector platforms that take advantage of different viruses introduce genes into cells but they don’tactively integrate into a cell’s DNA and require many viral events to transform a cell. ·Potentially Improved Safety—In clinical studies of gene therapy product candidates conducted by other entities, earlier generations of integratingviral vectors based on a mouse gamma-retrovirus were shown to preferentially integrate into certain regulatory regions of genes (such as the promoterregions) and in some instances inappropriately activate the cell to divide uncontrollably, leading to cancer through a process called insertionaloncogenesis. These genetic alterations have led to several well-publicized adverse events, including several reported cases of leukemia, andhighlighted the need to develop new gene therapy vectors with potentially improved safety profiles. Next generation lentiviral vectors, unlike gammaretroviruses, have a distinct pattern of integrating into regions that provide instructions for making proteins rather than preferentially integrating intoregions that can lead to cell proliferation and cancer. We believe this difference in integration patterns is a critical factor in potentially improving thesafety profile of the vector, and distinguishes them from earlier generations of integrating viral vectors. ·Carrying capacity—Unlike AAV, the lentivirus is able to carry large therapeutic gene sequences (up to 8,000 base pairs) into a host cell. This maylimit 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, lentiviralvectors offer more flexibility.2Hematopoietic Stem Cells (HSCs)Our gene therapy platform takes advantage of lentiviral vectors’ ability to stably integrate into the target cell’s genome by focusing on diseases we cantreat through genetic modification of HSCs, which when reintroduced back into the patient, differentiate into numerous other cell lineages, as depictedbelow. We believe our initial clinical indications—CALD, TDT and severe SCD—can all be treated by introducing a specific functional gene into HSCstaken 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 red blood cells(useful for ß-thalassemia and SCD), microglia (useful for CALD), T cells (useful for cancer and immunology) and others. As such, all progenitors derived froma 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.Our therapeutic approach in HSCsThe delivery of a gene therapy product in HSCs requires several steps. Importantly, our approach seeks to leverage cell transplant procedures andinfrastructure 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 of thevirus as well as the functional gene sequence the viral vector will carry. The use of multiple plasmids is an important safety step designed to furtherprevent the resulting lentiviral vectors from being able to replicate and cause infection on their own. 2.For the treatment of severe genetic and rare diseases, a sample of the patient’s own HSCs is extracted and isolated through a standard process known asapheresis, where HSCs are first mobilized into the blood stream from the bone marrow using a routinely-used pharmaceutical agent and then collectedfrom the patient’s blood. In some cases, such as for the treatment of severe SCD, 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’ existing DNA,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 viral vector orculture media. These gene-modified cells 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 HSCT) to removeendogenous bone marrow cells. The modified HSCs are then re-infused back into the patient (approximately one to two months after initial extractionof the patient’s HSCs) and begin re-populating a portion of the bone marrow as permanently modified HSCs in a process known as engraftment. Theengrafted HSCs will go on to give rise to progenitor cell types with the functional gene. 3Our therapeutic approach in T cell-based immunotherapySimilarly to our therapeutic approach in HSCs, the delivery of modified T cell products requires several steps. Importantly, our approach seeks to leveragecell transplant procedures and infrastructure already widely used in the clinic for allogeneic bone marrow transplant. 1.We produce our lentiviral vector by co-transfecting a packaging cell line with multiple plasmids that separately encode the various components of thevirus as well as the tumor-targeting protein the viral vector will carry. 2.For the treatment of cancer, a sample of the patient’s own white blood cells is extracted and isolated through a standard process known asleukapheresis, in which white blood cells are separated from the remaining fractions of the patient’s blood. 3.The lentiviral vector is mixed with the patient’s white blood cells, which include T cells, ex vivo. This leads to the insertion of the gene encoding aCAR into the T cells’ existing DNA, thus creating a population of modified T cells expressing a CAR or TCR. The cells are then washed to remove anyremnants of the viral vector or culture media and expanded to increase the number of modified T cells to the required dosage. These modified T cellsare the therapeutic drug product that is delivered back into the patient. 4.Prior to administering our drug product, the patient undergoes a standard lymphodepletion procedure to reduce the number of T cells that maycompete with the modified T cells. The modified T cells are then re-infused back into the patient.Our product candidate pipelineWe are developing our LentiGlobin product candidate to treat patients with TDT and severe SCD. We are conducting two Phase I/II clinical studies in theUnited States, Australia, and Thailand and in France, called the Northstar and HGB-205 studies, respectively, of our LentiGlobin product candidate toevaluate its safety and efficacy in subjects with TDT and severe SCD. We have initiated a Phase I clinical study in the United States, called the HGB-206study, to evaluate the safety and efficacy of our LentiGlobin product candidate in subjects with severe SCD. We are developing our Lenti-D productcandidate to treat patients with CALD, the most severe form of ALD. We are also currently conducting a Phase II/III clinical study of our Lenti-D productcandidate in the United States, which we refer to as the Starbeam Study, to examine the safety and efficacy of our Lenti-D product candidate in preservingneurological function and stabilizing cerebral demyelination in subjects with CALD. We are also pursuing opportunities to apply our gene therapy platform technologies in the field of immunotherapy in oncology by genetically modifyinga patient’s own T cells to target and destroy cancer cells. Our collaboration with Celgene focuses on CAR T cell therapy, which has been shown by academicand corporate researchers to have beneficial effects in clinical trials for patients with a variety of lymphomas. Our collaboration with Celgene is focused onproduct candidates directed against BCMA, a protein expressed on the surface of multiple myeloma cells and plasma cells. In February 2016, we initiated aPhase I clinical study (CRB-401) to evaluate the safety and effectiveness of our bb2121 product candidate, the lead product candidate from thiscollaboration, in the treatment of relapsed/refractory multiple myeloma. Celgene has exercised its option to exclusively license our bb2121 productcandidate, while we have retained an option to co-develop and co-promote this product candidate. We are also collaborating with Kite Pharma, Inc. in thedevelopment of a second-generation T cell receptor, or TCR, T cell therapy against HPV-16 E6 antigen, which is related to certain cancers associated with thehuman papilloma virus.Our LentiGlobin product candidate 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 theblood that 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 to premature death of red blood cells. The clinical implications of the a-globin/ß-globin imbalance are two-fold: first, patients lack sufficient RBCsand hemoglobin 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. The clinical presentation varies widely, dependent largely upon the type of inherited mutation. Mutations can be categorized as thosewhich result in no functional ß-globin production (ß°) and those which result in decreased functional ß-globin production (ß+). TDT refers to any mutationpairing that results in the need for chronic transfusions due4to severe anemia, and is the clinical finding in most patients with ß°/ß° genotype as well as many patients with other genotypes resulting in abnormal ß-globin production, such as the ß°/ß+ and ß+/ß+ genotypes. Affected patients produce as little as one to seven g/dL of hemoglobin (while a normal adultproduces 12-18 g/dL of hemoglobin). Hemoglobin E (ßE), which is another ß-globin mutation and is usually asymptomatic, can also result in TDT whenpaired 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, while the condition is considered rare in the United States and Europe. According to Thalassemia International Federation,about 288,000 patients with TDT are alive and registered as receiving regular treatment around the world, of which it is estimated that about 15,000 live inthe United States and Europe. Due to the rarity of this disease in the United States, published research on the prevalence of ß-thalassemia in the United Statesis limited.Limitations of current treatment optionsIn geographies where treatment is available, patients with TDT receive chronic blood transfusion regimens. These regimens consist of infusions with unitsof packed RBC, or pRBC, every three to five weeks, the timing of which is aimed at maintaining hemoglobin levels and controlling symptoms of the disease.While chronic blood transfusions can be effective at minimizing the symptoms of TDT, they often lead to iron overload, which over time leads to mortalitythrough iron-associated heart and liver toxicity. To prevent iron overload-associated risks, patients must adhere to therapeutic iron chelation regimens toreduce the iron overload. Poor compliance with chelation regimens remains a key challenge; it is estimated that with typical compliance, the overall lifeexpectancy for a patient with TDT is significantly reduced compared to the general population. Even patients who are compliant with transfusion and ironchelation regimens can experience a reduced quality of life due to the burden and side effects of therapy and the fluctuating levels of hemoglobin on amonth-to-month basis.The only potentially curative therapy for ß-thalassemia today is allogeneic HSCT. However, complications of allogeneic HSCT include a 10-30% risk ofengraftment failure in Human-Leukocyte-Antigen, or HLA, matched patients, a 12-16% incidence of life-threatening infection, and an approximately 30%risk of GVHD, a common complication in which donor immune cells (white blood cells in the graft) recognize the cells of the recipient (the host) as “foreign”and attack them. As a result of these safety challenges, allogeneic HSCT can lead to significant mortality rates, particularly for patients treated with cells froma donor who is not a matched sibling, and in older patients. Consequently, transplants are offered primarily to pediatric patients with a matched siblingdonor, which occurs in less than 25% of all cases. In addition, because of the need for immunosuppression following allogeneic HSCT, there is a risk ofopportunistic infections and other serious side effects associated with immunosuppressive drugs. Overall, TDT remains a devastating disease with an unmetmedical 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 TDT have a poor prognosis and experiencegrowth retardation, hepatosplenomegaly, or enlargement of the spleen, and skeletal deformities resulting from extra-medullary hematopoiesis. Ultimately,premature death is not uncommon. We believe that alternative therapies, such as those represented by our gene therapy approach, could offer a potentialsolution to the 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 RBC abnormalities, the mutanthemoglobin aggregates causing the RBCs to take on a sickle shape (sickle cells), which causes them to aggregate and obstruct small blood vessels, therebyrestricting blood flow to organs resulting in pain, cell death and organ damage. If oxygen levels are restored, the hemoglobin can disaggregate and the RBCswill 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-oxygenconditions. 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 250,000-300,000births 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 of manystates’ newborn screening procedures, the incidence is more than 1,600 births annually with an estimated prevalence of 100,000 individuals.5Limitations of current treatment optionsWhere adequate medical care is available, common treatments for patients with SCD largely revolve around management and prevention of acute sicklingepisodes. Chronic management may include hydroxyurea and, in certain cases, chronic transfusions. Hydroxyurea is currently the only medication approvedfor the treatment of severe SCD and is recommended for patients with recurrent episodes of acute pain or specific frequencies of painful crises or life-threatening complications. Not all severe SCD patients respond to hydroxyurea however, or are able to tolerate the cytotoxic effect of reduced white bloodcell and platelet counts. Thus, a significant number of patients with SCD find it difficult to adhere to hydroxyurea treatment, and for most patients there is noeffective long-term treatment.RBC transfusion therapy can be utilized to maintain the level of sickling hemoglobin below 30%, which decreases sickling of RBCs, increases theiroxygen-carrying capacity, reduces the risk of recurrent stroke, and decreases the incidence of associated co-morbidities. While standard blood transfusionsare often used to achieve this goal, especially during acute episodes, exchange transfusions offer better control of blood volume and viscosity whiledecreasing the risk of transfusion-related haemochromatosis and iron overload in the chronic setting. While transfusion therapy can be critical in themanagement of acute disease, and can be vital in preventing some of the chronic manifestations of severe SCD, it does not provide equal benefit to allpatients.Similar to TDT, the only potentially curative therapy currently available for SCD is allogeneic HSCT, however because of the significant risk oftransplant-related morbidity and mortality, this option is usually offered primarily to pediatric patients with available sibling-matched donors. It isparticularly difficult to find suitable donors for individuals of African descent, and it is estimated that approximately 10% of eligible patients do so. In lightof these factors, we believe SCD is a devastating disease with a significant unmet medical need.Our LentiGlobin product candidateWe are developing our LentiGlobin product candidate as a potential one-time treatment for both TDT and severe SCD. Our approach involves the ex vivoinsertion of a single codon variant of the normal ß-globin gene using a lentiviral vector into the patient’s own HSCs to enable formation of normallyfunctioning hemoglobin A and normal RBCs in patients. Importantly, this codon variant, referred to as T87Q, also serves as a distinct biomarker used toquantify expression levels of the functional ß-globin protein in patients with TDT and severe SCD, while also providing anti-sickling properties in thecontext of SCD. We refer to the HSCs that have undergone gene modification ex vivo as the final LentiGlobin drug product, or our LentiGlobin productcandidate.We are conducting two Phase I/II clinical studies of our LentiGlobin product candidate, to evaluate its safety and efficacy in subjects with TDT. InDecember 2013, we announced that the first subject with TDT had been treated in our French study of our LentiGlobin product candidate, called the HGB-205 study, which also permits the enrollment of subjects with severe SCD. In October 2014, we announced that the first subject with severe SCD had beentreated in the HGB-205 study. In March 2014, we announced that the first subject with TDT had been treated in our other study of our LentiGlobin productcandidate being conducted in the United States, Australia and Thailand, called the Northstar Study. We presented interim results from both the HGB-205study and the Northstar Study at the American Society of Hematology Annual Meeting in December 2015.We have initiated a Phase I clinical study in the United States, called the HGB-206 Study, to evaluate the safety and efficacy of our LentiGlobin productcandidate in subjects with severe SCD. Additionally, we are in discussions with the FDA regarding our planned Phase III clinical studies for the treatment ofTDT in subjects who do not have the ß°/ß° genotype. We believe that data from these studies, together with data from the ongoing Northstar and HGB-205studies could form the basis for a biologics licensing application, or BLA, submission for our LentiGlobin product candidate in the United States. Theseplanned clinical studies could support an accelerated approval, with post-approval confirmatory evidence to be provided with longer-term follow-up of thesestudies.Our LentiGlobin product candidate has been granted Orphan Drug status by the FDA and EMA for both β-thalassemia and SCD. Our LentiGlobin productcandidate was granted Fast-Track designation by the FDA for the treatment of β-thalassemia major in January 2013 and for the treatment of certain patientswith severe SCD in May 2014. In January 2015, the FDA granted Breakthrough Therapy designation to our LentiGlobin product candidate for the treatmentof transfusion-dependent patients with β-thalassemia major. We are participating in the EMA’s Adaptive Pathways pilot program (formerly referred to asAdaptive Licensing), which is part of the EMA’s effort to improve timely access for patients to new medicines. Based on our discussions involving the EMA,European Health Technology Assessment agencies and patient advocacy organizations as part of this program, we believe it is possible to seek conditionalapproval for the treatment of adults and adolescents with TDT on the basis of the totality of the clinical data, in particular reduction in transfusion need, fromthe ongoing Northstar study and supportive HGB-205 study, assuming these studies demonstrate acceptable efficacy and safety. We believe that conversionto full approval would be subject to the successful completion of our planned Phase III clinical studies, supportive long-term follow-up data and “real-life”post-approval monitoring data. Whether or not our clinical data are sufficient to support conditional, and ultimately full, approval will be a review decisionby the EMA.6Clinical development of our LentiGlobin product candidateThe HGB-205 Phase I/II clinical study for TDT and severe SCDThe HGB-205 study is a Phase I/II clinical study to examine the safety and efficacy of our LentiGlobin product candidate in up to seven subjects with adiagnosis of TDT or severe SCD. Study subjects must be between five and 35 years of age with a diagnosis of TDT or severe SCD. In December 2013, weannounced that the first subject with TDT had been treated in the HGB-205 study and in October 2014 we announced that the first subject with severe SCDhad been treated in the European HGB-205 study. To be enrolled, subjects with TDT must have received at least 100 mL/kg/year of pRBCs per year for thepast two years. Those with severe SCD must have failed to achieve clinical benefit from treatment with hydroxyurea and have an additional poor prognosticrisk factor (e.g., recurrent vaso-occlusive crises or acute chest syndromes). All subjects must be eligible for allogeneic HSCT, but without a matched siblingallogeneic HSCT donor.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 severe SCD patients only, efficacy will be measured by the number of vaso-occlusive crises or acute chest syndrome events at six, 12 and 24 months and evaluation of changes in the nature or frequency of the subject-specific maininclusion criteria.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 insertionalmutagenesis leading to clonal dominance or leukemia.Interim Clinical Data from the HGB-205 Study In December 2015, we presented interim clinical data from the HGB-205 study at the Annual Meeting of the American Society of Hematology, orASH. As of the data cut-off date of November 10, 2015, four subjects with TDT and one subject with severe SCD had undergone infusion with LentiGlobindrug product in the HGB-205 study. The two subjects with TDT for which we have at least 12 months of follow up data achieved rapid transfusionindependence with near-normal hemoglobin levels and are producing steadily increasing amounts of ßA-T87Q-globin, similar to what may be expected from asuccessful allogeneic transplant. As of November 10, 2015, these two subjects had been free from the need for transfusions for 23.4 months and 20.1 months,respectively. An additional two patients with TDT had been infused, although it was too early to draw any meaningful efficacy conclusions. At their mostrecent follow ups, three months and one month, respectively, these patients were producing measurable levels of ß-T87Q-globin. At the twelve-month post-infusion follow up for the subject with severe SCD, the proportion of anti-sickling hemoglobin accounted for 49 percent of all hemoglobin production, whichis above the 30 percent threshold expected to potentially achieve a disease-modifying clinical effect. Prior to infusion, this subject required chronic bloodtransfusions. Since infusion with LentiGlobin drug product, this subject was successfully weaned off of transfusions and has remained transfusion free formore than nine months. Since infusion, this subject has had no hospitalizations or acute SCD-related events. In this study, treatment with our LentiGlobinproduct candidate has been well tolerated, with no drug product-related adverse events observed as of November 10, 2015. Below is a table summarizing theinterim clinical data from the HGB-205 study presented at the ASH annual meeting in December 2015: TDTSevere SCDPatient12011202120312061204Enrollment age1816191713Genotypeβ0/ βEβ0/βEhomozygous IVS1 nt 110 G>Aβ0/βEβS/βSTransfusion requirements prior to study entry (mls/kg/year)139188176197170CD34+ VCN1.52.10.81.11.2/1.0*CD34+ cell count(x106/kg)8.913.68.812.05.6Days to neutrophil engraftmentDay +13Day +15Day +28Day +16Day +37HbAT87Q/total Hb (g/dL)7.9/10.810.3/13.14.3/8.02.1/10.65.5/11.7Last study follow up visit (months)**21184.5112*VCN is an abbreviation for Vector Copy Number, which is a measurement of the mean number of viral vectors in a population of cells, in this case, of theLentiGlobin drug product prior to infusion of the study subject. If more than one drug product was manufactured for a subject, the VCN of each drugproduct lot is quantified and the cell count is combined.**Last scheduled study visit for which results were available as of November 10, 2015. It should be noted that these data presented above are current as of the dates presented, are preliminary in nature and the HGB-205 study is not complete.There is limited data concerning long-term safety and efficacy following treatment with our LentiGlobin7product candidate. These data may not continue for these subjects or be repeated or observed in ongoing or future studies involving our LentiGlobin productcandidate, including the HGB-205 study, the Northstar Study or the HGB-206 study. It is possible that subjects for whom transfusion support has beenreduced or eliminated may receive transfusion support in the future.The Northstar Phase I/II clinical study for TDTThe Northstar Study is a single-dose, open-label, non-randomized, multi-site Phase I/II clinical study in the United States, Australia and Thailand toevaluate the safety and efficacy of the LentiGlobin product candidate in increasing hemoglobin production and eliminating or reducing transfusiondependence following treatment. In March 2014, we announced that the first subject with TDT had been treated in our Northstar Study.Up to 18 adults and adolescents will be enrolled in the study. Study subjects must be between 12 and 35 years of age with a diagnosis of TDT and receiveat 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. The subjectsmust 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 this 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 TDT 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 insertionalmutagenesis leading to clonal dominance or leukemia. Subjects will be monitored by regular screening. Each subject will remain on study for approximately26 months from time of consent and then will be enrolled in a long-term follow-up protocol that will assess safety and efficacy beyond 24 months.Interim Clinical Data from the Northstar StudyIn December 2015, we presented interim clinical data from the Northstar Study at the ASH Annual Meeting. As of the data cut-off date of October 28,2015, 13 subjects with TDT had undergone infusion with LentiGlobin drug product in the Northstar Study. As of October 28, 2015, nine of these subjects hadat least six months follow up following infusion. The median ßA-T87Q production range for these nine subjects was 4.9 g/dL, and was 4.9 g/dL among thefive subjects with the non-β0/β0 genotypes, and was 5.0 g/dL among the four subjects with the β0/β0 genotype. The five subjects with non-β0/β0 genotypeswith at least six months follow up have been free from the need for transfusions, ranging from 7.1 to 16.4 months of ongoing transfusion independence. Thefour subjects with the β0/β0 genotype experienced a reduction in transfusion volume from 33 percent to 100 percent. In the Northstar Study, treatment withour LentiGlobin product candidate has been consistent with autologous transplantation, with no drug product-related Grade 3 or greater adverse eventsobserved as of October 28, 2015.It should be noted that these data presented above are current as of the dates presented, are preliminary in nature and the Northstar Study is not complete.There is limited data concerning long-term safety and efficacy following treatment with our LentiGlobin product candidate. These data may not continue forthese subjects or be repeated or observed in ongoing or future studies involving our LentiGlobin product candidate, including the HGB-205 study, theNorthstar Study or the HGB-206 study. It is possible that subjects for whom transfusion support has been reduced or eliminated may receive transfusionsupport in the future.The HGB-206 clinical study for severe sickle cell diseaseThe HGB-206 Study is a single-dose, open-label, non-randomized, multi-site Phase I clinical study in the United States to evaluate the safety and efficacyof the LentiGlobin product candidate to treat severe SCD. Up to 20 adults will be enrolled in the study. Study subjects must be ≥18 years of age with a diagnosis of sickle cell disease, with either βS/βS or βS/β0genotype. The sickle cell disease must be severe, as defined by recurrent severe vaso-occlusive events, acute chest syndrome, history of an overt stroke, orechocardiographic evidence of an elevated tricuspid regurgitation jet velocity, an indicator of pulmonary hypertension, and subjects must have failed toachieve clinical benefit from treatment with hydroxyurea. The subjects must also be eligible for HSCT.Efficacy endpoints include changes in the frequency of severe vaso-occlusive crises, acute chest syndrome, and strokes or ischemicattacks. Pharmacodynamic endpoints include measurements of transgene persistence and transgene expression.8Safety endpoints include monitoring for laboratory parameters and frequency and severity of adverse events; the success and kinetics of HSCengraftment; the incidence of treatment related mortality and overall survival; the detection of vector-derived replication-competent lentivirus in anysubject; and the characterization of events of insertional mutagenesis leading to clonal dominance or leukemia.Each subject will remain on study for approximately 26 months from time of consent and then will be enrolled in a long-term follow-up protocol that willassess safety and efficacy beyond 24 months.Preliminary Clinical Data from the HGB-206 StudyIn December 2015, we presented preliminary clinical data from the HGB-206 study at the ASH Annual Meeting. As of the data cut-off date of November17, 2015, LentiGlobin drug product had been manufactured for four patients with severe SCD, and three of the patients had been infused. The two subjectswith at least three months of follow-up data show a gradual increase in hemoglobin A containing ßA-T87Q level post-infusion. The safety profile in the infusedpatients in the HGB-206 study is consistent with autologous transplantation and no drug product-related adverse events were observed as of November 17,2015. Below is a table summarizing the preliminary clinical data from the HGB-206 study presented at the ASH annual meeting in December 2015. Patient130113031306Enrollment age254220CD34+ VCN0.6/0.51.30.6CD34+ cell count(x106/kg)2.62.82.1Days to neutrophil engraftmentDay +18Day +16--HbAT87Q/total Hb (g/dL)0.3 / 8.51.0 / 8.6--Last study follow up visit (months)*34.5<1* Last scheduled study visit for which results were available as of November 17, 2015. The safety profile in the infused patients in the HGB-206 Study is consistent with autologous transplantation and no drug product-related grade 3 orgreater adverse events observed as of November 17, 2015. It should be noted that these data presented above are current as of the dates presented, are preliminary in nature and the HGB-206 study is not complete.There is limited data concerning long-term safety and efficacy following treatment with our LentiGlobin drug product. These data may not continue for thesesubjects or be repeated or observed in ongoing or future studies involving our LentiGlobin product candidate, including the HGB-205 study, the NorthstarStudy, or the HGB-206 study in severe SCD. It is possible that subjects for whom transfusion support has been reduced or eliminated may receive transfusionsupport in the future.Our planned Phase III clinical studies for TDTWe have discussed the designs of two planned Phase III clinical studies of our LentiGlobin product candidate with the FDA and EMA. Our planned HGB-207 study will be a single-dose, open-label, non-randomized, global, multi-site Phase III clinical study to evaluate the safety and efficacy of the LentiGlobinproduct candidate to treat TDT. Our HGB-207 study is currently planned to enroll up to 15 adult and adolescent subjects. Participants in this study must havea diagnosis of TDT and have non-β0/ β0 genotypes. They must also be eligible for HSCT. Efficacy in this study will be evaluated primarily by 12consecutive months of transfusion independence. Subjects will be monitored by regular screening. Each subject will remain in the study for approximately24 months of follow-up and will then be enrolled in a long-term follow-up protocol that will assess safety and efficacy beyond 24 months. As required of allgene therapy clinical trials, we filed the clinical study protocol for our HGB-207 study with the Recombinant DNA Advisory Committee, or RAC, convenedby the National Institutes of Health, or NIH. The RAC notified us that our HGB-207 study does not require an in-depth review or public RAC discussion. Weintend to begin initiating our HGB-207 study in late 2016.We are also considering initiating an additional Phase III clinical study in pediatric subjects who have a diagnosis of TDT, which we have referred to asthe HGB-208 study. Based upon the proposed protocol for the HGB-208 study filed with the RAC, the RAC notified us in 2015 that it recommends delay ofthe initiation of a Phase III pediatric clinical study for one to two years. We intend to continue to work closely with regulatory authorities and our clinicalstudy sites to evaluate our plans for both the HGB-207 study and for studying our LentiGlobin product candidate in pediatric subjects.9Our Lenti-D product candidate 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 throughout the body, including in the brain, spinal cord and adrenal glands. The build-up ofVLCFAs causes damage to the myelin sheath, a protective and insulating membrane that surrounds nerve cells, in the brain. This damage can result indecreased motor coordination and function, visual and hearing disturbances, the loss of cognitive function, dementia, seizures, and other complications,including death. The worldwide incidence rate for ALD is approximately one in 17,000 newborns.ALD is divided into various sub-segments with two main phenotypes that impact brain function: ·CALD (Cerebral adrenoleukodystrophy): The most severe form of ALD is CALD. CALD is characterized by progressive destruction of myelin,leading to severe loss of neurological function and eventual death. About 30-40% of patients with ALD are young boys affected by CALD. In boysaffected by CALD, learning and behavioral problems are often observed in mid-childhood between the ages of 3 and 15 years (median age 7). In theabsence of intervention, boys affected by CALD typically experience rapid degeneration into vegetative state, and ultimately death within a decade ofdiagnosis. ·AMN (Adrenomyeloneuropathy): AMN, which typically develops in adults aged 21 years and older, is the most common neurological form of ALD.All patients with AMN present with more slowly progressive symptoms resulting from (non-inflammatory) disruption of the axons (which are afundamental component of the central nervous system that allows nerve signals to be transmitted in the spinal cord). Approximately 45-60% ofpatients diagnosed with AMN converts to CALD during their lifetime after age 18.Limitations of current treatment optionsThere is a clear unmet medical need for patients with the cerebral phenotype of ALD. Currently, the only effective treatment option for patients withCALD is allogeneic HSCT. In this procedure, the patient is treated with HSCs containing a functioning copy of the gene contributed by a donor other thanthe patient. Allogeneic HSCT has also been shown to have potential clinical benefit in CALD affecting both children and adults.Allogeneic HSCT is preferably 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 CALD are carried out with non-sibling matched donor cells, partially matchedrelated or unrelated donor cells including umbilical cord blood cells because a matched sibling donor is not available in most cases. The difficulty of findinga suitable sibling-matched donor is one of the primary drawbacks of this approach. Complications of allogeneic HSCT include a significant risk of morbidityand mortality related to immunosuppressive medications, graft failure, GVHD and opportunistic infections, particularly in patients who undergo non-sibling-matched allogeneic HSCT.Moreover, of the approximately 80 boys who are born with CALD each year in the United States and European Union, we estimate that approximately50% 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 CALD are frequently misdiagnosed. Newbornscreening through a simple and inexpensive blood test can enable earlier detection of CALD and is available in several states. Based in part on the fact thatseveral states have approved or are currently considering universal newborn screening for ALD, it is our expectation that newborn screening will be broadlyadopted in the United States within the next five years, and potentially elsewhere, providing for the opportunity to identify more boys for proactivemonitoring 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 CALD. 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 ofALDP in patients with CALD. Upon successful engraftment of our Lenti-D product candidate, we expect that microglia in the brain derived from thetransduced HSCs will correct the metabolic abnormalities resulting from excess VLCFA and stabilize the demyelination and cerebral inflammationcharacteristic of CALD.We treated the first subject in the Starbeam Study in the United States in 2013. If successful, and pending further discussion with the regulatoryauthorities, the results from the Starbeam Study could potentially form the basis of a BLA submission to the FDA and an MAA to the EMA for this productcandidate. However, there can be no 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 that the Starbeam Study may not be deemed to be a pivotal study or may not provide sufficient support for a BLAsubmission. The FDA normally requires two pivotal10clinical 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 a BLAsubmission. Lenti-D has been granted Orphan Drug status by the FDA and EMA for adrenoleukodystrophy.Clinical development of our Lenti-D product candidateCompleted non-interventional retrospective study (the ALD-101 Study)Due to the rarity of CALD, allogeneic HSCT has historically not been subject to extensive analysis in controlled clinical studies, so progression of thedisease and the efficacy and safety profile of allogeneic HSCT is largely absent from the current scientific literature. In order to properly design future clinicalstudies of Lenti-D and interpret the efficacy and safety results thereof, at the recommendation of the FDA, we performed a non-interventional retrospectivedata collection study to assess the natural course of disease in CALD patients that were left untreated, which we refer to as the untreated group or cohort, incomparison to the efficacy and safety data obtained from patients that received allogeneic HSCT, which we refer to as the treated cohort. A non-interventional retrospective data collection study involves an examination of historical clinical records from patients in order to assess the typical course ofthe condition and the efficacy and safety of treatment options. In the study, we collected survival, functional and neuropsychological assessments andneuroimaging data for both treated and untreated patients, as available; however, given the retrospective nature of the study, we were not able to collectcomprehensive 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 and allogeneic HSCT-treated CALD patient populations.Three primary clinical measurements of CALD 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 CALD, 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 abnormalities typicallycaused by ALD. These neurological abnormalities are summarized below: Symptoms Score Loss of communication* 3No voluntary movement* 3Cortical blindness* 2Tube feeding* 2Wheelchair required* 2Total incontinence* 2Swallowing/other CNS dysfunctions 2Spastic gait (needs assistance) 2Hearing/auditory processing problems 1Aphasia/apraxia 1Visual impairment/fields cut 1Running difficulties/hyperreflexia 1Walking difficulties/spasticity/spastic gait (no assistance) 1Episodes of incontinency 1Nonfebrile seizures 1Total 25*Major Functional Disabilities (MFDs)Among the 15 functional domains in the NFS scale, we consider six to be of particular clinical importance because when these neurological abnormalitiesoccur, a patient’s ability to function independently is severely compromised. These particular deficiencies, which we define as Major Functional Disabilities,or MFDs, are loss of communication, complete loss of voluntary movement, cortical blindness, requirement for tube feeding, wheelchair dependence andtotal 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-half or more (i.e., thepresence of any such abnormalities) indicates the cerebral form of the disease, and patients with a Loes score of 10 or more generally are notconsidered to be good candidates for allogeneic HSCT due to the advanced stage of the disease.11 ·Gadolinium enhancement. One of the hallmarks of inflammatory disease in ALD patients is the presence of a compromised blood-brain barrier behindthe leading edge of demyelinating lesions in the brain. This can be assessed using a contrast agent called gadolinium in brain MRI studies. Evidenceof gadolinium enhancement in the brain in a MRI study, referred to by clinicians as a gadolinium positive result, suggests that neuroinflammation ispresent and the blood-brain barrier has been compromised, which in published studies has been shown to be a predictive biomarker of ALD diseaseprogression.Summary of findingsKey findings from the ALD-101 Study are summarized below: ·Untreated, patients with CALD progress to dismal outcomes. In the untreated cohort, the median overall survival was 92 months (7.7 years) and theestimated probability of survival at five years was 55%. Although informative, survival data must be considered in light of the fact that supportivemeasures may be used to sustain life after progression to a vegetative state. ·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 0.5 £ 9 Loes > 9 Untreated Cohort 42% 85% 44% 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-CALD diagnosis.As a consequence of this observation, and consistent with entry criteria that have been used in studies of allogeneic HSCT, the entry criteria for theStarbeam Study excludes subjects with evidence of advanced disease on NFS and Loes score to prevent enrollment of subjects whose disease would beexpected 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. The majority of untreatedsubjects (67%) had progressive disease resulting in premature MFD or death during the study period, with 91% (19/21) of gadolinium positivesubjects dying or having an MFD during the study period. ·Allogeneic HSCT was associated with disease stabilization. Despite the significant risk of morbidity and mortality associated with allogeneic HSCT,successful transplantation was shown to provide clinically meaningful benefit to patients with CALD, particularly those with early-stage disease. Ofthe subjects who were evaluable at 24 months post-allogeneic-HSCT, 49% (N=51) of the allogeneic-HSCT cohort remained MFD-free. AllogeneicHSCT was also associated with resolution of gadolinium enhancement. Of those patients who would meet eligibility criteria for the Starbeam study(baseline NFS of zero or one, gadolinium-positive prior to allogeneic HSCT, baseline Loes between 0.5 and nine, inclusive and did not have amatched sibling), four of 17 (24%) patients developed an MFD within 24 months post-allogeneic HSCT. ·Consistent with published literature, allogeneic HSCT, particularly with unmatched/unrelated donors, was associated with clinically significantmorbidity and mortality. ·Morbidity: Post-allogeneic HSCT, engraftment failure occurred in 12 of 65 (19%) patients, 10 of whom (83%) were transplanted with unrelateddonor cells. Despite prophylaxis, the GVHD rate was reported in 34 of 58 evaluable subjects (59%), including acute GVHD in 26 (45%) patientsand chronic GVHD in 12 (19%) 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 associated with a substantial risk of life-threatening infection. Infectionswere the most commonly reported serious adverse event, with at least one serious infection reported in 19 (29%) patients post-allogeneic HSCT.The substantial morbidity associated with allogeneic HSCT for CALD supports evaluating Lenti-D in the Starbeam Study as an alternativetherapeutic option that is expected to avoid the issues 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 estimated probability oftwo and five year survival rates post-allogeneic HSCT were 82% and 74%, respectively. As anticipated from the published literature, analysis ofsurvival by type of donor (matched sibling versus other) showed that the proportion of deaths through the observation period post- allogeneicHSCT was lower in matched-sibling donor cases than in other allogeneic HSCT cases. The majority of allogeneic HSCT patients (46 patients;71%) were transplanted with unrelated donor cells given the limited availability of HLA-matched sibling donors. As a result of this analysis, wedetermined to exclude patients with a sibling-matched donor from the Starbeam Study.12We 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 CALD, there remains a significant unmet medical need for safer therapies, particularly for patients withoutthe option of a sibling-matched donor. We believe that many of the issues that contribute to the mortality and morbidity associated with allogeneic HSCTcould be avoided using a patient’s own gene-modified HSCs. Importantly, the results from this study were also used to inform the criteria for patient andendpoint selection for our Starbeam Study.Previous clinical experience with lentiviral gene therapy for CALD (the TG04.06.01 Study)Between September 2006 and September 2010, four boys with a confirmed diagnosis of CALD 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 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,the Principal 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: ·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. ·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 further declinein 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 andwas still not detectable at month 12.We believe these efficacy results are consistent with outcomes that would be expected following successful allogeneic HSCT. All four boys were alivetwo years or more after treatment, while the ALD-101 Study would suggest an expected mortality rate of approximately 20% in the same two-year windowpost-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 secondyear after transplant, which is expected as it is also seen following allogeneic HSCT. Although neurologic deficits have occurred in these subjects post-treatment, we are encouraged by the fact that neurologic disease stabilized 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. In addition, none ofthese subjects experienced adverse events due to immune incompatibility issues typically associated with allogeneic HSCT, such as graft rejection or GVHD.We believe the efficacy and safety results of the TG04.06.01 Study provided 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 Starbeam Study. Thedesign of the Starbeam Study is built upon the observations made in the TG04.06.01 Study, but will enroll a larger number of subjects, is a multi-site trialwith a different primary endpoint and in consultation with experts in the field, and has a predefined criterion for clinical success. Additionally, withimprovements we have introduced into the vector manufacturing and transduction processes, we expect to obtain a higher frequency of gene-modified HSCsin subjects treated in the Starbeam Study compared to what was achieved in the TG04.06.01 Study, which we believe should translate into improved clinicalbenefit by virtue of the increased expression of normally-functioning ALDP.13Phase II/III Starbeam clinical studyIn October 2013, we treated the first subject in a Phase II/III clinical study, called the Starbeam Study, of our Lenti-D product candidate, to evaluate itssafety and efficacy in subjects with CALD. In May 2015, we announced that we had achieved our initial enrollment target for the Starbeam Study with 18subjects enrolled. The study is designed as a single-dose, open-label, non-randomized, international, multi-site Phase II/III study to test the safety andefficacy of our Lenti-D product candidate in preserving neurological function and stabilizing cerebral demyelination in subjects with CALD. Subjects will befollowed for 24 months post-infusion under this protocol. In accordance with applicable guidance from the FDA and EMA, we will be monitoring studysubjects in a separate long-term follow up protocol to evaluate safety for up to 15 years, and will also monitor efficacy endpoints to demonstrate a sustainedtreatment effect. In the study, subjects must be age seventeen years or younger with a confirmed diagnosis of active CALD, including elevated levels ofplasma VLCFA, a brain MRI Loes score of 0.5 to nine, inclusive, evidence of gadolinium enhancement and an NFS £ one. Subjects with a willing, unaffected10/10 HLA matched sibling HSCT donor will be excluded from the study.We have defined the primary efficacy endpoint in the Starbeam Study as the proportion of subjects who have no MFDs, as measured by NFS, at 24 months(±two months) post-infusion. Secondary efficacy evaluations, in each case measured at 24 months (±two months) post-infusion, capture the key assessmentsof CALD disease status, including the change from baseline in NFS and Loes score, resolution of gadolinium enhancement on MRI and determination ofMFD-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) followingtreatment with Lenti-D drug product. Thus, we expect the FDA and EMA will make a qualitative assessment of the efficacy and safety data from this study toevaluate whether the results are sufficient to support a BLA or MAA filing.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; detection of vector-derived replication of the lentivirus; and characterization and quantification of events related to thelocation 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 current number ofsubjects and design of the study and the qualitative/subjective assessment of the data, there can be no assurance the FDA or EMA will not require one or moreadditional clinical studies as a precursor to a BLA application or an MAA, respectively. The FDA has advised us that the Starbeam Study may not be deemedto be a pivotal 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 our Lenti-D product candidate prior to a BLA submission.The ALD-103 observational studyWe are also conducting an observational study of subjects with CALD treated by allogeneic HSCT referred to as the ALD-103 study. This study willcollect efficacy and safety outcomes data in patients who are undergoing allogeneic HSCT in a period that is contemporaneous with ALD-102. We anticipatethat our Lenti-D product candidate safety and efficacy will be evaluated by the FDA and EMA in light of the data collected in the Starbeam Study as well asour retrospective ALD-101 study and our observational ALD-103 study.Our Preclinical Research Opportunities in HSCsWe believe our current gene therapy platform will enable us to develop and test new vectors based on similar viral vector backbones that carry differentgene sequences for other severe genetic diseases. In this way, we believe that we can advance products efficiently through preclinical into clinicaldevelopment. We may consider research and development programs targeting other monogenic, genetic diseases that involve cells derived from HSCs for usein the ex vivo setting. These programs may involve severe genetic and rare diseases that could be developed and potentially commercialized on our own.In addition, we believe our expertise in lentiviral vector production and cell transduction also provides an opportunity to develop new lentiviral productsfor use in the in vivo setting. In this case, lentiviral vectors carrying certain gene sequences would be delivered directly to the disease site (e.g., to the brain,liver or eye) or into the bloodstream of the patient and, in each case, the vector would need to find the target cell in vivo and deliver the genetic material intothose target cells. Although this represents a less controlled environment in which to transduce cells and deliver genetic material, we believe it opens upadditional rare disease and large market indications where this approach is more appropriate for the disease and targeted cells. Our T Cell-Based Immunotherapy OpportunityWe are engaging in the discovery and development of novel, disease-altering gene therapies in oncology. We believe that our gene therapy platform canbe applied to genetically modify a patient’s own T cells to target and destroy cancer cells by recognizing specific cell surface proteins, in the case of chimericantigen receptors, or CARs, or by recognizing specific protein fragments derived from14either intracellular or extracellular protein, in the case of T cell receptors, or TCRs. Since our collaboration arrangement with Celgene was announced inMarch 2013, we have worked collaboratively to discover, develop and commercialize CAR T cell product candidates in oncology. Our collaborationarrangement with Celgene was amended in June 2015 to focus on CAR T cell product candidates targeting BCMA, a cell surface protein that is expressed onnormal plasma cells and on most multiple myeloma cells, but is absent from other normal tissues. In February 2016, we infused the first subject in our Phase Iclinical study of our bb2121 product candidate, the first product candidate from this collaboration. Celgene has exercised its option to exclusively licenseour bb2121 product candidate, while we have retained an option to co-develop and co-promote this product candidate. In June 2015, we announced astrategic collaboration with Kite Pharma, Inc. to jointly develop and commercialize second-generation TCR product candidates against the humanpapillomavirus type 16 E6 (HPV-16 E6) oncoprotein using our lentiviral and gene editing technologies. We are also independently researching anddeveloping other CAR T product candidates against a variety of targets relevant to both hematologic and solid tumors. Immune System and T CellsThe immune system recognizes danger signals and responds to threats at a cellular level. It is often described as having two arms. The first arm is known asthe innate immune system, which recognizes non-specific signals of infection or abnormalities as a first line of defense. The innate immune system is theinitial response to an infection, and the response is the same every time regardless of prior exposure to the infectious agent. The second arm is known as theadaptive immune system, which is composed of highly specific, targeted cells and provides long-term recognition and protection from infectious agents andabnormal processes such as cancer. The adaptive immune response is further subdivided into humoral, or antibody based, and cellular, which includes T cell-based immune responses.The most significant components of the cellular aspect of the adaptive immune response are T cells, so called because they generally mature in thethymus. T cells are involved in both sensing and killing infected or abnormal cells, as well as coordinating the activation of other cells in an immuneresponse. These cells can be classified into two major subsets, CD4+ T cells and CD8+ T cells, based on cell surface expression of the CD4 or CD8glycoproteins. Both subsets of T cells have specific functions in mounting an immune response capable of clearing an infection or eliminating cancerouscells. CD4+ T cells, or helper T cells, are generally involved in coordinating the immune response by enhancing the activation, expansion, migration, andeffector functions of other types of immune cells. CD8+ T cells, or cytotoxic T cells, can directly attack and kill cells they recognize as infected or otherwiseabnormal, and are aided by CD4+ T cells. Both types of T cells are activated when their T cell receptor recognizes and binds to a specific protein structureexpressed on the surface of another cell. This protein structure is composed of the major histocompatibility complex, or MHC, and a small protein fragment,or peptide, derived from either proteins inside the cell or on the cell surface. Circulating CD4+ and CD8+ T cells survey the body differentiating betweenMHC/peptide structures containing “foreign” peptides and those containing “self” peptides. A foreign peptide may signal the presence of an immune threat,such as an infection or cancer, causing the T cell to activate, recruit other immune cells, and eliminate the targeted cell.Although the immune system is designed to identify foreign or abnormal proteins expressed on tumor cells, this process is either ineffective or defectivein cancer patients. The defective process sometimes occurs when cancer cells closely resemble healthy cells and go unnoticed or if tumors lose their MHCprotein expression. Additionally, cancer cells employ a number of mechanisms to escape immune detection to suppress the effect of the immune response.Some tumors also encourage the production of cells that suppress the immune response, such as regulatory T cells that block cytotoxic T cells that wouldnormally attack the cancer. History of Cancer ImmunotherapyCancer has historically been treated with surgery, radiation, chemotherapy and hormone therapy. More recently, advances in understanding of theimmune system’s role in cancer have led to immunotherapy becoming an important treatment approach. Cancer immunotherapy began with treatments thatnonspecifically activated the immune system and had limited efficacy and/or significant toxicity. In contrast, new immunotherapy treatments can activatespecific, important immune cells, leading to improved targeting of cancer cells, efficacy, and safety. Within the immunotherapy category, treatments haveincluded cytokine therapies, antibody therapies, and adoptive cell transfer therapies.In 1986, interferon-a became the first cytokine approved for cancer patients. In 1992, interleukin-2, or IL-2, was the second approved cytokine in cancertreatment, showing efficacy in melanoma and renal cell cancer. IL-2 does not kill cancer cells directly, but instead nonspecifically activates and stimulatesthe growth of the body’s own T cells which then combat the tumor. Although interferon-a, IL-2, and subsequent cytokine therapies represent importantadvances in cancer treatment, they are generally limited by toxicity and can only be used in a limited number of cancers and patients.Cytokine-based therapies set the stage for immunotherapy, and antibody therapies represented the next significant advance, with targeted specificity anda generally better-tolerated side effect profile. Monoclonal antibodies, or mAbs, are designed to attach to proteins on cancer cells, and once attached, themAbs can make cancer cells more visible to the immune system, block growth signals of cancer cells, stop new blood vessels from forming, or deliverradiation or chemotherapy to cancer cells. The first FDA-approved15mAb specifically for cancer was rituximab in 1997, and since then, many other antibodies have received approval, including trastuzumab, bevacizumab,alemtuzumab, cetuximab, and panitumumab. More recently, antibodies have been conjugated with cytotoxic drugs to increase activity. The first approvedantibody drug conjugate was gemtuzumab ozogamicin in 2000, followed by brentuximab vedotin in 2011 and trastuzumab emtansine in 2013.The next important advance has been the development of antibodies that target T cell checkpoint pathways, which are means by which cancer cells areable to inhibit or turn down the body’s immune response to cancer. These treatments have shown an ability to activate T cells, shrink tumors, and improvepatient survival. In 2011, ipilimumab became the first checkpoint inhibitor approved by the FDA. Recent clinical data from checkpoint inhibitors such asnivolumab and pembrolizumab have confirmed both the approach and the importance of T cells as promising tools for the treatment of cancer.Despite these many advances, a significant unmet need in cancer still persists. We believe that the use of human cells as therapeutic entities to re-energizethe immune system will be the next significant advancement in the treatment of cancer. These cellular therapies may avoid the long-term side effectsassociated with current treatments and have the potential to be effective regardless of the type of previous treatments patients have experienced. We aredeveloping CAR and TCR-based approaches using our lentiviral vector gene transfer technology and experience in order to specifically and directly delivera payload of potent anti-cancer agents to T cells, which may give them the ability to kill the cancer cells. Our CAR and TCR T Cell TechnologiesLike our programs for HSCs, our T cell-based immunotherapies use a customized lentiviral vector to alter T cells ex vivo, or outside the body, so that the Tcells can recognize specific proteins or protein fragments on the surface of cancer cells in order to kill these diseased cells. T cells that have been genetically-engineered to make CAR or TCRs are designed to help a patient’s immune system overcome survival mechanisms employed by cancer cells. CAR T celltechnology directs T cells to recognize cancer cells based on expression of specific cell surface antigens, whereas TCR T cell technology provides the T cellswith a specific T cell receptor that recognizes protein fragments derived from either intracellular or extracellular proteins.With both our CAR and TCR T cell technologies, we harvest a patient’s white blood cells in a process called leukapheresis, activate certain T cells togrow and then the gene sequences for the CAR or TCR construct are transferred into the T cell DNA using a lentiviral vector. The number of cells is expandeduntil it reaches the desired dose. These genetically engineered cells, which will express the receptors that can recognize the specific proteins that arecharacteristic of specific cancers, are then infused back into the patient. Our entire T cell engineering process is rapid (complete in around ten days) andmanufactures modified T cells in a sterile closed system. When the engineered T cell is returned to the cancer patient, it engages the target protein on thecancer cell, triggers a series of signals that result in tumor cell killing through the production of anti-cancer cytokines, and undergoes multiple rounds of celldivision to greatly expand the number of these anti-cancer T cells. These engineered T cells have the natural “auto-regulatory” capability of normal T cellsand once the tumor cells containing the target antigen are destroyed, the engineered T cells decrease in number, but with the potential to leave a smallernumber of T cells in the body as a form of immune surveillance against potential tumor regrowth. The genetically-engineered T cells are designed tosupplement a patient’s immune system and can be further engineered to overcome immune evasion mechanisms employed by cancer cells. Our CAR and TCR T cell technologies also bring genomic engineering tools to the immunotherapy field. Using our gene editing technology, we have anumber of additional options to manipulate the genome of the cancer patient’s T cells to further increase the specificity of the anti-tumor activity and topotentially make these cells even more potent. Specificity and potency are essential to the development of T cell therapies that can effectively treat solidtumor cancers such as breast, lung and colon cancer. Our cancer immunotherapy research group is staffed by scientists drawn from both industry andacademic research centers that have pioneered the field of T cell therapy. This team is focused on the next generation of T cell engineering to discover anddevelop T cell product candidates to treat a variety of liquid and solid tumor malignancies. Our CAR T cell product candidate - bb2121We are developing bb2121, our first CAR T cell product candidate, as a potential treatment for multiple myeloma by binding to BCMA, a cell surfaceprotein expressed on cancer cells. Multiple myeloma is a hematologic malignancy that develops in the bone marrow in which normal antibody-producingcells transform into myeloma. The growth of the cancer cells in the bone marrow blocks production of normal blood cells and antibodies, and also causeslesions that weaken the bone. According to the National Cancer Institute, more than 26,000 cases of multiple myeloma are expected in the United States in2015. BCMA is expressed on normal plasma cells and on most multiple myeloma cells, but is absent from other normal tissues. We believe BCMA presentsan attractive immunotherapeutic target for our technology for a number of reasons. In a preclinical BCMA multiple myeloma xenograft model, a singleintravenous administration of bb2121 anti-BCMA CAR T cells resulted in rapid and sustained elimination of the tumors with 100 percent survival, while amonth-long course of anti-myeloma therapy bortezomib only delayed tumor growth. In December 2015, researchers from the NIH announced promisingclinical data in multiple myeloma with an anti-BCMA CAR T cell therapy that established clinical proof-of-concept for the BCMA target using a gamma-retroviral vector.16Our product candidate bb2121 is the result of our multi-year collaboration with Celgene and in February 2016, Celgene has exercised its option toexclusively develop and commercialize our bb2121 product candidate following the completion of the ongoing CRB-401 Phase I study. We retain an optionto co-develop and co-commercialize this product candidate, as described more fully below under “Strategic collaborations—Our strategic alliance withCelgene.”The CRB-401 clinical study for relapsed/refractory multiple myelomaIn February 2016, we treated the first subject in our Phase I clinical study (CRB-401) to examine the safety and efficacy of our bb2121 product candidatein patients with relapsed/refractory multiple myeloma. The study is a single-dose, open-label, non-randomized, multi-site Phase I clinical study in the UnitedStates to determine the maximally tolerated dose and recommended Phase II dose. We expect that up to 40 patients will be enrolled in the CRB-401 study. Inorder to be eligible for this study, patients must have received 3 prior regimens, including a proteasome inhibitor (bortezomib or carfilzomib) andimmunomodulatory agent (lenalidomide or pomalidomide). Following screening, enrolled subjects will undergo a leukapheresis procedure to collectautologous T cells for manufacturing our bb2121 drug product. Following manufacture of our bb2121 drug product, subjects will receive one cycle oflymphodepletion prior to bb2121 infusion. Our TCR product candidateIn collaboration with Kite Pharma, Inc., we are co-developing and, if approved, co-commercializing, second generation TCR T cell-based therapiesdirected against an HPV-16 E6 antigen relating to certain cancers associated with the human papillomavirus, or HPV. HPV is the most common viral infectionof the reproductive tract, with two viral strains, HPV type 16 and HPV type 18, believed to cause 70% of cervical cancers and precancerous cervical lesions,as well as other urogenital cancers. There were over 500,000 new cases and about 270,000 deaths attributable to cervical cancer worldwide in 2012.Additionally, HPV infection has become established as an etiologic risk factor for oropharyngeal head and neck cancers. The incidence of HPV-associatedoropharyngeal cancers has been increasing for at least the past decade, and recent studies show that about 70 percent of oropharyngeal cancers may be linkedto HPV. According to the Centers for Disease Control, there are over 12,000 new cases of oropharyngeal cancers in the United States a year, of which anestimated 7,500 new cases are attributable to HPV-16. Kite is currently conducting a Phase I/II study of a gamma-retroviral vector-based first generation TCRgene therapy directed against an HPV-16 E6 antigen that is not the subject of this collaboration. Our collaboration with Kite will leverage our lentiviralvector gene transfer platform in combination with gene editing technology. Kite will lead the program in the United States and we will have the option tolead the program in the European Union. Both companies will share overall costs, including research and development and sales and marketing expenses,and profits will be equally split between the companies. Additionally, Kite will have a co-promotion option in the European Union, and we will have a co-promotion option in the United States. Our other preclinical research opportunities in T cell-based immunotherapyWe are pursuing multiple programs that leverage the unique properties of lentiviral vectors to target T cells as a therapy for various cancers. Thisrepresents a direct application of our expertise in gene therapy and our capabilities, know-how and patents associated with lentiviral gene therapy and geneediting for ex vivo applications. We are also independently researching and developing other CAR-T product candidates against a variety of targets relevantto both hematologic and solid tumors. Our Gene Editing OpportunityIn June 2014, we acquired Pregenen, a privately-held biotechnology company headquartered in Seattle, Washington. Through the acquisition, weobtained rights to Pregenen’s gene editing technology platform and cell signaling technology, and have integrated these technologies and research team andexpanded its research efforts. We are focused on utilizing homing endonuclease and megaTAL gene editing technologies in a variety of potentialapplications and disease areas, including for oncology and hematology. Homing endonucleases and MegaTALs are novel enzymes that provide a highlyspecific and efficient way to modify the genome of a target cell to potentially treat a variety of diseases.All of the gene-editing technologies currently being explored by the pharmaceutical industry, including zinc finger nucleases, CRISPR/Cas9, andTALENs, share common features of a DNA binding domain and a DNA cleavage domain. They all differ in specificity, size, ease of delivery and as naturallyoccurring versus engineered nucleases. Homing endonucleases and megaTALs are based on a naturally-occurring class of DNA cleaving enzymes thatfunction as monomeric proteins able to bind DNA in a sequence-specific manner and cleave their target site. We believe there are multiple advantages ofhoming endonucleases and MegaTALs compared to other gene editing technologies, most notably: they are highly specific and efficient in cutting DNA andtheir compact size simplifies delivery to therapeutically relevant cell types. We are using our gene editing platform, along with collaborations with multipleacademic institutions, to potentially discover and develop next generation versions of our current ex vivo gene therapy product candidates, and to potentiallyexpand into new disease indications.17ManufacturingOur gene therapy platform has two main components: lentiviral vector production and the target cell transduction process, which results in drug product.Our lentiviral manufacturing processOur lentiviral vectors are assembled using a human cell line called HEK293T. The HEK293T cells are maintained in disposable flasks until sufficient cellmass has been generated to fill approximately 40 ten tray cell factories, or TTCFs, then transferred and allowed to adhere to the bottom of the trays. Adherentcells are transfected with multiple plasmids encoding all the genetic material required to assemble the lentiviral vector carrying the functional gene ofinterest. The transfected HEK293T cells then assemble our lentiviral vectors packaged with the functional gene of interest, which bud off into the cell culturemedia. The media containing the assembled vectors is harvested, purified, concentrated and formulated prior to freezing for storage. These finished lentiviralvectors are what is ultimately used to transduce the targeted cells 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 andrelated sequences are changed. If we were to undertake drug development in an additional indication, we believe we could rapidly move forward using thislentiviral vector 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 adapting our LentiGlobin and bb2121 vector productiontechnology to scalable production systems with the potential to satisfy an increased number of subjects per run. So far, we have demonstrated successfulproduction of LentiGlobin and bb2121 vectors on a small scale and are transferring the new process to a contract manufacturer to accommodate futuredemand for our drug candidates, if approved, in their current indications as well as those beyond our initial focus.Our HSC transduction process—creating the gene-modified HSCs (our drug product)The ultimate product of our manufacturing processes is the patient’s own gene-modified HSC cells, which we refer to as our drug product. The process forproducing drug product for our HSC-based product candidates is as follows: 1.Selection: We extract HSCs from peripheral blood mononuclear cells obtained from the patient’s blood by apheresis (or alternatively, by bone marrowharvest) following mobilization via a colony stimulating factor. The process is carried out using existing hospital infrastructure and standard protocolscurrently in place for stem cell transplant procedures, with enhanced controls for extracting the cells to be used for making our drug product.18 2.Pre-stimulation: The isolated HSCs are treated with a mixture of growth factors that help enable an efficient transduction process. 3.Transduction: The isolated, purified and pre-treated HSCs are exposed to our lentiviral vectors containing the appropriate functional gene andadditional proprietary elements for a period of time to facilitate transduction and insertion of the therapeutic DNA into the genome 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 any residualimpurities. A portion of the harvested cells is removed for quality control release testing, which includes ensuring that transduction was successful andthe 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.The final step is to return the gene-modified HSCs to the patient. Our T cell transduction process—creating the gene-modified T cells (our drug product)The ultimate product of our manufacturing processes is the patient’s own gene-modified T cells, which we refer to as our drug product. The process forproducing drug product for our T cell-based product candidates is as follows: 1.Leukapheresis: We collect white blood cells from the patient’s blood through a process called leukapheresis. The process is carried out using existinghospital infrastructure and standard protocols currently in place for blood donation procedures, with enhanced controls for extracting the cells to beused for making our drug product. 2.Activation: The white blood cell mixture, which includes T cells, are treated with proprietary processes to enable an efficient transduction process. 3.Transduction: The isolated, purified and pre-treated T cells are exposed to our lentiviral vectors containing the appropriate functional gene for aperiod of time to facilitate transduction and insertion of the therapeutic DNA into the genome of the target cells. 4.Expansion: The transduced T cells are then expanded for a period of approximately one week to increase the number of gene-modified T cells. 5.Final harvest: The gene-modified T cells are washed and re-suspended into cell culture media to remove any residual impurities. A portion of theharvested cells is removed for quality control release testing, which includes ensuring that transduction was successful and the functional genedelivered by the vector is adequately expressed by the target cells. 6.Formulation and freeze: The remaining cells are appropriately formulated and cryopreserved.The final step is to return the gene-modified T cells to the patient. We rely exclusively on the use of third party manufacturing organizations to manufacture our LentiGlobin, Lenti-D and bb2121 vectors and drug productcandidates, and do not own or operate any of our own facilities for these purposes. However, we believe our team of technical personnel has extensivemanufacturing, analytical and quality experience as well as strong project management discipline to effectively oversee these contract manufacturing andtesting activities, and to compile manufacturing and quality information for our regulatory submissions.Strategic collaborationsOur objective is to develop and commercialize products based on the transformative potential of gene therapy to treat patients with severe genetic andrare diseases and cancer. To access the substantial funding and other resources required to develop and commercialize gene therapy products in thesediseases, we have formed, and intend to seek other opportunities to form, strategic collaborations with third parties who can augment our industry leadinggene therapy, T cell immunotherapy, lentiviral vector and gene-editing expertise. To date, we have focused on forging a limited number of significantstrategic collaborations with leading pharmaceutical companies and academic research centers where both parties contribute expertise to enable thediscovery and development of potential product candidates.Our collaboration with CelgeneIn March 2013, we announced a strategic collaboration with Celgene to discover, develop and commercialize novel disease-altering gene therapies inoncology, which was amended and restated in June 2015, and amended again in February 2016. The multi-year research and development collaborationfocused on applying our expertise in gene therapy technology to CAR T cell-based therapies, to target and destroy cancer cells. Our collaboration nowfocuses exclusively on anti-BCMA CAR T product candidates. We advanced our development of our bb2121 product candidate, the first CAR productcandidate from our collaboration with Celgene, into clinical trials in February 2016. We will also work collaboratively with Celgene on potential next-generation anti-BCMA product candidates under this collaboration.19Under the terms of the collaboration, for up to two product candidates 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 productcandidates, provided that Celgene has agreed to reimburse us a specified amount per patient in the event we and Celgene mutually agree to expand any PhaseI clinical trial for any product candidate under the collaboration beyond a specified number of patients per clinical trial. This collaboration is governed by ajoint steering committee, or JSC, formed by representatives from us and Celgene. The JSC, among other activities, reviews the collaboration program, reviewsand evaluates product candidates and approves regulatory plans.On a product candidate-by-product candidate basis, up through a specified period following enrollment for the first patient in an initial Phase I clinicalstudy for such product candidate, we have granted Celgene an option to obtain an exclusive worldwide license to develop and commercialize such productcandidate pursuant to a written agreement, the form of which we have already agreed upon. Effective as of February 2016, Celgene has exercised its optionwith respect to the bb2121 product candidate, and we have licensed to Celgene the exclusive worldwide license to develop and commercialize the bb2121product candidate. We may elect to co-develop and co-promote the product candidate bb2121 and any other product candidates in the United States,provided that, if we do not exercise our option to co-develop and co-promote the product candidate bb2121 in-licensed by Celgene under the collaboration,then we will not be permitted to exercise our option to co-develop and co-promote any future product candidates under the collaboration.In connection with its exercise of the option to exclusively in-license the bb2121 product candidate, Celgene will pay to us an option fee in the amountof $10.0 million. If Celgene elects to exercise its option to exclusively in-license any additional product candidates, it must pay us an additional $15.0million per product candidate. In addition to the applicable option fees, Celgene must pay to us an additional fee in the amount of $10.0 million in the eventwe do not exercise our option to co-develop and co-promote that product candidate in the United States. In addition, for each product candidate that is in-licensed by Celgene, and for which we do not exercise our option to co-develop and co-promote in the United States, we will be eligible to receive up to$10.0 million in clinical milestone payments, up to $117.0 million in regulatory milestone payments and up to $78.0 million in commercial milestonepayments. We will also be eligible to receive a percentage of net sales as a royalty in a range from the mid-single digits to low-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 to co-develop and co-promote the product candidate within the United States, we would share equally in all costs relating to developing,commercializing and manufacturing the product candidate within the United States and we would share equally in the United States profits. Additionally, ifwe elect to co-develop and co-promote a product candidate, then the milestones and royalties would decrease compared to those described above. Under thisscenario, we would receive per product candidate up to $10.0 million in clinical milestone payments and outside of the United States, up to $54.0 million inregulatory milestone payments and up to $36.0 million in commercial milestone payments. In addition, to the extent any of the product candidates licensedby Celgene and co-developed and co-promoted by us are commercialized, we would be entitled to receive tiered royalty payments ranging from the mid-single digits to low-teens based on a percentage of net sales generated outside of the United States. The royalties payable to us are subject to certainreductions, including any royalty payments required to be made by Celgene to acquire patent rights, with an aggregate minimum floor.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.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. Celgene would reimburse us for our costs to manufacture and supply such vectors andassociated payloads, plus a modest mark-up.We received an initial up-front payment of $75.0 million from Celgene in connection with the collaboration, plus an additional $25.0 million inconnection with the amendment in June 2015. The collaboration term ends in June 2018. Either party may terminate the agreement upon written notice to theother party in the event of the other party’s uncured material breach. Celgene may terminate the agreement for any reason upon prior written notice to us. Ifthe agreement is terminated, rights to product candidates in development at the time of such termination will be allocated to the parties through a mechanismincluded in the agreement. In addition, if Celgene terminates the agreement for our breach, any then- existing co-development and co-promotion agreementwill be automatically terminated and replaced with a license agreement for such product candidate and any amounts payable by Celgene under any then-existing product license agreements will be reduced.20Baylor College of MedicineSimultaneous with entering into the collaboration agreement with us, Celgene entered into a strategic collaboration with the Baylor College of Medicine,or Baylor, to discover, develop and commercialize CAR T cell products. We are not a party to this collaboration agreement, although, by virtue of ouragreements with Celgene, the joint steering committee under the Baylor-Celgene collaboration agreement will include representatives selected by us,together with representatives selected by each of Celgene and Baylor. Under our collaboration agreement with Celgene, we may develop product candidatescovered by the intellectual property rights of Baylor in this field, which intellectual property rights would be in-licensed by Celgene pursuant to itscollaboration agreement with Baylor.Our collaboration with Kite PharmaIn June 2015, we announced a strategic collaboration with Kite Pharma, Inc. to jointly develop and commercialize second generation TCR productcandidates against the human papillomavirus type 16 E6, or HPV-16 E6, oncoprotein. The collaboration will apply our gene editing technology andexpertise to modify certain genes to enhance T cell function. In addition, we will explore using lentiviral vectors to optimize delivery of HPV-16 E6 TCRs inpatient T cells. Kite will lead the program in the United States, and we will have the option to lead the program in the European Union. Both companies willshare overall costs, including research and development, and sales and marketing expenses and profits will be equally split between the companies.Additionally, Kite will have a co-promotion option in the European Union, and we will have a co-promotion option in the United States.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 theseactivities. With respect to both licensed and company-owned intellectual property, we cannot be sure that patents will be granted with respect to any of ourpending patent applications 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 anypatents that may be granted to us in the future will be commercially useful in protecting our commercial products and methods of manufacturing the same.We 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, transgenes, methods of transferring genetic material into cells, genetically modified cells, processes tomanufacture our lentivirus-based product candidates and other proprietary technologies and processes related to our lead product development candidates.As of January 31, 2016, our patent portfolio includes the following: ·approximately 183 patents or patent applications that we own or have exclusively in-licensed from academic institutions and third parties related tolentiviral vectors and vector systems; ·approximately 70 patents or patent applications that we have non-exclusively in-licensed from academic institutions and third parties related tolentiviral vectors and vector systems; ·approximately 37 patents or patent applications that we own or have exclusively in-licensed from academic institutions and third parties, includingeight that are co-owned with MIT, related to vector manufacturing or production; ·approximately eight patents or patent applications that have been non-exclusively in-licensed from academic institutions and third parties related tovector manufacturing or production; ·approximately 23 patents or patent applications that we own or have exclusively or co-exclusively in-licensed from academic institutions and thirdparties related to therapeutic cellular product candidates; ·approximately 117 patents or patent applications that we own or have exclusively in-licensed from academic institutions and third parties related tooncology product candidates, including CAR T cell vector systems and manufacturing, T cell manufacturing, and therapeutic T cells;21 ·approximately 68 patents or patent applications that we own or have exclusively or co-exclusively in-licensed from academic institutions and thirdparties related to gene editing compositions and methods; and ·approximately two patent applications that we have non-exclusively in-licensed from academic institutions and third parties related to gene editingcompositions and methods.Our objective is to continue to expand our portfolio of patents and patent applications in order to protect our gene therapy product candidatesmanufacturing processes. Examples of the products and technology areas covered by our intellectual property portfolio are described below. See also “—License agreements.”ß-thalassemia/SCDThe ß-thalassemia/SCD 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 to produceour LentiGlobin product candidate for ß-thalassemia and SCD. As of January 31, 2016, we had an exclusive license to nine issued U.S. patents andone pending U.S. application. Corresponding foreign patents and patent applications include pending applications or issued patents in Australia,Canada, China, Europe, Hong Kong, Israel, and Japan. We expect the issued composition of matter patents to expire from 2019-2023 in the UnitedStates, and from 2019-2020 in the rest of the world (excluding possible patent term extensions). Further, we expect composition of matter patents, ifissued from the pending patent applications and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, to expire in2019-2020 (excluding possible patent term extensions). We expect the patents and patent applications in this portfolio other than composition ofmatter patents, if issued, and if the appropriate maintenance, renewal, annuity, or other governmental fees are 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 directed toaspects of our lentiviral vectors utilized to produce our LentiGlobin product candidate for ß-thalassemia and SCD. As of January 31, 2016, we had anexclusive license (from RDF) to seven issued U.S. patents and two pending U.S. applications related to our lentiviral vector platform. Correspondingforeign patents 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 2021-2027 (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 2021-2022 (excluding possible patent term extensions). We expect the patents and patent applications in thisportfolio other than composition of matter patents, if issued, and if the appropriate maintenance, renewal, annuity, or other governmental fees are paid,to expire in 2021-2022 (worldwide, excluding possible patent term extensions). ·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 January 31, 2016, we co-owned two issued U.S. patents and one pending U.S. application, as well ascorresponding 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.Cerebral Adrenoleukodystrophy (CALD)The CALD 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 aspects ofour lentiviral vectors utilized to produce our Lenti-D product candidate for CALD. ·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 Lenti-D product candidate for CALD. ·bluebird bio. The bluebird bio patent portfolio contains patent applications directed to compositions of matter for CALD gene therapy vectors andcompositions and methods of using the vectors and compositions in cell-based gene therapy of adrenoleukodystrophy or adrenomyeloneuropathy. Asof January 31, 2016, we owned two U.S. patent and one pending U.S. application and 17 pending corresponding foreign applications or issuedpatents. We expect the issued composition of matter patents for CALD gene therapy vectors to expire in 2032 (excluding possible patent termextensions). Further, we expect composition of matter patents, if issued from the pending patent applications and if the appropriate maintenance,renewal, annuity or other governmental fees are paid, to expire in 2032 (worldwide, excluding possible patent term extensions). We22 expect 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 2032 (worldwide, excluding possible patent term extensions).Lentiviral platform (e.g., vectors, manufacturing, and cell therapy products)The lentiviral platform, which is potentially applicable to the ß-thalassemia, SCD, CALD, oncology 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. Another component of the bluebird bio patent portfolio includes the vector manufacturing platform and is potentially applicable to theCALD, ß-thalassemia, SCD, oncology, and other programs. This portion of the portfolio contains patents and patent applications directed to improvedmethods for transfection and transduction of therapeutic cells. As of January 31, 2016, we owned 2 pending U.S. applications and 21 correspondingforeign patent applications. We expect composition of matter and method patents, if issued from the pending patent applications and if theappropriate maintenance, renewal, annuity or other governmental fees are paid, to expire from 2032 (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 2032 (worldwide, excluding possible patent term extensions).Oncology / T cell-based immunotherapy platformOur lead T cell immunotherapy product candidate, bb2121, includes three patent portfolios, described below. ·Pasteur Institute. The Pasteur patent portfolio contains the patents and patent applications described above. ·bb2121 Candidate Licenses. We have in-licensed a patent portfolio that contains patents and patent applications directed to aspects of our oncologyplatform to produce lentiviral vectors for a CAR T cell therapy product directed against BCMA. As of January 31, 2016, we had a co-exclusive licenseto seven issued U.S. patents and three pending U.S. applications and 28 pending corresponding foreign applications and 36 issued correspondingforeign patents related to bb2121. We expect the issued patents to expire from 2020-2032 (excluding possible patent term extensions). Further, weexpect composition of matter or methods patents, if issued from the pending patent applications and if the appropriate maintenance, renewal, annuityor other governmental fees are paid, to expire from 2020-2032 (excluding possible patent term extensions). We expect the other patents and patentapplications in this portfolio, if issued, and if the appropriate maintenance, renewal, annuity, or other governmental fees are paid, to expire in 2020-2032 (worldwide, excluding possible patent term extensions). In addition, as of January 31, 2016, we have an exclusive license to one pending U.S.application and 19 corresponding foreign patent applications related to bb2121. We expect composition of matter and methods patents, if issued fromthe pending patent applications and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, to expire in 2033(excluding possible patent term extensions). We expect the other patents and patent applications in this portfolio, if issued, and if the appropriatemaintenance, renewal, annuity, or other governmental fees are paid, to expire in 2033 (worldwide, excluding possible patent term extensions). ·bluebird bio. One aspect of the bluebird bio patent portfolio contains patent applications directed to certain specific compositions of matter forgenerating CAR T cells. As of January 31, 2016, we owned two pending U.S. provisional applications and six pending PCT applications. We expectany composition of matter or methods patents, if issued from a corresponding nonprovisional application or national stage application, orcorresponding foreign applications, if applicable, and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, to expirein 2035 (worldwide, excluding possible patent term extensions). We expect the other patents and patent applications in this portfolio, if issued, and ifthe appropriate maintenance, renewal, annuity, or other governmental fees are paid, to expire from 2035 (worldwide, excluding possible patent termextensions).Our oncology research program includes other patent portfolios, described below. ·RDF. The in-licensed RDF patent portfolio described above contains patents and patent applications that are also applicable to our oncologyplatform. In addition, the RDF portfolio contains additional patent applications directed to aspects of our oncology program. As of January 31, 2016,we had an exclusive license (from RDF) to one issued patent and one pending U.S. applications related to our oncology platform. We expect theissued patent to expire in 2021 (excluding possible patent term extensions). Further, we expect composition of matter or methods patents, if issuedfrom the pending patent applications and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, to expire in 2021-2022(excluding possible patent term extensions). We expect the other patents and patent applications in this portfolio, if issued, and if the appropriatemaintenance, renewal, annuity, or other governmental fees are paid, to expire in 2021-2022 (worldwide, excluding possible patent term extensions).23 ·bluebird bio. One aspect of the bluebird bio patent portfolio contains patent applications directed to certain specific compositions of matter forgenerating CAR T cells directed against various cancers. As of January 31, 2016, we owned two pending U.S. provisional applications. We expectany composition of matter or methods patents, if issued from a corresponding nonprovisional application or national stage application, orcorresponding foreign applications, if applicable, and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, to expirein 2036 (worldwide, excluding possible patent term extensions). We expect the other patents and patent applications in this portfolio, if issued, and ifthe appropriate maintenance, renewal, annuity, or other governmental fees are paid, to expire from 2036 (worldwide, excluding possible patent termextensions). ·T Cell Immunotherapy Product Candidate Licenses. We have in-licensed patents and patent applications that are directed to certain specificcompositions of matter for generating CAR T cells directed against various cancers. As of January 31, 2016, we had a co-exclusive or exclusive licenseto two pending U.S. provisional applications related to one particular target antigen. We expect any composition of matter or methods patents, ifissued from a corresponding nonprovisional application or national stage application, or corresponding foreign applications, if applicable, and if theappropriate maintenance, renewal, annuity or other governmental fees are paid, to expire in 2036 (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, orother governmental fees are paid, to expire from 2036 (worldwide, excluding possible patent term extensions). In addition, as of January 31, 2016, wehave an exclusive license to one issued U.S. patent and ten corresponding foreign patents and two corresponding foreign patent applications toanother particular target antigen. We expect the issued composition of matter patent to expire in 2036 (excluding possible patent termextensions). Further, we expect composition of matter or methods patents, if issued from the pending patent applications and if the appropriatemaintenance, renewal, annuity or other governmental fees are paid, to expire in 2036 (excluding possible patent term extensions). We expect the otherpatents and patent applications in this portfolio, if issued, and if the appropriate maintenance, renewal, annuity, or other governmental fees are paid, toexpire from 2036 (worldwide, excluding possible patent term extensions).Gene editing platform (e.g., homing endonucleases, chimeric endonucleases, megaTALs, genetically modified cells)The gene editing platform includes five patent portfolios, described below. ·Pasteur Institute. The Pasteur patent portfolio described above may contain patents and patent applications that are potentially applicable to our geneediting platform. ·RDF. The in-licensed RDF patent portfolio described above may contain patents and patent applications that are potentially applicable to our geneediting platform. ·Gene Editing License. We in-licensed patent portfolios that contain patents and patent applications directed to aspects of our gene editing platform toproduce genome modifying enzymes and genetically modified cells that are potentially applicable to our ß-thalassemia, SCD, oncology and otherprograms. As of January 31, 2016, we had an exclusive/co-exclusive license to three issued U.S. patents and two pending U.S. applications and twocorresponding foreign patents and nine corresponding patent applications related to our gene editing platform. We expect the issued composition ofmatter patents to expire in 2030 (excluding possible patent term extensions). Further, we expect composition of matter or methods patents, if issuedfrom the pending patent applications and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, to expire in 2030(excluding possible patent term extensions). We expect the other patents and patent applications in this portfolio, if issued, and if the appropriatemaintenance, renewal, annuity, or other governmental fees are paid, to expire in 2030 (worldwide, excluding possible patent term extensions). Inaddition, as of January 31, 2016, we had an exclusive license to one issued U.S. patent and one pending U.S. application and five correspondingforeign patents related to our gene editing platform. We expect the issued composition of matter patent to expire in 2031 in the United States(excluding possible patent term extensions) and in 2027 in the rest of the world. Further, we expect composition of matter and methods patents, ifissued from the pending patent applications and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, to expire in2027 (excluding possible patent term extensions). We expect the other patents and patent applications in this portfolio, if issued, and if theappropriate maintenance, renewal, annuity, or other governmental fees are paid, to expire in 2027 (worldwide, excluding possible patent termextensions). ·Academic Gene Editing Licenses. We in-licensed patent portfolios from multiple academic medical centers, each portfolio containing patents andpatent applications directed to aspects of our gene editing platform to produce genome modifying enzymes and genetically modified cells that arepotentially applicable to our ß-thalassemia, SCD, oncology and other programs. As of January 31, 2016, we had an exclusive license to one issuedU.S. patent and three pending U.S. applications and four corresponding foreign patents and four corresponding patent applications related to our geneediting platform. We expect the issued patent to expire in 2032 (excluding possible patent term extensions) in the U.S. and 2027-3032 in the rest ofthe world. We expect composition of matter or method patents, if issued from the pending patent applications and if the appropriate maintenance,renewal, annuity or other governmental fees are paid, to expire from 2027-2032 (excluding possible patent term extensions). We expect the otherpatents and patent applications in this portfolio, if issued, and if the appropriate maintenance, renewal, annuity, or other governmental fees are paid, toexpire in 2027-2032 (worldwide, excluding possible patent term24 extensions). As of January 31, 2016, we also had a non-exclusive license to one pending U.S. provisional application and one pending PCTapplication related to our gene editing platform. We expect any composition of matter or methods patents, if issued from a correspondingnonprovisional application or national stage application, or corresponding foreign applications, if applicable, and if the appropriate maintenance,renewal, annuity or other governmental fees are paid, to expire in 2036 (worldwide, excluding possible patent term extensions). We expect the otherpatents and patent applications in this portfolio, if issued, and if the appropriate maintenance, renewal, annuity, or other governmental fees are paid, toexpire from 2036 (worldwide, excluding possible patent term extensions). In addition, as of January 31, 2016, we had an exclusive license to 2pending U.S. applications and 19 corresponding pending foreign patent applications related to our gene editing platform. We expect composition ofmatter or method patents, if issued from the pending patent applications and if the appropriate maintenance, renewal, annuity or other governmentalfees are paid, to expire from 2031-2033 (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 2031-2033 (worldwide,excluding possible patent term extensions). As of January 31, 2016, we also had an exclusive license to one pending U.S. application and 18corresponding foreign patent applications related to our gene editing platform. We expect composition of matter or method patents, if issued from thepending patent applications and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, to expire from 2033 (excludingpossible patent term extensions). 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 2033 (worldwide, excluding possible patent term extensions). ·bluebird bio. One aspect of the bluebird bio patent portfolio contains patent applications that are potentially applicable to certain aspects of our geneediting platform to produce genome modifying enzymes and genetically modified cells that are potentially applicable to our oncology and otherprograms. As of January 31, 2016, we co-owned (with Cellectis) two pending U.S. applications and ten corresponding pending foreign patentapplications related to our gene editing platform. We expect composition of matter or method patents, if issued from the pending patent applicationsand if the appropriate maintenance, renewal, annuity or other governmental fees are paid, to expire from 2034 (excluding possible patent termextensions). We expect the other patents and patent applications in this portfolio, if issued, and if the appropriate maintenance, renewal, annuity, orother governmental fees are paid, to expire in 2034 (worldwide, excluding possible patent term extensions). 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 tofive years 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. Apatent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only one patentapplicable to an approved drug may be extended. Moreover, a patent can only be extended once, and thus, if a single patent is applicable to multipleproducts, it can only be extended based on one product. Similar provisions are available in Europe and other foreign jurisdictions to extend the term of apatent that covers an approved drug. When possible, depending upon the length of clinical trials and other factors involved in the filing of a BLA, we expectto apply 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 thirdparties. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physicaland electronic security of our information technology systems. While we have confidence in these individuals, organizations and systems, agreements orsecurity measures 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 or collaborators use intellectual property owned by others in their work for us,disputes may arise as to the rights in related or resulting know-how and inventions.License 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 ALDtherapy. Inserm-Transfert is referred to herein as Inserm. The Inserm licensed patent portfolio includes one U.S. patent in force. This portfolio has no pendingapplications. Inserm retains the right to practice the intellectual property licensed under the agreement for educational, clinical and preclinical studiespurposes.25Upon 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 materialbreach which remains uncured after 60 days of receiving written notice of such breach or in the event the other party become subject of a voluntary orinvoluntary petition in bankruptcy and such petition is not dismissed with prejudice within 120 days after filing. In addition, Inserm may terminate thelicense agreement in the event that we cannot prove within 60 days of written notice from Inserm that we have been diligent in developing the licensedproducts and introducing them 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 PasteurWe have entered into a license with Institut Pasteur for certain patents relating to the use of DNA sequences, lentiviral vectors and recombinant cells inthe field of ex vivo gene therapy and CAR T cell-based therapy in a range of indications, excluding vaccinations. This agreement was amended twice in 2012,again in 2013 and most recently in 2015. The Institut Pasteur licensed patent portfolio includes at least 83 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 dates between 2019 and 2023. The license is exclusivefor products containing human and non-human lentiviral vectors. Institut Pasteur retains the right, on behalf of itself, its licensees and research partners, toconduct research using the licensed intellectual property.We have the right to grant sublicenses outright to third parties under the agreement. For the first sublicense including a product targeting β-hemoglobinopathies (including TDT and severe SCD) or ALD (including CALD and AMN), we must pay Institut Pasteur an additional payment of €3.0million. If we receive any income (cash or non-cash) in connection with sublicenses for products targeting indications other than β-hemoglobinopathies(including TDT and severe SCD) or ALD (including CALD and AMN), we must pay Institut Pasteur a percentage of such income varying from low singledigits if the sublicense also includes licenses to intellectual property controlled by us, and a percentage of sublicense income in the mid-range double digitsif the sublicense does not include licenses to intellectual property controlled by us.Upon commercialization of our products covered by the in-licensed intellectual property, which we expect would include our LentiGlobin and Lenti-Dproduct 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 whichis creditable 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 ishigher than 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 anannual basis. We may unilaterally terminate the license agreement at any time by sending Institut Pasteur 90 days prior written notice. Either party mayterminate the license 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 may also 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 or five years after first marketauthorization of the first product, whichever occurs later. In the event the agreement is terminated, while the license grant would cease, we would retain theright to manufacture, import, use and sell licensed products for a certain period of time post-termination. In addition, our ownership stake in certain jointlymade improvements covered by the licensed patents would survive termination of the agreement. The longest lived patent rights licensed to us under theagreement are currently expected to expire in 2023.26Stanford 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, nonclinical 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 (unlessthe 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 requireus to 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.Massachusetts 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 20 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 in2023. 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 thiscase. MIT retains 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 respectto jointly owned intellectual property, any termination would allow MIT to grant licenses to any third party to such intellectual property, without ourapproval, 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 25 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 between 2021 and 2027. RDF retains the right, on27behalf of itself and other nonprofit academic research institutions, to practice and use the licensed patents for any academic, nonclinical research andeducational purposes. We have the right to grant sublicenses outright to third parties under the 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 expiresor ends.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.RDF 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 patentor patent 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 directlicense. The longest lived patent rights licensed to us under the agreement are in one U.S. patent currently expected to expire in 2027.CompetitionThe biotechnology and pharmaceutical industries are characterized by intense and rapidly changing competition to develop new technologies andproprietary products. We face potential competition from many different sources, including larger and better-funded pharmaceutical and biotechnologycompanies. Not only must we compete with other companies that are focused on gene therapy products but any products that we may commercialize willhave to compete with existing therapies and new therapies 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 LentiGlobin, Lenti-D and bb2121 product candidates,if approved and our preclinical T cell-based immunotherapy product candidates. These efforts include the following: ·ß-thalassemia: The current standard of care for the treatment of ß-thalassemia in the developed world is chronic blood transfusions to address thepatient’s anemia. In addition, such patients often receive iron chelation therapy to help manage the iron overload associated with their chronic bloodtransfusions. We understand that established biopharmaceutical companies, such as Novartis AG and ApoPharma Inc., who provide the leading ironchelation therapy, are seeking to develop improvements to their product profile and accessibility. In addition, some patients with ß-thalassemiareceive HSCT treatment, particularly if a sufficiently well-matched source of donor cells is identified. Approaches to reduce the risk of complicationsfrom allogeneic HSCTs are under investigation, including BPX-501, a modified donor T cell therapy in an ongoing Phase I/II study being supportedby Bellicum Pharmaceuticals, Inc. A number of different approaches are under investigation to improve treatment options, including iron modulatingagents and fetal hemoglobin regulators. There are also several different groups developing gene therapy approaches for ß-thalassemia. Some of thesegroups use a similar ex vivo autologous approach, but make use of different vectors and different cell processing techniques. These include:GlaxoSmithKline Plc, which has entered into an agreement with the San Raffaele Telethon Institute for Gene Therapy to advance several gene therapyprograms, including one for ß-thalassemia; Memorial Sloan Kettering, which received clearance for its IND from the FDA in 2012 for a Phase I/II genetherapy study; and Sangamo BioSciences Inc. (through its partnership with Biogen Idec), which has announced plans to initiate a Phase I clinicalstudy using zinc finger nuclease-mediated gene-editing techniques in hemoglobinopathies including ß-thalassemia, Acceleron Pharma, Inc., which isinvestigating Luspatercept (ACE-536), a subcutaneously-delivered protein therapeutic that targets molecules in the TGF-β superfamily, in a Phase IIIclinical trial in subjects with ß-thalassemia. ·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. In addition,some patients with SCD receive allogeneic HSCT treatment, particularly if a sufficiently well-matched source of donor cells is identified. Weunderstand that various biopharmaceutical companies and28 academic centers around the world are seeking to develop improvements to allogeneic HSCT, including BPX-501, a modified donor T cell therapy inan ongoing Phase I/II study being supported by Bellicum Pharmaceuticals, Inc. A number of different therapeutic approaches are under investigationtargeting the various aspects of SCD pathophysiology, including: pan-selectin inhibitors, including GMI-1070 in Phase II studies supported byGlycoMimetics Inc. (in 2011, Pfizer Inc. and GlycoMimetics Inc. entered a global collaboration to advance this compound); hemoglobin modifiers toprevent the sickling of RBC, including GBT440 in a Phase I/II study supported by Global Blood Therapeutics, Inc.; and also gene editing approachesbeing supported by Intellia Therapeutics, Inc. (in collaboration with Novartis AG), Editas Medicine, Inc. and CRISPR Therapeutics, Inc. (incollaboration with Vertex Pharmaceuticals Incorporated). There are also several different groups developing gene therapy approaches for SCD. Someof these groups use a similar ex vivo autologous approach, but make use of different vectors and different cell processing techniques. These include:UCLA, which has received funding from the California Institute of Regenerative Medicine to pursue a Phase I gene therapy study for SCD; andCincinnati Children’s Hospital Medical Center, which is conducting a Phase I/II gene therapy study for SCD and Sangamo BioSciences Inc. (throughits partnership with Biogen Idec) which has announced plans to investigate the use of zinc finger nuclease-mediated gene-editing techniques inhemoglobinopathies including SCD, although to our knowledge no clinical studies have been initiated. ·CALD: The current standard of care for the treatment of CALD is allogeneic HSCT. We understand that various academic centers around the world areseeking to develop improvements to allogeneic HSCT. In addition, some physicians recommend glyceryl trierucate—better known as Lorenzo’s Oil—to patients diagnosed with ALD or AMN. However, Lorenzo’s Oil has not been clinically proven to address the cerebral symptoms of ALD, and has notbeen approved by any major regulatory agency as a prescription drug. There are efforts underway to obtain FDA approval for Lorenzo’s Oil as aprescription drug. ·T cell-based immunotherapies for oncology: A number of pharmaceutical companies and academic collaborators are researching and developing Tcell-based immunotherapies for oncology, including Novartis AG (in collaboration with the University of Pennsylvania), Adaptimmune Inc., JunoTherapeutics, Inc. (in collaboration with Celgene, Memorial Sloan Kettering and the Fred Hutchinson Cancer Research Center), Kite Pharma, Inc. (incollaboration with Amgen, Inc. and the National Institutes of Health), Pfizer Inc. (through their collaboration with Cellectis SA and Servier), amongothers. Many of the T cell-based immunotherapy programs being developed by these companies are already in Phase I/II clinical trials for multipleindications.Many of our competitors, either alone or with their strategic partners, have substantially greater financial, technical and human resources than we do andsignificantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of treatments and thecommercialization 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.These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical study sitesand patient registration for clinical studies, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stagecompanies 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. Weexpect any treatments that we develop and commercialize to compete on the basis of, among other things, efficacy, safety, convenience of administration anddelivery, price, the level of generic competition and the availability of reimbursement from government and other third-party payors.Our 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 asignificant premium over competitive generic products.Government regulationIn the United States, biological products, including gene therapy products, are subject to regulation under the Federal Food, Drug, and Cosmetic Act, orFD&C Act, and the Public Health Service Act, or PHS Act, and other federal, state, local and foreign statutes and regulations. Both the FD&C Act and the PHSAct and their corresponding regulations govern, among other things, the testing, manufacturing, safety, efficacy, labeling, packaging, storage, recordkeeping, distribution, reporting, advertising and other promotional practices involving biological products. FDA approval must be obtained before clinicaltesting of biological products, and each clinical study protocol for a gene therapy product is reviewed by the FDA and, in some instances, the NIH, throughits RAC. FDA29approval 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 beable to 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 to theNIH 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 impossibleto predict whether legislative changes will be enacted, regulations, policies or guidance changed, or interpretations by agencies or courts changed, or whatthe impact 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 for the protection of human research subjects and their health information, to establish the safetyand efficacy of the proposed biological product for its intended use; ·submission to the FDA of a Biologics License Application, or BLA, for marketing approval that includes substantive evidence of safety, purity, andpotency 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 assess compliancewith GMP, to assure that the facilities, methods and controls are adequate to preserve the biological product’s identity, strength, quality and purityand, 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 the submission ofan IND to the FDA, a protocol and related documentation is submitted to and the study is registered with the NIH Office of Biotechnology Activities, or OBA,pursuant to the NIH Guidelines for Research Involving Recombinant DNA Molecules, or NIH Guidelines. Compliance with the NIH Guidelines is mandatoryfor investigators at institutions receiving NIH funds for research involving recombinant DNA, however many companies and other institutions not otherwisesubject to the NIH Guidelines voluntarily follow them. The NIH is responsible for convening the RAC, a federal advisory committee that discusses protocolsthat raise novel or particularly important scientific, safety or ethical considerations, at one of its quarterly public meetings. The OBA will notify the FDA ofthe RAC’s decision regarding the necessity for full public review of a gene therapy protocol. RAC proceedings and reports are posted to the OBA web siteand 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 available clinicaldata or literature and a proposed clinical protocol, to the FDA as part of the IND. Some preclinical testing may continue even after the IND is submitted. TheIND automatically becomes effective 30 days after receipt by the FDA, unless the FDA places the clinical study on a clinical hold within that 30-day timeperiod. In such a case, the IND sponsor and the FDA must resolve30any outstanding concerns before the clinical study can begin. With gene therapy protocols, if the FDA allows the IND to proceed, but the RAC decides thatfull public review of the protocol is warranted, the FDA will request at the completion of its IND review that sponsors delay initiation of the protocol untilafter completion of the RAC review process. The FDA may also impose clinical holds on a biological product candidate at any time before or during clinicalstudies due to safety concerns or non-compliance. If the FDA imposes a clinical hold, studies may not recommence without FDA authorization and then onlyunder terms authorized by the FDA. Accordingly, we cannot be sure that submission of an IND will result in the FDA allowing clinical studies to begin, orthat, once begun, issues will not arise that suspend or terminate such studies.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 monitor subjectsafety, including stopping rules that assure a clinical study will be stopped if certain adverse events should occur. Each protocol and any amendments to theprotocol must be submitted to the FDA as part of the IND. Clinical studies must be conducted and monitored in accordance with the FDA’s regulationscomprising the GCP requirements, including the requirement that all research subjects provide informed consent. Further, each clinical study must bereviewed 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 in theclinical studies are minimized and are reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent thatmust be signed by each clinical study subject or his or her legal representative and must monitor the clinical study until completed. Clinical studies also mustbe reviewed by an institutional biosafety committee, or IBC, a local institutional committee that reviews and oversees basic and clinical research conductedat 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 or life-threatening diseases, especially when the product may be too inherently toxic to ethically administer to healthy volunteers, the initial human testingis 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 and providean 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 clinical studiesare used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up. TheFDA recommends that sponsors observe subjects for potential gene therapy-related delayed adverse events for a 15-year period, including a minimum of fiveyears 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.Human 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 establishthe safety, 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 has a publicly accessible database, the Genetic Modification Clinical Research Information System which includes informationon gene transfer studies and serves as an electronic tool to facilitate the reporting and analysis of adverse events on these studies.31Concurrent with clinical studies, companies usually complete additional animal studies and must also develop additional information about the physicalcharacteristics 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 todemonstrate that 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.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 efficacyto an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether theapplication should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers suchrecommendations carefully when making decisions. During the biological product approval process, the FDA also will determine whether a Risk Evaluationand Mitigation Strategy, or REMS, is necessary to assure the safe use of the biological product. If the FDA concludes a REMS is needed, the sponsor of theBLA must submit 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 withthe GTPs. 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 criteria forapproval 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.32If 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 in sixmonths, 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 review goalsare 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.Orphan 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 andfor which there is no reasonable expectation that the cost of developing and making a drug or biological product available in the United States for this typeof disease or condition will be recovered from sales of the product. Orphan product designation must be requested before submitting an NDA or BLA. Afterthe FDA grants orphan product designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphanproduct designation 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 productand the 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 aFast Track product at any time during the clinical development of the product. Unique to a Fast Track product, the FDA may consider for review sections ofthe marketing application on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of thesections of the application, the FDA agrees to accept sections of the application and determines that the schedule is acceptable, and the sponsor pays anyrequired user fees 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 demonstratesthat such product may have substantial improvement on one or more clinically significant endpoints over existing therapies. Additionally, FDA will seek toensure the sponsor of a breakthrough therapy product receives timely advice and interactive communications to help the sponsor design and conduct adevelopment program as efficiently as possible. Any product is eligible for priority review if it has the potential to provide safe and effective therapy whereno satisfactory alternative therapy exists or a significant improvement in the treatment, diagnosis or prevention of a disease compared to marketed products.The FDA will attempt to direct additional resources to the evaluation of an application for a new drug or biological product designated for priority review inan effort to facilitate the review. Additionally, a product may be eligible for accelerated approval. Drug or biological products studied for their safety andeffectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive acceleratedapproval, which means that they may be approved on the basis of adequate and well-controlled clinical studies establishing that the product has an effect ona surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on a clinical endpoint33other than survival or irreversible morbidity. As a condition of approval, the FDA may require that a sponsor of a drug or biological product receivingaccelerated approval perform adequate and well-controlled post-marketing clinical studies. In addition, the FDA currently requires as a condition foraccelerated approval pre-approval of promotional materials, which could adversely impact the timing of the commercial launch of the product. Fast Trackdesignation, Breakthrough Therapy designation, priority review and accelerated approval do not change the standards for approval but may expedite thedevelopment 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,and expect to continue to rely, on third parties for the production of clinical and commercial quantities of any products that we may commercialize.Manufacturers of our products are required to comply with applicable requirements in the GMP regulations, including quality control and quality assuranceand maintenance of records and documentation. Other post-approval requirements applicable to biological products, include reporting of GMP deviationsthat may affect the identity, potency, purity and overall safety of a distributed product, record-keeping requirements, reporting of adverse effects, reportingupdated safety and efficacy information, and complying with electronic record and signature requirements. After a BLA is approved, the product also may besubject to official lot release. As part of the manufacturing process, the manufacturer is required to perform certain tests on each lot of the product before it isreleased for distribution. If the product is subject to official release by the FDA, the manufacturer submits samples of each lot of product to the FDA togetherwith a release protocol 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. TheFDA also may perform certain confirmatory tests on lots of some products, such as viral vaccines, before releasing the lots for distribution by themanufacturer. In addition, the FDA conducts laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness ofbiological 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-sponsored scientific and educational activities, and promotional activities involving the internet. Discovery of previously unknown problems or the failureto comply with the applicable regulatory requirements may result in restrictions on the marketing of a product or withdrawal of the product from the marketas well as possible civil or criminal sanctions. Failure to comply with the applicable U.S. requirements at any time during the product development process,approval process or after approval, may subject an applicant or manufacturer to administrative or judicial civil or criminal sanctions and adverse publicity.FDA sanctions could include refusal to approve pending applications, withdrawal of an approval, clinical hold, warning or untitled letters, product recalls,product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, mandated correctiveadvertising or communications with doctors, debarment, restitution, disgorgement of profits, or civil or criminal penalties. Any agency or judicialenforcement action could have 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 before being implemented and other types of changes to the approved product, such as adding new indications and additional labeling claims,are also subject to 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 eligible forlimited 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 14years from the product’s approval date. The patent term restoration period is generally one-half the time between the effective date of an IND and thesubmission date of a BLA plus the time between the submission date of a BLA and the approval of that application. Only one patent applicable to anapproved biological product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. TheU.S. PTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we may intend toapply for restoration of patent term for one of our currently owned or licensed patents to add patent life beyond its current expiration date, depending on theexpected length of the clinical studies and other factors involved in the filing of the relevant BLA.34A biological product can obtain pediatric market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivityperiods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on thevoluntary 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. The first biologic product submittedunder the abbreviated approval pathway that is determined to be interchangeable with the reference product has exclusivity against other biologicssubmitting under the abbreviated approval pathway for the lesser of (i) one year after the first commercial marketing, (ii) 18 months after approval if there isno legal challenge, (iii) 18 months after the resolution in the applicant’s favor of a lawsuit challenging the biologics’ patents if an application has beensubmitted, 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 the Toxic Substances Control Act, affect our business. These and other laws govern our use,handling and disposal of various biological, chemical and radioactive substances used in, and wastes generated by, our operations. If our operations result incontamination of the environment or expose individuals to hazardous substances, we could be liable for damages and governmental fines. We believe that weare in material compliance with applicable environmental laws and that continued compliance therewith will not have a material adverse effect on ourbusiness. We cannot predict, however, how changes in these laws may 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 otherwiseinfluence a person 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 for each clinical trial to each country’s national health authority and an independent ethics committee, much like theFDA and the IRB, respectively. Once the CTA is approved in accordance with a country’s requirements, the corresponding clinical study may proceed.The requirements and process governing the conduct of clinical studies, product licensing, pricing and reimbursement vary from country to country. In allcases, 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 product under European Union regulatory systems, we must submit a marketing authorizationapplication. 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 otherthings, region-specific document requirements. The European Union also provides opportunities35for market exclusivity. For example, in the European Union, upon receiving marketing authorization, innovative medicinal products generally receive eightyears of data exclusivity and an additional two years of market exclusivity. If granted, data exclusivity prevents regulatory authorities in the European Unionfrom referencing the innovator’s data to assess a generic or biosimilar application. During the additional two-year period of market exclusivity, a generic orbiosimilar marketing authorization can be submitted, and the innovator’s data may be referenced, but no generic or biosimilar product can be marketed untilthe expiration of the market exclusivity. However, there is no guarantee that a product will be considered by the European Union’s regulatory authorities tobe an innovative medicinal product, and products may not qualify for data exclusivity. Products receiving orphan designation in the European Union canreceive ten years of market exclusivity, during which time no similar medicinal product for the same indication may be placed on the market. An orphanproduct can also obtain an additional two years of market exclusivity in the European Union for pediatric studies. No extension to any supplementaryprotection certificate can be granted on the basis of pediatric studies for orphan indications.The criteria for designating an “orphan medicinal product” in the European Union are similar in principle to those in the United States. Under Article 3 ofRegulation (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.Orphan medicinal products are eligible for financial incentives such as reduction of fees or fee waivers and are, upon grant of a marketing authorization,entitled to ten years of market exclusivity for the approved therapeutic indication. The application for orphan drug designation must be submitted before theapplication for marketing authorization. The applicant will receive a fee reduction for the marketing authorization application if the orphan drug designationhas been granted, but not if the designation is still pending at the time the marketing authorization is submitted. Orphan drug designation does not conveyany advantage in, or shorten 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 criteria fororphan 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 conduct ofclinical 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.The EMA has established the Adaptive Pathways program intended to expedite or facilitate either an initial approval of a drug in a well-defined patientsubgroup with a high medical need and subsequent widening of the indication to a larger patient population, or an early regulatory approval (e.g.,conditional approval), which is prospectively planned, and where uncertainty is reduced through the collection of post-approval data on a drug’s use inpatients. The approach builds in regulatory processes already in place within the existing EU legal framework.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.EmployeesAs of January 31, 2016, we had 254 full-time employees, 70 of whom have Ph.D., M.D. or Pharm.D. degrees. Of these full-time employees, 199 employeesare engaged in research and development activities and 55 employees are engaged in finance, legal, business development, human resources, informationtechnology, facilities and other general administrative functions. We have no collective bargaining agreements with our employees and we have notexperienced any work stoppages. We consider our relations with our employees to be good.Corporate 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. Our mailing address and executive offices are located at 150 Second Street, Third36Floor, Cambridge, Massachusetts and our telephone number at that address is (339) 499-9300. We maintain an Internet website at the following address: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 we makewith 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 current reportson 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 information availableon 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 these risks,together with the other information appearing elsewhere in this Annual Report on Form 10-K, including our financial statements and related notes hereto,before deciding to invest in our common stock. The occurrence of any of the following risks could have a material adverse effect on our business, financialcondition, results of operations and future growth prospects. In these circumstances, the market price of our common stock could decline, and you may loseall or part of your investment.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 States and onlyone product has been approved in the European Union, or EU.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 ourgene therapy platform will not cause significant delays or unanticipated costs, or that such development problems can be solved. We may also experiencedelays in developing a sustainable, reproducible and commercial-scale manufacturing process or transferring that process to commercial partners, which mayprevent us from completing our clinical studies or commercializing our products on a timely or profitable basis, if at all.In addition, the clinical study requirements of the U.S. Food and Drug Administration, or FDA, the European Medicines Agency, or EMA and otherregulatory agencies and the criteria these regulators use to determine the safety 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 bemore expensive and take longer than for other, better known or more extensively studied pharmaceutical or other product candidates. At the moment, onlyone gene therapy product, UniQure’s Glybera, which received marketing authorization in the EU in 2012, has been approved in the Western world, whichmakes it difficult to determine how long it will take or how much it will cost to obtain regulatory approvals for our product candidates in the United States,the EU or other jurisdictions. Approvals by the EMA and the European Commission may not be indicative of what the FDA 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 NIH, are also subject toreview by the NIH Office of Biotechnology Activities’ Recombinant DNA Advisory Committee, or RAC. Although the FDA decides whether individual genetherapy protocols may proceed, the RAC review process can impede the initiation of a clinical study, even if the FDA has reviewed the study and approvedits initiation. For example, although we have discussed with the FDA the protocol design for a Phase III clinical study in pediatric subjects for ourLentiGlobin product candidate, the RAC completed its public review in June 2015 and recommended a delay of initiation of a Phase III pediatric clinicalstudy in the United States for an additional one to two years. We cannot predict if this recommendation may delay enrollment of such a pediatric clinicalstudy. Clinical trial sites in the United States that receive NIH funding for research involving recombinant or synthetic nucleic acid molecules are required tofollow RAC recommendations, or risk losing NIH funding for such research or needing NIH pre-approval before conducting such research. In addition, theFDA can put an investigational new drug application, or IND, on clinical hold if the information in an IND is not sufficient to assess the risks in pediatricpatients. Before a clinical study can begin at any institution, that institution’s institutional review board, or IRB, and its Institutional Biosafety Committeewill have to review the proposed clinical study to assess the safety of the study. Moreover, serious adverse events or developments in clinical trials of genetherapy product candidates conducted by others may cause the FDA or other regulatory bodies to initiate a clinical hold on our clinical trials or otherwisechange the requirements for approval of any of our product candidates.37These regulatory review agencies, committees and advisory groups and the new requirements and guidelines they promulgate may lengthen theregulatory review process, require us to perform additional or larger studies, increase our development costs, lead to changes in regulatory positions andinterpretations, delay or prevent approval and commercialization of these treatment candidates or lead to significant post-approval studies, limitations orrestrictions. As we advance our product candidates, we will be required to consult with these regulatory and advisory groups and comply with applicablerequirements and guidelines. If we fail to do so, we may be required to delay or discontinue development of our product candidates. Delay or failure toobtain, or unexpected costs in obtaining, the regulatory approval necessary to bring a potential product to market could decrease our ability to generatesufficient 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 eligible patients to participate in testing our product candidates. We have experienced delays in some of ourclinical studies, and we may experience similar delays in the future. If patients are unwilling to participate in our gene therapy studies because of negativepublicity from adverse events in the biotechnology or gene therapy industries or for other reasons, including competitive clinical studies for similar patientpopulations, the timeline for recruiting patients, conducting studies and obtaining regulatory approval of potential products may be delayed. These delayscould result in increased costs, delays in advancing our product development, delays in testing the effectiveness of our technology or termination of theclinical studies altogether.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 in astudy, 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, including as a result of adverse effects observed in similar or competing therapies; ·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 hematopoietic stem cell, or HSC, product candidates are rare geneticdisorders with limited patient pools from which to draw for clinical studies. It has been estimated that about 1.5% (80 to 90 million people) of the globalpopulation are carriers of ß-thalassemia, with about 60,000 symptomatic individuals born annually, the great majority in the developing world. According toThalassemia International Federation, about 288,000 patients with transfusion-dependent β-thalassemia, or TDT, are alive and registered as receiving regulartreatment around the world, of which we estimate that about 10,000-15,000 live in the United States and Europe. The global incidence of SCD is estimated tobe 250,000-300,000 births annually with a global prevalence estimated to be about 20-25 million. The worldwide incidence rate for adrenoleukodystrophy,the superset of cerebral adrenoleukodystrophy, or CALD, is approximately one in 17,000 newborns. CALD in young boys accounts for about 30-40% ofpatients diagnosed with adrenoleukodystrophy. Further, because newborn screening for CALD is not widely adopted, and it can be difficult to diagnoseCALD in the absence of a genetic screen, we may have difficulty finding patients who are eligible to participate in our study. The eligibility criteria of ourclinical studies will further limit the pool of available study participants. Additionally, the process of finding and diagnosing patients may prove costly.Finally, our treatment process requires that the procurement of autologous cells from subjects be conducted where the cells can be shipped to a transductionfacility within the required timelines, as the HSCs and T cells, in the case of our oncology product candidate, have limited viability following harvest.38Our current product candidates are being developed to treat rare conditions and certain cancers. We plan to seek initial marketing approval in the UnitedStates and the European Union. We may not be able to initiate or continue clinical studies if we cannot enroll a sufficient number of eligible patients toparticipate in the clinical studies required by the FDA or the EMA or other regulatory agencies. Our ability to successfully initiate, enroll and complete aclinical study in any foreign 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 terminate ongoingor 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 applicable regulatoryauthorities.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 asto outcome. 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 obtaining required 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 or due to unforeseen safetyissues; ·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; ·failure to obtain sufficient cells from patients to manufacture enough drug product or achieve target cell doses; ·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.Any 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 demonstrate comparability of our modified product candidates to earlier versions. Clinicalstudy delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitorsto bring products to market before we do, which could impair our ability to successfully commercialize our product candidates and may harm our businessand results of operations.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 regulatory 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;39 ·be required to perform additional clinical studies or clinical studies of longer duration to support approval or be subject to additional post-marketingtesting requirements; ·have regulatory authorities withdraw their approval of the product or impose restrictions on its use; ·be subject to the addition of labeling statements, such as warnings or contraindications; ·be sued; or ·experience damage to our reputation.Treatment with our gene therapy product candidates involves chemotherapy and myeloablative treatments, which can cause side effects or adverse eventsthat are unrelated to our product candidates, but may still impact the success of our clinical studies. Additionally, our product candidates could potentiallycause other adverse events that have not yet been predicted. The inclusion of critically ill patients in our clinical studies may result in deaths or other adversemedical events due to other therapies or medications that such patients may be using, or the progression of their disease. As described above, any of theseevents could prevent us from achieving or maintaining 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. Initial success in ourongoing clinical studies may not be indicative of results obtained when these studies are completed. Furthermore, success in early clinical studies may notbe indicative of results obtained in later studies.Our current viral vectors and our product candidates first initiated evaluation in human clinical studies in 2013, 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 ongoing or future clinical studies will succeed. Study designs andresults from previous studies are not necessarily predictive of our future clinical study designs or results, and initial results may not be confirmed upon fullanalysis of the complete study data. There is limited data concerning long-term safety and efficacy following treatment with our gene therapy productcandidates. These data, or other positive data, may not continue or occur for these subjects or for any future subjects in our ongoing or future clinical studies,and may not be repeated or observed in ongoing or future studies involving our product candidates. For instance, while patients with TDT or severe SCD whohave been treated with our LentiGlobin product candidate may experience a reduction or temporary elimination of transfusion support, there can be noassurance that they will not require transfusion support in the future. Furthermore, our product candidates may also fail to show the desired safety and efficacyin later stages of clinical development despite having successfully advanced through initial clinical studies. There can be no assurance that any of thesestudies will ultimately be successful or support further clinical advancement or regulatory approval of our product candidates.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. Dataobtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. In addition,regulatory delays or rejections may be encountered as a result of many factors, including changes in regulatory policy during the period of productdevelopment.Patients with different genotypes may respond differently to treatment with our product candidates, which may result in the delay of our clinicaldevelopment and commercialization plans.Initial results from our ongoing clinical studies suggest that patients with TDT who do not have the β0/β0 genotype respond better to treatment with ourLentiGlobin product candidate than patients who do have the β0/β0 genotype. Consequently, we expect to seek FDA approval of our LentiGlobin productcandidate initially for the treatment of TDT in patients who do not have the β0/β0 genotype. These differences in responsiveness require us to engageregulatory authorities in additional discussions. In order to support an application for FDA approval of our LentiGlobin product candidate in patients whohave the β0/β0 genotype, we will need to conduct additional clinical studies, but we do not yet have plans regarding when these trials will commence, orwhen our LentiGlobin product candidate may be commercially available to all genotypes.The results from our Starbeam Study may not be sufficiently robust to support the submission of marketing approval for our Lenti-D product candidate.Before we submit our Lenti-D product candidate 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.The FDA has advised us that our Starbeam Study, which is a single-arm, open-label study to evaluate the safety and efficacy of our Lenti-D productcandidate to halt the progression of CALD, may not be deemed to be a pivotal study or may not provide sufficient support for a Biologics LicenseApplication, or BLA, submission. The FDA normally requires two pivotal clinical studies to approve a drug or biologic product, and thus the FDA mayrequire that we conduct larger or additional clinical studies of our Lenti-D product candidate prior to a BLA submission. The FDA typically does not considera single clinical study to be adequate to serve as a pivotal40study unless it is, among other things, well-controlled and demonstrates a clinically meaningful effect on mortality, irreversible morbidity, or prevention of adisease with potentially serious outcome, and a confirmatory study would be practically or ethically impossible. Due to the nature of CALD and the limitednumber of patients with this condition, we believe a placebo-controlled and blinded study is not practicable for ethical and other reasons. However, it is stillpossible that, even if we achieve favorable results in the Starbeam Study, the FDA may require us to enroll additional subjects or conduct additional clinicalstudies, possibly involving a larger sample size or a different clinical study design, particularly if the FDA does not find the results from the Starbeam Studyto be sufficiently persuasive to support a BLA submission. The FDA may also require that we conduct a longer follow-up period of subjects treated with ourLenti-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 anticipate that the safety andefficacy of our Lenti-D product candidate will be evaluated in light of the data collected in our retrospective ALD-101 Study and our observational ALD-103study. However, due to the retrospective nature of the ALD-101 study, and the limited number of patients with this condition, the FDA has advised us that theALD-101 Study is not sufficiently robust to serve as a conventional historical control group and as a basis of comparison against the results of the StarbeamStudy. Thus, we expect that the FDA will assess the totality of the safety and efficacy data from our CALD clinical studies in reviewing any future BLAsubmission for our Lenti-D product candidate. Based on this assessment, the FDA may require that we conduct additional preclinical or clinical studies priorto 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 our Lenti-D product candidate for thisindication. If the FDA or the EMA requires additional studies, we would incur increased costs and delays in the marketing approval process, which mayrequire us to expend more resources than we have available. In addition, it is possible that the FDA and the EMA may have divergent opinions on theelements necessary for a successful BLA and Marketing Authorization Application, or MAA, respectively, which may cause us to alter our development,regulatory and/or commercialization strategies.We cannot be certain that our planned Phase III clinical studies of our LentiGlobin product candidate, together with data from our ongoing TDT clinicalstudies (Northstar and HGB-205), will be sufficient to form the basis for a BLA submission for our LentiGlobin product candidate.In general, the FDA requires the successful completion of two pivotal trials to support approval of a BLA, but in certain circumstances, will approve aBLA based on only one pivotal trial. If successful, we believe the results from our planned Phase III clinical studies in patients with TDT who do not have theβ0/ β0 genotype, together with data from our ongoing TDT clinical studies (Northstar and HGB-205), could be sufficient to form the basis for a BLAsubmission for our LentiGlobin product candidate to treat patients with TDT who do not have the β0/ β0 genotype. However, it should be noted that ourability to submit and obtain approval of a BLA is ultimately an FDA review decision, which will be dependent upon the data available at such time, and theavailable data may not be sufficiently robust from a safety and/or efficacy perspective to support the submission or approval of a BLA. Depending on theoutcome of these planned and ongoing clinical studies, the FDA may require that we conduct additional or larger pivotal trials before we can submit orobtain approval for a BLA for our LentiGlobin product candidate for the treatment of TDT.In June 2015, the RAC recommended that we delay the initiation of a Phase III clinical study for pediatric patients with TDT for one to two years. Anydelay in the initiation or completion of such a study could similarly delay our ability to submit a BLA for our LentiGlobin product candidate or obtain fullapproval in Europe.Before beginning our planned Phase III clinical studies of our LentiGlobin product candidate, the FDA must review the final protocols for the studies,along with additional information supporting the respective proposed study designs. Concurrent with starting the studies, the FDA will review certainupdated chemistry, manufacturing and controls, or CMC, information that we are required to submit. If the FDA does not approve the protocols for theplanned studies in the forms in which we submit them, or if the FDA is not satisfied with the additional CMC information we plan to provide, the start orcontinuation of these clinical studies may be delayed or the design of the studies may change.There can be no assurance that we will ultimately receive conditional marketing approval of our LentiGlobin product candidate in the European Union,or the nature of the conditions that would be imposed on us if conditionally approved.The EMA Adaptive Pathways program in which we are participating is intended to facilitate either an initial approval in a well-defined patient subgroupwith a high medical need and subsequent widening of the indication to a larger patient population, or an early regulatory approval (e.g. conditionalapproval), which is prospectively planned, and where uncertainty is reduced through the collection of post-approval data on a drug’s use in patients. Basedon our discussions with the EMA, we believe our LentiGlobin product candidate may be eligible for conditional approval under this program for thetreatment of patients with TDT on the basis of the totality of clinical data, in particular reduction in transfusion need, from the ongoing Northstar study andsupportive HGB-205 study.41However, it should be noted that the EMA Adaptive Pathways program is a pilot program, and as such there is limited information and precedentregarding the potential outcomes for sponsors that participate in this program. Whether our LentiGlobin product candidate is eligible for conditionalapproval will ultimately be determined at the discretion of the EMA and will be dependent upon the data available at such time, and the available data maynot be sufficiently robust from a safety and/or efficacy perspective to support conditional approval. Depending on the outcome of our planned and ongoingclinical trials, the EMA may require that we conduct additional or larger clinical trials before our LentiGlobin product candidate is eligible for conditionalapproval. Even if conditional approval is obtained, the conditions to be imposed on us under this program are unknown and will be imposed at the time ofany such conditional approval.Changes in our manufacturing processes may cause delays in our clinical development and commercialization plans.The manufacturing processes for our lentiviral vectors and our product candidates are complex. As we develop a commercial-scale manufacturing processfor our LentiGlobin and Lenti-D product candidates, we are exploring improvements to the manufacturing process for both producing our lentiviral vectorsand for our product candidates on a continual basis. In some circumstances, changes in the manufacturing process may require us to perform additionalcomparability studies or to collect additional data from patients prior to undertaking additional clinical studies. The FDA may also require us to file a newIND with respect to such changes in our manufacturing process. These requirements may lead to delays in our clinical development and commercializationplans.In previous clinical studies involving viral vectors for gene therapy, some subjects experienced serious adverse events, including the development ofleukemia due to vector-related insertional oncogenesis. If our vectors demonstrate a similar effect, we may be required to halt or delay further clinicaldevelopment of our product candidates.A significant risk in any gene therapy product based on viral vectors is that the vector will insert in or near cancer-causing oncogenes leading touncontrolled clonal proliferation of mature cancer cells in the patient. For example, in 2003, 20 subjects treated for X-linked severe combinedimmunodeficiency in two gene therapy studies using a murine, or mouse-derived, gamma-retroviral vector showed correction of the disease, but the studieswere terminated after five subjects developed leukemia (four of whom were subsequently cured). The cause of these adverse events was shown to beinsertional oncogenesis, which is the process whereby the corrected gene inserts in or near a gene that is important in a critical cellular process like growth ordivision, and this insertion results in the development of a cancer (often leukemia). Using molecular diagnostic techniques, it was determined that clonesfrom these subjects showed retrovirus insertion in proximity to the promoter of the LMO2 proto-oncogene. Earlier generation retroviruses like the one used inthese two studies have been shown 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 and also therequirement of enhanced safety monitoring in gene therapy clinical trials, including periodic analyses of the therapy’s genetic insertion sites. In publishedstudies, lentiviral vectors have demonstrated an improved safety profile over gamma-retroviral vectors, with no disclosed events of gene therapy-relatedadverse events, which we believe is due to a number of factors including the tendency of these vectors to integrate within genes rather than in areas thatcontrol gene expression, as well as their lack of strong viral enhancers. However, it should be noted that in our Phase I/II study (the LG001 Study) ofautologous HSCs transduced ex vivo using an earlier generation of our LentiGlobin vector, called HPV569, we initially observed in one subject that adisproportionate number of the cells expressing our functional gene had the same insertion site. Tests showed that this partial clonal dominance contained aninsertion of the functional gene in the HMGA2 gene that persisted for a period of two to three years. Although there was some initial concern that theobserved clonal dominance might represent a pre-leukemic event, there have been no adverse clinical consequences of this event, or any signs of cancer, inover seven years since the observation was made. The presence of the HMGA2 clone has steadily declined in this subject over time to the point that it is nolonger the most common clone observed in this subject.Notwithstanding the historical data regarding the potential safety improvements of lentiviral vectors, the risk of insertional oncogenesis remains asignificant concern for gene therapy and we cannot assure that it will not occur in any of our ongoing or planned clinical studies. There is also the potentialrisk of delayed adverse events following exposure to gene therapy products due to persistent biological activity of the genetic material or other componentsof products used to carry the genetic material. The FDA has stated that lentiviral vectors possess characteristics that may pose high risks of delayed adverseevents. If any such adverse events occur, further advancement of our clinical studies could be halted or delayed, which would have a material adverse effecton our business and operations.In previous clinical studies involving T cell-based immunotherapies, some subjects experienced serious adverse events. Our T cell-based immunotherapyproduct candidates may demonstrate a similar effect or have other properties that could halt their clinical development, prevent their regulatory approval,limit their commercial potential, or result in significant negative consequences.Our bb2121 product candidate is a chimeric antigen receptor, or CAR, T cell-based immunotherapy. In previous clinical studies involving CAR T cellproduct candidates from other companies or academic researchers, some subjects experienced serious adverse events, including febrile neutropenia, chemicallaboratory abnormalities, low blood counts, neurotoxicity, and significant, acute42toxicities with symptoms thought to be associated with the release of cytokines. These symptoms included fever, low blood pressure and kidneydysfunction. Some patients also experienced toxicity of the central nervous system, such as confusion, somnolence and speech impairment. There have beenlife threatening events related to cytokine release syndrome and toxicities of the central nervous system. Some of these events required intense medicalintervention such as intubation. Several patients have died in clinical trials of these CAR T cell product candidates.Undesirable side effects caused by our bb2121 product candidate, or our other T cell-based immunotherapy product candidates, could cause us orregulatory authorities to interrupt, delay or halt clinical studies and could result in a more restrictive label or the delay or denial of regulatory approval by theFDA or other comparable foreign regulatory authorities. Results of our studies could reveal a high and unacceptable severity and prevalence of side effects orunexpected characteristics. Treatment-related side effects could also affect patient recruitment or the ability of enrolled subjects to complete the studies orresult in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff, astoxicities resulting from T cell-based immunotherapies are not normally encountered in the general patient population and by medical personnel. We expectto have to train medical personnel regarding our T cell-based immunotherapy product candidates to understand their side effects for both our planned clinicaltrials and upon any commercialization of any T cell-based immunotherapy product candidates. Inadequate training in recognizing or managing the potentialside effects of T cell-based immunotherapy product candidates could result in patient deaths. Any of these occurrences may harm our business, financialcondition and prospects significantly.Even if we complete the necessary preclinical and clinical studies, we cannot predict when or if we will obtain regulatory approval to commercialize aproduct 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 regulationfrom future legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical studies and thereview process. Regulatory agencies also may approve a treatment candidate for fewer or more limited indications than requested or may grant approvalsubject to the performance of post-marketing studies. In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable forthe successful commercialization of our treatment candidates. For example, the development of our product candidates for pediatric use is an important partof our current business 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 potentially costly post-approval studies, post-market surveillance or patient or drugrestrictions. For example, the FDA typically advises that patients treated with gene therapy undergo follow-up observations for potential adverse events for a15-year period. Additionally, the holder of an approved BLA is obligated to monitor and report adverse events and any failure of a product to meet thespecifications in the BLA. The holder of an approved BLA must also submit new or supplemental applications and obtain FDA approval for certain changesto the approved product, product labeling or manufacturing process. Advertising and promotional materials must comply with FDA rules and are subject toFDA 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 aregulatory agency discovers previously unknown problems with a product such as adverse events of unanticipated severity or frequency, or problems withthe facility where the product is manufactured, a regulatory agency may impose restrictions relative to that product or the manufacturing facility, includingrequiring recall 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;43 ·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, research and preclinical andclinical testing, and these third parties may not perform satisfactorily.We do not expect to independently conduct all aspects of our vector production, product manufacturing, research and preclinical and clinical testing. Wecurrently 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 similarinstitutions 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 andcommercialize on our own, we will remain responsible for ensuring that each of our IND-enabling studies and clinical studies are conducted in accordancewith the study plan and protocols.If 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 and BLA 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 thebankruptcy 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 commercialize futureproducts. 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 manufacturing facilities onwhich 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 supplier mayrequire licenses to manufacture such components if such processes are not owned by the supplier or in the public domain and we may be unable to transfer orsublicense 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. Some components of a finished therapeutic product approved for commercial sale or used in late-stage clinical studies must be manufactured in accordance with GMP. These regulations govern manufacturing processes and procedures (including recordkeeping) and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved forsale. Poor control of production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in theproperties or stability of our product candidates that may not be detectable in final product testing. We or our contract manufacturers must supply allnecessary44documentation in support of a BLA or MAA on a timely basis and where required, must adhere to the FDA’s or other regulator’s good laboratory practices, orGLP, and GMP regulations enforced by the FDA or other regulator through facilities inspection programs. Some of our contract manufacturers have notproduced a commercially-approved product and therefore have not obtained the requisite FDA or other regulatory approvals to do so. Our facilities andquality systems and the facilities and quality systems of some or all of our third-party contractors must pass a pre-approval inspection for compliance with theapplicable regulations as a condition of regulatory approval of our product candidates or any of our other potential products. In addition, the regulatoryauthorities may, at any time, audit or inspect a manufacturing facility involved with the preparation of our product candidates or our other potential productsor the associated quality systems for compliance with the regulations applicable to the activities being conducted. If these facilities do not pass a pre-approval plant inspection, FDA or other regulatory 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-party contractors.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 costlyand/or time-consuming for us or a third party to implement and that may include the temporary or permanent suspension of a clinical study or commercialsales or the temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract couldmaterially harm our business.If we or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA or other regulators can impose regulatory sanctionsincluding, among other things, refusal to approve a pending application for a biologic product, or revocation of a pre-existing approval. As a result, ourbusiness, financial condition and 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 or similar regulatory submission which could result in further delay. The regulatory agencies may also require additional studies if a newmanufacturer is relied upon for commercial production. Switching manufacturers may involve substantial costs and is likely to result in a delay in our desiredclinical and commercial timelines.These factors could cause the delay of clinical studies, regulatory submissions, required approvals or commercialization of our product candidates, causeus to incur higher costs and prevent us from commercializing our products successfully. Furthermore, if our suppliers fail to meet contractual requirements,and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, our clinical studies may be delayed orwe 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 unsatisfactory manner, itmay 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, regulatoryand scientific 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 additionalclinical studies before approving any marketing applications. Upon inspection, the FDA may determine that our clinical studies did not comply with GCPs.In addition, 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 clinicalstudies, which would delay the regulatory approval process.Employees of our CROs are not our employees, and we are therefore unable to directly monitor whether or not they devote sufficient time and resources toour clinical and nonclinical programs, which must be conducted in accordance with GCPs and GLPs, respectively. These CROs may also have relationshipswith other commercial entities, including our competitors, for whom they may also be conducting clinical studies or other drug development activities thatcould harm our competitive position. If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or ifthe quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or forany other reasons, our clinical studies may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfullycommercialize our product candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costscould increase, and our ability to generate revenues could be delayed.45We 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 our tradesecrets 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 ofthese agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets orother unauthorized 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 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 $166.8 million and $48.7 million for the years ended December 31, 2015 and 2014, respectively. As of December31, 2015, we had an accumulated deficit of $314.2 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, to a lesser extent, through collaboration agreements and grants fromgovernmental agencies and charitable foundations. The amount of our future net losses will depend, in part, on the rate of our future expenditures and ourability to obtain funding through equity or debt financings, strategic collaborations or additional grants. We have not completed pivotal clinical studies forany product candidate and it will be several years, if ever, before we have a product candidate ready for commercialization. Even if we obtain regulatoryapproval to market a product candidate, our future revenues will depend upon the size of any markets in which our product candidates have receivedapproval, and our ability to achieve sufficient market acceptance, reimbursement from third-party payors and adequate market share for our productcandidates in those markets.We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses willincrease substantially 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; ·initiate additional preclinical, clinical or other studies for our oncology product candidates; ·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;46 ·seek to identify and validate additional product candidates; ·acquire or in-license other product candidates and technologies; ·make milestone or other payments under any license agreements or our stock purchase agreement with the former equityholders of Pregenen; ·maintain, protect and expand our intellectual property portfolio; ·establish a sales, marketing and distribution infrastructure in the United States and Europe to commercialize any products for which we may obtainmarketing approval; ·attract and retain skilled personnel; ·build 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, pricing and reimbursement approvals necessary to commercialize our product candidates. We do notanticipate generating revenues from product sales for the foreseeable future, if ever. Our ability to generate future revenues from product sales dependsheavily 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, commercial-scale, 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) productsand 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 partner or,if launched independently, by establishing a sales force, marketing and distribution infrastructure; ·obtaining sufficient pricing and reimbursement for our product candidates from third-party and governmental payors; ·obtaining market acceptance of our product candidates and gene therapy as a viable treatment option; ·addressing any competing technological and market developments; ·identifying and validating new gene therapy product candidates; ·negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter; and ·maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how.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.47From time to time, we will need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this necessarycapital when needed may force us to delay, limit or terminate our product development efforts or other operations.We are currently advancing our LentiGlobin, Lenti-D and bb2121 product candidates through clinical development and other product candidatesthrough preclinical development. Developing gene therapy products is expensive, and we expect our research and development expenses to increasesubstantially in connection with our ongoing activities, particularly as we advance our product candidates in clinical studies.As of December 31, 2015, our cash, cash equivalents and marketable securities were $865.8 million. We expect that our existing cash, cash equivalents,and marketable securities will be sufficient to fund our current operations through 2018. However, our operating plan may change as a result of many factorscurrently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, government orother third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or a combinationof these approaches. In any event, we will require additional capital to obtain regulatory approval for, and to commercialize, our product candidates. Even ifwe believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we havespecific strategic objectives.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 acceptableto us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additionalsecurities, 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 equityor convertible securities would dilute all of our stockholders. The incurrence of indebtedness would result in increased fixed payment obligations and wemay be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sellor license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We could also berequired to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable and we may berequired to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have amaterial adverse effect on our business, operating results and prospects.If 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 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 into bindingagreements with any such manufacturers to support commercialization. Additionally, these manufacturers do not have experience producing our vectorsand product candidates at commercial levels and may not achieve the necessary regulatory approvals or produce our vectors 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 all of thedesired commercialization regions to support commercialization of our products. Although we intend to rely on third-party manufacturers forcommercialization, we have only entered into agreements with such manufacturers to support our clinical studies. We may be unable to negotiate bindingagreements with the manufacturers to support our commercialization activities at commercially reasonable terms.No manufacturer currently has the experience or ability to produce our vectors and product candidates at commercial levels. We are currently developinga commercial-scale manufacturing process for our LentiGlobin and Lenti-D product candidates, which we are transferring to one or more contractmanufacturers. We may run into technical or scientific issues related to manufacturing or development that we may be unable to resolve in a timely manner orwith available funds. Although we have been able to produce our Lenti-D vector at commercial scale, we have not completed the characterization andvalidation activities necessary for commercial and regulatory approvals. If our manufacturing partners do not obtain such regulatory approvals, ourcommercialization efforts will be harmed.Additionally, since the HSCs and T cells have a limited window of stability following procurement from the subject, we must set up transduction facilitiesin the regions where we wish to commercialize our product. Currently, we rely on third-party contract manufacturers in the United States and Europe toproduce our product candidates for our clinical studies. Since a portion of our target patient populations will be outside the United States and Europe, we willneed to set up additional transduction facilities that can replicate our transduction process. Establishment of such facilities may be financially impractical orimpeded by technical, quality, or48regulatory issues related to these new sites and we may also run into technical or scientific issues related to transfer of our transduction process or otherdevelopmental 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 product candidates, wemay 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 in the United States, Europe and other regions, either on our own or with others. We may enter intocollaborations with other entities to utilize their mature marketing and distribution capabilities, but we may be unable to enter into marketing agreements onfavorable terms, if at all. If our future collaborative partners do not commit sufficient resources to commercialize our future products, if any, and we are unableto develop the necessary marketing capabilities on our own, we will be unable to generate sufficient product revenue to sustain our business. We will becompeting with many companies that currently have extensive and well-funded marketing and sales operations. Without a significant internal team or thesupport of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are more advanced oreffective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our product candidates.We are engaged in gene therapy for severe genetic and rare diseases and in the field of T cell-based immunotherapy, both of which are competitive andrapidly changing fields. We have competitors both in the United States and internationally, including major multinational pharmaceutical companies,biotechnology companies and universities and other research institutions. Some of the pharmaceutical and biotechnology companies we expect to competewith include GlaxoSmithKline plc through their collaboration with TIGET/MolMed, Sangamo BioSciences Inc. through their collaboration with BiogenIdec, Bellicum Pharmaceuticals, Inc., Global Blood Therapeutics, Inc., Novartis AG through their collaboration with the University of Pennsylvania,GlycoMimetics Inc., Acceleron Pharma, Inc., Kite Pharma, Inc., Pfizer Inc. through their collaboration with Cellectis SA, Adaptimmune Inc. and JunoTherapeutics, Inc. through their collaboration with Celgene Corporation. In addition, many universities and private and public research institutes are activein our target disease areas.Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff, manufacturingcapabilities, experienced marketing and manufacturing organizations. Competition may increase further as a result of advances in the commercialapplicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring orlicensing on an exclusive basis, products that are more effective or less costly than any product candidate that we may develop, or achieve earlier patentprotection, regulatory approval, product commercialization and market penetration than us. Additionally, technologies developed by our competitors mayrender our potential product 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 pathway could allow competitors to reference data from biological products already approved after 12 years from the timeof approval. In Europe, the European Commission has granted marketing authorizations for several biosimilars pursuant to a set of general and product class-specific guidelines for biosimilar approvals issued over the past few years. In Europe, a competitor may reference data from biological products alreadyapproved, but will not be able 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 thefirst eight of those 10 years, the marketing authorization holder obtains an approval for one or more new therapeutic indications that bring significant clinicalbenefits compared with existing therapies. In addition, companies may be developing biosimilars in other countries that could compete with our products. Ifcompetitors are able to obtain marketing49approval for biosimilars referencing our products, our products may become subject to competition from such biosimilars, with the attendant competitivepressure and consequences. Expiration or successful challenge of our applicable patent rights could also trigger competition from other products, assumingany 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. Orphandrug exclusivity also can be lost when a second applicant demonstrates its drug is “clinically superior” to the original orphan drug.Finally, 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, forany products 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-partypayors 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 or governmental payors accepting gene therapy products in general, and our product candidates in particular, asmedically useful, cost-effective, and safe. Any product that we bring to the market may not gain market acceptance by physicians, patients, third-party payorsand others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue andmay not become profitable. The degree of market acceptance of these product candidates, if approved for commercial sale, will depend on a number offactors, 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 by whichour 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; ·the pricing of our 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 not beknown 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 international operationscould 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 worldwide basisor 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;50 ·economic weakness, including inflation, or political instability in particular foreign economies and markets; and ·foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doingbusiness in another country.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 or gene therapy. In addition, because our CAR and TCR T cell product candidates represent new approaches to the treatment ofcancer, we cannot accurately estimate the potential revenue. Sales of our product candidates will depend substantially, both domestically and abroad, on theextent to which the costs of our product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare managementorganizations, or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors. If reimbursementis not available, or is available only to limited levels, we may not be able to successfully commercialize our product candidates. Even if coverage is provided,the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a sufficient return on ourinvestment.There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products, including gene therapies. In the UnitedStates, the principal decisions about reimbursement for new medicines are typically made by the Centers for Medicare & Medicaid Services, or CMS, anagency within the U.S. Department of Health and Human Services, as CMS decides whether and to what extent a new medicine will be covered andreimbursed under Medicare. Private payors tend to follow CMS to a substantial degree. It is difficult to predict what CMS will decide with respect toreimbursement for fundamentally novel products such as ours, as there is no body of established practices and precedents for these new products.Reimbursement agencies in Europe may be more conservative than CMS. For example, a number of cancer drugs have been approved for reimbursement inthe United States and have not been approved for reimbursement in certain European countries. In addition, costs or difficulties associated with thereimbursement of Glybera could create an adverse environment 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 candidates. We expect to experience pricing pressures in connection with the sale of any of our product candidates, due to the trend towardmanaged healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcarecosts in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriersare being erected to the entry of new products.Healthcare legislative reform measures may have a material adverse effect on our business and results of operations.In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in March 2010, thePatient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or the Health Care Reform Law, was passed,which substantially changes the way health care is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceuticalindustry. The Health Care Reform Law, among other things, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid DrugRebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, established annual fees and taxes onmanufacturers of certain branded prescription drugs, and promoted a new Medicare Part D coverage gap discount program.In addition, other legislative changes have been proposed and adopted in the United States since the Health Care Reform Law was enacted. On August 2,2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on DeficitReduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach requiredgoals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments toproviders up to 2% per fiscal year. On51January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, delayed for another two months thebudget cuts mandated by these sequestration provisions of the Budget Control Act of 2011. On March 1, 2013, the President signed an executive orderimplementing sequestration, and on April 1, 2013, the 2% Medicare payment reductions went into effect. We expect that additional state and federalhealthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcareproducts and services, which could result in reduced demand for our product candidates or additional pricing pressures. For each state that does not choose toexpand its Medicaid program, there may be fewer insured patients overall, which could impact the sales, business and financial condition of manufacturers ofbranded prescription drugs or other therapies. Where patients receive insurance coverage under any of the new options made available through the AffordableCare Act, the possibility exists that manufacturers may be required to pay Medicaid rebates on that resulting drug utilization, a decision that could impactmanufacturer revenues. The U.S. federal government also has announced delays in the implementation of key provisions of the Affordable Care Act. Theimplications of these delays for our and our partners’ business and financial condition, if any, are not yet clear.The delivery of healthcare in the European Union, including the establishment and operation of health services and the pricing and reimbursement ofmedicines, is almost exclusively a matter for national, rather than EU, law and policy. National governments and health service providers have differentpriorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context. In general, however, the healthcarebudgetary constraints in most EU member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health serviceproviders. Coupled with ever-increasing EU and national regulatory burdens on those wishing to develop and market products, this could prevent or delaymarketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to commercialize any products for which weobtain marketing approval.We cannot predict what healthcare reform initiatives may be adopted in the future. Further federal, state and foreign legislative and regulatorydevelopments are likely, and we expect ongoing initiatives to increase pressure on drug pricing. Such reforms could have an adverse effect on anticipatedrevenues from product candidates that we may successfully develop and for which we may obtain regulatory approval and may affect our overall financialcondition and ability to develop product candidates.Due to the novel nature of our technology and the potential for our product candidates to offer therapeutic benefit in a single administration, we faceuncertainty related to pricing and reimbursement for these product candidates.Our target patient populations are relatively small, as a result, the pricing and reimbursement of our product candidates, if approved, must be adequate tosupport commercial infrastructure. If we are unable to obtain adequate levels of reimbursement, our ability to successfully market and sell our productcandidates will be adversely affected. The manner and level at which reimbursement is provided for services related to our product candidates (e.g., foradministration of our product to patients) is also important. Inadequate reimbursement for such services may lead to physician resistance and adversely affectour 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 our business maysuffer. Because the target patient populations of our product candidates are small, we must be able to successfully identify patients and achieve asignificant market share to maintain profitability and growth.We focus our research and product development on treatments for severe genetic and rare 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, arebased on estimates. These estimates may prove to be incorrect and new studies may change the estimated incidence or prevalence of these diseases. Thenumber of patients in the United States, Europe and elsewhere may turn out to be lower than expected, may not be otherwise amenable to treatment with ourproducts, or new patients may become increasingly difficult to identify or gain access to, all of which would adversely affect our results of operations and ourbusiness.The market opportunities for our T cell-based immunotherapy product candidates may be limited to those patients who are ineligible for or have failedprior treatments and may be small.Our first clinical study of bb2121, our lead T cell-based immunotherapy product candidate, will be conducted with patients who have been diagnosedwith relapsed/refractory multiple myeloma. The FDA often approves new therapies initially only for use in patients with relapsed or refractory advanceddisease. We expect to initially seek approval of our T cell-based immunotherapy product candidates in this setting. Subsequently, for those products thatprove to be sufficiently beneficial, if any, we would expect to seek approval in earlier lines of treatment and potentially as a first line therapy, but there is noguarantee that our product candidates, even if approved, would be approved for earlier lines of therapy, and, prior to any such approvals, we may have toconduct additional clinical trials.52Our projections of both the number of people who have the cancers we may be targeting, as well as the subset of people with these cancers in a position toreceive second or third line therapy, and who have the potential to benefit from treatment with our product candidates, are based on our beliefs and estimates.These estimates have been derived from a variety of sources, including scientific literature, surveys of clinics, patient foundations, or market research, andmay prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these cancers. The number of patients may turn out to belower than expected. Additionally, the potentially addressable patient population for our product candidates may be limited or may not be amenable totreatment with our product candidates. Even if we obtain significant market share for our product candidates, because the potential target populations aresmall, we may never achieve profitability without obtaining regulatory approval for additional indications.Risks related to our business operationsIf we undertake business combinations, collaborations or similar strategic transactions, they may disrupt our business, divert management’s attention,dilute stockholder value or be difficult to integrate.On a regular basis, we consider various business combination transactions, collaborations, license agreements and strategic transactions with third parties,including transactions which may result in us acquiring, or being acquired by, a third party. The consummation or performance of any future businesscombination, collaboration or strategic transaction may involve risks, such as: ·diversion of managerial resources from day-to-day operations; ·challenges associated with integrating acquired technologies and operations of acquired companies; ·exposure to unforeseen liabilities; ·difficulties in the assimilation of different cultures and practices, as well as in the assimilation and retention of broad and geographically dispersedpersonnel and operations; ·misjudgment with respect to value, return on investment or strategic fit; ·higher than expected transaction costs; and ·additional dilution to our existing stockholders if we issue equity securities as consideration for any acquisitions.As a result of these risks, we may not be able to achieve the expected benefits of any such transaction. If we are unsuccessful in completing or integratingany acquisition, we may be required to reevaluate that component of our strategy only after we have incurred substantial expenses and devoted significantmanagement time and resources in seeking to complete and integrate the acquisition.Future business combinations could involve the acquisition of significant intangible assets. We may need to record write-downs from future impairmentsof identified intangible assets and goodwill. These accounting charges would increase a reported loss or reduce any future reported earnings. In addition, wecould use substantial portions of our available cash to pay the purchase price for company or product candidate acquisitions. Subject to the limitations underour existing indebtedness, it is possible that we could incur additional debt or issue additional equity securities as consideration for these acquisitions, whichcould cause our stockholders to suffer significant dilution.The failure to successfully integrate Precision Genome Engineering, Inc.’s business and operations or fully realize the benefits of this acquisition mayadversely affect our future results.On June 30, 2014, we acquired all of the outstanding capital stock of Precision Genome Engineering, Inc., or Pregenen. Based in Seattle, Washington,Pregenen was focused on the development of gene editing and cell signaling technologies. The success of our acquisition of Pregenen depends, in part, onour ability to successfully integrate Pregenen’s business and operations and fully realize the anticipated benefits and synergies from combining our businesswith Pregenen’s business, in particular our ability to advance Pregenen’s gene editing and cell signaling technologies to the stage where they can beincorporated into our existing or new product candidates. However, to realize these anticipated benefits, we must successfully combine these businesses andcontinue the research and development activities previously undertaken by Pregenen as a stand-alone company. If we are unable to achieve these objectives,the anticipated benefits of our acquisition of Pregenen may not be realized fully or at all or may take longer to realize than expected. Any failure to timelyrealize these anticipated benefits could have a material adverse effect on our development programs, expenses and operating results.53Negative public opinion and increased regulatory scrutiny of gene therapy and genetic research may damage public perception of our product candidatesor 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 ourbusiness or financial condition and may delay or impair the development and commercialization of our product candidates or demand for any products wemay develop. For example, in 2003, 20 subjects treated for X-linked severe combined immunodeficiency in two gene therapy studies using a murine gamma-retroviral vector showed correction of the disease, but the studies were terminated after five subjects developed leukemia (four of whom were subsequentlycured). Although none of our current product candidates utilize these gamma-retroviruses, our product candidates use a viral delivery system. Adverse eventsin our clinical studies, even if not ultimately attributable to our product candidates (such as the many adverse events that typically arise from the transplantprocess) and the resulting publicity could result in increased governmental regulation, unfavorable public perception, potential regulatory delays in thetesting or approval of our potential product candidates, stricter labeling requirements for those product candidates that are approved and a decrease indemand for any such product candidates.Our future success depends on our ability to retain key employees, consultants and advisors and to attract, retain and motivate qualified personnel.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 ouremployment at any time, as all of our employees are “at will” employees. Recruiting and retaining other qualified employees, consultants and advisors forour business, including scientific and technical personnel, will also be critical to our success. There is currently a shortage of skilled executives in ourindustry, which is likely to continue. As a result, competition for skilled personnel is intense and the turnover rate can be high. We may not be able to attractand retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for individuals with similarskill sets. In addition, failure to succeed in preclinical or clinical studies may make it more challenging to recruit and retain qualified personnel. The inabilityto recruit or loss of the services of any executive, key employee, consultant or advisor may impede the progress of our research, development andcommercialization objectives.We will need to expand our organization and we may experience difficulties in managing this growth, which could disrupt our operations.As of January 31, 2016, we had 254 full-time employees. As our business activities expand, we expect to expand our full-time employee base and to hiremore consultants and contractors. Our management may need to divert a disproportionate amount of its attention away from our day-to-day activities anddevote a substantial amount of time to managing these growth activities. We may not be able to effectively manage the expansion of our operations, whichmay result in weaknesses in our infrastructure, operational mistakes, loss of business opportunities, loss of employees and reduced productivity amongremaining employees. Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as thedevelopment of additional product candidates. If our management is unable to effectively manage our growth, our expenses may increase more thanexpected, our ability to generate and/or grow revenues could be reduced, and we may not be able to implement our business strategy.Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities, including non-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 have adopted a code ofconduct applicable to all of our employees, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detectand prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations orother actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are notsuccessful 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.54We face potential product liability, and, if successful claims are brought against us, we may incur substantial liability and costs. If the use of our productcandidates harms patients, or is perceived to harm patients even when such harm is unrelated to our product candidates, our regulatory approvals could berevoked 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 subjects participating in clinical trials, consumers, healthcare providers,pharmaceutical companies or others selling or otherwise coming into contact with our products. There is a risk that our product candidates may induceadverse events. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs. In addition, regardless ofmerit or eventual outcome, product liability claims may 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 and we believe our product liability insurance coverage is sufficient 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 to protect us against losses due to liability. If andwhen we obtain marketing approval for product candidates, we intend to expand our insurance coverage to include the sale of commercial products; however,we may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts. On occasion, large judgments have beenawarded in class action lawsuits based on drugs or medical treatments that had unanticipated adverse effects. A successful product liability claim or series ofclaims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could adversely affect our results ofoperations 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 regulatoryapproval process in other countries, or impact and limit the type of regulatory approvals our product candidates receive or maintain. As a result of thesefactors, a product liability claim, even if successfully defended, could have a material adverse effect on our business, financial condition or results ofoperations.If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that couldhave 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.55We 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 and geneediting platforms. Although our LentiGlobin, Lenti-D and bb2121 product candidates are currently in clinical development, our research programs,including our oncology research programs, may fail to identify other potential product candidates for clinical development for a number of reasons. Ourresearch methodology may be unsuccessful in identifying potential product candidates or our potential product candidates may be shown to have harmfulside effects or may have other 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 adverse effecton 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 programs orproduct 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 orprofitable market opportunities. Our spending on current and future research and development programs for product candidates may not yield anycommercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we mayrelinquish valuable rights to that product candidate through strategic collaboration, licensing or other royalty arrangements in cases in which it would havebeen more advantageous for us to retain sole development and commercialization rights to such product candidate, or we may allocate internal resources to aproduct candidate in a therapeutic area in which it would have been more advantageous to enter into a partnering arrangement.We incur significant costs as a result of operating as a public company, and our management devotes substantial time to new compliance initiatives.As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses. In addition, the Sarbanes-Oxley Act,as well as rules subsequently implemented by the SEC, and The NASDAQ Global Select Market have imposed various requirements on public companies. InJuly 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was enacted, resulting in significant corporategovernance and executive compensation-related regulations. Stockholder activism, the current political environment and the current high level ofgovernment intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliancecosts and impact the manner in which we operate our business in ways we cannot currently anticipate. Our management and other personnel will need todevote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliancecosts and will make some activities more time-consuming and costly. For example, we expect these rules and regulations to make it more difficult and moreexpensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain our current levels of suchcoverage.Risks 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 coverour product 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 forour product 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 usto develop product candidates, and threaten our ability to commercialize, future products. Several patent applications covering our product candidates havebeen filed recently. We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patent or whether any issued patents willbe found invalid and unenforceable56or will be threatened by third parties. Any successful opposition to these patents or any other patents owned by or licensed to us could deprive us of rightsnecessary for the successful commercialization of any product candidates that we may develop. Further, if we encounter delays in regulatory approvals, theperiod of time during which we could market a product candidate under patent protection could be reduced. Since patent applications in the United Statesand most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we were the first to fileany patent application related to a product candidate. Furthermore, if third parties have filed such patent applications, an interference proceeding in theUnited States can be initiated by a third party to determine who was the first to invent any of the subject matter covered by the patent claims of ourapplications. In addition, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after it is filed. Variousextensions may be available however the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates areobtained, 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 discoveryand development processes that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can bedifficult to protect. 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 maintainingphysical security of our premises and physical and electronic security of our information technology systems. While we have confidence in these individuals,organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach. In addition, our tradesecrets may otherwise 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 or technology to enter into confidentiality agreements, we cannot provide any assurancesthat all such agreements have been duly executed or that our trade secrets and other confidential proprietary information will not be disclosed or thatcompetitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position and may have a material adverse effect on ourbusiness. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties formisappropriating the trade secret. In addition, others may independently discover our trade secrets and proprietary information. For example, the FDA, as partof its Transparency Initiative, is currently considering whether to make additional information publicly available on a routine basis, including informationthat we may consider to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA’s disclosure policies may changein 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. As aresult, 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 haveany such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could materiallyadversely affect 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 substantial amountof 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, ex parte reexaminations, post-grant review, and inter partes review proceedingsbefore the U.S. Patent and Trademark Office, or U.S. PTO, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pendingpatent applications, which are owned by third parties, exist in the fields in which we are pursuing development candidates. As the biotechnology andpharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of thepatent rights of third parties.Third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents or patent applicationswith claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Becausepatent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our productcandidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If anythird-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formedduring the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such productcandidate 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 ofcompetent jurisdiction to cover aspects of our formulations, processes for manufacture or57methods of use, including combination therapy, the holders of any such patents may be able to block our ability to develop and commercialize theapplicable product candidate unless we obtained a license or until such patent expires. In either case, such a license may not be available on commerciallyreasonable 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 andwould be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to paysubstantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one ormore 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 development pipelinethrough 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 intechnology resulting from the collaboration. Regardless of such right of first negotiation for intellectual property, we may be unable to negotiate a licensewithin the specified 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 toother 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 otherwise experiencedisruptions 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.58In 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 withrespect to those rights, and our competitors could market competing products using the intellectual property. In certain cases, we control the prosecution ofpatents resulting from licensed technology. In the event we breach any of our obligations related to such prosecution, we may incur significant liability toour licensing partners. Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issuesand is complicated by the rapid pace of scientific discovery in our industry. Disputes may arise regarding intellectual property subject to a licensingagreement, 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 our partners;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 file infringementclaims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors isnot 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 our patents donot 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 patents orpatent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights toit from 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 amaterial adverse effect on the price of our common stock.Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defenseof 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 number ofsignificant 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.59We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information ofthird 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 orknow-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 challenginginventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual propertyrights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business.Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and otheremployees.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 the U.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 many 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 are situations in whichnon-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevantjurisdiction. In such an event, our competitors might be able to enter the market and this circumstance would have a material adverse effect on our 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,defendant counterclaims alleging invalidity and/or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meetany of several statutory requirements, including patent eligible subject matter, lack of novelty, obviousness or non-enablement. Grounds for anunenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the U.S. PTO, ormade a misleading statement, during prosecution. Third parties may also raise similar claims before administrative bodies in the United States or abroad, evenoutside the context of litigation. Such mechanisms include re-examination, post grant review, and equivalent proceedings in foreign jurisdictions (e.g.,opposition proceedings). Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover our productcandidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, wecannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevailon a legal assertion of invalidity and/or unenforceability, 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 a material 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 biotechnologypatents is costly, time-consuming and inherently uncertain. In addition, the United States has recently enacted and is currently implementing wide-rangingpatent reform legislation. Recent U.S. Supreme Court rulings have60narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition toincreasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value ofpatents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the U.S. PTO, the laws and regulations governing patents couldchange in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in thefuture.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 beable to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using ourinventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patentprotection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, butenforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rightsmay not be effective or sufficient 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 insubstantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpretednarrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits thatwe initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectualproperty rights around the 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 you purchasethem.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 biotechnology andpharmaceutical industry factors may negatively 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, includingthe 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 respect tothe FDA’s review of that IND or BLA; ·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;61 ·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 partner orour 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.Actual or potential sales of our common stock by our employees, including our executive officers, pursuant to pre-arranged stock trading plans couldcause our stock price to fall or prevent it from increasing for numerous reasons, and actual or potential sales by such persons could be viewed negativelyby 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 and members of our board of directors, have adopted and may continue to adopt stocktrading plans pursuant to which they have arranged to sell shares of our common stock from time to time in the future. Generally, sales under such plans byour executive officers and directors require public filings. Actual or potential sales of our common stock by such persons could cause the price of ourcommon stock to fall or prevent it from increasing for numerous reasons.Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result inadditional 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 year. If our board of directors or compensation committee elects to increase the number of shares available forfuture grant by the maximum amount each year, our stockholders may experience additional dilution, which could cause our stock price to fall. We also havean Employee Stock Purchase Plan and any shares of common stock purchased pursuant to that plan will also cause dilution.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 risk isespecially relevant for us because biotechnology and pharmaceutical companies have experienced significant stock price volatility in recent years. If we facesuch litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.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,or NOLs, and other pre-change tax attributes (such as research tax credits) to62offset its post-change income may be limited. We have completed several financings since our inception which we believe have resulted in a change incontrol as defined by IRC Section 382. We may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As aresult, if we 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 the development,operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholderswill 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 more difficult for athird party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders or remove our current management.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; ·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 of incorporationand 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 delaying ordeterring 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. Item 1B. Unresolved Staff CommentsNot applicable. Item 2. PropertiesOur corporate headquarters are located in Cambridge, Massachusetts. Our current leased facility encompasses approximately 53,500 square feet of officeand laboratory space, located at 150 Second Street, Cambridge, Massachusetts. The nine-year lease63commenced in December 2013 and we have the option to extend this lease by an additional five years. We also lease 23,195 square feet of office spacelocated at 215 First Street, Cambridge, Massachusetts, which lease expires between March 12, 2017 and July 12, 2020 at our option. In 2015 we also enteredinto a lease agreement for approximately 253,108 square feet of office and laboratory space located in a building under construction at 60 Binney Street,Cambridge, Massachusetts starting on October 1, 2016. The lease will continue until the end of the 120th full calendar month following April 2017 or theearlier the date we occupy the building or other conditions specified in the lease occur. We have the option to extend the 60 Binney Street lease for twosuccessive five-year terms. We also lease approximately 7,800 square feet of office and laboratory space in Seattle, Washington, which lease expires inDecember 2016. We believe that our existing facilities are adequate for our current needs. Item 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, asof December 31, 2015, we were not party to any legal or arbitration proceedings that may have, or have had in the recent past, significant effects on ourfinancial position or profitability. No governmental proceedings are pending or, to our knowledge, contemplated against us. We are not a party to anymaterial proceedings in which any director, member of senior management or affiliate of ours is either a party adverse to us or our subsidiaries or has amaterial interest adverse to us or our subsidiaries. Item 4. Mine Safety DisclosuresNot applicable. 64PART II Item 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.” The following table shows the high and low saleprices per share of our common stock as reported on the Nasdaq Global Select Market for the periods indicated: High Low 2014 First Quarter 2014 $28.08 $19.34 Second Quarter 2014 $41.75 $17.40 Third Quarter 2014 $40.31 $30.33 Fourth Quarter 2014 $94.77 $29.73 2015 First Quarter 2015 $128.88 $83.00 Second Quarter 2015 $197.35 $116.00 Third Quarter 2015 $171.24 $82.05 Fourth Quarter 2015 $106.95 $48.85 On February 18, 2016, the last reported sale price for our common stock on the Nasdaq Global Select Market was $52.10 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, 2015, 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.65The 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. HoldersAs of February 18, 2016, there were approximately 19 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. Thisnumber 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.66Recent Sales of Unregistered SecuritiesDuring the year ended December 31, 2015, we issued an aggregate of 164,049 shares of common stock pursuant to the cashless net exercise ofoutstanding warrants exercisable for 177,276 shares of our common stock held by an existing investor. Such sale of securities were made in reliance upon theexemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, for transactions by an issuer not involving a publicoffering. The foregoing securities are deemed restricted securities for the purposes of the Securities Act of 1933, as amended.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.Purchases of Equity Securities by the IssuerWe repurchased the following shares in the periods set forth in the table below: Period Total Number of Shares (orUnits) Purchased Average Price Paid perShare (or Unit) Total Number of Shares (orUnits) Purchased as Part ofPublicly Announced Plan orProgram Maximum Number (orApproximate Dollar Value)of Shares (orUnits) that May Yet BePurchased Under the Plansor Programs July 1 to July 31, 2015 (a) 628 $158.91 — — August 1 to August 31, 2015(b) 239 $135.89 — — Total 867 — (a)Our 2013 Stock Option and Incentive Plan (“Option Plan”), permits participants to use the fair market value of our common stock they own to pay forthe exercise of stock options (“stock swap method”). In connection with the exercise of a stock option to purchase 2,500 shares of our common stock atan exercise price of $39.89 per share, an optionee tendered 628 shares of our common stock held by the optionee in consideration of the full aggregateexercise price in accordance with the terms of the option and the Option Plan. The shares used under the stock swap method are included in the totalnumber of shares purchased in the table above. (b)In connection with the exercise of a stock option to purchase 812 shares of our common stock at an exercise price of $39.89 per share, an optioneetendered 239 shares of our common stock held by the optionee in consideration of the full aggregate exercise price in accordance with the terms of theoption and the Option Plan. The shares used under the stock swap method are included in the total number of shares purchased in the table above. 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.67We derived the consolidated financial data for the years ended December 31, 2015, 2014 and 2013 and as of December 31, 2015 and 2014 from ouraudited consolidated financial statements, which are included elsewhere in this Annual Report on Form 10-K. We derived the consolidated financial data forthe years ended December 31, 2012 and 2011 and as of December 31, 2012 and 2011 from our audited consolidated financial statements that are notincluded elsewhere in this Annual Report on Form 10-K. Historical results are not necessarily indicative of the results to be expected in future periods. Years Ended December 31, 2015 2014 2013 2012 2011 (1) (in thousands, except per share amounts) Consolidated statements of operations data: Revenue: Collaboration revenue $14,079 $25,031 $19,792 $— $— Research and license fees — 390 389 340 640 Grant revenue — — — — 242 Total revenue 14,079 25,421 20,181 340 882 Expenses: Research and development 134,038 62,574 31,002 17,210 11,409 General and administrative 46,209 23,227 14,126 6,846 4,615 Change in fair value of contingent consideration 2,869 246 — — — Total operating expenses 183,116 86,047 45,128 24,056 16,024 Loss from operations (169,037) (60,626) (24,947) (23,716) (15,142)Other income (expense), net 2,314 120 (374) 46 (456)Income tax (expense) benefit (60) 11,797 — — — Net loss $(166,783) $(48,709) $(25,321) $(23,670) $(15,598)Net loss per share applicable to common stockholders - basic and diluted $(4.81) $(1.83) $(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 34,669 26,546 12,555 262 120 As of December 31, 2015 2014 2013 2012 2011 (1) (in thousands) Consolidated balance sheet data: Cash and cash equivalents $164,269 $347,845 $206,279 $67,011 $25,604 Marketable securities 701,494 144,158 — — 3,507 Working capital 483,597 437,011 177,113 63,156 27,087 Total assets 1,002,337 556,739 224,390 69,322 30,918 Construction financing lease obligation 61,901 — — — — Other long-term obligations 49,572 22,504 37,849 601 1,329 Preferred stock — — — 122,177 82,403 Common stock and additional paid-in capital 1,166,954 638,712 250,342 15,270 7,734 Total stockholders' equity (deficit) 850,496 491,257 151,667 (55,747) (55,707) (1)Starting in 2014, the selected financial data includes the impact of the acquisition of Pregenen in June 2014. See Note 11. “Business Combinations” inthe accompanying notes to consolidated financial statements for additional information. 68Item 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 this AnnualReport 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-lookingstatements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private SecuritiesLitigation Reform Act of 1995 and other federal securities laws. In this Annual Report on Form 10-K, words such as “may,” “expect,” “anticipate,”“estimate,” “intend,” and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended toidentify forward-looking statements.Our actual results and the timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations,financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statementscontained in this Annual Report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry inwhich we operate are consistent with the forward-looking statements contained in this Annual Report, they may not be predictive of results or developmentsin future periods.The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Annual Report onForm 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. Wedisclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect anychange in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood thatactual results will differ from those set forth in the forward-looking statements.OverviewWe are a clinical-stage biotechnology company committed to developing potentially transformative gene therapies for severe genetic and rare diseasesand in the field of T cell-based immunotherapy. With our lentiviral-based gene therapy and gene editing capabilities, we have built an integrated productplatform with broad potential application in these areas. We believe that gene therapy for severe genetic diseases has the potential to change the way thesepatients are treated by correcting the underlying genetic defect that is the cause of their disease, rather than offering treatments that only address theirsymptoms. We and our scientific collaborators have generated what we believe is human proof-of-concept data for our gene therapy platform in threeunderserved diseases.We are conducting three clinical studies of our LentiGlobin product candidate: a Phase I/II study in the United States, Australia, and Thailand, called theNorthstar Study, for the treatment of transfusion-dependent β-thalassemia, or TDT; a single-center Phase I/II study in France (HGB-205) for the treatment ofTDT and severe sickle cell disease, or severe SCD; and a Phase I study in the United States (HGB-206) for the treatment of severe SCD. Both TDT and severeSCD are rare, hereditary blood disorders that often lead to severe anemia and shortened lifespans. Our LentiGlobin product candidate has been grantedOrphan Drug status by the U.S. Food and Drug Administration, or FDA, and the European Medicines Agency, or EMA, for both β-thalassemia and SCD. OurLentiGlobin product candidate was granted Fast-Track designation by the FDA for the treatment of β-thalassemia major in January 2013 and for the treatmentof certain patients with severe SCD in May 2014. In January 2015, the FDA granted Breakthrough Therapy designation to our LentiGlobin product candidatefor the treatment of transfusion-dependent patients with β-thalassemia major. We have discussed the designs of two global Phase III clinical trials of ourLentiGlobin product candidate for patients with TDT with the FDA and EMA. We expect that our HGB-207 study will enroll patients with TDT who do nothave the β0/β0 genotype for adult and adolescent patients, and once initiated, is currently expected to enroll approximately 15 patients to be evaluated for 24months following treatment. We anticipate that the primary endpoint of this study will be 12 months of transfusion independence following treatment. Inaddition, we are considering initiating an additional Phase III clinical study in pediatric patients who have a diagnosis of TDT.We are also conducting a Phase II/III clinical study, called the Starbeam Study, of our Lenti-D product candidate, to evaluate its safety and efficacy insubjects with cerebral adrenoleukodystrophy, or CALD, a rare, hereditary neurological disorder that is often fatal. In October 2013, we announced that thefirst subject had been treated in this study and in May 2015 we announced the achievement of enrollment of 18 subjects in this study. We are alsoconducting an observational study of subjects with CALD treated by allogeneic hematopoietic stem-cell transplant referred to as the ALD-103 study. OurLenti-D product candidate has been granted Orphan Drug status by the FDA and the EMA for the treatment of adrenoleukodystrophy. In March 2013, we entered into a global strategic collaboration with Celgene Corporation, or Celgene, to discover, develop and commercialize chimericantigen receptor-modified T cells, or CAR T cells, as potentially disease-altering therapies in oncology. This collaboration had an initial term of three years,and Celgene made a $75.0 million up-front, non-refundable cash payment to us as69consideration for entering into the collaboration. In June 2015, we amended and restated the collaboration agreement, or the Amended CollaborationAgreement, to focus exclusively on anti-BCMA product candidates for a new three-year term. B-cell maturation antigen, or BCMA, is a cell surface proteinthat is expressed on normal plasma cells and on most multiple myeloma cells, but is absent from other normal tissues. As consideration for the AmendedCollaboration Agreement, we received an upfront, non-refundable cash payment of $25.0 million to fund research and development under thecollaboration. During the year ended December 31, 2015, we recognized $14.1 million of revenue associated with our collaboration with Celgene related tothe research and development services performed. As of December 31, 2015, we have classified $41.8 million of deferred revenue related to our collaborationwith Celgene as current or long-term in the accompanying balance sheets based on the contractual term of the arrangement. In February 2016, we initiated aPhase I clinical study of bb2121, the first anti-BCMA product candidate from this collaboration. This study will enroll up to 40 patients who have receivedthree prior regimens for treatment of multiple myeloma. In February 2016, Celgene exercised its option to obtain an exclusive worldwide license to developand commercialize bb2121 and as a result, will pay to us an option fee in the amount of $10.0 million in the first quarter of 2016. We may elect to co-developand co-promote bb2121, and any other product candidates in the United States under this collaboration arrangement.In June 2014, we acquired Precision Genome Engineering, Inc., or Pregenen, a privately-held biotechnology company headquartered in Seattle,Washington. Through the acquisition, we obtained rights to Pregenen’s gene editing and cell signaling technology. The agreement provides for up to $135.0million in future contingent cash payments by us upon the achievement of certain preclinical, clinical and commercial milestones related to the Pregenentechnology, of which $15.0 million relates to preclinical milestones, $20.1 million relates to clinical milestones and $99.9 million relates to commercialmilestones. During 2015, a $1.0 million milestone was achieved and paid to the former equityholders of Pregenen. We estimate future contingent cashpayments have a fair value of $8.7 million as of December 31, 2015, $3.6 million of which is classified as a current liability.As of December 31, 2015, we had cash, cash equivalents and marketable securities of approximately $865.8 million. We expect that our existing cash,cash equivalents and marketable securities will be sufficient to fund our current operations through 2018.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 candidates in compliance with good manufacturing practices, or GMP, to conduct clinical studies of our productcandidates, to provide general and administrative support for these operations and to protect our intellectual property. We do not have any productsapproved for sale and have not generated any revenue from product sales. We have funded our operations primarily through the sale of common stock in ourpublic offerings, private placements of preferred stock and warrants and through collaborations.We have never been profitable and have incurred net losses in each year since inception. Our net losses were $166.8 million for the year ended December31, 2015 and our accumulated deficit was $314.2 million as of December 31, 2015. 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 withour ongoing and planned activities, as we: ·conduct clinical studies for our LentiGlobin, Lenti-D, and bb2121 product candidates; ·increase research and development-related activities for the discovery and development of oncology product candidates; ·continue our research and development efforts; ·manufacture clinical study materials and develop large-scale manufacturing capabilities; ·seek regulatory approval for our product candidates; and ·add personnel to support our product development and commercialization efforts.We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for oneor more 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 and marketing organization. If we seek toobtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses as we prepare for product sales,marketing, manufacturing, and distribution. Accordingly, we will seek to fund our operations through public or private equity or debt financings, strategiccollaborations, or other sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable termsor at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition andour ability to develop our products.70Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increasedexpenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenues from the sale of our products, we may notbecome profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue ouroperations at planned levels and be forced to reduce our operations.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, which was amended in 2015. The terms of thisamended arrangement contain multiple deliverables, which include at inception: (i) research and development services, (ii) participation on the joint steeringcommittee, or JSC, (iii) participation on the patent committee, (iv) a license to the first product candidate, (v) manufacture of vectors and associated payloadfor incorporation into the first optioned product candidate under the license, and (vi) participation on the joint governance committee, or JGC, under the co-development and co-promotion agreement for the first optioned product candidate under the license. We recognize arrangement consideration allocated toeach unit of accounting when all of the revenue recognition criteria 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 associatedwith discovery, research and development services, joint steering committee services and patent committee services is recognized ratably over the associatedperiod 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 refundprovisions in 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.Research 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 clinical sites that 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; ·costs associated with our research platform and preclinical activities; ·costs associated with our regulatory, quality assurance and quality control operations; and ·amortization of intangible assets.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 weundertake; ·future clinical study results;71 ·uncertainties in clinical study enrollment rates; ·changing standards for regulatory approval; 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 weexperience significant delays in enrollment in any of our clinical studies, we could be required to expend significant additional financial resources and timeon the completion of clinical development for our product candidates.From inception through December 31, 2015, we have incurred $292.1 million in research and development expenses. We plan to increase our researchand development expenses for the foreseeable future as we continue to advance the development of our Lenti-D, LentiGlobin, and bb2121 productcandidates, conduct research and development activities in oncology, including under our strategic collaboration with Celgene, and continue the researchand development of product candidates using our gene editing technology platform. Our research and development activities include the following: ·We are conducting a Phase II/III clinical study to examine the safety and efficacy of our Lenti-D product candidate in the treatment of CALD. InOctober 2013, we announced that the first subject had been treated in this study. ·We are conducting a Phase I/II clinical study in the United States, Australia and Thailand to study the safety and efficacy of our LentiGlobin productcandidate in the treatment of subjects with TDT. In March 2014, 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 safety and efficacy of our LentiGlobin product candidate in the treatment ofsubjects with TDT and severe SCD. In December 2013, we announced that the first subject with TDT had been treated in this study and in October2014, we announced that the first subject with severe SCD had been treated in this study. ·We are conducting a Phase I clinical study in the United States to study the safety and efficacy of our LentiGlobin product candidate in the treatmentof subjects with severe SCD. In June 2015, we announced that the first subject with severe SCD had been treated in this study. ·We are conducting a Phase I clinical study in the United States to study the safety and efficacy of our bb2121 product candidate in the treatment ofsubjects with relapsed/refractory multiple myeloma. In February 2016, we announced that the first subject with relapsed/refractory multiple myelomahad been treated in this study. ·We will continue to manufacture clinical study materials in support of our clinical studies.Our direct research and development expenses consist principally of external costs, such as fees paid to investigators, consultants, central laboratories andCROs in connection with our clinical studies, and costs related to acquiring and manufacturing clinical study materials. Effective January 1, 2014, we beganallocating salary and benefit costs directly related to specific programs. We do not allocate personnel-related discretionary bonus or stock-basedcompensation costs, costs associated with our general discovery platform improvements, depreciation or other indirect costs that are deployed across multipleprojects under development and, as such, the costs are separately classified as personnel and other expenses in the table below: Year ended December 31, 2015 2014 2013 (in thousands)LentiGlobin $38,515 $21,444 $8,490 Lenti-D 13,666 12,137 4,396 Pre-clinical programs 15,937 6,651 783 Total direct research and development expense 68,118 40,232 13,669 Employee- and contractor-related expenses 11,793 6,771 9,152 Stock-based compensation expense 24,854 5,151 3,809 Platform-related expenses 21,217 5,112 1,067 Facility expenses 7,282 5,292 2,288 Other expenses 774 16 1,017 Unallocated personnel and other expenses 65,920 22,342 17,333 Total research and development expense $134,038 $62,574 $31,002 72General and administrative expensesGeneral and administrative expenses consist primarily of salaries and related costs for personnel, including stock-based compensation and travel expensesfor our employees in executive, operational, finance, legal, business development, commercial and human resource functions. Other general andadministrative expenses include facility-related costs, professional fees for accounting, tax and legal and consulting services, directors’ fees and expensesassociated 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. Additionally, if and when we believe a regulatory approval of the first productcandidate appears likely, we anticipate an increase in payroll and related expenses as a result of our preparation for commercial operations, especially as itrelates to the sales and marketing of our product candidates.Other income (expense), netOther income and expense consists primarily of interest income earned on investments, the gain or loss associated with the change in the fair value ofpreferred stock warrants, foreign currency gain or loss and tax incentives from the Massachusetts Life Sciences Center. In 2015, we received $0.9 millionrelated to the disgorgement of short-swing profits arising from trades by a bluebird officer under Section 16(b) of the Securities Exchange Act of 1934, asamended.Until our IPO in June 2013 when all our outstanding preferred stock warrants were converted into common stock warrants, we recognized the re-measurement gain or loss associated with the change in the fair value of the preferred stock warrant liability as a component of other income (expense), net.We used the Black-Scholes option pricing model to estimate the fair value of preferred stock warrants. We based the estimates in the Black-Scholes optionpricing model, in part, on subjective assumptions, including stock price volatility, risk-free interest rate, dividend yield, and the fair value of the preferredstock underlying the warrants.Critical 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 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 financialstatements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued research and development expenses, stock-based compensation, and business combinations. We base our estimates on historical experience, known trends and events and various other factors that arebelieved to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilitiesthat are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. In making estimatesand judgments, management employs critical accounting policies.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.73Collaboration revenueAs of December 31, 2015, our collaboration revenue was generated exclusively from our collaboration arrangement with Celgene. The terms of thisarrangement contains multiple deliverables, which include at inception: (i) research and development services, (ii) participation on the JSC, (iii) participationon the patent committee, (iv) a license to the first product candidate, (v) manufacture of vectors and associated payload for incorporation into the firstoptioned product candidate under the license, and (vi) participation on the JGC under the co-development and co-promotion agreement for the first optionedproduct candidate under the license. Non-refundable payments to us under this arrangement may include: (i) up-front research fees, (ii) product candidatelicense fees, (iii) payments for the manufacture and supply of vectors and payloads, (iv) payments based on the achievement of certain milestones and(v) royalties on product sales. Additionally, we may elect to share in the costs incurred from the development, commercialization and manufacture of productcandidates 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 product candidateslicensed by our collaborators.We analyze multiple-element arrangements based on the guidance in FASB ASC Topic 605-25, Revenue Recognition-Multiple-Element Arrangements, orASC 605-25. Pursuant to the guidance in ASC 605-25, we evaluate multiple-element arrangements to determine (1) the deliverables included in thearrangement and (2) whether the individual deliverables represent separate units of accounting or whether they must be accounted for as a combined unit ofaccounting. This evaluation involves subjective determinations and requires us to make judgments about the individual deliverables and whether suchdeliverables are separable from the other aspects of the contractual relationship. Deliverables are considered separate units of accounting 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 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 hasstandalone value, we consider factors such as the research, manufacturing and commercialization capabilities of the collaboration partner and the availabilityof the associated expertise in the general marketplace. In addition, we consider whether the collaboration partner can use the other deliverable(s) for theirintended purpose without the receipt of the remaining element(s), whether the value of the deliverable is dependent on the undelivered item(s) and whetherthere are other vendors that can provide the undelivered element(s). The collaboration arrangement does not contain a general right of return relative to thedelivered 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 andpattern of recognition. We determine the selling price of a unit of accounting following the hierarchy of evidence prescribed by ASC 605-25. Accordingly,we determine the estimated selling price for units of accounting within each arrangement using vendor-specific objective evidence, or VSOE, of selling price,if available, 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.We validate the BESP for units of accounting by evaluating whether changes in the key assumptions used to determine the BESP will have a significanteffect on the 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. The license to the first product candidate is considered a deliverable at the inception of thearrangement but options to license any additional product candidates are substantive options and therefore are not considered deliverables at inception.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 arrangement consideration attributed to licenses that have standalone value from the otherdeliverables to be provided in an arrangement upon delivery. We will recognize as revenue arrangement consideration attributed to licenses that do not havestandalone value from the other deliverables to be provided in an arrangement over our estimated performance period as the arrangement would be accountedfor 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 pattern74of performance and/or objectively measurable performance measures do not exist, then we recognize revenue under the arrangement on a straight-line basisover the period we are expect to complete our performance obligations. Conversely, if the pattern of performance in which the service is provided to thecustomer can be determined and objectively measurable performance measures exist, then we recognize revenue under the arrangement using theproportional performance method. Revenue recognized is limited to the lesser of the cumulative amount of payments received or the cumulative amount ofrevenue earned, as determined 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, 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 performanceto achieve the milestone, (ii) the consideration relates solely to past performance and (iii) the consideration is reasonable relative to all of the deliverablesand payment terms within the arrangement. We evaluate factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcometo achieve 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 commercialmilestone payments will be accounted for as royalties and recorded as revenue upon achievement of the milestone, assuming all other revenue recognitioncriteria 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.Intangible assetsIntangible assets consist of acquired core technology with finite lives. We amortize intangible assets using the straight-line method over their estimatedeconomic lives. We evaluate the potential impairment of intangible assets if events or changes in circumstances indicate that the carrying amount of theassets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. The impairment test is based on a comparison of theundiscounted cash flows expected to be generated from the use of the asset group and its eventual disposition to the carrying value of the asset group. Ifimpairment is indicated, the asset is written down by the amount by which the carrying value of the asset exceeds the related fair value of the asset. We havenot recognized an impairment charge related to intangible assets.Construction financing lease obligationBeginning in 2015 and until construction completion, we record certain estimated construction costs incurred and reported to us by the landlord for our60 Binney Street location as an asset and corresponding construction financing lease obligation on the consolidated balance sheets because we are deemedto be the owner of the building during the construction period for accounting purposes. Any incremental costs incurred directly by us are also capitalized. Ineach reporting period, the landlord estimates and reports to us costs incurred to date related to our portion of the building using allocation estimates andprovides supporting invoices for our review. We periodically meet with the landlord and its construction manager to review these estimates and observeconstruction progress before recording such amounts.Contingent considerationEach reporting period, we revalue the contingent consideration obligations associated with business combinations to their fair value and record increasesin their fair value as contingent consideration expense and decreases in the fair value as contingent consideration income. Changes in contingentconsideration result from changes in the assumptions regarding probabilities of successful achievement of related milestones, the estimated timing in whichthe milestones are achieved and the discount rate used to estimate the fair value of the liability. Contingent consideration may change significantly asdevelopment of our programs progress and additional data are obtained, impacting our assumptions. The assumptions used in estimating fair value requiresignificant judgment and the use of different assumptions and judgments could result in a materially different estimate of fair value.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 been75performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced orotherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractualmilestones are met. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstancesknown to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. Examples ofestimated accrued research and development expenses include fees paid to: ·CROs in connection with clinical studies; ·investigative sites in connection with clinical studies; ·vendors in connection with preclinical development activities; and ·vendors related to development, manufacturing, and distribution of clinical trial materials.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 ina prepayment 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 tobe expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or 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 units. 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 payments toemployees, 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 re-measured 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 ofthe award, which is generally the vesting term. Compensation expense related to awards to non-employees with service-based vesting conditions isrecognized on the then-current fair value at each financial reporting date prior to the measurement date over the associated service period of the award, whichis generally the vesting term, using the accelerated attribution method. Compensation expense related to awards to employees with performance-basedvesting conditions is recognized based on the grant date fair value over the requisite service period using the accelerated attribution method to the extentachievement of the performance condition is probable. Compensation expense related to awards to non-employees with performance-based vestingconditions is recognized based on the then-current fair value at each financial reporting date prior to the measurement date over the requisite service periodusing the accelerated attribution method 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 unit 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 historical volatility of a group of similar companies that are publicly traded. For theseanalyses, we select companies with comparable characteristics to ours including enterprise value, risk profiles, position within the industry, and withhistorical share price information sufficient to meet the expected life of the stock-based awards. We compute the historical volatility data using the dailyclosing prices for the selected companies’ shares during the equivalent period of the calculated expected term of our stock-based awards. We will continue toapply this process until a sufficient amount of historical information regarding the volatility of our own76stock price becomes available. We estimate the expected life of our employee stock options using the “simplified” method, whereby, the expected life equalsthe average of the vesting term and the original contractual term of the option. The risk-free interest rates for periods within the expected life of the optionwere 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 areexpected to vest. To the extent that actual forfeitures differ from our estimates, the difference is recorded as a cumulative adjustment in the period theestimates were revised. 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, 2015 2014 2013 Expected volatility 72.6% 82.3% 82.0%Expected term (in years) 5.9 6.0 6.1 Risk-free interest rate 1.7% 1.8% 1.1%Expected dividend yield 0.0% 0.0% 0.0%Weighted average exercise price per share $113.37 $26.92 $8.59 Stock-based compensation totaled approximately $41.1 million for the year ended December 31, 2015 and $10.8 million for the year ended December 31,2014. As of December 31, 2015, we had $80.7 million of total unrecognized compensation expense related to unvested stock options, net of related forfeitureestimates, which is expected to be recognized over a weighted-average remaining vesting period of approximately 2.9 years and $6.2 million of totalunrecognized compensation expenses related to unvested restricted stock units, net of related forfeiture estimates, which is expected to be recognized over aweighted-average remaining vesting period of 2.2 years. We expect the impact of our stock-based compensation expense for stock options and restrictedstock units granted to employees and non-employees to grow in future periods due to the current year and potential future increases in the value of ourcommon stock and headcount.Recent accounting pronouncementsSee Note 2 to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this Annual Report onForm 10-K for a description of recent accounting pronouncements applicable to our business.Results of OperationsComparison of the years ended December 31, 2015 and 2014: Year ended December 31, 2015 2014 Change (in thousands) Revenue: Collaboration revenue $14,079 $25,031 $(10,952)Research and license fees — 390 (390)Total revenue 14,079 25,421 (11,342)Operating expenses: Research and development 134,038 62,574 71,464 General and administrative 46,209 23,227 22,982 Change in fair value of contingent consideration 2,869 246 2,623 Total operating expenses 183,116 86,047 97,069 Loss from operations (169,037) (60,626) 108,411 Other income (expense), net 2,314 120 (2,194)Loss before income taxes (166,723) (60,506) 106,217 Income tax (expense) benefit (60) 11,797 11,857 Net loss $(166,783) $(48,709) $118,074 77Revenue. Total revenue was $14.1 million for the year ended December 31, 2015, compared to $25.4 million for the year ended December 31, 2014. Thedecrease of $11.3 million was primarily due to a change in revenue recognition resulting from the amendment to our Celgene collaboration in 2015.Research and development expenses. Research and development expenses were $134.0 million for the year ended December 31, 2015, compared to $62.6million for the year ended December 31, 2014. The increase of $71.5 million was primarily due to the increase in headcount, in-licensing costs, clinical trial-related costs, and manufacturing-related expenses necessary to support the advancement of our product candidates into clinical trials and included thefollowing increases: ·Direct research and development expenses: ·$31.3 million of employee compensation and benefits, of which $19.7 million was related to stock-based compensation expense ($10.1 million ofwhich is non-recurring and related to modifications of awards of a non-employee founder and two former employees) and $7.3 million related toincreased payroll expense related to increased headcount to support our advancing pipeline. ·$12.0 million of non-recurring in-license milestones and fees, of which $5.4 million related to an upfront payment for amending and restating anexisting patent sublicense agreement; $3.3 million (€3.0 million) related to an upfront payment for amending an existing license agreement withInstitut Pasteur; and $2.5 million related to upfront payments for new license agreements with collaborators to support our preclinical oncologyprograms. ·$8.9 million of manufacturing costs for our ongoing clinical and pre-clinical studies. ·$5.3 million of clinical trial-related costs to support the advancement of our clinical programs. ·$4.9 million of direct project laboratory supplies related to increased headcount and process development activities. ·Other expenses: ·$1.9 million in amortization of our gene editing platform intangible asset related to our acquisition of Pregenen in mid-2014. ·$1.9 million in expenses related to ongoing collaboration research agreements.General and administrative expenses. General and administrative expenses were $46.2 million for the year ended December 31, 2015, compared to $23.2million for the year ended December 31, 2014. The increase of $23.0 million was primarily due to the following increases in expenses: $15.1 million ofemployee-related costs to support our overall growth, of which $10.6 million was related to stock-based compensation expense and $2.5 million was relatedincreased payroll expense due to increased headcount; $2.3 million of consulting costs to support our overall growth; $1.2 million in rent and other facility-related expenses related to accommodate increased headcount; $1.1 million of commercial market research and $1.1 million of professional fees.Change in fair value of contingent consideration. The change in fair value of contingent consideration of $2.6 million was primarily related to thesuccessful achievement of a milestone in 2015 and an increase in the probability of successful achievement of future milestones expected to be achievedwithin the next twelve months.Other income (expense), net. Other income (expense), net, was $2.3 million for the year ended December 31, 2015, compared to $0.1 million for the yearended December 31, 2014. The increase of $2.2 million was primarily related to interest income earned on marketable securities purchased in the second halfof 2015 and income from the disgorgement of short-swing profits arising from trades by a bluebird officer under Section 16(b) of the Securities Exchange Actof 1934.Income tax (expense) benefit. The change in income tax (expense) benefit was primarily attributable to a non-recurring tax benefit recognized in 2014 asa result of the acquisition of Pregenen.78Comparison of the years ended December 31, 2014 and 2013: Year ended December 31, 2014 2013 Change (in thousands) Revenue: Collaboration revenue $25,031 $19,792 $5,239 Research and license fees 390 389 1 Total revenue 25,421 20,181 5,240 Operating expenses: Research and development 62,574 31,002 31,572 General and administrative 23,227 14,126 9,101 Change in fair value of contingent consideration 246 — 246 Total operating expenses 86,047 45,128 40,919 Loss from operations (60,626) (24,947) 35,679 Other income (expense), net 120 (374) (494)Loss before income taxes (60,506) (25,321) 35,185 Benefit from income taxes 11,797 — (11,797)Net loss $(48,709) $(25,321) $23,388 Revenue. Total revenue was $25.4 million for the year ended December 31, 2014, compared to $20.2 million for the year ended December 31, 2013. Theincrease of $5.2 million was primarily due to a full year of revenue from our Celgene collaboration, which was signed on March 19, 2013 and was expected tobe recognized on a straight-line basis through March 2016.Research and development expenses. Research and development expenses were $62.6 million for the year ended December 31, 2014, compared to $31.0million for the year ended December 31, 2013. The increase of $31.6 million was primarily due to the increase in headcount, clinical trial-related costs andmanufacturing-related expenses necessary to support the advancement of our product candidates into clinical trials, as well as expenses for the Celgenecollaboration, and included the following increases in expenses: ·Direct research and development expenses: ·$8.4 million of employee compensation and benefits, of which $1.3 million was related to stock-based compensation expense. ·$6.8 million of manufacturing costs for our ongoing clinical studies. ·$6.3 million of clinical trial-related costs. ·$2.9 million of direct project laboratory supplies related to increased headcount and process development activities. ·$1.0 million of license fees. ·Other expenses: ·$2.5 million in rent and other facility-related expenses related to our new corporate headquarters. ·$1.9 million in amortization of our gene editing platform intangible asset related to our acquisition of Pregenen. ·$0.8 million in expenses related to ongoing collaboration agreements. ·$0.8 million in costs associated with preclinical research activities.General and administrative expenses. General and administrative expenses were $23.2 million for the year ended December 31, 2014, compared to $14.1million for the year ended December 31, 2013. The increase of $9.1 million was primarily due to the following increases in expenses: $5.9 million ofemployee-related costs to support our overall growth, of which $2.4 million was related to stock-based compensation expense and $0.8 million was related toa one-time severance charge; $1.0 million of professional fees to support the requirements of being a public company; $0.2 million in rent and other facility-related expenses related to our new corporate headquarters to accommodate increased headcount; $0.7 million in general office expenses as a result ofincreased headcount and $0.9 million in depreciation and amortization relating to our fixed assets, including our new corporate headquarters.Change in fair value of contingent consideration. The change in fair value of contingent consideration of $0.2 million was related to the acquisition ofPregenen in 2014.79Other income (expense), net. Other income (expense), net, was $0.1 million for the year ended December 31, 2014, compared to $(0.4) million for the yearended December 31, 2013. The decrease of $0.5 million was primarily due to the re-measurement of fair value of our convertible preferred stock warrants in2013, foreign currency gain and interest income.Benefit from income taxes. The increase in income tax benefit was attributable to a non-recurring tax benefit recognized in 2014 as a result of theacquisition of Pregenen.Liquidity and Capital ResourcesAs of December 31, 2015, we had cash, cash equivalents and marketable securities of approximately $865.8 million. We expect cash, cash equivalentsand marketable securities to fund operations through 2018. Cash in excess of immediate requirements is invested in accordance with our investment policy,primarily with a view to liquidity and capital preservation. As of December 31, 2015, our funds are held in U.S. Treasury securities, U.S. government agencysecurities, federally insured deposits, certificates of deposit and money market funds.We have incurred losses and cumulative negative cash flows from operations since our inception in April 1992, and as of December 31, 2015, we had anaccumulated deficit of $314.2 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 public or private equity or debt financings, strategic collaborations, or other sources.We have funded our operations principally from the sale of common stock, preferred stock and through the Celgene collaboration. On June 24, 2013, wecompleted our initial public offering, or IPO, whereby we sold 6,832,352 shares of common stock at a price of $17.00 per share for aggregate net proceedsreceived by us of $104.9 million. On July 14, 2014, we sold 3,450,000 shares of common stock (inclusive of 450,000 shares of common stock sold by uspursuant to the full exercise of an overallotment option granted to the underwriters in connection with the offering) through an underwritten public offeringat a price of $34.00 per share for aggregate net proceeds to us of $109.8 million. On December 19, 2014, we sold 3,047,500 shares of common stock(inclusive of 397,500 shares of common stock sold by us pursuant to the full exercise of an overallotment option granted to the underwriters in connectionwith the offering) through an underwritten public offering at a price of $85.00 per share for aggregate net proceeds to us of $243.3 million. On June 29, 2015,we sold 2,941,176 shares of common stock through an underwritten public offering at a price of $170.00 per share for aggregate net proceeds to us of $477.2million.Sources of LiquidityCash FlowsThe following table sets forth the primary sources and uses of cash for each of the periods below: Year ended December 31, 2015 2014 2013 (in thousands) Net cash provided by (used in): Operating activities$(98,429) $(59,693) $43,450 Investing activities (571,867) (157,193) (9,823)Financing activities 486,720 358,452 105,641 Net (decrease) increase in cash and cash equivalents$(183,576) $141,566 $139,268 Cash Flows from Operating Activities. The net cash used in operating activities was $98.4 million for the year ended December 31, 2015 and primarilyconsisted of a net loss of $166.8 million adjusted for non-cash items including stock-based compensation of $41.1 million, depreciation and amortization of$7.4 and a net increase in operating assets and liabilities of $16.0 million. The significant items in the increase in operating assets and liabilities include anincrease in deferred revenue of $11.2 million related to the amendment to our collaboration with Celgene and an increase in accrued expenses of $9.4 millionrelated to an increase in accrued goods and services and an increase in the contingent consideration, offset by a decrease in prepaid expenses and other assetsof $6.8 million due to purchases of marketable securities at a premium. The net cash used in operating activities was $59.7 million for the year ended December 31, 2014 and primarily consisted of a net loss of $48.7 millionadjusted for non-cash items including a noncash benefit on release of tax valuation allowance of $11.8 million, stock-based compensation of $10.8 million,depreciation and amortization of $4.2 and a net decrease in operating assets and liabilities of $14.7 million. The significant items in the decrease in operatingassets and liabilities include a decrease in deferred revenue of $24.9 million due to amortization of the up-front payment related to the Celgene collaboration,a decrease in accounts payable of $2.280million and a decrease in prepaid expenses and other assets of $0.3 million offset by an increase in accrued expenses and other liabilities of $10.0 million andan increase in deferred rent of $2.0 million.The net cash provided by operating activities was $43.5 million for the year ended December 31, 2013 and primarily consisted of a net loss of $25.3million adjusted for non-cash items including stock-based compensation of $6.5 million, depreciation and amortization of $0.9 million, re-measurement ofwarrants of $0.4 million and a net increase in operating assets and liabilities of $60.9 million. The significant items in the increase in operating assets andliabilities include an increase in deferred revenue of $54.9 million due to the up-front payment related to the Celgene collaboration, an increase in deferredrent of $7.4 million related to leasehold improvements at our new corporate headquarters, and an increase in accounts payable of $2.1 million, slightly offsetby an increase in prepaid expenses and other assets of $4.2 million.Cash Flows from Investing Activities. Net cash used in investing activities for the year ended December 31, 2015 was $571.9 million and was primarilydue to the purchase of $755.2 million of available-for-sale marketable securities offset by $199.2 million in proceeds from the maturities of available-for-salemarketable securities.Net cash used in investing activities for the year ended December 31, 2014 was $157.2 million and was primarily due to the purchase of $175.0 million ofavailable-for-sale marketable securities, purchase of fixed assets of $8.7 million and cash paid in connection with the acquisition of Pregenen of $4.7 million.The fixed asset purchases primarily consisted of leasehold improvements for the build-out of our new corporate headquarters. These decreases were partiallyoffset by $31.0 million in proceeds from the maturities of investments.Net cash used in investing activities for the year ended December 31, 2013 was $9.8 million and consisted primarily of purchases of property andequipment of $8.7 million and the new $1.3 million cash-collateralized irrevocable standby letter of credit on the corporate headquarters lease that we signedin June 2013. The fixed asset purchases primarily consisted of leasehold improvements at our new corporate headquarters and purchases of lab equipment forthe additional lab space added during the first quarter of 2013 and lab equipment to support the start-up of the Celgene program. The new $1.3 million letterof credit, naming our landlord as beneficiary, is reduced to $1.0 million, $0.8 million, and $0.6 million upon the rent commencement date and the first andsecond anniversaries of the rent commencement date, respectively.Cash Flows from Financing Activities: Net cash provided by financing activities for the year ended December 31, 2015 was $486.7 million and wasprimarily due to proceeds from our June 2015 common stock offering and $10.1 million proceeds from the issuance of common stock, primarily related to theexercise of stock options.Net cash provided by financing activities for the year ended December 31, 2014 was $358.5 million and was primarily due to proceeds from our July andDecember 2014 common stock offerings.Net cash provided by financing activities for the year ended December 31, 2013 was $105.6 million and was primarily due to the issuance of 6,832,352common stock related to our IPO that closed on June 24, 2013, for total proceeds of $104.9 million, the repayment of a non-recourse note collateralized byrestricted stock of $0.3 million, and proceeds from the exercise of common stock options of $0.4 million.Contractual Obligations and CommitmentsThe following table summarizes our contractual obligations at December 31, 2015. Total 2016 2017through2018 2019through2020 After2020 (in thousands) 150 Second Street Lease$24,987 $3,261 $6,818 $7,234 $7,674 60 Binney Street Lease 197,948 — 31,652 38,164 128,132 Other operating leases (1) 1,316 1,189 127 — — License costs (2) 4,737 927 1,865 1,945 — Sponsored research agreements 1,318 1,318 — — — Total$230,306 $6,695 $40,462 $47,343 $135,806 (1)Includes costs of our 215 First Street, Cambridge, Massachusetts office lease and the lease for our lab and office space in Seattle, Washington.(2)License costs include annual license maintenance fee payments. We have not included annual license maintenance fees or minimum royalty paymentsafter December 31, 2020, as we cannot estimate if they will occur.81We 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 a BLA, 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: ·In connection with the Pregenen acquisition, we agreed to make contingent cash payments to the former equityholders of Pregenen. In accordancewith accounting for business combinations guidance, these contingent cash payments are recorded as contingent consideration liabilities on ourconsolidated balance sheets at fair value. During the second quarter of 2015, a $1.0 million milestone was achieved, which resulted in a $1.0 millionpayment to the former equityholders of Pregenen during the third quarter of 2015. The aggregate remaining undiscounted amount of contingentconsideration potentially payable is $134.0 million. ·Under a license agreement with Inserm-Transfert pursuant to which we license certain patents and know-how for use in 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 in thelow single digits. The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the low single digits. ·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-range double digits depending on the nature of the sublicense and stage of development. Starting in 2016, we will be required to make an annualmaintenance payment, which is creditable against royalty payments on a year-by-year basis. On April 1, 2015, we amended this license agreementwith Institut Pasteur, which resulted in a payment of $3.3 million (€3.0 million) that was paid during the second quarter of 2015. ·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-licensed intellectualproperty in the low single digits that varies with net sales. The royalty is reduced for each third-party license that requires payments by us with respectto a licensed product, provided that the royalty to Stanford is not less than a specified percentage that is less than one percent. We have been payingStanford an annual maintenance fee, which will be creditable against our royalty payments. ·Under a license agreement with the Massachusetts Institute of Technology, or MIT, pursuant to which we license various patents, we will be requiredto 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 of products coveredby the in-licensed intellectual property by us or our sublicensees. The royalty is in the low single digits and is reduced for royalties payable to thirdparties, provided that the royalty to MIT is not less than a specified percentage that is less than one percent. We have the right to sublicense our rightsunder this agreement, and we will be required to pay a percentage of such license income varying from the mid-single digits to low double digits. Weare required to pay MIT an annual maintenance fee based on net sales of licensed products, which is creditable against 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 is reducedby half if during the ten year following first marketing approval the last valid claim within the licensed patent that covers the licensed product expiresor ends.We enter into contracts in the normal course of business with CROs for preclinical research studies and clinical trials, research supplies and other servicesand products for operating purposes. These contracts generally provide for termination on notice, and therefore are cancelable contracts and not included inthe table of contractual obligations and commitments.On June 3, 2013, we entered into a nine-year building lease for approximately 43,600 square feet of space located at 150 Second Street, Cambridge,Massachusetts, commencing on the earlier of the substantial completion of our build-out work or January 1, 2014. This lease was amended in June 2014 toadd an additional approximately 9,900 square feet. The lease originally had monthly lease payments of $0.2 million for the first 12 months, which increasedto $0.3 million per month beginning in December 2014 due to the lease amendment, with annual rent escalations thereafter and provides a rent abatement of$0.2 million per month for the first six months. The total operating lease obligation of the noncancellable term of this agreement is $29.5 million. In addition,the lease provides a contribution from the landlord towards the initial build-out of the space of up to $7.8 million. We have the option to extend82this lease by an additional five years. In accordance with the lease, we entered into a cash-collateralized irrevocable standby letter of credit in the amount of$1.3 million, naming the landlord as beneficiary. This letter of credit was reduced to $0.8 million during the second quarter of 2015, which was the firstanniversary of the rent commencement date, and may be further reduced to $0.6 million upon the second anniversary of the rent commencement date.On June 29, 2015, we entered into a lease agreement for additional office space located at 215 First Street, Cambridge, Massachusetts. Under the terms ofthe lease, we leased approximately 15,120 square feet starting on July 13, 2015 for $0.5 million per year in base rent, which is subject to a 3% annual rentincrease plus certain operating expenses and taxes. The lease will continue until the end of the 60th full calendar month following the date the landlorddelivers the premises to us, and includes early termination provisions that could allow us to terminate the lease at the end of the 20th full calendar monthfollowing the delivery of the premises if we meet certain conditions specified within the lease. Under the terms of the lease, we have also leased an additional8,075 square feet of office space in the same premises starting on January 1, 2016 for an additional $0.3 million per year in base rent, which is subject to a 3%annual rent increase plus certain operating expenses and taxes.On September 21, 2015, we entered into a lease agreement for additional office and laboratory space located in a building under construction at 60Binney Street, Cambridge, Massachusetts. Under the terms of the lease, starting on October 1, 2016, we will lease approximately 253,108 square feet at$72.50 per square foot per year, or $18.4 million per year in base rent, which is subject to scheduled annual rent increases of 1.75% plus certain operatingexpenses and taxes. We also executed a $9.2 million letter of credit upon signing the lease, which was required to be collateralized with a bank account at afinancial institution in accordance with the lease agreement. The lease will continue until the end of the 120th full calendar month following April 2017 orthe earlier the date we occupy the building or other conditions specified in the lease occur. Pursuant to a work letter entered into in connection with thelease, the landlord will contribute an aggregate of $42.4 million toward the cost of construction and tenant improvements for the building. The purpose of thelease is to supplement and eventually replace our current leased premises at 150 Second Street and 215 First Street in Cambridge, Massachusetts and weintend to move our corporate headquarters to 60 Binney Street in mid-2017. We have the option to extend the lease for two successive five-year terms.We also lease approximately 7,800 square feet of office and laboratory space in Seattle, Washington, which lease expires in December 2016.Off-Balance Sheet ArrangementsAs of December 31, 2015, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC. Item 7A. Quantitative and Qualitative Disclosures about Market RisksWe are exposed to market risk related to changes in interest rates. As of December 31, 2015 and 2014, we had cash, cash equivalents and marketablesecurities of $865.8 million and $492.0 million, respectively, primarily invested in U.S. Treasuries, U.S. government agency securities, federally insureddeposits, certificates of deposit and money market funds. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in thegeneral level of U.S. interest rates, particularly because our investments are in short-term securities. Our available for sale securities are subject to interest raterisk and will fall in value if market interest rates increase. If market interest rates were to increase immediately and uniformly by 100 basis points, or onepercentage point, from levels at December 31, 2015, the net fair value of our interest-sensitive marketable securities would have resulted in a hypotheticaldecline of $7.6 million. 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 in Item 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 our disclosurecontrols and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as ofthe end of the period covered by this Annual Report on Form 10-K. Based on83such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedureswere effective.Management’s Annual Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financialreporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, ourprincipal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles and includes those policies and procedures that: ·Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; ·Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management anddirectors; and ·Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have amaterial effect on the financial statements. Under the supervision and with the participation of management, including our principal executive andfinancial officers, we assessed our internal control over financial reporting as of December 31, 2015, based on criteria for effective internal control overfinancial reporting established in Internal Control — Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of theTreadway Commission (COSO). Our management’s assessment of the effectiveness of our internal control over financial reporting included testing andevaluating the design and operating effectiveness of our internal controls. In our management’s opinion, we have maintained effective internalcontrol over financial reporting as of December 31, 2015, based on criteria established in the COSO 2013 framework.The effectiveness of the our internal control over financial reporting as of December 31, 2015 has been audited by Ernst & Young LLP, an independentregistered public accounting firm, as stated in their report which is included herein.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, notabsolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls canprovide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations includethe realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls canbe circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of anysystem of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design willsucceed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, orthe degree of compliance with the policies or procedures may deteriorate. Projections of any evaluation of effectiveness to future periods are subject to therisk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.Changes 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 are reasonablylikely to materially affect, our internal control over financial reporting.Report of Independent Registered Public Accounting FirmThe Board of Directors and Stockholders ofbluebird bio, Inc.We have audited bluebird bio, Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). bluebirdbio, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internalcontrol over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Ourresponsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.84We 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 effective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures aswe considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree ofcompliance with the policies or procedures may deteriorate.In our opinion, bluebird bio, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based onthe COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balancesheets of bluebird bio, Inc. as of December 31, 2015 and 2014, and the related consolidated statements of operations and comprehensive loss, convertiblepreferred stock and stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2015 of bluebird bio, Inc. andour report dated February 25, 2016 expressed an unqualified opinion thereon./s/ Ernst & Young LLP Boston, MassachusettsFebruary 25, 2016 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 ourofficers (including Nick Leschly, Chief Executive Officer, Jeffrey Walsh, Chief Operating Officer, David Davidson, Chief Medical Officer, Jason Cole, SeniorVice President and General Counsel and Eric Sullivan, Senior Director, Finance and Principal Accounting Officer) and certain of our directors (includingDaniel Lynch and James Mandell) have entered into trading plans covering periods after the date of this annual report on Form 10-K in accordance with Rule10b5-1 and our policy governing transactions in our securities. Generally, under these trading plans, the individual relinquishes control over the transactionsonce the trading plan is put into place. Accordingly, sales under these plans may occur at any time, including possibly before, simultaneously with, orimmediately after significant events involving our company. We do not undertake to report Rule 10b5-1 trading plans that may be adopted by any officers ordirectors in the future, or to report any modifications or termination of any publicly announced trading plan, except to the extent required by law. On February 24, 2016, Jeffrey T. Walsh was appointed our Chief Financial and Strategy Officer and principal financial officer, in each case, effectiveMarch 1, 2016. Mr. Walsh, 50, has served as our Chief Operating Officer since May 2011 (and will serve as such through February 29, 2016) and previouslyserved as our principal financial officer from June 2013 to November 2014. Prior to becoming our Chief Operating Officer, Mr. Walsh served as chiefbusiness officer of Taligen Therapeutics, Inc. from November 2008 to February 2011. Mr. Walsh has also held senior business development, finance andoperations roles at PathoGenesis Corp. (acquired by Chiron Corporation), Allscripts Healthcare Solutions Inc., EXACT Sciences Corporation and InotekPharmaceuticals Corp. There are no new arrangements or understandings between Mr. Walsh and us in connection with his appointment as our ChiefFinancial and Strategy Officer and principal financial officer. In connection with the appointment of Mr. Walsh and effective as of March 1, 2016, James M. DeTore will no longer serve as our Chief Financial Officerand Treasurer and principal financial officer, and Mr. DeTore’s employment with us will end on March 18,852016. In connection with the termination of Mr. DeTore’s employment, he is entitled to certain severance benefits pursuant to the terms of an employmentagreement, dated October 20, 2014, between us and Mr. DeTore. Mr. DeTore’s departure did not result from any disagreement regarding our financialreporting or accounting policies, procedures, estimates or judgments. Also on February 24, 2016, Eric Sullivan was appointed our Vice President, Finance and Treasurer, effective March 1, 2016. Mr. Sullivan, who has servedas our Senior Director of Finance since November 2013 (and will serve as such through February 29, 2016), will continue to serve as our principal accountingofficer, a position he has held since March 2014. There are no new arrangements or understandings between Mr. Sullivan and us in connection with hisappointment as our Vice President, Finance and Treasurer. 86PART III Item 10. Directors, Executive Officers, and Corporate GovernanceIncorporated by reference from the information in our Proxy Statement for our 2016 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 2016 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 2016 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 2016 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 2016 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. 87PART IV Item 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 Financial Statements orNotes 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 below arefiled or incorporated by reference as part of this Annual Report on Form 10-K. 88bluebird bio, Inc.Index to consolidated financial statements PagesReport of independent registered public accounting firm F-2Consolidated Balance Sheets F-3Consolidated Statements of Operations and Comprehensive Loss F-4Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) F-5Consolidated Statements of Cash Flows F-8Notes to consolidated financial statements F-9 F-1Report 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, 2015 and 2014, and the related consolidatedstatements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the three years inthe period ended December 31, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express anopinion on 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 standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide 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. atDecember 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31,2015, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), bluebird bio, Inc.’s internalcontrol over financial reporting as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework issued by the Committeeof Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 25, 2016 expressed an unqualified opinionthereon./s/ Ernst & Young LLPBoston, MassachusettsFebruary 25, 2016 F-2bluebird bio, Inc.Consolidated Balance Sheets(in thousands, except per share data) December 31, 2015 2014 Assets Current assets: Cash and cash equivalents$164,269 $347,845 Marketable securities 353,680 125,710 Prepaid expenses and other current assets 6,016 6,434 Total current assets 523,965 479,989 Marketable securities 347,814 18,448 Property and equipment, net 82,614 15,740 Intangible assets, net 24,456 28,219 Goodwill 13,128 13,128 Restricted cash and other non-current assets 10,360 1,215 Total assets$1,002,337 $556,739 Liabilities and stockholders' equity Current liabilities: Accounts payable$6,334 $2,954 Accrued expenses and other current liabilities 28,145 14,649 Deferred revenue, current portion 5,889 25,375 Total current liabilities 40,368 42,978 Deferred rent, net of current portion 8,294 8,674 Deferred revenue, net of current portion 35,959 5,302 Contingent consideration, net of current portion 5,082 6,321 Construction financing lease obligation 61,901 — Other non-current liabilities 237 2,207 Total liabilities 151,841 65,482 Commitments and contingencies (Note 8) Stockholders' equity: Preferred stock, $0.01 par value, 5,000 shares authorized; 0 shares issued and outstanding at December 31, 2015 and December 31, 2014 — — Common stock, $0.01 par value, 125,000 shares authorized; 36,894 and 32,340 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively 369 323 Additional paid-in capital 1,166,585 638,389 Accumulated other comprehensive loss (2,291) (71)Accumulated deficit (314,167) (147,384)Total stockholders' equity 850,496 491,257 Total liabilities and stockholders' equity$1,002,337 $556,739 See accompanying notes to consolidated financial statements. F-3bluebird bio, Inc.Consolidated Statements of Operations and Comprehensive Loss(in thousands, except per share data) Year ended December 31, 2015 2014 2013 Revenue: Collaboration revenue$14,079 $25,031 $19,792 Research and license fees — 390 389 Total revenue 14,079 25,421 20,181 Operating expenses: Research and development 134,038 62,574 31,002 General and administrative 46,209 23,227 14,126 Change in fair value of contingent consideration 2,869 246 — Total operating expenses 183,116 86,047 45,128 Loss from operations (169,037) (60,626) (24,947)Other income (expense), net: Interest income, net 1,591 152 29 Other income (expense), net 723 (32) (403)Total other income (expense), net 2,314 120 (374)Loss before income taxes (166,723) (60,506) (25,321)Income tax (expense) benefit (60) 11,797 — Net loss$(166,783) $(48,709) $(25,321)Net loss per share - basic and diluted$(4.81) $(1.83) $(2.02)Weighted-average number of common shares used in computing net loss per share - basic and diluted 34,669 26,546 12,555 Other comprehensive income (loss): Unrealized loss on available-for-sale securities, net of tax (2,220) (71) — Total other comprehensive loss (2,220) (71) — Comprehensive loss$(169,003) $(48,780) $(25,321) See accompanying notes to consolidated financial statements. F-4bluebird bio, Inc.Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)(in thousands) Series A-1 Series A-2 Series B Series C Series D convertible convertible convertible convertible convertible preferred stock preferred stock preferred stock preferred stock preferred stock 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 Vesting of restricted stock issued in exchange for nonrecourse note — — — — — — — — — — Vesting of restricted stock — — — — — — — — — — Proceeds from IPO, net of closing costs of $11,229 — — — — — — — — — — Conversion of convertible preferred stock into common stock — — (22,304) (7,137) (115,204) (40,321) (39,943) (12,382) (120,409) (60,000)Reclassification of warrants to purchase preferred stock to stockholders' equity — — — — — — — — — — Repayment of nonrecourse note — — — — — — — — — — Exercise of common stock warrants — — — — — — — — — — Exercise of stock options — — — — — — — — — — Stock-based compensation Net loss — — — — — — — — — — Balance at December 31, 2013 — $— — $— — $— — $— — $— Series A-1 Accumulated Total convertible Additional other stockholders' preferred stock Common stock paid-in comprehensive Accumulated equity Shares Amount Shares Amount capital income (loss) deficit (deficit) Balance at December 31, 2012 12,981 $2,337 309 $3 $15,267 $— $(73,354) $(55,747)Vesting of restricted stock issued in exchange for nonrecourse note — — 41 — — — — — Vesting of restricted stock — — 45 — — — — — Proceeds from IPO, net of closing costs of $11,229 — — 6,832 69 104,852 — — 104,921 Conversion of convertible preferred stock into common stock (12,981) (2,337) 16,389 164 122,014 — — 119,841 Reclassification of warrants to purchase preferred stock to stockholders' equity — — — — 655 — — 655 Repayment of nonrecourse note — — — — 344 — — 344 Exercise of common stock warrants — — 102 1 (1) — — — Exercise of stock options — — 222 2 481 — — 483 Stock-based compensation 6,491 — — 6,491 Net loss — — — — — — (25,321) (25,321)Balance at December 31, 2013 — $— 23,940 $239 $250,103 $— $(98,675) $151,667 F-5bluebird bio, Inc.Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)(in thousands) Series A-1 Series A-2 Series B Series C Series D convertible convertible convertible convertible convertible preferred stock preferred stock preferred stock preferred stock preferred stock Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Balance at December 31, 2013 — $— — $— — $— — $— — $— Vesting of restricted stock issued in exchange for nonrecourse note — — — — — — — — — — Issuance of common stock upon public offering, net of issuance costs of $23,295 — — — — — — — — — — Issuance of common stock in connection with acquisition — — — — — — — — — — Exercise of common stock warrants — — — — — — — — — — Exercise of stock options — — — — — — — — — — Issuance of common stock in exchange for consulting services to non-employees Stock-based compensation — — — — — — — — — — Unrealized loss on available-for-sale securities, net of tax — — — — — — — — — — Net loss — — — — — — — — — — Balance at December 31, 2014 — $— — $— — $— — $— — $— Series A-1 Accumulated Total convertible Additional other stockholders' preferred stock Common stock paid-in comprehensive Accumulated equity Shares Amount Shares Amount capital income (loss) deficit (deficit) Balance at December 31, 2013 — $— 23,940 $239 $250,103 $— $(98,675) $151,667 Vesting of restricted stock issued in exchange for nonrecourse note — — 69 1 (1) — — — Issuance of common stock upon public offering, net of issuance costs of $23,295 — — 6,498 65 352,977 — — 353,042 Issuance of common stock in connection with acquisition — — 411 4 19,470 — — 19,474 Exercise of common stock warrants — — 114 1 (1) — — — Exercise of stock options — — 1,306 13 5,036 — — 5,049 Issuance of common stock in exchange for consulting services to non-employees — — 2 — 42 — — 42 Stock-based compensation — — — — 10,763 — — 10,763 Unrealized loss on available-for- sale securities, net of tax — — — — — (71) — (71)Net loss — — — — — — (48,709) (48,709)Balance at December 31, 2014 — $— 32,340 $323 $638,389 $(71) $(147,384) $491,257 F-6bluebird bio, Inc.Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)(in thousands) Series A-1 Series A-2 Series B Series C Series D convertible convertible convertible convertible convertible preferred stock preferred stock preferred stock preferred stock preferred stock Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Balance at December 31, 2014 — $— — $— — $— — $— — $— Vesting of restricted stock units — — — — — — — — — — Issuance of common stock upon public offering, net of issuance costs of $22,753 — — — — — — — — — — Issuance of common stock to Pregenen equityholders — — — — — — — — — — Exercise of common stock warrants — — — — — — — — — — Exercise of stock options — — — — — — — — — — Purchase of common stock under ESPP Stock-based compensation — — — — — — — — — — Unrealized loss on available-for-sale securities, net of tax — — — — — — — — — — Net loss — — — — — — — — — — Balance at December 31, 2015 — $— — $— — $— — $— — $— Series A-1 Accumulated Total convertible Additional other stockholders' preferred stock Common stock paid-in comprehensive Accumulated equity Shares Amount Shares Amount capital income (loss) deficit (deficit) Balance at December 31, 2014 — $— 32,340 $323 $638,389 $(71) $(147,384) $491,257 Vesting of restricted stock units — — 62 1 (1) — — — Issuance of common stock upon public offering, net of issuance costs of $22,753 — — 2,941 29 477,218 — — 477,247 Issuance of common stock to Pregenen equityholders — — 94 1 (1) — — — Exercise of common stock warrants — — 164 2 (2) — — — Exercise of stock options — — 1,282 13 9,370 — — 9,383 Purchase of common stock under ESPP — — 11 — 492 — — 492 Stock-based compensation — — — — 41,120 — — 41,120 Unrealized loss on available-for- sale securities, net of tax — — — — — (2,220) — (2,220)Net loss — — — — — — (166,783) (166,783)Balance at December 31, 2015 — $— 36,894 $369 $1,166,585 $(2,291) $(314,167) $850,496 See accompanying notes to consolidated financial statements. F-7bluebird bio, Inc.Consolidated Statements of Cash Flows(in thousands) Year ended December 31, 2015 2014 2013 Operating activities Net loss$(166,783) $(48,709) $(25,321)Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Noncash benefit on release of tax valuation allowance — (11,797) — Depreciation and amortization 7,419 4,228 941 Stock-based compensation expense 41,120 10,763 6,491 Change in fair value of contingent consideration 2,344 246 — Issuance of restricted common stock in exchange for consulting services to non-employees — 168 — Re-measurement of warrants — — 440 Other non-cash items 1,513 142 9 Changes in operating assets and liabilities: Prepaid expenses and other assets (6,847) 307 (4,214)Accounts payable 2,541 (2,249) 2,067 Accrued expenses and other liabilities 9,423 9,969 761 Deferred revenue 11,171 (24,871) 54,868 Deferred rent (330) 2,110 7,408 Net cash (used in) provided by operating activities (98,429) (59,693) 43,450 Investing activities Restricted cash (8,816) 209 (1,153)Purchase of property and equipment (7,055) (8,708) (8,670)Purchases of marketable securities (755,175) (174,981) — Proceeds from maturities of marketable securities 199,179 30,960 — Acquisition of business, net of cash acquired — (4,673) — Net cash used in investing activities (571,867) (157,193) (9,823)Financing activities Cash paid for contingent purchase price consideration (453) — — Proceeds from public offering of common stock, net of issuance costs 477,064 353,226 104,921 Repayment of nonrecourse note collateralized by restricted stock — — 344 Proceeds from issuance of common stock 10,109 5,226 376 Net cash provided by financing activities 486,720 358,452 105,641 (Decrease) increase in cash and cash equivalents (183,576) 141,566 139,268 Cash and cash equivalents at beginning of period 347,845 206,279 67,011 Cash and cash equivalents at end of period$164,269 $347,845 $206,279 Non-cash investing and financing activities: Construction financing lease obligation$61,901 $— $— Purchases of property and equipment included in accounts payable and accrued expenses$2,089 $387 $1,924 Offering expenses included in accounts payable and accrued expenses$— $183 $— Reclassification of warrants to additional paid-in capital$— $— $655 Conversion of preferred stock to common stock upon closing of IPO$— $— $122,178 Stock option exercise proceeds receivable$17 $98 $107 See accompanying notes to consolidated financial statements. F-8bluebird bio, Inc.Notes to Consolidated Financial Statements 1. Description of the businessbluebird bio, Inc. (the “Company” or “bluebird”) was incorporated in Delaware on April 16, 1992, and is headquartered in Cambridge, Massachusetts. TheCompany researches, develops, manufactures and plans to commercialize gene therapies for the treatment of severe genetic and rare diseases and in the fieldof T cell-based immunotherapy. Since its inception, the Company has devoted substantially all of its resources to its research and development effortsrelating to its product candidates, including activities to manufacture product candidates, conduct clinical studies of its product candidates, performpreclinical research to identify new product candidates and provide general and administrative support for these operations.On June 30, 2014, the Company acquired all of the outstanding capital stock of Precision Genome Engineering, Inc. (“Pregenen”) and in connectiontherewith, obtained the rights to Pregenen’s gene editing and cell signaling technology. See Note 11, “Business combinations,” for additional information.In July 2014, the Company sold 3,450,000 shares of common stock (inclusive of 450,000 shares of common stock sold by the Company pursuant to thefull exercise of an overallotment option granted to the underwriters in connection with the offering) through an underwritten public offering at a price of$34.00 per share. The aggregate net proceeds received by the Company from the offering were $109.8 million, net of underwriting discounts andcommissions and offering expenses payable by the Company of approximately $7.5 million.In December 2014, the Company sold 3,047,500 shares of common stock (inclusive of 397,500 shares of common stock sold by the Company pursuant tothe full exercise of an overallotment option granted to the underwriters in connection with the offering) through an underwritten public offering at a price of$85.00 per share. The aggregate net proceeds received by the Company from the offering were $243.3 million, net of underwriting discounts andcommissions and estimated offering expenses payable by the Company of approximately $15.8 million.In June 2015, the Company sold 2,941,176 shares of common stock through an underwritten public offering at a price of $170.00 per share. The aggregatenet proceeds received by the Company from the offering were $477.2 million, net of underwriting discounts and commissions and offering expenses ofapproximately $22.8 million.As of December 31, 2015, the Company had cash, cash equivalents and marketable securities of $865.8 million. Although the Company has incurredrecurring losses, the Company expects its cash, cash equivalents and marketable securities will be sufficient to fund current operations for at least the nexttwelve months. 2. Summary of significant accounting policies and basis of presentationBasis of presentation and principles of consolidationThe accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: Precision GenomeEngineering, Inc., bluebird bio France – SARL, bluebird bio Australia Pty Ltd., bluebird bio (Bermuda) Ltd. and bluebird bio Securities Corporation. Allintercompany balances and transactions have been eliminated in consolidation. The assets acquired and liabilities assumed in connection with theCompany’s acquisition of Pregenen were recorded at their fair values as of June 30, 2014, the date of the acquisition, and the operating results of Pregenenhave been consolidated with those of the Company from the date of acquisition. These consolidated financial statements have been prepared in conformitywith accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant torefer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and AccountingStandards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).Certain aggregations of prior year amounts have been made to conform to current year presentation. In the consolidated balance sheets, prior year deferredtax assets are included within prepaid expenses and other current assets and prior year deferred tax liabilities are included within other non-current liabilities.In the statements of operations and comprehensive loss, prior year foreign currency gains (losses), re-measurement of warrants, and other income are includedwithin other income (expense), net.Foreign currency translationThe Company’s consolidated financial statements are prepared in U.S. dollars. Its foreign subsidiaries use the U.S. dollar as their functional currency andmaintains records in the local currency. Nonmonetary assets and liabilities 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 statementF-9accounts are re-measured at average exchange rates for the reporting period. The resulting gains or losses are included in other income (expense), net in theconsolidated 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 futureoutcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differingmaterially from those estimated amounts used in the preparation of the financial statements. Estimates are used in the following areas, among others:acquisition-date fair value and subsequent fair value estimates used to assess potential impairment of long-lived assets, including goodwill and intangibleassets, construction financing lease obligations, contingent consideration, stock-based compensation expense, accrued expenses, revenue and income taxes.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 final maturities of three months or less from the date of purchase to be cashequivalents. Cash and cash equivalents comprise funds in cash, money market accounts, U.S. Treasury securities, and federally insured deposits. Cashequivalents are reported at fair value.Marketable securitiesThe Company classifies marketable securities with a remaining maturity when purchased of greater than three months as available-for-sale. Marketablesecurities with a remaining maturity date greater than one year are classified as non-current. Available-for-sale securities are maintained by an investmentmanager and may consist of U.S. Treasury securities, U.S. government agency securities, and certificates of deposit. Available-for-sale securities are carried atfair value with the unrealized gains and losses included in other comprehensive income (loss) as a component of stockholders’ equity until realized. Anypremium or discount arising at purchase is amortized and/or accreted to interest income and/or expense over the life of the instrument. Realized gains andlosses are determined using the specific identification method and are included in other income (expense).If any adjustment to fair value reflects a decline in value of the investment, the Company considers all available evidence to evaluate the extent to whichthe decline is “other-than-temporary” and, if so, mark the investment to market through a charge to the Company’s statement of operations andcomprehensive loss.Concentrations of credit risk and off-balance sheet riskFinancial instruments that subject the Company to credit risk primarily consist of cash and cash equivalents and available-for-sale securities. TheCompany maintains its cash and cash equivalent balances with high-quality financial institutions and, consequently, the Company believes that such fundsare subject to minimal credit risk. The Company’s available-for-sale investments primarily consist of U.S. Treasury securities, U.S. government agencysecurities and certificates of deposit, and potentially subject the Company to concentrations of credit risk. The Company has adopted an investment policywhich limits the amounts the Company may invest in any one type of investment and requires all investments held by the Company to be at least AA+/Aa1rated, thereby reducing credit risk exposure.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 marketF-10participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs areinputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed basedon the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fairvalue of the investments and is not a measure of the investment credit quality. The three levels of the fair value 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 are observable,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.A financial 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 marketable securities (Note 3 and Note 4) and contingent consideration (Note 4 and Note 11).The carrying amounts of accounts payable and accrued expenses approximate their fair values due to their short-term maturities.Business combinationsOn June 30, 2014, the Company completed its acquisition of Pregenen for total consideration of $31.0 million, consisting of cash consideration of $5.1million, common stock consideration of $19.3 million and contingent consideration with an estimated fair value of $6.6 million on the date of purchase. Theestimated fair value of the contingent consideration is based upon significant assumptions regarding probabilities of successful achievement of relatedmilestones, the estimated timing in which the milestones are achieved and discount rates. The estimated fair value could materially differ from actual valuesor fair values determined using different assumptions. See Note 4, “Fair value measurements,” for additional information.This transaction was accounted for as a business combination under the acquisition method of accounting. Accordingly, the tangible assets andidentifiable intangible assets acquired and liabilities assumed were recorded at fair value as of the date of acquisition, with the excess purchase price recordedas goodwill. The estimated fair values of the assets acquired and liabilities assumed at the date of acquisition are summarized in Note 11, “Businesscombinations.” The estimated fair values of acquired assets and assumed liabilities were determined using the methods discussed in the following paragraphsand require significant judgment and estimates, which could materially differ from actual values and fair values determined using different methods orassumptions.GoodwillGoodwill represents the excess of the purchase price over the fair value of the net assets acquired when accounted for using the acquisition method ofaccounting for business combinations. Goodwill is not amortized but is evaluated for impairment within the Company’s single reporting unit on an annualbasis, during the fourth quarter, or more frequently if an event occurs or circumstances change that would more-likely-than-not reduce the fair value of theCompany’s reporting unit below its carrying amount. The Company has not recognized any impairment charges related to goodwill.Intangible assetsIntangible assets consist of acquired core technology with finite lives. The Company amortizes its intangible assets using the straight-line method overtheir estimated economic lives. The Company evaluates the potential impairment of intangible assets if events or changes in circumstances indicate that thecarrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. The impairment test is based on acomparison of the undiscounted cash flows expected to be generated from the use of the asset group and its eventual disposition to the carrying value of theasset group. If impairment is indicated, the asset is written down by the amount by which the carrying value of the asset exceeds the related fair value of theasset. The Company has not recognized an impairment charge related to intangible assets.Contingent considerationEach reporting period, the Company revalues the contingent consideration obligations associated with business combinations to their fair value andrecords within operating expenses increases in their fair value as contingent consideration expense and decreasesF-11in the fair value as contingent consideration income. Changes in contingent consideration result from changes in the assumptions regarding probabilities ofsuccessful achievement of related milestones, the estimated timing in which the milestones are achieved and the discount rate used to estimate the fair valueof the liability. Contingent consideration may change significantly as development of the Company’s programs in certain indications progress andadditional data are obtained, impacting the Company’s assumptions. The assumptions used in estimating fair value require significant judgment. The use ofdifferent assumptions and judgments could result in a materially different estimate of fair value. See Note 4, “Fair value measurements,” for additionalinformation.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 areas follows: Asset Estimated useful lifeComputer equipment and software 3 yearsOffice and laboratory equipment 2 -5 yearsLeasehold improvements Shorter of the useful life or remaining lease term The Company records certain estimated construction costs incurred and reported by a landlord as an asset and corresponding construction financing leaseobligation on the consolidated balance sheets. See Note 8, “Commitments and contingencies,” for additional information.Impairment 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 assets to future net undiscounted cash flows that the assets are expected to generate. Ifsuch assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the book value of the assets exceed their fairvalue, which is measured based on the projected discounted future net cash flows arising from the assets. No impairment losses have been recorded during theyears ended December 31, 2015, 2014 and 2013.Warrants to purchase convertible preferred stockIn conjunction with various financing transactions, the Company issued warrants to purchase shares of the Company’s convertible preferred stock. Uponclosing of the Company’s Initial Public Offering (“IPO”) in June 2013, all warrants exercisable for convertible preferred stock were automatically convertedinto warrants exercisable for common stock, resulting in the reclassification of the related convertible preferred stock warrant liability to additional paid-incapital. As of December 31, 2015, there are no warrants outstanding.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 revenuefrom research 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 assuredAmounts 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.F-12Collaboration revenueAs of December 31, 2015, the Company’s collaboration revenue is generated exclusively from its collaboration arrangement with Celgene Corporation(“Celgene”), which was originally entered into in March 2013 and was subsequently amended in June 2015 (the “Amended Collaboration Agreement”). Theamended terms of this arrangement contain multiple deliverables, which include at inception: (i) research and development services, (ii) participation on ajoint steering committee (“JSC”), (iii) participation on the patent committee, (iv) a license to the first product candidate, (v) manufacture of vectors andassociated payload for incorporation into the first optioned product candidate under the license, and (vi) participation on a joint governance committee(“JGC”) under the co-development and co-promotion agreement for the first optioned product candidate under the license.In connection with the Amended Collaboration Agreement, the Company received an upfront, one-time, non-refundable, non-creditable payment of $25.0million to fund research and development under the collaboration. Other non-refundable payments to the Company under this arrangement may include:(i) product candidate license fees, (ii) payments in the event the Company does not exercise its option to co-develop and co-promote in the United States,(iii) payments for the manufacture and supply of vectors and payloads, (iv) payments based on the achievement of certain clinical, regulatory, andcommercials milestones and (v) royalties on product sales.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 beaccounted for as a combined unit of accounting. This evaluation involves subjective determinations and requires management to make judgments about theindividual deliverables and whether such deliverables are separable from the other aspects of the contractual relationship. Deliverables are consideredseparate units of accounting provided that: (i) the delivered item(s) has value to the customer on a standalone basis and (ii) if the arrangement includes ageneral right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in thecontrol of the Company. In assessing whether an item has standalone value, the Company considers factors such as the research, manufacturing andcommercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. In addition, theCompany considers whether the collaboration partner can use the other deliverable(s) for their intended purpose without the receipt of the remainingelement(s), whether the value of the deliverable is dependent on the undelivered item(s) and whether there are other vendors that can provide the undeliveredelement(s). The Company’s 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 605-25 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 Company considers applicable market conditions and relevant entity-specific factors, including factors that were contemplated innegotiating the agreement with the customer and estimated costs. The Company validates the BESP for units of accounting by evaluating whether changes inthe key assumptions used to determine the BESP will have a significant effect on the allocation of arrangement consideration between multiple units ofaccounting.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 optionwill be exercised. For arrangements under which an option is considered substantive, the Company does not consider the item underlying the option to be adeliverable at the inception of the arrangement and the associated option fees are not included in allocable arrangement consideration, assuming the optionis not priced at a significant and incremental discount. Conversely, for arrangements under which an option is not considered substantive or if an option ispriced at a significant and incremental discount, the Company would consider the item underlying the option to be a deliverable at the inception of thearrangement and a corresponding amount would be included in allocable arrangement consideration. One of the options in the Amended CollaborationAgreement has been determined not to be substantive and any other options have been determined to be substantive. None of the options are priced at asignificant and incremental discount.F-13The 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 considerationattributed to licenses that do not have standalone value from the other deliverables to be provided in an arrangement over the Company’s estimatedperformance period as the arrangement would be accounted for as a single unit of accounting.The Company recognizes revenue from the Celgene arrangement associated research and development services, joint steering committee services andpatent committee services ratably over the associated period of performance, which is initially estimated to be three years. If there is no discernible pattern ofperformance and/or objectively measurable performance measures do not exist, then the Company recognizes revenue under the arrangement on a straight-line basis over the period the Company is expected to complete its performance obligations. Conversely, if the pattern of performance in which the service isprovided to the customer can be determined and objectively measurable performance measures exist, then the Company recognizes revenue under thearrangement using the proportional performance method. Revenue recognized is limited to the lesser of the cumulative amount of payments received or thecumulative amount of revenue earned, as determined using the straight-line method or proportional performance method, as applicable, as of the periodending 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 therespective milestone in making this assessment. There is considerable judgment involved in determining whether a milestone satisfies all of the criteriarequired to conclude that a milestone is substantive. The Company has concluded that all of the clinical and regulatory milestones pursuant to itscollaboration arrangement are substantive. Accordingly, in accordance with FASB ASC Topic 605-28, Revenue Recognition-Milestone Method, revenuefrom clinical and regulatory milestone payments will be recognized in its entirety upon successful accomplishment of the milestone, assuming all otherrevenue recognition criteria are met. Milestones that are not considered substantive would be recognized as revenue over the remaining period ofperformance, assuming all other revenue recognition criteria are met. All commercial milestones will be accounted for in the same manner as royalties andrecorded as revenue upon achievement of the milestone, assuming all other 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 have previously included delivery of an intellectual property license or theperformance of research and development activities. The Company does not have any material research arrangements or license arrangements that containmultiple deliverables. The Company is compensated under research arrangements and license arrangements through nonrefundable up-front payments andfuture royalties on net product sales. Research fees are recognized as revenue on a straight-line basis over the period that the research services are expected tobe performed unless the Company’s pattern of performance can be determined to be other than straight-line, in which case, the Company uses theproportional performance method. Nonrefundable license fees are recognized as revenue upon delivery provided there are no undelivered elements in thearrangement.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.F-14Stock-based compensationThe Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (“ASC718”). ASC 718 requires all stock-based payments to employees, including grants of employee stock options and restricted stock units and modifications toexisting stock options, to be recognized in the consolidated statements of operations and comprehensive loss based on their fair values. The Company usesthe Black-Scholes option pricing model to determine the fair value of options granted.The Company’s stock-based awards are subject to either service or performance-based vesting conditions. Compensation expense related to awards toemployees and directors with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associatedservice period of the award, which is generally the vesting term. Compensation expense related to awards to non-employees with service-based vestingconditions is recognized based on the then-current fair value at each financial reporting date prior to the measurement date over the associated service periodof the award, which is generally the vesting term, using the accelerated attribution method. Compensation expense related to awards to employees withperformance-based vesting conditions is recognized based on the grant date fair value over the requisite service period using the accelerated attributionmethod 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 each financial reporting date prior to the measurement date over the requisiteservice period using the accelerated attribution method to the extent achievement of the performance condition is probable.The Company expenses restricted stock unit 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 units to non-employees are adjusted through share-based compensation expense at each reporting period endto reflect the 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-freeinterest rate, and (iv) expected dividends. Due to the lack of company specific historical and implied volatility data of its common stock, the Company hasbased its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. When selecting these publiccompanies on which it has based its expected stock price volatility, the Company selected companies with comparable characteristics to it, includingenterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected term of the stock-basedawards. The Company computes historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of thecalculated expected term of the stock-based awards. The Company will continue to apply this process until a sufficient amount of historical informationregarding the volatility 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 itslack of sufficient historical data. The risk-free interest rates for periods within the expected term of the option are based on the U.S. Treasury securities with amaturity date commensurate with the expected term of the associated award. The Company has never paid, and does not expect to pay dividends in theforeseeable future.The Company is also required to estimate forfeitures at the time of grant, and revise those estimates in subsequent periods if actual forfeitures differ fromits 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 stock optionand warrant award is estimated at the date of grant using the Black-Scholes option pricing model with assumptions generally consistent with those used foremployee stock options, with the exception of expected term, which is over the contractual life.Other income (expense), netOther income (expense), net consists primarily of interest income earned on investments net of amortization of premium and accretion of discount, and in2015, includes $0.9 million related to the disgorgement of short-swing profits arising from trades by a bluebird officer under Section 16(b) of the Securitiesand Exchange Act of 1934. Other income (expense), net also includes the gain or loss associated with the change in the fair value of preferred stock warrants,foreign currency gain or loss and tax incentives from the Massachusetts Life Sciences Center.F-15Net 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,unvested restricted stock, restricted stock units, and employee stock purchase plan stock 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 tocommon stockholders for the period to be allocated between common and participating securities based upon their respective rights to received dividends asif all income for the period had been distributed. Accordingly, in periods in which the Company reports a net loss attributable to common stockholders whenparticipating securities are outstanding, losses are not allocated to the participating securities.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 inthe financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basesof assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, ifbased upon the weight 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 benefitwill more 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 of December 31, 2015 and 2014, the Company does not have any significant uncertain tax positions.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.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 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes (“ASU No. 2015-17”), which requires companies to classify alldeferred tax assets and liabilities as noncurrent on the balance sheet. The standard will be effective for annual reporting periods beginning after December 15,2016 and interim periods within those annual periods, and early adoption is permitted. The Company prospectively adopted this guidance in the fourthquarter of 2015, which resulted in the removal of gross deferred tax assets and liabilities from the Company's consolidated balance sheet, the net impact ofwhich was zero. Prior periods were not retrospectively adjusted.In 2015, the FASB issued ASU 2015-05, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for FeesPaid in a Cloud Computing Arrangement (“ASU No. 2015-05”), which clarifies customer’s accounting for fees paid in a cloud computing arrangement. Thestandard will be effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2015 and earlyadoption is permitted. The Company prospectively adopted this guidance in the fourth quarter of 2015. The adoption of this standard in 2015 is not expectedto have a material impact on the Company’s consolidated financial statements.In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), which supersedes all existing revenuerecognition requirements, including most industry-specific guidance. The new standard requires a company to recognize revenue when it transfers goods orservices to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. The new standard will beeffective on January 1, 2018 and early adoption is notF-16permitted for public entities. The Company is currently evaluating the potential impact that Topic 606 may have on its financial position and results ofoperations. 3. Marketable securitiesThe following table summarizes the available-for-sale securities held at December 31, 2015 and 2014 (in thousands): Description Amortized Cost Unrealized Gains Unrealized Losses Fair Value December 31, 2015 U.S. government agency securities and treasuries $689,425 $22 $(2,300) $687,147 Certificates of deposit 14,360 — (13) 14,347 Total $703,785 $22 $(2,313) $701,494 December 31, 2014 U.S. government agency securities $131,589 $6 $(59) $131,536 Certificates of deposit 12,640 — (18) 12,622 Total $144,229 $6 $(77) $144,158 No available-for-sale securities held as of December 31, 2015 or 2014 had remaining maturities greater than three years. 4. Fair value measurementsThe following table sets forth the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2015 and 2014(in thousands): Description Total Quotedprices inactivemarkets(Level 1) Significantotherobservableinputs(Level 2) Significantunobservableinputs(Level 3) December 31, 2015 Assets: Cash and cash equivalents $164,269 $158,269 $6,000 $— Marketable securities: U.S. government agency securities and treasuries 687,147 — 687,147 — Certificates of deposit 14,347 — 14,347 — Total assets $865,763 $158,269 $707,494 $— Liabilities: Contingent consideration $8,665 $— $— $8,665 Total liabilities $8,665 $— $— $8,665 December 31, 2014 Assets: Cash and cash equivalents $347,845 $347,845 $— $— Marketable securities: U.S. government agency securities 131,536 — 131,536 — Certificates of deposit 12,622 — 12,622 — Total assets $492,003 $347,845 $144,158 $— Liabilities: Contingent consideration $6,796 $— $— $6,796 Total liabilities $6,796 $— $— $6,796 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 cash equivalents.As of December 31, 2015, cash and cash equivalents comprise funds in cash, money market accounts, U.S. Treasury securities and federally insured deposits.As of December 31, 2014, cash and cash equivalents comprise funds in cash and money market accounts.F-17Marketable securitiesThe amortized cost of available-for-sale securities is adjusted for amortization of premiums and accretion of discounts to maturity. At December 31, 2015and 2014, the balance in the Company’s accumulated other comprehensive loss was composed solely of activity related to the Company’s available-for-salemarketable securities. There were no realized gains or losses recognized on the maturity of available-for-sale securities during the years ended December 31,2015 or 2014, and as a result, the Company did not reclassify any amount out of accumulated other comprehensive income (loss) for the same periods.The aggregate fair value of securities held by the Company in an unrealized loss position for less than twelve months as of December 31, 2015 and 2014was $638.1 million and $134.4 million, respectively. As of December 31, 2015 and 2014, there were no securities held by the Company in an unrealized lossposition for more than twelve months. The Company has the intent and ability to hold such securities until recovery. The Company determined that there wasno material change in the credit risk of the above investments. As a result, the Company determined it did not hold any investments with an other-than-temporary impairment as of December 31, 2015 and 2014.Contingent considerationIn connection with the acquisition of Pregenen, the Company recorded contingent consideration pertaining to the amounts potentially payable toPregenen’s former equityholders pursuant to the Stock Purchase Agreement by and among the Company, Pregenen and Pregenen’s former equityholders.Contingent consideration is measured at fair value and is based on significant inputs not observable in the market, which represents a Level 3 measurementwithin the fair value hierarchy. The valuation of contingent consideration uses assumptions the Company believes would be made by a market participant.The Company assesses these estimates on an on-going basis as additional data impacting the assumptions is obtained. Future changes in the fair value ofcontingent consideration related to updated assumptions and estimates are recognized within the consolidated statements of operations and comprehensiveloss.Contingent consideration may change significantly as development progresses and additional data are obtained, impacting the Company’s assumptionsregarding probabilities of successful achievement of related milestones used to estimate the fair value of the liability and the timing in which they areexpected to be achieved. In evaluating the fair value information, considerable judgment is required to interpret the market data used to develop theestimates. The estimates of fair value may not be indicative of the amounts that could be realized in a current market exchange. Accordingly, the use ofdifferent market assumptions and/or different valuation techniques could result in materially different fair value estimates.The significant unobservable inputs used in the measurement of fair value of the Company’s contingent consideration are probabilities of successfulachievement of preclinical, clinical and commercial milestones, the period in which these milestones are expected to be achieved ranging from 2016 to 2026and discount rates ranging from 9.5% to 13.5%. Significant increases or decreases in any of the probabilities of success would result in a significantly higheror lower fair value measurement, respectively. Significant increases or decreases in these other inputs would result in a significantly lower or higher fair valuemeasurement, respectively.The table below provides a roll-forward of fair value of the Company’s contingent consideration obligations which include Level 3 inputs (in thousands): Year ended December 31, 2015 2014 Beginning balance$6,796 $— Additions — 6,550 Changes in fair value 2,869 246 Payments (1,000) — Ending balance$8,665 $6,796 As of December 31, 2015 and 2014, $3.6 million and $0.5 million, respectively, of the fair value of the Company’s total contingent considerationobligations was reflected as components of accrued expenses and other current liabilities within the consolidated balance sheets, with the remaining balancesof $5.1 million and $6.3 million, respectively, reflected as a non-current liability. A $1.0 million milestone under the Stock Purchase Agreement wasachieved and paid to the former equityholders of Pregenen during 2015. Please refer to Note 8, “Commitments and contingencies,” for further information. F-185. Property and equipment, netProperty and equipment, net, consists of the following (in thousands): December 31, 2015 2014 Computer equipment and software$1,259 $814 Office equipment 1,104 786 Laboratory equipment 10,520 7,223 Leasehold improvements 11,010 10,318 Construction-in-progress 65,542 — Total property and equipment 89,435 19,141 Less accumulated depreciation and amortization (6,821) (3,401)Property and equipment, net$82,614 $15,740 Depreciation and amortization expense related to property and equipment was $3.7 million, $2.3 million, and $0.9 million for the years endedDecember 31, 2015, 2014, and 2013, respectively. Construction-in-progress as of December 31, 2015 includes $62.1 million related to costs incurred by thelandlord at 60 Binney Street in Cambridge, Massachusetts. Please refer to Note 8, “Commitments and contingencies,” for further information. 6. Restricted cashAs of December 31, 2015 and 2014, the Company maintained letters of credit of $10.0 million and $1.2 million, respectively, which are required to becollateralized with a bank account at a financial institution in accordance with the Company’s current and future headquarters’ lease agreements. AtDecember 31, 2015, $9.2 million relates to the 60 Binney Lease and is subject to increase to $13.8 million when the Company first requests reimbursement oftenant improvement costs from the landlord. Subject to the terms of the lease and certain reduction requirements specified therein, this amount may decreaseby $1.5 million on the third, fourth, and fifth anniversaries of the date the Company occupies the building. 7. Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities consist of the following (in thousands): December 31, 2015 2014 Employee compensation $5,935 $4,943 Accrued goods and services 16,153 7,358 Accrued professional fees 1,014 428 Deferred rent, current portion 964 914 Contingent consideration, current portion 3,584 475 Other 495 531 Total accrued expenses and other current liabilities $28,145 $14,649 The change in fair value of contingent consideration was primarily related to an increase in the probability of successful achievement of milestonesexpected to be achieved within the next twelve months. 8. Commitments and contingenciesOn June 3, 2013, the Company entered into a nine-year building lease for approximately 43,600 square feet of space located at 150 Second Street,Cambridge, Massachusetts, which commenced in December 2013. This lease was amended in June 2014 to add approximately 9,900 additional square feet.The lease originally had monthly lease payments of $0.2 million for the first 12 months, which increased to $0.3 million per month beginning in December2014 due to the lease amendment, with annual rent escalations thereafter. Rent expense is recognized on a straight-line basis over the term of the lease. TheCompany has the option to extend this lease by an additional five years. The lease provided a contribution from the landlord towards the initial build-out ofthe space of up to $7.8 million. The Company capitalizes the leasehold improvements as property and equipment and records the landlord incentivepayments received as deferred rent and amortizes these amounts as reductions to rent expense over the lease term. In addition, in accordance with the lease,the Company entered into a cash-collateralized irrevocable standby letter of credit in the amount of $0.8 million, naming the landlord as beneficiary. Thismay be reduced to $0.6 million upon the second anniversary of the rentF-19commencement date in the second quarter of 2016. The lease for the Company’s former headquarters, located at 840 Memorial Drive, Cambridge,Massachusetts, expired on March 31, 2015.On June 29, 2015, the Company entered into a lease agreement for additional office space located at 215 First Street, Cambridge, Massachusetts. Underthe terms of the lease, the Company leased approximately 15,120 square feet starting on July 13, 2015 for $0.5 million per year in base rent, which is subjectto a 3% annual rent increase plus certain operating expenses and taxes. The lease may continue until the end of the 60th full calendar month following thedate the landlord delivers the premises to the Company, and includes early termination provisions that allows the Company to terminate the lease at the endof the 20th full calendar month following the delivery of the premises now that the Company has met certain conditions specified within the lease. Under theterms of the lease, the Company has also leased an additional 8,075 square feet of office space in the same premises starting on January 1, 2016 for anadditional $0.3 million per year in base rent, which is subject to a 3% annual rent increase plus certain operating expenses and taxes.On September 21, 2015, the Company entered into a lease agreement for additional office and laboratory space located in a building (the “Building”)under construction at 60 Binney Street, Cambridge, Massachusetts (the “60 Binney Lease”). Under the terms of the 60 Binney Lease, starting on October 1,2016, the Company will lease approximately 253,108 square feet of office and laboratory space at $72.50 per square foot per year, or $18.4 million per yearin base rent, which is subject to scheduled annual rent increases of 1.75% plus certain operating expenses and taxes. The Company also executed a $9.2million letter of credit upon signing the 60 Binney Lease, which was required to be collateralized with a bank account at a financial institution in accordancewith the 60 Binney Lease agreement. The 60 Binney Lease will continue until the end of the 120th full calendar month following April 2017 or the earlier thedate the Company occupies the Building or other conditions specified in the 60 Binney Lease occur. Pursuant to a work letter entered into in connectionwith the 60 Binney Lease, the landlord will contribute an aggregate of $42.4 million toward the cost of construction and tenant improvements for theBuilding. The purpose of the 60 Binney Lease is to supplement and eventually replace the Company’s current leased premises at 150 Second Street and 215First Street in Cambridge, Massachusetts and the Company intends to move its corporate headquarters to 60 Binney Street in mid-2017. The Company hasthe option to extend the 60 Binney Lease for two successive five-year terms.Because the Company is involved in the construction project, including having responsibility to pay for a portion of the costs of finish work andmechanical, electrical, and plumbing elements of the Building, among other items, the Company is deemed for accounting purposes to be the owner of theBuilding during the construction period. Accordingly, the Company has recorded project construction costs incurred by the landlord as an asset in “Propertyand equipment, net” and a related financing obligation in “Construction financing lease obligation” on the Company’s consolidated balance sheet.The Company bifurcates its future lease payments pursuant to the 60 Binney Lease into (i) a portion that is allocated to the Building and (ii) a portionthat is allocated to the land on which the Building is being constructed, which is recorded as rental expense. Although the Company estimates that theCompany will not begin making lease payments pursuant to the 60 Binney Lease until April 2017, the portion of the lease obligation allocated to the land istreated for accounting purposes as an operating lease that commenced upon execution of the 60 Binney Lease in September 2015. During the year endedDecember 31, 2015, the Company recognized $0.5 million of non-cash rental expense attributable to the land.As of December 31, 2015, Property and equipment, net, includes $62.1 million related to construction costs for the Building. The construction financinglease obligation related to the Building was $61.9 million, which were incurred by the landlord only. No cash was paid to the landlord related to the Buildingfor the twelve months ended December 31, 2015.Once the landlord completes the construction of the Building, the Company will evaluate the 60 Binney Lease in order to determine whether or not the60 Binney Lease meets the criteria for “sale-leaseback” treatment. If the 60 Binney Lease meets the “sale-leaseback” criteria, the Company will remove theasset and the related liability from its consolidated balance sheet and treat the 60 Binney Lease as either an operating or a capital lease based on theCompany’s assessment of the accounting guidance. The Company expects that upon completion of construction of the Building the 60 Binney Lease willnot meet the “sale-leaseback” criteria. If the 60 Binney Lease does not meet “sale-leaseback” criteria, the Company will treat the 60 Binney Lease as afinancing obligation and will depreciate the asset in accordance with the Company’s accounting policy.F-20As of December 31, 2015, future minimum commitments under the 60 Binney Lease and facility operating leases were as follows (in thousands): Years ended December 31, 60 Binney StreetLease 150 Second StreetLease Other OperatingLeases Total LeaseCommitments 2016 $— $3,261 $1,189 $4,450 2017 13,061 3,359 127 16,547 2018 18,591 3,460 — 22,051 2019 18,916 3,563 — 22,479 2020 19,248 3,670 — 22,918 2021 and thereafter 128,132 7,674 — 135,806 Total minimum lease payments $197,948 $24,987 $1,316 $224,251 For the 60 Binney Lease, the table above sets forth the future minimum rental payments that the Company is obligated to pay after taking occupancyincluding amounts reflected on the consolidated balance sheet under the caption “Construction financing lease obligation”. The Company expects tocommence these rental payments upon completion of the Building, estimated to be April 2017.Rent expense is calculated on a straight-line basis over the term of the lease. Rent expense recognized under all leases, including additional rent chargesfor utilities, parking, maintenance, and real estate taxes, and including rental expense attributable to the 60 Binney Lease land was $5.7 million, $4.3 million,and $2.4 million for the years ended December 31, 2015, 2014 and 2013, respectively.The Company is party to various agreements, principally relating to licensed technology, that require future payments relating to milestones not met atDecember 31, 2015 and December 31, 2014 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 Company indemnifies,holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the Company’s businesspartners. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum potential amount offuture payments the Company could be required to make under these indemnification agreements is unlimited. The Company has never incurred costs todefend lawsuits or settle claims related to these indemnification agreements.The Company’s wholly-owned subsidiary bluebird bio France – SARL participates in the French Crédit d’Impôt Recherche (“CIR”) program, whichallows companies to monetize up to 30% of eligible research expenses. The Company received aggregate reimbursement of €1.6 million related to years2012 through 2014. The Company has not yet applied for €1.0 million related to the year ended December 31, 2015, which is classified as a current assetwithin the consolidated balance sheets as of December 31, 2015. The years 2012 through 2015 are open and subject to examination.On June 30, 2014, the Company acquired Pregenen. During 2015, a $1.0 million milestone under the Stock Purchase Agreement was achieved, whichresulted in a $1.0 million payment to the former equityholders of Pregenen. The Company may be required to make up to an additional $134.0 million infuture contingent cash payments to the former equityholders of Pregenen upon the achievement of certain preclinical, clinical and commercial milestonesrelated to the Pregenen technology, of which $14.0 million relates to preclinical milestones, $20.1 million relates to clinical milestones and $99.9 millionrelates to commercial milestones. In accordance with accounting for business combinations guidance, contingent consideration liabilities are required to berecognized on the consolidated balance sheets at fair value. Estimating the fair value of contingent consideration requires the use of significant assumptionsprimarily relating to probabilities of successful achievement of certain preclinical, clinical and commercial milestones, the expected timing in which thesemilestones will be achieved and discount rates. The use of different assumptions could result in materially different estimates of fair value. See Note 4, “Fairvalue measurements,” and Note 11, “Business combinations,” for additional information. 9. Common stock and preferred stockThe Company is authorized to issue 125,000,000 shares of common stock. Holders of common stock are entitled to one vote per share. Holders ofcommon stock are entitled to receive dividends, if and when declared by the Company’s Board of Directors, and to share ratably in the Company’s assetslegally available for distribution to the Company’s shareholders in the event of liquidation. Holders of common stock have no preemptive, subscription,redemption or conversion rights.The Company is authorized to issue 5,000,000 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,F-21redemption terms, liquidation preferences and the number of shares constituting any series, without any further vote or action by the Company’sshareholders. As of December 31, 2015 and 2014, the Company had no shares of preferred stock issued or outstanding.Reserved for future issuanceThe Company has reserved for future issuance the following number of shares of common stock (in thousands): December 31, 2015 2014 Options to purchase common stock 3,532 3,652 Restricted stock units 148 179 2013 Stock Option and Incentive Plan 565 465 Warrants to purchase common stock — 177 2013 Employee Stock Purchase Plan 227 238 Acquisition holdback (Note 11) — 94 4,472 4,805 10. Significant agreementsCelgene CorporationOriginal Collaboration AgreementOn March 19, 2013, the Company entered into a Master Collaboration Agreement (the “Collaboration Agreement”) with Celgene Corporation(“Celgene”) to discover, develop and commercialize potentially disease-altering gene therapies in oncology. The collaboration is focused on applying genetherapy technology to genetically modify a patient’s own T cells, known as chimeric antigen receptor, or CAR T cells, to target and destroy cancer cells.Additionally, on March 19, 2013, the Company entered into a Platform Technology Sublicense Agreement (the “Sublicense Agreement”) with Celgenepursuant to which the Company obtained a sublicense to certain intellectual property from Celgene, originating under Celgene’s license from Baylor Collegeof Medicine, for use in the collaboration.Under the terms of the Collaboration Agreement, the Company received a $75.0 million up-front, non-refundable cash payment. The Company wasresponsible for conducting discovery, research and development activities through completion of Phase I clinical studies, if any, during the initial term of theCollaboration Agreement, or three years. The collaboration is governed by a joint steering committee (“JSC”) formed by an equal number of representativesfrom the Company and Celgene. The JSC, among other activities, reviews the collaboration program, reviews and evaluates product candidates and approvesregulatory plans. In addition to the JSC, the Collaboration Agreement provides that the Company and Celgene each appoint representatives to a patentcommittee, which is responsible for managing the intellectual property developed and used during the collaboration.Amended Collaboration AgreementOn June 3, 2015, the Company and Celgene amended and restated the Collaboration Agreement (the “Amended Collaboration Agreement”). Under theAmended Collaboration Agreement, the parties will now focus the collaboration exclusively on anti- B-cell maturation antigen (“BCMA”) productcandidates for a new three-year term. In connection with the Amended Collaboration Agreement, the Company received an upfront, one-time, non-refundable, non-creditable payment of $25.0 million to fund research and development under the collaboration. The collaboration will continue to begoverned by the JSC. Under the terms of the Amended Collaboration Agreement, for up to two product candidates selected for development under the collaboration, theCompany is responsible for conducting and funding all research and development activities performed up through completion of the initial Phase I clinicalstudy, if any, of such product candidate.On a product candidate-by-product candidate basis, up through a specified period following enrollment of the first patient in an initial Phase I clinicalstudy for such product candidate (the “Option Period”), the Company has granted Celgene an option to obtain an exclusive worldwide license to developand commercialize such product candidate pursuant to a written agreement, the form of which the Company has already agreed upon, provided that, ifCelgene does not exercise its option with respect to the first product candidate under the Amended Collaboration Agreement prior to the expiration of theapplicable Option Period then it will not be permitted to exercise its option with respect to any future product candidates under the Amended CollaborationAgreement. In the event that Celgene exercises its option with respect to any product candidate, the Company may elect to co-develop and co-promote theproduct candidate in the United States, provided that, if the Company does not exercise its option co-develop and co-promote the first product candidate in-licensed by Celgene under the Amended Collaboration Agreement, then the Company will not be permitted to exercise its option to co-develop and co-promote any future product candidates under the Amended Collaboration Agreement.F-22If Celgene elects to exercise its option to exclusively in-license a product candidate, it must pay the Company an option fee in the amount of $10.0million for the first product candidate and $15.0 million for any additional product candidates, plus an additional fee in the amount of $10.0 million in theevent the Company does not exercise its option to co-develop and co-promote that product candidate in the United States. In addition to the applicableoption fee, for each product candidate that is in-licensed by Celgene, and for which the Company does not exercise its option to co-develop and co-promotein the United States, the Company will be eligible to receive up to $10.0 million in clinical milestone payments, up to $117.0 million in regulatory milestonepayments and up to $78.0 million in commercial milestone payments. The Company will also be eligible to receive a percentage of net sales as a royalty in arange from the mid-single digits to low-teens. The royalties payable to the Company are subject to certain reductions, including for any royalty paymentsrequired to be made by Celgene to acquire patent rights, with an aggregate minimum floor. Celgene will assume certain development obligations and mustreport on its progress in achieving these milestones on a quarterly basis.If the Company elects to co-develop and co-promote a product candidate licensed by Celgene, then the Company and Celgene would share equally in allcosts incurred relating to the development, commercialization and manufacturing of the product candidate within the United States and share equally in theprofits generated by such product candidate in the United States. Additionally, if the Company elects to co-develop and co-promote a product candidate,then the milestones and royalties would decrease compared to those described above. Under this scenario, the Company would receive, per product, up to$10.0 million in clinical milestone payments and, outside of the United States, up to $54.0 million in regulatory milestone payments and up to $36.0 millionin commercial milestone payments. In addition, to the extent any of the product candidates licensed by Celgene and co-developed and co-promoted by theCompany are commercialized, the Company would be entitled to receive tiered royalty payments ranging from the mid-single digits to low-teens based on apercentage of net sales from sales generated outside of the United States. The royalties payable to the Company are subject to certain reductions, includingfor any royalty payments required to be made by Celgene to acquire patent rights, with an aggregate minimum floor. The co-development and co-promotionagreement would be governed by a joint governance committee, or JGC, formed by representatives from the Company and Celgene. The JGC will, amongother activities, supervise the overall performance of the development and commercialization of elected product candidates and licensed products for UnitedStates administration.Celgene is solely responsible for the manufacture and supply of drug product for any optioned product candidate. Under the Amended CollaborationAgreement, subject to customary “back-up” supply rights granted to Celgene, the Company has the sole right to manufacture or have manufactured suppliesof vectors and associated payloads manufactured for incorporation into the optioned product candidate. Celgene would reimburse the Company for its coststo manufacture and supply such vectors and associated payloads, plus a mid-single digit mark-up. If Celgene does not exercise its option with respect to any product candidate prior to expiration of the applicable option period, then the Company hasthe right to develop that product candidate outside the scope of the Amended Collaboration Agreement.Either party may terminate the Amended Collaboration Agreement upon written notice to the other party in the event of the other party’s uncured materialbreach. Celgene may terminate the Amended Collaboration Agreement for any reason upon prior written notice to the Company. If the 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 theagreement. In addition, if Celgene terminates the agreement for the Company’s breach, any then-existing co-development and co-promotion agreement willbe automatically terminated and replaced with a license agreement for such product candidate and any amounts payable by Celgene under any then-existingproduct license agreements will be reduced. Under the Amended Collaboration Agreement, the so-called “call option” under the prior collaboration agreement, pursuant to which Celgene had theoption to terminate the collaboration agreement and obtain fully paid-up licenses to product candidates in the event of a change of control transactioninvolving the Company, has been eliminated.Under the Sublicense Agreement, the Company will continue to have access to certain intellectual property rights in-licensed to Celgene pursuant to itscollaboration agreement with the Baylor College of Medicine, which was first established in connection with the initiation of the original CollaborationAgreement between the Company and Celgene.Accounting AnalysisThe Company’s Amended Collaboration Agreement with Celgene contains the following deliverables: (i) research and development services,(ii) participation on the JSC, (iii) participation on the patent committee, (iv) a license to the first product candidate, (v) manufacture of vectors and associatedpayload for incorporation into the first optioned product candidate under the license, and (vi) participation on the JGC under the co-development and co-promotion agreement for the first optioned product candidate under the license.The license to the first product candidate is considered a deliverable at the inception of the arrangement and therefore the associated option fee isincluded in allocable arrangement consideration. The Company believes there is minimal risk with regard toF-23whether Celgene will exercise the option based on the successful completion of preclinical activities and proximity of enrollment of the first patient in aninitial Phase I clinical study for this product candidate. Further, Celgene loses the right to option any other product candidates if it does not agree to licensethe first product candidate. The Company has determined that the obligation within the license to manufacture or have manufactured supplies of vectors andassociated payloads for incorporation into the first optioned product candidate is a deliverable, consistent with the option to license the first productcandidate.However, the Company has determined that the options to license any additional product candidates are substantive options and therefore are notconsidered deliverables at execution of the Amended Collaboration Agreement. Celgene is not contractually obligated to exercise the options. Additionally,as a result of the uncertain outcome of the discovery, research and development activities, the Company is at risk with regard to whether Celgene willexercise the options to license additional product candidates. Moreover, the Company has determined that the options are not priced at a significant andincremental discount. Accordingly, the options to other product candidates are not considered deliverables at the inception of the arrangement and theassociated option fees are not included in allocable arrangement consideration.The Company concluded that each of the three delivered elements at the inception of the agreement (research and development services, participation onthe JSC and participation on the patent committee) has standalone value from the other undelivered elements. Additionally, the Amended CollaborationAgreement does not include return rights related to the collaboration term. Accordingly, each deliverable qualifies as a separate unit of accounting.The Company determined that each of the identified deliverables have the same period of performance (the three year term through projected initial PhaseI study completion) and have the same pattern of revenue recognition, ratably over the period of performance as there is no other discernible pattern ofrecognition. The Company identified the allocable arrangement consideration as the $25.0 million up-front research and development funding payment,$10.0 million option fee for the first product candidate, $20.0 million related to remaining deferred revenue from the original Collaboration Agreement, and$54.1 million of contingent revenue related to the estimated amounts that will be received from Celgene for manufacturing services. The $109.0 million totalallocable arrangement consideration was allocated based on the relative estimated selling price of the separate units of accounting at the inception of theamended agreement, resulting in $17.3 million allocated to the three delivered elements at the inception of the agreement, which will be recognized over aninitial three year term. This initial term will be revisited as the development plan timing changes or as a result of other events that impact the period overwhich the Company’s obligations relate.The Company evaluated all of the milestones that may be received in connection with Celgene’s option to license a product candidate resulting from thecollaboration. 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 that may be received under the option to the licenseagreement are considered substantive on the basis of the contingent nature of the milestone, specifically reviewing factors such as the scientific, clinical,regulatory, commercial and other risks that must be overcome to achieve the milestone 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 the associated milestone is achieved, assuming all other revenue recognitioncriteria are met. All commercial milestones will be accounted for in the same manner as royalties and recorded as revenue upon achievement of the milestone,assuming all other revenue recognition criteria are met.During the years ended December 31, 2015, 2014 and 2013, the Company recognized $14.1million, $25.0 million and $19.8 million, respectively, ofrevenue associated with its collaboration with Celgene related to the recognition of discovery, research and development services. As of December 31, 2015and 2014, there was $41.8 million and $30.7 million of deferred revenue, respectively, related to the Company’s collaboration with Celgene, which isclassified as current or non-current in the consolidated balance sheets based on the contractual term of the arrangement, $14.2 million of which as ofDecember 31, 2015 is expected to be recognized through the first half of 2018. 11. Business combinationsOn June 30, 2014, the Company completed its acquisition of Pregenen, a privately-held biotechnology company, upon which Pregenen became a wholly-owned subsidiary. As a result, the Company obtained gene editing and cell signaling technology with a broad range of potential therapeutic applications.Under the terms of the Stock Purchase Agreement, the Company purchased all of Pregenen’s outstanding capital stock in exchange for 405,401unregistered shares of common stock and $5.1 million in cash. The consideration for the transaction also included an additional 94,117 shares of commonstock that was held for a period of 18 months after the acquisition to settle potential claims for indemnification for breaches or inaccuracies in Pregenen’srepresentations and warranties, covenants, and agreements and an additional 2,119 shares relating to a working capital adjustment. On December 29, 2015,94,117 shares of common stock were grantedF-24in full to Pregenen’s former equityholders. The Stock Purchase Agreement also provides for up to $135.0 million in future contingent cash payments uponthe achievement of certain preclinical, clinical and commercial milestones related to the Pregenen technology, $134.0 million of which have not yet beenachieved as of December 31, 2015, which is comprised of $14.0 million in preclinical milestones, $20.1 million in clinical milestones and $99.9 million incommercial milestones. During 2015, a $1.0 million milestone under the Stock Purchase Agreement was achieved and paid to the former equityholders ofPregenen.The acquisition-date fair value of the purchase consideration is as follows (in thousands): Cash$5,093 Common stock 19,348 Contingent consideration 6,550 Total purchase consideration$30,991 Common stock in the table above is comprised of $15.6 million in common stock issued in June 2014, $3.6 million in common stock that was held backfor a period of 18 months and issued in December 2015 and $0.1 million related to a working capital adjustment issued in July 2014.The transaction was accounted for as a business combination under the acquisition method of accounting. Accordingly, the tangible and identifiableintangible assets acquired and liabilities assumed were recorded at estimated fair value as of the date of acquisition, with the remaining considerationtransferred recorded as goodwill.The purchase price allocation has been finalized and the following table summarizes the estimated fair value of the assets acquired and liabilities assumedat the date of acquisition (in thousands): Acquisition date fair value Cash$420 Gene editing platform intangible asset 30,100 Goodwill 13,128 Other assets acquired 111 Total assets acquired 43,759 Deferred tax liabilities 11,797 Other liabilities assumed 971 Total liabilities assumed 12,768 Net assets acquired$30,991 The fair value of the gene editing platform intangible asset was determined using a relief from royalty approach, including assumptions of projectedrevenues and royalty rate in addition to a discount rate of 15.5% applied to the projected cash flows. The Company considers the intangible asset acquired tobe developed technology, as at the date of the acquisition it could be used the way it is intended to be used in certain ongoing research and developmentactivities. The Company believes the assumptions are representative of those a market participant would use in estimating fair value. The gene editingplatform intangible asset will be amortized to research and development expense over its expected useful life of approximately eight years.Amortization expense for the gene editing platform intangible asset was $3.8 million and $1.9 million for the years ended December 31, 2015 and 2014,respectively, and accumulated amortization as of December 31, 2015 and 2014 was $5.6 million and $1.9 million, respectively. The estimated amortizationof intangible assets for the year ended December 31, 2016 and for each of the five succeeding years and thereafter is as follows (in thousands): 2016$3,763 2017 3,763 2018 3,763 2019 3,763 2020 3,763 2021 and thereafter 5,641 Total$24,456 The deferred tax liabilities acquired of $11.8 million primarily relate to the tax impact of future amortization or impairments associated with the identifiedintangible asset, which is not deductible for tax purposes. See Note 14 “Income taxes,” for additional information.F-25Goodwill is calculated as the difference between the acquisition-date fair value of the consideration transferred and the fair values of the assets acquiredand liabilities assumed and is not expected to be deductible for income tax purposes. Goodwill is recorded as an indefinite-lived asset and is not amortizedbut tested for impairment on an annual basis or when indications of impairment exist. Among the factors that resulted in goodwill for the Pregenenacquisition was the opportunity to recognize synergies with the Company’s existing gene insertion platform and deferred tax liabilities recognized inconnection with the acquisition.The Company incurred a total of $0.2 million in transaction costs in connection with the acquisition, which were included in general and administrativeexpenses within the consolidated statements of operations and comprehensive loss for the year ended December 31, 2014.In connection with the acquisition, the Company issued 3,267 shares of common stock to a former consultant of Pregenen and recognized $0.2 million ofexpense within general and administrative expenses in the consolidated statements of operations and comprehensive loss for the year ended December 31,2014. 12. Stock-based compensation and warrantsOn 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 IPO on June 24, 2013. The 2013 Plan replaces the 2010 Stock Option and GrantPlan (“2010 Plan”).The 2013 Plan allows for the granting of incentive stock options, non-qualified stock options, restricted stock units and restricted stock awards to theCompany’s employees, members of the board of directors, and consultants of the Company. The Company initially reserved 955,000 shares of its commonstock for the issuance of awards under the 2013 Plan. The 2013 Plan provides that the number of shares reserved and available for issuance under the 2013Plan will automatically increase each January 1, beginning on January 1, 2014, by four percent of the outstanding number of shares of common stock on theimmediately preceding December 31 or such lesser number of shares as determined by the Company’s compensation committee. In January 2015 and January2016, the number of common stock available for issuance under the 2013 Plan was increased by approximately 1.3 million and 1.5 million shares,respectively, as a result of this automatic increase provision.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, 2015, the total number ofcommon stock that may be issued under all plans is 0.6 million.The Company does not currently hold any treasury shares. Upon stock option exercise, the Company issues new shares and delivers them to theparticipant.Stock-based compensation expenseThe Company recognized stock-based compensation expense totaling $41.1 million, $10.8 million, and $6.5 million during the years endedDecember 31, 2015, 2014 and 2013, respectively. Share-based compensation expense recognized by award type is as follows (in thousands): Year ended December 31, 2015 2014 2013 Stock options$37,536 $9,487 $6,399 Restricted stock awards — 52 92 Restricted stock units 3,325 1,158 — Employee stock purchase plan 259 66 — $41,120 $10,763 $6,491 F-26The 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, 2015 2014 2013 Expected volatility 72.6% 82.3% 82.0%Expected term (in years) 5.9 6.0 6.1 Risk-free interest rate 1.7% 1.8% 1.1%Expected dividend yield 0.0% 0.0% 0.0% The intrinsic value of options exercised during the years ended December 31, 2015, 2014, and 2013, was $147.9 million, $41.4 million, and $3.9 million,respectively.The weighted-average fair values of options granted during 2015, 2014 and 2013 was $74.65, $18.53, and $7.36, respectively.There were no unvested restricted stock awards as of December 31, 2015 and 2014 and no restricted stock awards were granted during 2015. Theaggregate fair value of restricted stock awards that vested during the years ended December 31, 2014 and 2013, based on the estimated fair value of theunderlying stock on the day of vesting was $1.9 million, and $1.5 million, respectively.As of December 31, 2015, there was $80.7 million, $6.2 million and $0.1 million of unrecognized compensation expense related to unvested stockoptions, restricted stock units and the employee stock purchase plan, respectively, that is expected to be recognized over a weighted-average period of 2.9,2.2, and 0.1 years.In the first quarter of 2015, the Company entered into a Transitional Services and Separation Agreement with its Chief Scientific Officer, ending hisemployment with the Company effective July 6, 2015. Subsequent to this separation date, he is serving as a member of the Company’s Scientific AdvisoryBoard. Under the terms of the agreement, outstanding options held by the Chief Scientific Officer were modified. The incremental value of the modificationwas estimated to be $3.0 million using a Black-Scholes option valuation model, which was recognized within research and development expense on astraight-line basis through the date of separation in the third quarter of 2015.In the second quarter of 2015, the Company modified the vesting conditions of a stock option award held by a non-employee founder, which resulted in$6.7 million of stock-based compensation expense recognized to research and development expense during the second quarter of 2015.In the fourth quarter of 2015, the Company modified the vesting conditions of stock option awards held by two employees immediately following theirseparation from the Company. As a result of the modification, the Company recognized $0.6 million of stock-based compensation expense during the fourthquarter of 2015.During the year ended December 31, 2014, the Company modified the vesting conditions of stock option awards held by several former employees, whichresulted in $0.6 million of incremental expense recognized within general and administrative expenses during 2014.Stock optionsThe following table summarizes the stock option activity under the Company’s equity awards plans (shares and aggregate intrinsic value in thousands): Shares Weighted-averageexercise priceper share Weighted-averagecontractuallife (in years) Aggregateintrinsicvalue (a)(in thousands) Outstanding at December 31, 2014 3,652 $12.30 Granted 1,245 $114.32 Exercised (1,283) $7.42 Canceled or forfeited (82) $68.16 Outstanding at December 31, 2015 3,532 $48.74 7.8 $114,870 Exercisable at December 31, 2015 1,159 $11.53 6.7 $61,163 Vested and expected to vest at December 31, 2015 3,423 $50.02 8.0 $110,888 (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, 2015.F-27Restricted stock unitsThe following table summarizes the restricted stock unit activity under the Company’s equity award plans (shares in thousands): Shares Weighted-averagegrant datefair value Unvested balance at December 31, 2014 179 $30.47 Granted 41 156.83 Vested (62) 30.47 Forfeited (10) 30.47 Unvested balance at December 31, 2015 148 $65.79 WarrantsAs of December 31, 2015 and 2014, there were 0 and 177,276 warrants outstanding, respectively. As of December 31, 2015 and 2014, there was nooutstanding warrant liability. During the years ended December 31, 2015 and 2014, there were 177,276 and 160,676 warrants exercised, respectively, and nocancellations or expirations.Note receivableIn November 2010, the Company received a non-recourse note from its Chief Executive Officer (“CEO”) in exchange for the purchase of 329,256 sharesof restricted 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 statementin connection with the Company’s IPO, the CEO repaid the note in full plus all accrued interest. The Company recorded stock-based compensation expensein connection with this restricted stock award of $0, $0.1 million and $0.1 million for the years ended December 31, 2015, 2014 and 2013, respectively.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 approved byits 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 a totalof 238,000 shares of the Company’s common stock to participating employees. The first offering period under the 2013 ESPP opened on August 1, 2014.During the year ended December 31, 2015, 10,545 shares of common stock were issued under the 2013 ESPP. 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 did not make any contributions to the 401(k) Plan through December 31, 2014. In January 2016, theCompany made contributions of approximately $0.6 million related to employee contributions made during 2015, which is included in accrued expensesand other current liabilities as of December 31, 2015. 14. Income taxesThe components of loss before income taxes were as follows (in thousands): Year ended December 31, 2015 2014 2013 U.S.$(162,287) $(61,118) $(26,018)Foreign (4,436) 612 697 Total$(166,723) $(60,506) $(25,321) F-28The benefit for income taxes were as follows (in thousands): Year ended December 31, 2015 2014 2013 Current Federal$— $— $— State — 1 — Foreign 60 — — Deferred Federal — (9,390) — State — (2,408) — Foreign — — — Total income tax expense (benefit)$60 $(11,797) $— A reconciliation of income tax benefit computed at the statutory federal income tax rate to the Company’s effective income tax rate benefit as reflected inthe financial statements is as follows: Year ended December 31, 2015 2014 2013 Federal income tax expense at statutory rate 34.0% 34.0% 34.0%State income tax, net of federal benefit 4.2% 4.0% 4.5%Permanent differences (6.4%) (3.2%) (0.6%)Research and development credit 14.6% 25.7% 6.0%Other (1.5%) 0.0% 0.0%Change in valuation allowance (44.9%) (41.0%) (43.9%)Effective income tax rate benefit 0.0% 19.5% 0.0% For the years ended December 31, 2015 and 2014, the Company recognized an income tax (expense) benefit of $(0.1) million or 0.0%, and $11.8 millionor 19.5%, respectively. In 2014, the Company recorded a non-recurring tax benefit of $11.8 million due to the release of a portion of the valuation allowancedue to taxable temporary differences available as a source of income to realize certain pre-existing deferred tax assets as a result of the acquisition ofPregenen. Excluding the impact of this item, the Company’s overall tax provision and effective tax rate would be zero. The Company did not recognize anytax benefit for the years ended December 31, 2015 and December 31, 2013 as the Company was subject to a full valuation allowance.Deferred 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 (in thousands): Year ended December 31, 2015 2014 Deferred tax assets: U.S. net operating loss carryforwards$62,844 $33,767 Foreign net operating loss carryforwards 194 899 Tax credit carryforwards 47,386 23,274 Capitalized research and development expenses, net 979 1,372 Capital lease 24,315 — Deferred revenue 16,438 12,050 Capitalized license fees 5,488 384 Accruals and other 19,486 7,168 Total deferred tax assets 177,130 78,914 Intangible assets (9,606) (11,084)Fixed assets (26,681) (2,526)Less valuation allowance (140,843) (65,304)Net deferred taxes$— $— A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. Dueto the uncertainty surrounding the realization of the favorable tax attributes in future tax returns, the Company has recorded a full valuation allowanceagainst the Company’s otherwise recognizable net deferred tax assets. In 2015, theF-29Company prospectively adopted ASU 2015-17, Balance Sheet Classification of Deferred Taxes, which requires companies to classify all deferred tax assetsand liabilities as noncurrent on the balance sheet. See Note 2, “Summary of significant accounting policies and basis of presentation,” for additionalinformation. This resulted in the removal of gross deferred tax assets and liabilities from the Company's consolidated balance sheet, the net impact of whichwas zero. Prior periods were not retrospectively adjusted. The valuation allowance increased on a net basis by approximately $75.5 million during the yearended December 31, 2015 due primarily to net operating losses and tax credit carryforwards.As of December 31, 2015, 2014 and 2013, the Company had U.S. federal net operating loss carryforwards of approximately $347.5 million, $130.0million, and $30.3 million, respectively, which may be available to offset future income tax liabilities and expire at various dates through 2035. As ofDecember 31, 2015, 2014 and 2013, the Company also had U.S. state net operating loss carryforwards of approximately $335.0 million, $115.5 million, and$13.3 million, respectively, which may be available to offset future income tax liabilities and expire at various dates through 2035. At December 31, 2015,$185.8 million and $185.8 million of federal and state net operating losses, respectively, relate to excess equity based compensation tax deductions, thebenefits for which will be recorded to additional paid-in capital when recognized through a reduction of cash taxes paid. At December 31, 2015, 2014 and2013, the Company also had approximately $0.6 million, $2.7 million, and $2.0 million, respectively, of foreign net operating loss carryforwards that may beavailable to offset future income tax liabilities; these carryforwards do not expire.As of December 31, 2015, 2014 and 2013, the Company had federal research and development and orphan drug tax credit carryforwards of approximately$44.9 million, $22.0 million, and $2.7 million, respectively, available to reduce future tax liabilities which expire at various dates through 2035. As ofDecember 31, 2015, 2014 and 2013, the Company had state credit carryforwards of approximately $3.8 million, $2.0 million, and $1.4 million, respectively,available to reduce future tax liabilities which expire at various dates through 2030.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 theevent of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50 percent, as defined underSections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of tax attributes that can beutilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Companyimmediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has completedseveral financings 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, 2015, 2014 and 2013,the Company had no significant accrued interest or penalties related to uncertain tax positions and no significant amounts have been recognized in theCompany’s consolidated statements of operations and comprehensive loss.For all years through December 31, 2015, 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. A full valuation allowance has been provided against the Company’sresearch and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the deferred tax asset established forthe 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, 2012 through December 31, 2015. To the extentthe Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the InternalRevenue Service, state or foreign tax authorities to the extent utilized in a future period. F-3015. 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 (in thousands): Year ended December 31, 2015 2014 2013 Warrants — 177 338 Outstanding stock options 3,532 3,652 3,958 Unvested restricted stock — — 69 Restricted stock units 148 179 — ESPP shares 3 6 — Acquisition holdback (Note 11) — 94 — 3,683 4,108 4,365 16. Selected Quarterly Financial Data (Unaudited)The following table contains quarterly financial information for 2015 and 2014. 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. 2015 FirstQuarter SecondQuarter ThirdQuarter FourthQuarter Total (in thousands, except per share data) Total revenue $6,344 $4,940 $1,324 $1,471 $14,079 Total operating expenses 31,270 56,963 44,451 50,432 183,116 Loss from operations (24,926) (52,023) (43,127) (48,961) (169,037)Net loss (24,787) (51,795) (42,924) (47,277) (166,783)Net loss per share applicable to common stockholders - basic and diluted $(0.76) $(1.57) $(1.18) $(1.29) $(4.81) 2014 FirstQuarter SecondQuarter ThirdQuarter FourthQuarter Total (in thousands, except per share data) Total revenue $6,335 $6,335 $6,365 $6,386 $25,421 Total operating expenses 17,003 19,669 23,375 26,000 86,047 Loss from operations (10,668) (13,334) (17,010) (19,614) (60,626)Net loss (10,609) (1,526)(1) (17,030) (19,544) (48,709)Net loss per share applicable to common stockholders - basic and diluted $(0.44) $(0.06) $(0.61) $(0.67) $(1.83) (1)During the second quarter of 2014, the Company recorded an income tax benefit of $11.8 million in connection with the acquisition of Pregenencompleted in June 2014. See Note 11, “Business Combinations” for additional information. 17. Subsequent eventsOn February 10, 2016, under the Company’s Amended Collaboration Agreement with Celgene focused on anti-BCMA product candidates, Celgeneexercised its option to obtain an exclusive worldwide license to develop and commercialize bb2121 pursuant to an executed license agreement entered intoby the parties on February 16, 2016. On February 17, 2016, the parties further amended the Amended Collaboration Agreement to update the timing ofcertain deliverables in connection with Celgene’s option exercise for the license of the bb2121 product candidate. As a result, Celgene will pay the Companyan option fee in the amount of $10.0 million in the first quarter of 2016. The Company may now elect to co-develop and co-promote the product candidate inthe United States and will receive an additional fee in the amount of $10.0 million in the event the Company does not exercise its option to co-develop andco-promote bb2121 with Celgene. See Note 10 for additional information on the Company’s collaboration with Celgene. On February 24, 2016, the Company appointed Jeffrey T. Walsh as Chief Financial and Strategy Officer and principal financial officer of the Company, ineach case, effective March 1, 2016. Mr. Walsh has served as the Company’s Chief Operating Officer sinceF-31May 2011 (and will serve as such through February 29, 2016) and previously served as the Company’s principal financial officer from June 2013 toNovember 2014. In connection with the appointment of Mr. Walsh and effective as of March 1, 2016, James M. DeTore will no longer serve as Chief Financial Officer andTreasurer and principal financial officer of the Company, and Mr. DeTore’s employment with the Company will end on March 18, 2016. In connection withthe termination of Mr. DeTore’s employment, he is entitled to certain severance benefits pursuant to the terms of an employment agreement, dated October20, 2014, between the Company and Mr. DeTore. The Company has evaluated all events or transactions that occurred after December 31, 2015. In the judgment of management, there were no othermaterial events that impacted the consolidated financial statements or disclosures. F-32 SIGNATURESPursuant 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 James M.DeTore, 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 theretoand other 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 President, Chief Executive Officer and Director February 25, 2016Nick Leschly (Principal Executive Officer) /s/ James M. DeTore Chief Financial Officer and Treasurer February 25, 2016James M. DeTore (Principal Financial Officer) /s/ Eric Sullivan Senior Director, Finance February 25, 2016Eric Sullivan (Principal Accounting Officer) /s/ Daniel S. Lynch Director February 25, 2016Daniel S. Lynch /s/ Wendy L. Dixon, Ph.D. Director February 25, 2016Wendy L. Dixon, Ph.D. /s/ James Mandell, M.D.. Director February 25, 2016James Mandell, M.D. /s/ John M. Maraganore, Ph.D.. Director February 25, 2016John M. Maraganore, Ph.D. /s/ David P. Schenkein, M.D. Director February 25, 2016David P. Schenkein, M.D. /s/ Mark Vachon Director February 25, 2016Mark Vachon Exhibit Index Incorporated by ReferenceExhibitNumber Exhibit Title Form File no. Exhibit Filing Date 2.1 Stock Purchase Agreement by and between the Registrant and Precision GenomeEngineering, Inc. 8-K 001-35966 2.1 June 30, 2014 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 3.3 Amendment No. 1 to Amended and Restated By-laws of the Registrant 8-K 001-35966 3.1 February 11, 2016 4.1 Specimen Common Stock Certificate S-1/A 333-188605 4.1 June 4, 2013 4.2 Amended and Restated Investors’ Rights Agreement, dated as of July 23, 2012, byand among the Registrant and the Investors listed therein. S-1/A 333-188605 4.5 May 14, 2013 4.3 Amendment to Amended and Restated Investors’ Rights Agreement, dated as ofJuly 8, 2014, by and among the Registrant and the Investors listed therein. 10-Q 001-35966 4.6 August 12, 2014 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 itsExecutive Officers 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 theRegistrant (formerly known as Genetix Pharmaceuticals Inc., successor-in-interest toInnogene Pharmaceuticals Inc.) and Massachusetts Institute of Technology, asamended S-1/A 333-188605 10.6 May 14, 2013 10.7† Patent and Know-How License Agreement No. 07554F30, dated May 14, 2009, byand between the Registrant (formerly known as Genetix Pharmaceuticals Inc.) andINSERM-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† 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 10.10† Amendment No. 4 to License Agreement, dated April 1, 2015, by and between theRegistrant and Institut Pasteur 10-Q 001-35966 10.10 May 6, 2015 10.11† License Agreement, dated December 7, 2011, by and between the Registrant andResearch Development Foundation S-1/A 333-188605 10.9 May 14, 2013 10.12† 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 10.13† Master Collaboration Agreement by and between the Registrant and CelgeneCorporation, dated March 19, 2013 S-1/A 333-188605 10.11 May 14, 2013 Incorporated by ReferenceExhibitNumber Exhibit Title Form File no. Exhibit Filing Date 10.14† Amended and Restated Master Collaboration Agreement by andbetween the Registrant and Celgene Corporation, dated June 3, 2015 10-Q 001-35966 10.14 August 6, 2015 10.15# Amended and Restated Employment Agreement by and between theRegistrant and Nick Leschly S-1/A 333-188605 10.12 June 4, 2013 10.16# Amended and Restated Employment Agreement by and between theRegistrant and Jeffrey T. Walsh S-1/A 333-188605 10.13 June 4, 2013 10.17# Amended and Restated Employment Agreement by and between theRegistrant and Mitch Finer S-1/A 333-188605 10.14 June 4, 2013 10.18# Transitional Services and Separation Agreement by and between theRegistrant and Mitch Finer 10-Q 001-35966 10.17 May 6, 2015 10.19# Amended and Restated Employment Agreement by and between theRegistrant and David M. Davidson, M.D. S-1/A 333-188605 10.15 June 4, 2013 10.20# Employment Agreement, dated February 3, 2014, by and between theRegistrant and Jason F. Cole 10-Q 001-35966 10.18 May 13, 2014 10.21# Employment Agreement, dated October 20, 2014, by and between theRegistrant and James DeTore 8-K 001-35966 10.1 November 10, 2014 10.22# Employment Agreement, dated May 30, 2015, by and between theRegistrant and Philip D. Gregory 10-Q 001-35966 10.21 August 6, 2015 10.23# Offer Letter, dated October 14, 2013, by and between the Registrant andEric Sullivan 10-Q 001-35966 10.19 May 13, 2014 10.24# 2013 Employee Stock Purchase Plan S-1/A 333-188605 10.17 June 4, 2013 10.25# Executive Cash Incentive Bonus Plan S-1/A 333-188605 10.18 May 14, 2013 10.26 Lease, dated June 3, 2013, by and between the Registrant and 150Second Street, LLC, as amended S-1/A 333-188605 10.19 June 4, 2013 10.27 Lease Amendment, dated November 15, 2013, by and between theRegistrant and 150 Second Street, LLC, as amended 10-K 001-35966 10.19 March 5, 2014 10.28 Lease Amendment, dated June 9, 2014, by and between the Registrantand 150 Second Street, LLC, as amended 10-Q 001-35966 10.24 August 12, 2014 10.29 Lease, dated June 29, 2015, by and between the Registrant and ARE-MA Region No. 38, LLC 10-Q 001-35966 10.29 August 6, 2015 10.30† Lease, dated September 21, 2015, by and between the Registrant andARE-MA Region No. 40 LLC 10-Q 001-35966 10.30 November 5, 2015 21.1 Subsidiaries of the Registrant — — — Filed herewith 23.1 Consent of Ernst & Young LLP — — — Filed 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 adoptedpursuant to Section 302 of 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 adoptedpursuant to Section 302 of the Sarbanes-Oxley Act of 2002. — — — Filed herewith Incorporated by ReferenceExhibitNumber Exhibit Title Form File no. Exhibit Filing Date 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 herewith 101 The following materials from the Company’s Annual Report on Form 10-K for theyear ended December 31, 2015, formatted in XBRL (eXtensible Business ReportingLanguage): (i) Consolidated Balance Sheets, (ii) Consolidated Statements ofOperations and Comprehensive Loss, (iii) Consolidated Statements of ConvertiblePreferred Stock and Stockholders’ Equity (Deficit), (iv) Consolidated Statements ofCash Flows and (v) Notes to Consolidated Financial Statements. — — — Filed 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.#Indicates a management contract or any compensatory plan, contract or arrangement. Exhibit 21.1BLUEBIRD BIO, INC.The following is a list of subsidiaries of the Company as of December 31, 2015: Name Jurisdiction of Incorporationbluebird bio, Inc. Delawarebluebird bio Securities Corporation Massachusettsbluebird bio France, SARL Francebluebird bio Australia PTY LTD Australiabluebird bio (Bermuda) Ltd. BermudaPrecision Genome Engineering, Inc. Washington Exhibit 23.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the following Registration Statements: (1)Registration Statement (Form S-3 No. 333-197192) of bluebird bio, Inc., (2)Registration Statement (Form S-8 No. 333-189560) pertaining to the Second Amended and Restated 2002 Employee, Director and ConsultantPlan, 2010 Stock Option and Grant Plan, 2013 Stock Option and Incentive Plan, and 2013 Employee Stock Purchase Plan of bluebird bio, Inc.,and (3)Registration Statement (Form S-8 Nos. 333-194340 and 333-202283) pertaining to the 2013 Stock Option and Incentive Plan of bluebird bio,Inc.;of our reports dated February 25, 2016, with respect to the consolidated financial statements of bluebird bio, Inc. and the effectiveness of internal controlover financial reporting of bluebird bio, Inc., included in this Annual Report (Form 10-K) of bluebird bio, Inc. for the year ended December 31, 2015./s/ Ernst & Young LLPBoston, MassachusettsFebruary 25, 2016Exhibit 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;(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 materially affect,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: February 25, 2016By: /s/ Nick Leschly Nick Leschly President and Chief Executive Officer (Principal Executive Officer) Exhibit 31.2CERTIFICATIONSI, James M. DeTore, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;(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 materially affect,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: February 25, 2016By: /s/ James M. DeTore James M. DeTore Chief Financial Officer and Treasurer (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, 2015 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: February 25, 2016By: /s/ Nick Leschly Nick Leschly President and Chief Executive Officer (Principal Executive Officer) Date: February 25, 2016By: /s/ James M. DeTore James M. DeTore Chief Financial Officer and Treasurer (Principal Financial Officer)

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