UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
___________________________________________________________________________
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
___________________________________________________________________________
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
For the transition period from to
Commission File Number: 001-35966
___________________________________________________________________________
bluebird bio, Inc.
(Exact Name of Registrant as Specified in Its Charter
___________________________________________________________________________
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
60 Binney Street
Cambridge, Massachusetts
(Address of Principal Executive Offices)
13-3680878
(IRS Employer
Identification No.)
02142
(Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
(339) 499-9300
(Registrant’s Telephone Number, Including Area Code)
___________________________________________________________________________
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
BLUE
The NASDAQ Stock Market LLC
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ 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 ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange
Act.
Large accelerated filer
Non-accelerated filer
☒
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The 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 Nasdaq
Global Select Market on June 30, 2019, the last business day of the registrant’s most recently completed second quarter, was $7,025,034,290.
As of February 13, 2020, there were 55,611,565 shares of the registrant’s common stock, par value $0.01 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement relating to its 2020 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual
Report on Form 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 this report relates.
Table of Contents
PART I.
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV.
Item 15.
Item 16.
Signatures
Table of Contents
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risks
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never
materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. We make such
forward-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 can
identify 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:
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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 for our product candidates;
the timing or success of commercialization of our approved product, and any future approved products;
the pricing and reimbursement of our approved product, and any future approved products;
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 approved product, 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 financial
performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be
materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause
actual results to differ materially from current expectations include, among other things, those listed under Part I, Item 1A. Risk Factors and elsewhere in this
Annual Report on Form 10-K. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law,
we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
This Annual Report on Form 10-K also contains estimates, projections and other information concerning our industry, our business, and the markets for
certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information
that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or
circumstances 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.
Table of Contents
Item 1. Business
Overview
PART I
We are a biotechnology company committed to researching, developing, and commercializing potentially transformative gene therapies for severe genetic
diseases and cancer. We have built an integrated product platform with broad therapeutic potential in a variety of indications based on our lentiviral gene
addition platform, gene editing and cancer immunotherapy capabilities. We believe that gene therapy for severe genetic diseases has the potential to change
the way patients living with these diseases are treated by addressing the underlying genetic defect that is the cause of their disease, rather than offering
treatments that only address their symptoms. Our gene therapy programs include LentiGlobin for β-thalassemia; LentiGlobin for sickle cell disease, or SCD;
and Lenti-D for cerebral adrenoleukodystrophy, or CALD. Our programs in oncology are focused on developing novel T cell-based immunotherapies,
including chimeric antigen receptor (CAR) and T cell receptor (TCR) T cell therapies. bb2121 (idecabtagene vicleucel), and bb21217 are CAR-T cell product
candidates for the treatment of multiple myeloma and partnered under our collaboration arrangement with Bristol-Myers Squibb.
In June 2019, we received conditional marketing approval from the European Commission for LentiGlobin gene therapy for β-thalassemia, being
marketed in the European Union as ZYNTEGLOTM gene therapy (autologous CD34+ cells encoding βA-T87Q-globin gene), for patients 12 years and older with
transfusion-dependent β-thalassemia, or TDT, who do not have a β0/β0 genotype, for whom hematopoietic stem cell, or HSC, transplantation is appropriate,
but a human leukocyte antigen-matched, or HLA, related HSC donor is not available. We have begun commercializing ZYNTEGLO in the European Union
and expect to begin generating product revenue in the first half of 2020. In the fourth quarter of 2019, we initiated rolling submission of a biologics license
application, or BLA, to the U.S. Food and Drug Administration, or FDA, for regulatory approval of LentiGlobin for β-thalassemia in the United States for the
treatment of patients with TDT who do not have a β0/β0 genotype. We are engaged with the FDA in discussions regarding the requirements and timing for
providing certain information regarding various release assays for LentiGlobin for β-thalassemia, and subject to these ongoing discussions, we are currently
planning to complete the BLA submission in the second half of 2020. We are engaged with the FDA and the European Medicines Agency, or EMA, in
discussions regarding our proposed development plans for LentiGlobin for β-thalassemia in patients with TDT and β0/β0 genotypes.
We are currently developing LentiGlobin gene therapy for SCD in the United States and the European Union. We are engaged with the FDA and EMA in
discussions regarding our proposed development plans, and anticipate a potential first submission in 2022 for marketing approval of LentiGlobin for the
treatment of patients with SCD on the basis of clinical data from our ongoing HGB-206 and HGB-210 studies.
We are currently developing Lenti-D gene therapy for CALD in the United States and the European Union. Based on our discussions with the FDA and
EMA, we believe that we may be able to seek approval for our Lenti-D gene therapy for the treatment of patients with CALD on the basis of clinical data
from our ongoing Starbeam study, and the completed ALD-103 observational study. We anticipate a potential first submission in 2020 for marketing approval
of our Lenti-D gene therapy for the treatment of patients with CALD.
In collaboration with Bristol-Myers Squibb, or BMS, we are developing bb2121 (idecabtagene vicleucel, or ide-cel) and bb21217 product candidates as
treatments for multiple myeloma. We are co-developing and co-promoting ide-cel in the United States with BMS and we have exclusively licensed to BMS
the development and commercialization rights for ide-cel outside of the United States. We and BMS anticipate a potential first submission in the first half of
2020 for marketing approval of ide-cel as a treatment for relapsed and refractory multiple myeloma. We have exclusively licensed the development and
commercialization rights for the bb21217 product candidate to BMS, with an option for us to elect to co-develop and co-promote bb21217 within the United
States.
We also have the following programs to discover and develop T cell product candidates to treat hematologic and solid tumor malignancies: acute myeloid
leukemia, Merkel cell carcinoma, diffuse large B-cell lymphoma, and MAGE-A4 positive solid tumors. In the field of severe genetic diseases, we have a
preclinical program for a gene therapy to treat mucopolysaccharidosis type I (MPSI), a genetic ultra-rare metabolic condition that causes severe neurologic
impairment and organ damage.
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Our Platform
Our platform is based on lentiviral vectors which are used to introduce a functional copy of a gene to the patient’s own isolated HSCs, in the case of our
programs in severe genetic diseases, or the patient’s own isolated white blood cells which include T cells, in the case of our programs in oncology. Allogeneic
hematopoietic stem cell transplant, or allogeneic HSCT, is an existing approach of treating a patient using HSCs contributed by a donor other than the patient
that contain the properly functioning copy of the gene whose mutation has caused the underlying disease. However, this approach has significant limitations
in the treatment of severe genetic diseases, including difficulties in finding appropriate HLA-matched donors and carries the risk of transplant-related
rejection, graft-versus-host disease, or GVHD, and death. Our approach is intended to address the significant limitations of allogeneic HSCT while utilizing
existing stem cell transplant infrastructure and processes. Also, because our approach has the potential to drive sustained expression of the functional protein
encoded by the gene insert after a single administration, we believe the value proposition offered by our product candidates for patients, families, health care
providers and payers would be significant.
Although our initial focus for severe genetic diseases is in TDT, SCD and CALD, and for oncology is in multiple myeloma, we believe our gene therapy
platform has broad therapeutic potential in a variety of indications. We believe that our lentiviral vectors can be used to introduce virtually any gene into a cell
and have the potential to be manufactured on a commercial scale reproducibly and reliably, as each new vector is produced using substantially the same
process.
We also have discovery research programs utilizing our cell signaling and gene editing technology platform across our pipeline. For instance, we are
exploring applications of our CAR and TCR T cell technologies and expertise in cancer immunotherapy in combination with novel proteins based on
synthetic biology. These technologies may potentially allow our future T cell-based product candidates to detect the tumor microenvironment or, in the case
of future CAR-T cell product candidates, to be regulated by small molecules. In addition, we are focused on utilizing homing endonuclease and megaTAL
gene editing technologies in a variety of potential applications and disease areas, including oncology, hematology and other diseases. Homing endonucleases
and megaTALs are novel enzymes that provide a highly specific and efficient way to modify DNA sequences to edit or insert genetic components to
potentially treat a variety of diseases.
Our Programs in Severe Genetic Diseases
β-thalassemia
Overview
β-thalassemia is a rare genetic disease caused by a mutation in the β-globin gene resulting in the production of defective red blood cells, or RBCs.
Genetic mutations cause the absence or reduced production of the beta chains of hemoglobin, or β-globin, thereby preventing the proper formation of
hemoglobin A, which normally accounts for greater than 95% of the hemoglobin in the blood of adults. Hemoglobin is an iron-containing protein in the blood
that carries oxygen from the respiratory organs to the rest of the body. Hemoglobin A consists of four chains—two chains each of α-globin and β-globin.
Genetic mutations that impair the production of β-globin can lead to a relative excess of α-globin, leading to premature death of RBCs. The clinical
implications of the α-globin/ β-globin imbalance are two-fold: first, patients lack sufficient RBCs and hemoglobin to effectively transport oxygen throughout
the body and can become severely anemic; and second, the ineffective production of RBCs can lead to a range of multi-systemic complications, including but
not limited to splenomegaly, marrow expansion, bone deformities, and iron overload in major organs.
The clinical course of β-thalassemia correlates with the degree of globin chain imbalance. Nearly 350 different mutations have been described in patients
with β-thalassemia. Mutations can be categorized as those that result in no functional β-globin production (β0) and those that result in decreased functional β-
globin production (β+). TDT refers to any genotype that results in the need for chronic transfusions due to severe anemia. Affected patients produce as little as
one to seven g/dL of hemoglobin (in contrast, a normal adult produces 12 to 18 g/dL of hemoglobin).
Limitations of current treatment options
In geographies where treatment is available, patients with TDT receive chronic blood transfusions to survive. These regimens consist of regular infusions
with units of packed RBC, or pRBC, usually every two to five weeks, which are intended to maintain hemoglobin levels and control 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 may lead to
significant morbidity and mortality through iron-associated heart and liver toxicity. To help reduce iron overload-associated risks and resulting complications,
patients receiving regular transfusions must adhere to therapeutic iron chelation regimens to reduce the iron overload. Despite improvements in supportive
care with transfusion and chelation, the overall life expectancy for a patient with
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TDT is significantly reduced compared to the general population. In addition, patient and caregiver quality of life can be significantly affected by
complications associated with TDT and chronic disease management.
The only potentially curative therapy for β-thalassemia has been allogeneic HSCT, with best outcomes observed in pediatric patients with a matched
sibling donor. However, allogeneic HSCT is associated with serious risks, some of which can be life threatening and result in death. Potential complications
of allogeneic HSCT include a risk of engraftment failure in unrelated HLA matched patients, a risk of life-threatening infection, and a risk of GVHD, a
common complication in which donor immune cells (white blood cells in the transplanted cells, or graft) recognize the cells of the recipient (the host) as
“foreign” and attack them. As a result of these safety challenges, allogeneic HSCT is associated with significant mortality rates, particularly for patients
treated with cells from a donor who is not a matched sibling, and in patients over 11 years old. Consequently, we believe there is a need for an option that can
address the underlying genetic cause of TDT for more patients.
LentiGlobin for β-thalassemia
Our approach involves using a lentiviral vector to insert the normal β-globin gene with a single amino acid substitution into the patient’s own HSCs ex
vivo, to enable formation of normally functioning hemoglobin A and normal RBCs in patients. Importantly, this amino acid substitution, referred to as T87Q,
also serves as a distinct biomarker used to quantify expression levels of the gene therapy-derived β-globin protein in patients with TDT. We refer to the cells
that have undergone our ex vivo manufacturing process resulting in genetically modified HSCs as LentiGlobin for β-thalassemia.
We are conducting, or have conducted, the following clinical studies of LentiGlobin for β-thalassemia to evaluate its efficacy and safety in the treatment
of patients with TDT:
• Northstar study (HGB-204), is a completed, single-dose, open-label, non-randomized, multi-site phase 1/2 clinical study in the United States,
Australia and Thailand to evaluate the safety and efficacy of LentiGlobin for β-thalassemia in increasing hemoglobin production and eliminating or
reducing transfusion dependence following treatment. In March 2014, we announced that the first patient had been treated in this study. This study
was completed in February 2018, and patients in this study were enrolled in a long-term follow-up protocol to assess safety and efficacy beyond the
Northstar study follow-up period. Eighteen adults and adolescents were enrolled in the study. To be eligible for enrollment in this study, patients
were between 12 and 35 years of age with a diagnosis of TDT and received at least 100 mL/kg/year of pRBCs or at least eight transfusions per year
in each of the two years preceding enrollment. The patients were also medically eligible for allogeneic HSCT. Efficacy was evaluated primarily by
the production of ≥2.0 g/dL of hemoglobin A containing βA-T87Q-globin for the six-month period between 18 and 24 months post-treatment.
Exploratory efficacy endpoints included pRBC transfusion requirements per month and per year, post-treatment. Safety evaluations 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 patient and characterization of events of insertional mutagenesis leading to clonal
dominance or leukemia. Subjects were monitored by regular screening. Each patient remained on study for approximately 26 months from time of
consent and then were enrolled in a long-term follow-up protocol that is assessing safety and efficacy beyond the study protocol’s follow-up period.
• Northstar-2 study (HGB-207) is an ongoing single-dose, open-label, non-randomized, international, multi-site phase 3 clinical study to evaluate the
safety and efficacy of LentiGlobin for β-thalassemia to treat patients with TDT and non-β0/β0 genotypes. In December 2016, we announced that the
first patient had been treated in our Northstar-2 study. Twenty-three patients are enrolled in the study, consisting of 15 adolescent and adult patients
between 12 and 50 years of age at enrollment, and eight pediatric patients less than 12 years of age at enrollment. To be enrolled, patients with TDT
and non-β0/β0 genotypes must have received at least 100 mL/kg/year of pRBCs or at least eight transfusions per year for the past two years. All
patients must be eligible for allogeneic HSCT, but without a matched family HSCT donor. The primary endpoint of this study is the proportion of
treated patients who achieve transfusion independence, defined as weighted average hemoglobin levels ≥9.0 g/dL without any pRBC transfusions for
a continuous period of at least 12 months at any time during the study after treatment. The secondary endpoints of this study are to quantify gene
transfer efficiency and expression, and to measure the effects of treatment with the LentiGlobin for β-thalassemia on transfusion requirements post-
treatment and clinical events. 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 patient and
characterization of events of insertional mutagenesis leading to clonal dominance or leukemia. Each patient will remain on study for approximately
24 months post-treatment and then will be enrolled in a long-term follow-up protocol that will assess safety and efficacy beyond the study protocol’s
follow-up period.
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• Northstar-3 study (HGB-212) is an ongoing single-dose, open-label, non-randomized, international, multi-site phase 3 clinical study to evaluate the
efficacy and safety of LentiGlobin for β-thalassemia to treat patients with TDT and β0/β0 genotypes or IVS-I-110 mutation. In November 2017, we
announced that the first patient had been treated in our Northstar-3 study. Approximately 18 patients who are less than 50 years of age at enrollment
are expected to be enrolled in the study. To be eligible, patients with TDT and β0/β0 genotypes or IVS-I-110 mutation must have received at least 100
mL/kg/year of pRBCs or at least eight transfusions per year for the past two years. All patients must be clinically stable and eligible to undergo
HSCT, as well as having been treated and followed for at least the last two years in a specialized center that maintained detailed medical records,
including transfusion history. The primary endpoint of this study is the proportion of treated patients who meet the definition of “transfusion
reduction,” which is defined as demonstration of reduction in volume of pRBC transfusion requirements (in mL/kg) in the post-treatment time period
of months 12 to 24 compared to the average annual transfusion requirement in the 24 months prior to enrollment. The secondary endpoints of this
study are to measure the proportion of patients who meet the definition of “transfusion independence,” to quantify gene transfer efficiency and
expression, and to measure the effects of treatment with LentiGlobin for β-thalassemia on transfusion requirements post-treatment and clinical
events. Each patient will remain on study for approximately 24 months post-treatment and then will be enrolled in a long-term follow-up protocol
that will assess safety and efficacy beyond the study protocol’s follow-up period.
• HGB-205 is a completed, single-dose, open-label, non-randomized, phase 1/2 clinical study at a single site in France to examine the safety and
efficacy of LentiGlobin in four patients with TDT and three patients with SCD. In December 2013, we announced that the first patient with TDT had
been treated in our HGB-205 study and in October 2014 we announced that the first patient with SCD had been treated in our HGB-205 study.
Patients were required to be between five and 35 years of age with a diagnosis of TDT or SCD at the time of enrollment. To be enrolled, patients
with TDT must have received at least 100 mL/kg/year of pRBCs per year for the past two years. Those with SCD must have failed to achieve clinical
benefit from treatment with hydroxyurea and have an additional poor prognostic risk factor (e.g., recurrent vaso-occlusive events, or VOEs, or acute
chest sydrom, or ACS). All patients must have been eligible for allogeneic HSCT, but without a matched sibling allogeneic HSCT donor. The
primary objective of our HGB-205 study was to determine the safety, tolerability and success of engraftment of LentiGlobin. The secondary
objectives of the study were to quantify gene transfer efficiency and expression, and to measure the effects of treatment with LentiGlobin on disease-
specific biological parameters and clinical events. In the case of patients with TDT and SCD, this meant the volume of pRBC transfusions, and for
patients with SCD, it also meant the number of VOEs and ACS in each patient, compared with the two-year period prior to treatment. 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 patient and characterization of events of insertional
mutagenesis leading to clonal dominance or leukemia.
LentiGlobin for β-thalassemia has been granted Orphan Drug status by the FDA and EMA for β-thalassemia and was granted Fast-Track designation by
the FDA for the treatment of β-thalassemia major. The FDA has granted Breakthrough Therapy designation to LentiGlobin for β-thalassemia for the treatment
of transfusion-dependent patients with β-thalassemia major, and rare pediatric disease designation for the treatment of TDT. We are participating in the EMA’s
Adaptive Pathways pilot program (formerly referred to as Adaptive Licensing), which is part of the EMA’s effort to improve timely access for patients to new
medicines. In addition, the EMA has granted Priority Medicines (PRIME) eligibility for LentiGlobin for β-thalassemia.
We are commercializing LentiGlobin for β-thalassemia in the European Union as a potential one-time treatment for TDT. In June 2019, the European
Commission granted conditional marketing authorization for LentiGlobin for β-thalassemia (autologous CD34+ cells encoding βA-T87Q-globin gene) for the
treatment of patients 12 years and older with TDT who do not have a β0/β0 genotype, for whom HSCT is appropriate but an HLA-matched related HSC donor
is not available. In the fourth quarter of 2019, we initiated a rolling submission of a BLA in the United States, which will be based on data from the Northstar
study and the Northstar-2 study of our LentiGlobin for β-thalassemia for the treatment of patients with TDT and non-β0/β0 genotypes. We are engaged with
the FDA in discussions regarding the requirements and timing for providing certain information regarding various release assays for LentiGlobin for β-
thalassemia, and subject to these ongoing discussions, we are currently planning to complete the BLA submission in the second half of 2020. In addition, if
successful, we believe the data from our Northstar-3 study, together with data from our Northstar study and Northstar-2 study and HGB-205 study, could be
sufficient to form the basis for a BLA supplement submission for LentiGlobin for β-thalassemia in the United States, and a MAA variation submission in the
EU, for the treatment of patients with TDT and β0/β0 genotypes.
In December 2019, we presented the following updated clinical data from our Northstar, Northstar-2 and Northstar-3 studies at the 61st Annual Meeting
of the American Society of Hematology, or ASH Annual Meeting.
• Northstar study (HGB-204) – As of the data cut-off date of June 12, 2019:
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Ten patients with non-β0/β0 genotypes and eight patients with β0/β0 genotypes had undergone infusion with LentiGlobin for β-thalassemia,
with up to five years of follow up (median 44.9 months; min–max: 34.8–61.3 months).
Eight of ten treated patients who did not have a β0/β0 genotype achieved and continued to maintain transfusion independence, or TI, for up
to 51.3 months, with a median weighted average hemoglobin during TI of 10.3 g/dL. TI is defined as weighted average Hb ≥ 9 g/dL without
RBC transfusions for more than 12 months. In the two patients who did not achieve TI, transfusion volumes were reduced by 79% and
52%.
◦ Of the eight patients who have a β0/β0 genotype, three achieved and continued to maintain TI with a current duration up to 30.4 months, and
a median weighted average hemoglobin during TI of 9.9 g/dL.
◦ Among patients who achieved TI, a decrease in markers of iron burden, including liver iron concentration, serum ferritin and transferrin
saturation, were observed over time. Liver iron concentrations began to decrease in eight of the eleven patients who achieved TI. The
largest decrease was observed in the seven patients who had 48 months of data available. A median 44% reduction (ranging from 17% to
83%) was reported in these seven patients.
• Northstar-2 study (HGB-207) – All data presented at the ASH Annual Meeting and summarized below are as of the data cut-off date of June 12,
2019:
◦
Twenty-one of 23 patients were treated and have been followed for a median of 11.6 months. These patients ranged in age from eight to 34
years, including six pediatric (<12 years) and 15 adolescent/adult (≥12 years) patients.
◦ Of the ten patients with sufficient follow-up duration to be evaluable tor the primary endpoint of TI, nine out of ten patients had achieved
TI, with median weighted average hemoglobin levels of 12.2 g/dL (ranging from 11.4 to 12.8 g/dL) during TI. All nine patients continued
to maintain TI for a median duration of 15.2 months (ranging from 12.1 to 21.3 months) as of the data cutoff.
◦
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The median total hemoglobin was > 12 g/dL at 1-year post-treatment.
Eighteen out of 20 patients with at least five months of follow-up have discontinued transfusions for at least 3.5 months and the median
total hemoglobin levels at months 6, 12 and 18 of follow up were 11.5 g/dL (n=17), 12.3 g/dL (n=11) and 12.2 g/dL (n=8), respectively.
HbAT87Q levels were stable over time at 8.7 g/dL at Month 6; 9.3 g/dL at Month 12; and 9.4 g/dL at Month 18.
In an exploratory analysis, bone marrow from nine patients who had reached 12 months of follow-up and had achieved TI was evaluated for
myeloid to erythroid ratio. In all nine patients, an increase in the myeloid to erythroid ratio was observed, suggesting improvement in bone
marrow RBC production. A trend toward normalization of soluble transferrin receptor, a marker of RBC production, and reticulocyte
counts, a marker of hemolysis or RBC destruction, was also observed.
• Northstar-3 study (HGB-212) – All data presented at the ASH Annual Meeting and summarized below are as of the data cut-off date of September
30, 2019:
◦
◦
Thirteen patients (eight β0/β0, two β0/IVS-I-110, three homozygous IVS-I-110 genotypes) were treated and had a median follow-up of 8.8
months (ranging from 2.5 to 20.0 months). Median age at enrollment was 17 years of age (ranging from seven to 33 years); four patients
were under 12 years of age.
Two patients had at least 12 months of follow-up and were evaluable for TI. Both patients (one patient with a β0/β0 genotype and one
pediatric patient with a β0/IVS-I-110 genotype) achieved and continued to maintain TI with Hb levels of 13.2 g/dL and 10.4 g/dL,
respectively.
◦ Nine of 11 patients with at least six months of follow-up did not receive a transfusion for more than three months as of last follow-up. In
these patients, total hemoglobin levels ranged from 8.3 to 14.2 g/dL.
Non-serious adverse events observed in the HGB-204, HGB-207 and HGB-212 studies as of their respective data cut-off dates that were attributed to
LentiGlobin for β-thalassemia were hot flush, dyspnoea, abdominal pain, pain in extremities, thrombocytopenia, leukopenia, neutropenia and non-cardiac
chest pain. One serious adverse event of thrombocytopenia was considered possibly related to LentiGlobin for β-thalassemia. Additional adverse events
observed in clinical studies were consistent with the known side effects of HSC collection and bone marrow ablation with busulfan, including serious adverse
events of veno-occlusive disease. There have been no new unexpected safety events, no deaths, no graft failure and no cases of vector-mediated replication
competent lentivirus or clonal dominance. In addition, there have been no new reports of veno-occlusive liver disease as of the data cutoffs presented at ASH.
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Sickle cell disease
Overview
SCD is a hereditary blood disorder resulting from a mutation in the β-globin gene that causes polymerization of hemoglobin proteins, resulting in
abnormal red blood cell function. The disease is characterized by anemia, VOEs, a common complication of SCD in which there is severe pain due to
obstructed blood flow in the small blood vessels of the body, cumulative damage to multiple organs, infections, stroke, overall poor quality of life and early
death in a large subset of patients. Under low-oxygen conditions, which are exacerbated by the RBC abnormalities, the mutant hemoglobin polymerizes
causing the RBCs to take on a sickle shape, which causes them to aggregate and obstruct small blood vessels, thereby restricting blood flow to organs
resulting in pain, cell death and organ damage. If oxygen levels are restored, the hemoglobin can depolymerize and the RBCs will return to their normal
shape, but over time, repeated sickling damages the cell membrane and the cells fail to return to the normal shape even in high-oxygen conditions.
Limitations of current treatment options
Where adequate medical care is available, common treatments for patients with SCD largely revolve around management and prevention of acute
sickling episodes. Chronic management may include hydroxyurea and, in certain cases, chronic RBC transfusions. RBC transfusion therapy can be utilized to
maintain the level of sickle hemoglobin below 30% to 50%, which decreases sickling of RBCs, reduces the risk of recurrent stroke, and decreases the
incidence of associated co-morbidities. While transfusion therapy can be critical in the management of acute disease, and can be vital in preventing some of
the chronic manifestations of SCD, it does not provide equal benefit to all patients. Furthermore, in patients with SCD, it is associated with risks such as
infection with blood-borne pathogens, alloimmunization, and adverse transfusion reactions that may lead to fatal outcomes. Additional complications of
chronic transfusion include iron overload.
Hydroxyurea is currently one of four medications approved for the treatment of SCD and is recommended for patients with recurrent moderate to severe
painful crises, to reduce the frequency of painful crises. However, not all patients with SCD respond to hydroxyurea, or are able to tolerate the cytotoxic effect
of reduced white blood cell and platelet counts. A significant number of patients with SCD find it difficult to adhere to hydroxyurea treatment, and for most
patients there is no effective long-term treatment. L-glutamine was approved by the FDA in 2017, and voxelotor and crizanlizumab-tmca were approved by
the FDA in 2019 for the treatment of sickle cell disease and as such, there are limited long-term data available regarding the safety or efficacy of these
treatments.
The only potentially curative therapy currently available for SCD is allogeneic HSCT, but it is limited to patients with severe disease manifestations and
carries significant risk of transplant-related morbidity and mortality. Thus, this option is usually offered primarily to pediatric patients with available sibling-
matched donors. It is particularly difficult to find suitable donors for individuals of African descent, and it is estimated that only a fraction of eligible patients
undergo transplant. In light of these factors, we believe that SCD is a seriously debilitating and life-threatening disease with a significant unmet medical need.
LentiGlobin for sickle cell disease
We are developing LentiGlobin for SCD as a potential one-time treatment for patients with SCD. As in our approach with LentiGlobin for β-thalassemia
in TDT, our approach in SCD involves the ex vivo insertion of the normal β-globin gene with the T87Q amino acid substitution using a lentiviral vector into
the patient’s own HSCs to enable formation of normally functioning hemoglobin A and normal RBCs in patients. In LentiGlobin for SCD, T87Q serves as a
distinct biomarker used to quantify expression levels of the functional β-globin protein in patients with SCD, while also providing anti-sickling properties in
the context of SCD. We refer to the cells that have undergone our ex vivo manufacturing process resulting in genetically modified HSCs as LentiGlobin for
SCD.
We are conducting, or plan to conduct, the following clinical studies of LentiGlobin for SCD to evaluate its safety and efficacy:
• HGB-206 is a single-dose, open-label, non-randomized, multi-site phase 1/2 clinical study in the United States to evaluate the safety and efficacy of
LentiGlobin for SCD. Up to 50 adult and adolescent patients are expected to be enrolled in the study. Patients must be ≥18 years of age with a
diagnosis of sickle cell disease, with either βS/βS or βS/β0 genotype. The sickle cell disease must be severe, as defined by recurrent severe VOEs,
ACS, history of an overt stroke, or echocardiographic evidence of an elevated tricuspid regurgitation jet velocity, an indicator of pulmonary
hypertension, and patients must have failed to achieve clinical benefit from treatment with hydroxyurea. The patients must also be eligible for HSCT.
We refer to the patients enrolled under the original study protocol as patients in
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“Group A.” In October 2016, we announced amendments in the study protocol to incorporate several changes with the goal of increasing production
of anti-sickling β-globin, such as increasing the percentage of transduced cells through manufacturing improvements, increasing target busulfan area
under the curve, introducing a minimum period of regular blood transfusions prior to stem cell collection, and collecting HSCs from peripheral blood
after mobilization with plerixafor rather than via bone marrow harvest. We refer to the patients enrolled under the amended study protocol utilizing
HSCs from bone marrow harvest as patients in “Group B.” We refer to the patients enrolled under the amended study protocol utilizing HSCs from
peripheral blood after mobilization with plerixafor as patients in “Group C.” In February 2017, we announced that the first patient had been treated
under the amended study protocol. The primary efficacy endpoint for this study is globin response based on βA-T87Q expression and total hemoglobin,
and the secondary efficacy endpoint for this study is the frequency of VOEs. Safety endpoints include monitoring for laboratory parameters and
frequency and severity of adverse events; the success and kinetics of HSC engraftment; the incidence of treatment related mortality and overall
survival; the detection of vector-derived replication-competent lentivirus in any patient; and the characterization of events of insertional mutagenesis
leading to clonal dominance or leukemia. Each patient 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 will assess safety and efficacy beyond the study protocol’s follow up period.
• HGB-210 is a single-dose, open-label, non-randomized, multi-site, international phase 3 clinical study to evaluate the efficacy and safety of
LentiGlobin for SCD in the treatment of patients with SCD and a history of vaso-occlusive events, or VOEs. Approximately 35 pediatric, adolescent
and adult patients are expected to be enrolled in the study. Patients must be at least two years of age at enrollment with a diagnosis of sickle cell
disease, with either βS/βS or βS/β0 genotype. The sickle cell disease must be severe, as defined by recurrent severe VOEs, and patients must have
failed to achieve clinical benefit from treatment with hydroxyurea. The patients must also be eligible for HSCT. The primary efficacy endpoint for
this study is globin response based on βA-T87Q expression and total hemoglobin, and the secondary efficacy endpoint for this study is the frequency of
VOEs. Safety endpoints include monitoring for laboratory parameters and frequency and severity of adverse events; the success and kinetics of HSC
engraftment; the incidence of treatment related mortality and overall survival; the detection of vector-derived replication-competent lentivirus in any
patient; and the characterization of events of insertional mutagenesis leading to clonal dominance or leukemia. Each patient 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 will assess safety and efficacy
beyond the study protocol’s follow up period.
• HGB-211, our planned, single-dose, open-label, non-randomized, multi-site phase 3 clinical study to evaluate the efficacy and safety of LentiGlobin
for SCD in pediatric patients with SCD and elevated stroke risk. This study is expected to enroll approximately 18 patients two to 14 years of age.
The primary endpoint of the study is expected to be transcranial dopplier response without transfusion.
• HGB-205 is a completed single-center phase 1/2 study in France of patients with SCD which also enrolled patients with TDT. In October 2014, we
announced that the first patient with SCD had been treated in this study.
LentiGlobin for SCD has been granted Orphan Drug status by the FDA and EMA and Fast-Track designation by the FDA for the treatment of certain
patients with SCD. The FDA has also granted Regenerative Medicine Advanced Therapy (RMAT) designation to LentiGlobin for SCD.
We are engaged with the FDA and the EMA in ongoing discussions regarding our proposed development plans for our LentiGlobin for SCD.
Specifically, we are seeking to validate the use of a primary efficacy endpoint of globin response based on βA-T87Q expression and total hemoglobin in our
ongoing HGB-206 study as a surrogate endpoint for other SCD clinical outcomes such as VOEs. Based on our discussions with the FDA and EMA, we
believe that the ongoing HGB-206 and HGB-210 studies may be sufficient to form the basis for a BLA submission in the United States or a MAA in Europe
for the treatment of patients with SCD. These studies have been planned and are being conducted with the goal of achieving a more accelerated development
path for our LentiGlobin product candidate, with a potential first submission for regulatory approval in 2022.
In December 2019, we presented updated clinical data from our HGB-206 study at the ASH Annual Meeting. All data presented at the ASH Annual
Meeting and summarized below, including the summary of safety results below, are as of the data cut-off date as of August 26, 2019:
•
Summary of efficacy results –
◦ Group A patients: A total of seven patients have undergone infusion with LentiGlobin drug product in Group A, with at least three years of
post-treatment follow-up.
▪
Five of the seven patients did not require regular RBC transfusions post-treatment.
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▪
▪
Levels of HbAT87Q and total hemoglobin remained durable in all seven patients, and median HbAT87Q levels were 0.9 g/dL and total
hemoglobin was 9.0 g/dL.
Patients experienced a reduction, but not complete elimination of vaso-occlusive crises, or VOC, and ACS events at two years
post-treatment.
◦ Group B patients: Two patients have undergone infusion with LentiGlobin drug product in Group B, with up to two years of post-treatment
follow-up.
▪
▪
▪
Both patients did not require regular RBC transfusions post-treatment.
Levels of HbAT87Q and total hemoglobin remained durable at two years of post-treatment follow-up for the two patients. HbAT87Q
levels were 3.6 g/dL and 7.1 g/dL, and total hemoglobin was 11.3 g/dL and 13.0 g/dL.
Patients experienced a reduction, but not complete elimination of VOC and ACS events at two years post-treatment.
◦ Group C patients: A total of 17 patients have undergone infusion with LentiGlobin drug product in Group C.
▪
In the 12 patients with six or more months of follow-up, median levels of gene therapy-derived anti-sickling hemoglobin, HbAT87Q,
were at least 40% of total hemoglobin. Total hemoglobin and HbAT87Q levels ranged from 9.3 to 15.2 g/dL and 2.7 to 9.0 g/dL,
respectively.
▪ Within 3 months of treatment, HbAT87Q accounts for over 30% of total globin, and this rises to 44 – 59% at later follow-up. This
results in hemoglobin S levels being decreased, over time, to less than 50% of total hemoglobin.
▪
Treatment reduced key markers of hemolysis, including reticulocyte counts, lactate dehydrogenase levels and total bilirubin
concentration.
▪ Among the nine patients with at least six months of follow-up who had four or more VOC or ACS events in the two years prior to
treatment, there was a 99% reduction in annualized rate of VOC and ACS. There were no reports of ACS or serious VOC at up to
21 months post-treatment in these patients. One non-serious Grade 2 VOC was observed in a patient approximately 3.5 months
post-infusion.
•
Summary of safety results – As of the data cut-off, the safety data from all patients in HGB-206 were reflective of underlying SCD, the known side
effects of HSC collection and myeloablative conditioning with busulfan. There have been no serious adverse events related to LentiGlobin for SCD.
One mild, non-serious event of hot flush was reported that the investigator considered to be related to LentiGlobin for SCD; it occurred and resolved
on the day of drug product infusion and did not require treatment.
The Lenti-D product candidate
Adrenoleukodystrophy
Overview
Adrenoleukodystrophy is a rare X-linked, metabolic disorder caused by mutations in the ABCD1 gene which results in a deficiency in
adrenoleukodystrophy protein, or ALDP, and subsequent accumulation of very long-chain fatty acids, or VLCFA. VLCFA accumulation occurs in plasma and
all tissue types, but primarily affects the adrenal cortex and white matter of the brain and spinal cord, leading to a range of clinical outcomes. The most severe
form of ALD, the inflammatory cerebral phenotype, referred to as CALD, involves a progressive destruction of myelin, the protective sheath of the nerve
cells in the brain that are responsible for thinking and muscle control. Symptoms of CALD usually occur in early childhood and progress rapidly if untreated,
leading to severe loss of neurological function and eventual death in most patients. We estimate that approximately 35% to 40% of boys with ALD will
develop CALD.
Limitations of current treatment options
Currently, the only effective treatment option for CALD is allogeneic HSCT. In this procedure, the patient is treated with HSCs containing a functioning
copy of the gene contributed by a donor other than the patient. Allogeneic HSCT is an effective treatment option for patients in the earliest stages of cerebral
disease, particularly if done using cells from an unaffected human leukocyte antigen (HLA)-matched sibling donor, which minimizes the risk associated with
allogeneic HSCT. However, the majority of allogeneic HSCT procedures for CALD are carried out with non-sibling matched donor cells or partially matched
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related or unrelated donor cells including umbilical cord blood cells because a matched sibling donor is not available. While safety risks, including transplant-
related morbidity and mortality, graft failure, GVHD, and opportunistic infections are of particular concern when transplants are performed in the absence of a
matched sibling donor, the potential for life-threatening risks exists even when an HLA-matched sibling donor is available. Donor availability and transplant-
related risks limit the broader use of allogeneic HSCT.
As the outcome of HSCT varies with clinical stage of the disease at the time of transplant, early diagnosis of CALD is important. In the United States,
newborn screening for ALD was added in February 2016 to the Recommended Universal Screening Panel, a list of disorders that are screened at birth and
recommended by the Secretary of the U.S. Department of Health and Human Services for states to screen as part of their state universal newborn screening
program. Disorders are chosen based on evidence that supports the potential net benefit of screening, among other factors. An increasing number of states are
including ALD testing in their state newborn screening programs, however only a limited number of states are currently active. Outside the United States, the
Minister of Health in the Netherlands has approved the addition of adrenoleukodystrophy to the newborn screening program, and a pilot began in 2019.
Development of the Lenti-D product candidate
We are developing our Lenti-D product candidate as an autologous treatment of CALD, with the potential to provide the effectiveness seen with
allogeneic HSCT, but without the immunologic risk. Our approach involves the ex vivo insertion of a functional copy of the ABCD1 gene via a lentiviral
vector into the patient’s own HSCs. Following engraftment, we expect the transduced HSCs to differentiate into other cell types, including macrophages and
cerebral microglia, which produce functional ALDP. We believe that the functional ALDP can then enable the local degradation of VLCFAs in the brain,
which in turn can stabilize the disease by preventing further cerebral inflammation and demyelination that are characteristics of CALD.
We are conducting the Starbeam study (ALD-102), a multi-site, international phase 2/3 study of our Lenti-D product candidate to evaluate its safety and
efficacy in the treatment of patients with CALD, and the ALD-104 study, a multi-site phase 3 study of our Lenti-D product candidate for the treatment of
patients with CALD, to enable access following completion of enrollment in the Starbeam study, and to evaluate the suitability of an additional conditioning
regimen for use with the Lenti-D product candidate.
Based on our discussions with the FDA and EMA, we believe that we may be able to seek approval for our Lenti-D product candidate for the treatment
of patients with CALD on the basis of safety and efficacy data from our ongoing Starbeam study, safety data from our ongoing ALD-104 study, and the
ongoing ALD-103 observational study. For the assessment of efficacy, we expect that the clinical results of the Starbeam study will be compared to a
clinically meaningful benchmark based on the medical literature and data collected in ALD-101, a retrospective analysis that assessed the natural history of
CALD as well as outcomes of patients with CALD who had received allogeneic HSCT. For the assessment of safety, we expect that the clinical results of the
Starbeam study will be compared to data collected from the ALD-103 study, a multinational, multi-site, prospective and retrospective observational study that
is running concurrently with the Starbeam study and is designed to evaluate outcomes of allogeneic HSCT in patients with CALD. We anticipate a potential
first submission in 2020 for regulatory approval of our Lenti-D product candidate for the treatment of patients with CALD. Lenti-D has been granted Orphan
Drug status by the FDA and EMA for adrenoleukodystrophy. The FDA has granted Breakthrough Therapy designation and the EMA has granted PRIME
eligibility to the Lenti-D product candidate for CALD.
Clinical results of the Lenti-D product candidate
• Completed non-interventional retrospective study (the ALD-101 Study)
CALD is a rare disease and as such, data on the natural history of the disease, as well as the efficacy and safety profile of allogeneic HSCT, is limited
in the scientific literature. In order to further characterize the natural history of CALD, describe outcomes after HSCT, and identify predictors of
positive treatment outcomes, we performed a large, multicenter, retrospective chart review and collected data on 72 untreated CALD patients, and 65
CALD patients who received allogeneic HSCT. In the study, we collected survival, functional and neuropsychological assessments and
neuroimaging data for both treated and untreated patients, as available; however, given the retrospective nature of the study, we were not able to
collect comprehensive data for all patients. Additional analyses were conducted to gain further insight into ongoing risks and determinants of
successful outcomes after HSCT, identify appropriate populations for treatment, and define endpoints that could be useful for future clinical studies.
•
Starbeam study (ALD-102) – phase 2/3 study for the treatment of patients with CALD
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Our Starbeam study is a single-dose, open-label, non-randomized, international, multi-site phase 2/3 study to evaluate the safety and efficacy of the
Lenti-D drug product in males with CALD ≤ 17 years of age. We treated the first patient in the Starbeam study in the United States in October 2013.
We announced that we achieved our enrollment target in September 2018.
In the study, patients must be age seventeen years or younger with a confirmed diagnosis of active CALD, including elevated levels of plasma
VLCFA, a Loes score of 0.5 to ≤ 9, inclusive, evidence of gadolinium enhancement and an NFS ≤ 1. Patients with a willing, unaffected 10/10 HLA-
matched sibling HSCT donor are excluded from the study.
The primary efficacy endpoint of the study is the proportion of patients who are alive and free of major functional disabilities (MFD) at 24 months
post-treatment. MFDs, which represent end-stage disease, have been characterized as having the most significant impact on the ability of patients
with CALD to function independently, representing unambiguous and profound neurologic degeneration. These MFDs are: loss of communication,
no voluntary movement, cortical blindness, tube feeding, wheelchair dependence, and total incontinence. Secondary and exploratory endpoints
include the following:
◦
◦
Changes in neurologic function score (NFS), a 25-point scale used to evaluate the severity of gross neurologic dysfunction by scoring 15
neurological abnormalities across multiple domains.
Changes in Loes score, a 34-point scale designed to objectively measure the extent of demyelination and atrophy in CALD patients, based
on brain magnetic resonance imagining, or MRI, studies. Increasing Loes scores indicate worsening disease.
◦ Gadolinium enhancement (GdE). CALD can progress rapidly and is associated with severe inflammation and disruption of the blood brain
barrier which can be detected by gadolinium enhancement on brain MRI. Evidence of gadolinium enhancement, referred to by clinicians as
a gadolinium positive result, is highly predictive of rapid neurologic decline. However, while pre-transplant gadolinium status is clearly
correlated with rapid disease progression, the kinetics of gadolinium enhancement after clinically successful HCST are not well understood.
GdE was assessed by magnetic resonance imaging (MRI) every six months following transplant up to 24-months, and every 12 months
thereafter.
The primary safety endpoint is the proportion of patients who experience either ≥ Grade 2 acute GVHD or chronic GVHD by 2 years post-treatment.
Additional safety evaluations include the following: success and kinetics of HSC engraftment, incidence of transplant-related mortality; detection of
vector-derived replication-competent lentivirus; and characterization and quantification of events related to the location of insertion of the functional
gene in target cells. Patients will be followed for 24 months post-treatment under this protocol. In accordance with applicable guidance from the
FDA and EMA, we will be monitoring patients 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 sustained treatment effect.
In September 2019, we presented updated clinical data at the13th European Pediatric Neurology Society (EPNS) Congress. All data presented and
summarized below are as of the data cut-off date of April 25, 2019, except as otherwise indicated below:
◦
The data reflect a total patient population of 32 patients in the study, with a median follow-up time of 21.2 months, and a range of zero to
60.2 months.
◦ Of the 32 patients who have received Lenti-D, 15 have completed the two-year follow-up period and enrolled in the long-term follow-up
protocol, 14 are currently on-study, and three are no longer on-study. Of the three patients who are no longer on the study, two withdrew
from the study at investigator discretion, and one died following rapid disease progression and development of MFDs beginning early in the
study post-treatment.
◦ Of the 17 patients who have or would have reached 24 months of follow-up and completed the study, 88 percent (N=15/17) continue to be
alive and MFD-free in a long-term follow-up protocol. The 14 patients currently on-study have less than 24 months of follow-up and have
shown no evidence of MFDs. The longest follow-up of the 14 patients was 20.4 months.
◦ Of the 32 patients who have received Lenti-D, 30 had stable NFS (NFS ≤ 4, without a change of >3 from baseline) following treatment,
◦ As of the data cut-off, no acute or chronic GvHD have been reported post- treatment and there have been no reports of graft failure, cases of
insertional oncogenesis, or replication competent lentivirus. The safety profile of Lenti-D treatment is generally consistent with
myeloablative conditioning with busulfan and cyclophosphamide. Three adverse events (AE) have been deemed potentially related to
treatment with Lenti-D drug product and include BK-mediated viral cystitis (N=1, grade 3) and vomiting (N=2, grade 1); all three resolved
using standard measures.
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•
The ALD-103 study – Observational study
We are also conducting the ALD-103 study, an observational prospective and retrospective data collection study of 60 patients with CALD ≤17 years
of age who received allogeneic HSCT. This study is ongoing and designed to collect efficacy and safety outcomes data in patients who have
undergone allogeneic HSCT in a period that is contemporaneous with the Starbeam study. The study measures CALD disease-related outcomes in
four patient cohorts: early disease 1 (N=21; Loes ≤4 and NFS ≤1); early disease 2 (N=9; Loes >4 to 9 and NFS ≤1); all early disease (N=30; Loes ≤9
and NFS ≤1); and advanced disease (N=10; Loes >9 or NFS >1). Transplant-related outcomes are assessed by donor stem cell source and by
conditioning regimen. We anticipate that 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 in conjunction with our retrospective observational ALD-101 study and our retrospective and prospective
observational ALD-103 study, as well as safety results from our ongoing ALD-104 study.
In September 2019, we presented interim clinical data from the ALD-103 study at the 13th EPNS Congress. All data presented and summarized
below are as of the data cut-off date of April 25, 2019:
◦ As of February 11, 2019, 47 patients were enrolled in the ALD-103 study and had undergone allogeneic HSCT. Updated results show that
early treatment with allogeneic HSCT provides improved overall and MFD-free survival for patients with CALD irrespective of the stage of
early disease.
◦ At 24 months post- allogeneic HSCT, 77.2 percent of patients in the all early disease cohort achieved MFD-free survival and 89.1 percent
achieved overall survival compared to 35.0 percent and 52.5 percent, respectively, in the advanced disease cohort.
◦
The risk associated with allogeneic HSCT varied by donor source. While there were no substantial differences observed between the groups
in ALD-103, more patients who were treated with umbilical cord stem cells from an unrelated donor (38.9 percent [7/18]) experienced
engraftment failure by Month 24 compared to patients who received bone marrow or umbilical cord cells from a matched sibling donor or
bone marrow cells from an unrelated donor (zero percent in both groups).
◦ Analyses done by conditioning regimen showed higher rates of acute (42.9 percent [6/14]) and chronic (54.5 percent [6/11]) GvHD in
patients who received myeloablative conditioning with busulfan and cyclophosphamide compared to those who were myeloablated with
busulfan and fludarabine (6.3 percent [1/16] and 13.3 percent [2/15], respectively).
◦ Analyses showed higher rates of engraftment failure in patients who received myeloablative conditioning with busulfan and fludarabine.
28.6 percent (6/21) experienced engraftment failure by 24 months compared to zero percent in the busulfan and cyclophosphamide group.
◦
23.5 percent (8/34) and 27.6 percent (8/29) of patients enrolled in the study experienced acute and chronic GvHD, respectively. The overall
rates of 100-day and one-year transplant-related mortality were zero percent (0/38) and 12.1 percent (4/33), respectively. The overall rate of
engraftment failure by Month 24 was 21.6 percent occurring in eight of 37 evaluable patients.
Our collaboration with Boston Children’s Hospital in SCD
We are collaborating with investigators at Boston Children’s Hospital, or BCH, to advance a product candidate that utilizes a lentiviral vector delivering a
short hairpin RNA, or shRNA, embedded in a microRNA, or miRNA, which is commonly known as a shMIR, to suppress the genetic target BCL11a in order
to upregulate fetal hemoglobin to treat patients with SCD. We have an exclusive license to this program and the related intellectual property from BCH. In
December 2019, BCH presented interim clinical data from the investigator-initiated phase I study at the ASH Annual Meeting. As of the presentation at the
ASH Annual Meeting, eight patients had enrolled in the study, and five patients had received treatment with drug product, with follow-up periods ranging
from 1 month to 18 months.
Our preclinical research opportunities in severe genetic diseases
We believe our current gene therapy platform will enable us to develop and test new vectors based on similar viral vector backbones that carry different
gene sequences for other severe genetic diseases. In this way, we believe that we can advance products efficiently through preclinical into clinical
development. We may consider research and development programs targeting other monogenic, genetic diseases that involve cells derived from HSCs for use
in the ex vivo setting. These programs may involve severe genetic and rare diseases that could be developed and potentially commercialized on our own. For
instance, we are collaborating with the University of Minnesota on a research program for a gene therapy to treat mucopolysaccharidosis
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type 1 (MPSI), an ultra-rare metabolic condition that causes severe neurologic impairment and organ damage, also referred to as Hurler Syndrome.
In addition, we believe our expertise in gene editing and cell transduction also provides an opportunity to develop new products for use in the in vivo
setting. In this case, homing endonucleases and megaTALs that provide a highly specific and efficient way to modify DNA sequences to edit or insert genetic
components could be delivered directly to the disease site (e.g., to the brain, liver or eye) or into the bloodstream of the patient and, in vivo deliver the genetic
material to or modify those target cells. We believe in vivo gene editing opens up additional rare disease and large market indications where this approach is
more appropriate for the disease and targeted cells. For instance, we have a research collaboration with Novo Nordisk A/S to jointly develop in vivo genome
editing treatments for genetic diseases, including hemophilia. We also have a research collaboration with Forty Seven, Inc. to pursue clinical proof-of-concept
for an antibody-based conditioning regimen in combination with our ex vivo lentiviral gene therapy platform.
Our Programs in CAR and TCR T Cell Technologies
Like 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
T cells 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 cell technology directs T cells to recognize cancer cells based on expression of specific cell surface antigens, whereas TCR T cell technology provides
the T cells with a specific T cell receptor that recognizes protein fragments derived from either intracellular or extracellular proteins which are displayed on
the tumor cell surface. For 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 to grow and then use a lentiviral vector to transfer the gene sequences for the CAR or TCR construct into the T cell DNA. Once returned to the
patient, these genetically engineered cells engage the target protein on the cancer cell, triggering a series of signals that result in tumor cell killing, the
production of anti-cancer cytokines, and multiple rounds of cell division to greatly expand the number of these anti-cancer T cells in the patient. These
engineered T cells have the natural “auto-regulatory” capability of normal T cells and once the tumor cells containing the target antigen are destroyed, the
engineered T cells decrease in number, but with the potential to leave a smaller number of memory T cells in the body as a form of immune surveillance
against potential tumor regrowth. The genetically-engineered T cells are designed to supplement a patient’s immune system and may 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. For instance, we are exploring applications of
our CAR and TCR T cell technologies in combination with novel proteins based on synthetic biology. These technologies may potentially allow our future T
cell-based product candidates to detect the tumor microenvironment or, in the case of future CAR T cell product candidates, to be regulated by small
molecules. In addition, using our gene editing technology, we potentially have a number 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 to potentially make these cells even more potent. Specificity and potency are
essential to the development of T cell therapies that can effectively treat solid tumor cancers such as breast, lung and colon cancer. Our cancer
immunotherapy research group is staffed by scientists drawn from both industry and academic 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 and develop T cell product candidates to treat a variety of hematologic
and solid tumor malignancies. We have research programs in acute myeloid leukemia (in collaboration with Seattle Children’s Research Institute), Merkel cell
carcinoma (in collaboration with Fred Hutchinson Cancer Research Center), diffuse large B-cell lymphoma, and MAGE-A4 positive solid tumors.
Our collaboration with BMS focuses on CAR T cell product candidates directed against BCMA, a protein expressed on the surface of multiple myeloma
cells, plasma cells and some mature B cells. We are developing, in collaboration with BMS, ide-cel and bb21217 product candidates with the goal of filing for
regulatory approval in multiple myeloma on a global basis.
We also have collaborations in the field of cancer with Regeneron Pharmaceuticals, Inc., or Regeneron, for the discovery, development, and
commercialization of novel cell therapies; with Medigene AG, through its subsidiary Medigene Immunotherapies GmbH, to discover TCR product
candidates; with Gritstone Oncology, Inc., to validate targets and discover TCR product candidates; and with TC Biopharm Limited, in the research and
development of gamma delta CAR T cells.
The anti-BCMA CAR T cell product candidates: ide-cel and bb21217
Overview
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In collaboration with BMS, we are developing ide-cel and bb21217, with the goal of filing for regulatory approval in multiple myeloma on a global
basis. Ide-cel and bb21217 both bind to BCMA, a cell surface protein expressed on cancer cells. Multiple myeloma is a hematologic malignancy that
develops in the bone marrow in which normal antibody-producing plasma cells transform into myeloma. The growth of the cancer cells in the bone marrow
blocks production of normal blood cells and antibodies, and also causes lesions that weaken the bone. BCMA is expressed on normal plasma cells, some
mature B cells, and on malignant multiple myeloma cells, but is believed to be absent from other normal tissues.
Collaboration with BMS
Ide-cel and bb21217 arose from our multi-year collaboration with Celgene Corporation, or Celgene, which was acquired by BMS in November 2019.
Since our collaboration arrangement with Celgene was announced in March 2013, we have worked collaboratively to discover, develop and commercialize
CAR T cell product candidates in oncology. Our collaboration arrangement was amended in June 2015 to focus on CAR T cell product candidates targeting
BCMA. In March 2018, we entered into an agreement with Celgene, now BMS, to co-develop and co-promote ide-cel in the United States, in which both
parties will share equally in costs and profits on terms described more fully below under “Strategic collaborations—Our strategic alliance with BMS.” In
September 2017, BMS exercised its option to obtain an exclusive worldwide license to develop and commercialize bb21217, and we retain an option to co-
develop and co-commercialize this product candidate.
The acquisition of Celgene by BMS may result in organizational and personnel changes, shifts in business focus or other developments that may have a
material adverse effect on our collaboration. There is no guarantee that BMS will place the same emphasis on the collaboration or on the development and
commercialization of ide-cel or bb21217.
Development of ide-cel and bb21217
In collaboration with BMS, we are developing ide-cel and bb21217, with the goal for filing for regulatory approval in multiple myeloma on a global
basis. The FDA and EMA have granted Orphan Drug status to both ide-cel and bb21217 for the treatment of patients with relapsed and refractory multiple
myeloma. The FDA has granted Breakthrough Therapy designation and the EMA has granted PRIME eligibility to ide-cel for relapsed and refractory
multiple myeloma. We and BMS anticipate a potential submission in the first half of 2020 for marketing approval of ide-cel for the treatment of relapsed and
refractory multiple myeloma.
For the development of ide-cel, BMS is conducting, or is planning to conduct, the following clinical studies in multiple myeloma:
•
CRB-401, an open label, single-arm, multicenter, phase 1 study of patients with relapsed and refractory multiple myeloma.
• KarMMa, an open label, single-arm, multicenter, phase 2 study of patients with relapsed and refractory multiple myeloma.
• KarMMa-2, an open-label, multi-cohort, multicenter phase 2 study of patients with relapsed and refractory multiple myeloma and in high-risk
multiple myeloma.
• KarMMa-3, an open-label, randomized, multicenter, phase 3 study comparing the efficacy and safety of ide-cel versus standard triplet regimens in
patients with relapsed and refractory multiple myeloma.
• KarMMa-4, an open label, single-arm, multicenter, phase 1 study intended to determine the optimal target dose and safety of ide-cel in patients with
high-risk newly-diagnosed multiple myeloma.
For the development of the bb21217 product candidate, we are conducting the CRB-402 study, an open label, single-arm, multicenter, phase 1 study of
patients with relapsed and refractory multiple myeloma. In September 2017, we announced that the first patient had been treated in this study.
Clinical results of ide-cel
• KarMMa Study – phase 2 efficacy and safety study of ide-cel for the treatment of patients with relapsed and refractory multiple myeloma
The KarMMa study is a pivotal open-label, single arm, multicenter, phase 2 study evaluating the safety and efficacy of ide-cel in adult patients with
relapsed and refractory multiple myeloma, in North America and Europe. All enrolled patients had received at least three prior regimens, including
an immunomodulatory (IMiD) agent, a proteasome inhibitor (PI) and an anti-CD38 antibody, and all were refractory to their last regimen, defined as
progression during or
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within 60 days of their last therapy. Ninety-four percent of patients were refractory to an anti-CD38 antibody and 84% percent were triple refractory
(refractory to an IMiD agent, PI and anti-CD38 antibody).
The primary endpoint of the study is overall response rate as assessed by an independent review committee (IRC) according to the International
Myeloma Working Group (IMWG) criteria. Complete response rate is the key secondary endpoint. Other efficacy endpoints include time to
response, duration of response, progression-free survival, overall survival and minimal residual disease evaluated by next-generation sequencing
assay. The study enrolled 140 patients, of whom 128 patients were treated with ide-cel across the target dose levels of 150-450 x 106 CAR+ T cells
after receiving lymphodepleting chemotherapy. In December 2019, we and BMS released the following top-line results from this study:
◦
◦
◦
128 patients were treated with ide-cel across the target dose levels of 150x106, 300x106, and 450x106 CAR+ T cells. The median follow-up
duration for all subjects was 11.3 months.
Results for the primary endpoint and key secondary endpoint, as well as median duration of response (DoR) and median progression-free
survival (PFS) across the target dose levels and at each of the three target doses explored in the study were as follows:
CAR+ T cell dose level
N
Measures:
Overall response rate, n (%)
Complete response (CR)/ Stringent
CR, n (%)
150 x 106
4
300 x 106
70
450 x 106
54
150-450 x 106
128
2 (50.0)
1 (25.0)
48 (68.6)
20 (28.6)
44 (81.5)
19 (35.2)
94 (73.4)
40 (31.3)
Median DoR, months
*
9.9
11.3
10.6
Median PFS, months
*Median DoR and median PFS are not reported for the 150 x 106 CAR+ T cells dose group due to the small number of
evaluable patients
11.3
5.8
8.6
*
The safety results were consistent with those observed in the phase 1 CRB-401 study, which evaluated the preliminary safety and efficacy
of ide-cel in patients with relapsed and refractory multiple myeloma. Instances of grade 3 or higher cytokine release syndrome (CRS)
occurred in 5.5% (7/128) of patients, including one fatal CRS event. Investigator identified grade 3 or higher neurotoxicity events (iiNT)
occurred in 3.1% (4/128) of patients and there were no Grade 4 iiNT events reported. Grade 3 or higher CRS and iiNT events were reported
in <6% of subjects at each target dose. CRS of any grade occurred in 83.6% (107/128) of patients and iiNT of any grade occurred in 18%
(23/128) of patients.
•
The CRB-401 study – phase 1 study of ide-cel for the treatment of patients with relapsed and refractory multiple myeloma
The CRB-401 study is a single-dose, open-label, non-randomized, multi-site phase 1 dose escalation/ dose expansion clinical study in the United
States to examine the safety and efficacy of ide-cel in up to 67 patients with relapsed and refractory multiple myeloma. In order to be eligible for
CRB-401, patients must have received three prior regimens, including a proteasome inhibitor (PI; bortezomib or carfilzomib) and an
immunomodulatory agent (IMiD; lenalidomide or pomalidomide), or be “double-refractory” to both a proteasome inhibitor and an
immunomodulatory agent. In the expansion cohort, patients must have received at least a PI, an IMiD and daratumumab, and be refractory to their
last line of therapy. Patients receive one cycle of lymphodepletion with cyclophosphamide and fludarabine prior to infusion of the bb2121 drug
product. In September 2017, we announced that the expansion cohort of the study had been initiated with first patient treated, and the final patient
enrolled in this study was treated in February 2018.
The primary endpoint of the study is the incidence of adverse events and abnormal laboratory test results, including dose-limiting toxicities. The
study also seeks to assess disease-specific response including: complete response (CR), very good partial response (VGPR), and partial response
(PR) according to the International Myeloma Working Group Uniform Response Criteria for Multiple Myeloma. The study also seeks to determine
the maximally tolerated dose and recommended dose for further clinical trials. Each patient is followed for up to 60 months post-treatment, and then
is enrolled in a long-term follow-up protocol that will assess safety and efficacy beyond the 60-month period.
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In June 2018, updated clinical data from the CRB-401 study were presented at the American Society of Clinical Oncology Annual Meeting, or
ASCO. All data presented at ASCO and summarized below are as of the data cut-off date of March 29, 2018:
◦
◦
◦
◦
◦
43 patients had been enrolled and treated in either the dose-escalation cohort of the study, at four dose levels (50 x 106, 150 x 106, 450 x
106 and 800 x 106 CAR T cells), or in the dose expansion cohort in a dose range between 150 and 450 x 106 CAR T cells. Patients in the
study were heavily pre-treated, with a median of seven prior myeloma treatment regimens (with a range of 3 to 14) in the dose escalation
cohort (n=21), and with a median of eight prior regimens (with a range of 3 to 23) in the dose expansion cohort (n=22). Approximately 90%
of the patients had received prior treatment with two IMiD therapies, two proteasome inhibitors, daratumumab and an autologous stem cell
transplant.
Response outcomes in patients evaluable for efficacy, with at least 2 months of response data or progressive disease/ death within 2 months
were as follows:
CAR T cell dose level
N
50 x 106
3
150 x 106
14
> 150 x 106
22
Median follow up (min, max)
84 days (59, 94)
87 days (36, 638)
194 days (46, 556)
Measures:
Overall response rate (ORR)
Complete response (CR)
Very good partial response (VGPR)
33.3%
0%
0%
57.1%
42.9%
7.1%
95.5%
50%
36.4%
Median duration of response (mDOR)
1.9 months
Not estimable
10.8 months
Responses were dose-related and observed for both low and high BCMA expression levels. In patients treated with 450 x 106 CAR T cells
whose myeloma cells expressed low levels of BCMA (0 to 50% of cells BCMA positive), 8 of 8 had a response. In those expressing high
BCMA (≥50% BCMA positive), 10 of 11 had a response.
The median progression-free survival (PFS) estimate for patients in the dose-escalation phase treated at active doses (≥150 x 106 CAR T
cells) was 11.8 months (95% CI 8.8, NE), while patients receiving 50 x 106 CAR T cells had a median PFS of 2.7 months (95% CI 1.0,
2.9).
In the dose-escalation and expansion phase of the study, all patients who responded and were evaluable for minimal residual disease (MRD
as measured by adaptive next-generation sequencing assay) (n=16) were MRD negative at one or more time points. Additionally, two
patients who did not have a response and were evaluated for MRD were MRD positive at month one. The median PFS estimate in MRD
negative responders (n=16) was 17.7 months (95% CI: 5.8, NE).
◦ Among all infused patients (n=43), 63% had cytokine release syndrome (CRS), mostly Grade 1 & 2, with 2 patients experiencing Grade 3
CRS (5%). Nine patients (21%) received tocilizumab, including 4 patients (9%) who also received steroids and the median duration of CRS
was 6 days (1, 32). For patients receiving 150 x 106 CAR T cells (n=18), the rate of CRS was 39% with no grade 3 cases. For patients
receiving ≥150 x 106 CAR T cells (n=22), the rate of CRS was 82% with 9.1% of patients experiencing grade 3 events. Also among all
infused patients, there were 14 patients (33%) who experienced neurotoxicity, with one patient experiencing a grade 3 or higher event.
Other frequent Grade 3/4 AEs included cytopenias commonly associated with lymphodepleting chemotherapy such as neutropenia (79%),
thrombocytopenia (51%) and anemia (44%), as well as infection (any grade) with a frequency of 61% overall and 23% in the first month.
Grade 3 or higher infection occurred with a frequency of 21% overall and 5% in the first month.
Clinical results of the bb21217 product candidate
•
The CRB-402 study – phase 1 clinical study of bb21217 for the treatment of patients with relapsed and refractory multiple myeloma
Our CRB-402 study is a single-dose, open-label, non-randomized, multi-site phase 1 dose escalation/ dose expansion clinical study in the United
States to examine the safety and efficacy of our bb21217 product candidate in up to 74 patients with relapsed and refractory multiple myeloma. In
order to be eligible for CRB-402, patients must have received three prior regimens, including a proteasome inhibitor (PI: bortezomib or carfilzomib)
and immunomodulatory agent (IMiD: lenalidomide or pomalidomide), or be “double-refractory” to both a proteasome
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inhibitor and an immunomodulatory agent. In the expansion cohort, patients must have received at least a PI, and IMiD and daratumumab, and be
refractory to their last line of therapy. Patients receive one cycle of lymphodepletion with cyclophosphamide and fludarabine prior to infusion of the
bb21217 drug product. In September 2017, we announced the treatment of the first patient with relapsed and refractory multiple myeloma in this
study.
The primary endpoint of the study is the incidence of adverse events and abnormal laboratory test results, including dose-limiting toxicities. The
study also seeks to assess disease-specific response including: complete response (CR), very good partial response (VGPR), and partial response
(PR) according to the International Myeloma Working Group Uniform Response Criteria for Multiple Myeloma. The study also seeks to determine
the maximally tolerated dose and recommended dose for further clinical trials. Each patient will be followed for up to 60 months post-treatment, and
then will be enrolled in a long-term follow-up protocol that will assess safety and efficacy beyond the 60-month period.
In December 2019, we and BMS presented clinical data from the CRB-402 study at the ASH Annual Meeting. All data presented at the ASH Annual
Meeting and summarized below are as of the data cut-off date of September 4, 2019:
◦
◦
38 patients received treatment as of the data cut-off. Patients had a median of six prior lines of therapy (with a range of 3 to 17 lines) and 82
percent of patients received at least one prior autologous stem cell transplant. High-risk cytogenetics were reported in 34 percent of patients
and 95 percent of patients received prior treatment with an anti-CD38 antibody.
24 of the 38 patients received bb21217 in the dose escalation cohort at three dose levels; 12 at 150 x 106 CAR+ T cells, 6 at 300 x 106
CAR+ T cells, and 6 at 450 x 106 CAR+ T cells. 14 additional patients received bb21217 in the dose expansion cohort at two dose levels; 8
at 300 x 106 CAR+ T cells and 6 at 450 x 106 CAR+ T cells.
◦ All patients treated in CRB-402 (n=38) had previously received at least three prior lines of therapy, including an immunomodulatory agent
and proteasome inhibitor. The enrollment criteria for the dose expansion cohort required all enrolled patients (n=14) to be refractory to their
last prior line of therapy and have previously received an anti-CD38 antibody.
◦
◦
◦
◦
◦
◦
33 of the 38 patients were evaluable for clinical response as defined per the International Myeloma Working Group Uniform Response
Criteria for multiple myeloma
12 evaluable patients (defined as treated patients with ≥ two months of response data or progressive disease/death/lost to follow-up within
<=2 months) in the 150 x 106 CAR+ T cells cohort, had a median follow-up of 17.6 months (ranging from 12 to 23 months). Ten of 12
(83%) demonstrated clinical response, including four with a stringent complete response (sCR) or complete response (CR), and six with a
very good partial response (VGPR). Among the ten confirmed responders, the median duration of response was 11.1 months (95%
Confidence Interval (CI); 3.3 – not estimable).
Follow-up within the two higher dose cohorts (300 x 106 and 450 x 106 CAR+ T cells) remains early and none of the confirmed responders
have experienced disease progression. In the 300 x 106 CAR+ T cells cohort, 14 patients were evaluable for response and 6 of the 14 (43%)
evaluable patients demonstrated clinical response, including four with a VGPR and two with a partial response (PR), with a median follow-
up of four months (ranging from 2 to 10 months). In the 450 x 106 CAR+ T cells cohort, seven patients were evaluable for response and four
of the seven (57%) evaluable patients demonstrated clinical response, including one with a sCR, two with a VGPR and one with a PR, with
a median follow-up of 3.3 months (ranging from <1 to 6 months).
Evidence of myeloma in the bone marrow, known as minimal residual disease (MRD), was undetectable by next-generation sequencing at a
sensitivity level of 10-5 in 94% (n=16/17) of all confirmed responders who had evaluable bone marrow samples (patients with > PR and > 1
valid post-baseline MRD assessment).
CAR T cell persistence was observed in eight of ten patients with ongoing response and evaluable at six months, and two out of two
patients with ongoing response and evaluable at 18 months.
The adverse events observed with bb21217 were consistent with known toxicities of CAR T therapies, regardless of dose level.
▪ Of the 38 treated patients, the most common Grade 3/4 toxicities include neutropenia (82%), leukopenia (55%), thrombocytopenia
(55%), anemia (50%), lymphopenia (34%), hypophosphatemia (21%), hyponatremia (13%) and febrile neutropenia (11%). Grade
3/4 infections were reported in seven patients (18%).
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▪
Twenty-five of 38 patients (66%) developed bb21217-related cytokine release syndrome (CRS); 12 Grade 1, 11 Grade 2, one
Grade 3 and one Grade 5 (death). The fatal CRS event occurred at the 450 x 106 CAR+ T cells dose level, after 15 days of follow-
up. Nine of 38 (24%) patients developed neurotoxicity; three Grade 1, three Grade 2, two Grade 3 (one with vertigo/dizziness and
one with encephalopathy) and one Grade 4 (encephalopathy, previously reported). For the one patient previously reported with
Grade 4 neurotoxicity, Grade 3 CRS was also reported, and both have resolved
Our other programs in cancer
We are pursuing multiple programs that leverage the unique properties of lentiviral vectors to target T cells as a therapy for various cancers. This
represents a direct application of our expertise in gene therapy and our capabilities, know-how and patents associated with lentiviral gene therapy and gene
editing for ex vivo applications. We have programs at various stages of research and preclinical development through our collaborations with Regeneron,
Medigene AG, Gritstone Oncology, Inc., and TC Biopharm Limited against a variety of targets relevant to both hematologic and solid tumors. We also have
academic collaborations at various stages or research and preclinical development at the Seattle Children's Research Institute, University of North Carolina,
and the Fred Hutchinson Cancer Research Center. We are also independently researching and developing other CAR T cell product candidates against a
variety of cancer targets.
Our Gene Editing Capabilities
In June 2014, we acquired 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. Since the acquisition, we have integrated these technologies and
research team and we have expanded the scope of our research efforts in this area. We are focused on utilizing homing endonuclease and megaTAL gene
editing technologies in a variety of potential applications and disease areas, including for oncology and hematology. Homing endonucleases and megaTALs
are novel enzymes that provide a highly specific 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, and
TALENs, share common features of a DNA binding domain and a DNA cleavage domain. They all differ in specificity, size, ease of delivery and as naturally
occurring versus engineered nucleases. Homing endonucleases and megaTALs are based on a naturally occurring class of DNA cleaving enzymes that
function as monomeric proteins able to bind DNA in a sequence-specific manner and cleave their target site. We believe there are multiple advantages of
homing endonucleases and megaTALs compared to other gene editing technologies, most notably: they are highly specific and efficient in cutting DNA and
their compact size simplifies delivery to therapeutically relevant cell types. We are using our gene editing platform, along with collaborations with multiple
academic institutions, to potentially discover and develop next-generation gene therapy and oncology product candidates.
Manufacturing
Our gene therapy platform has two main components: lentiviral vector production and the target cell transduction process, which results in drug product.
Our lentiviral manufacturing process
Our lentiviral vectors are assembled using a human cell line called HEK293T. The HEK293T cells are maintained in disposable flasks until sufficient cell
mass 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. Adherent
cells are transfected with multiple plasmids encoding all the genetic material required to assemble the lentiviral vector carrying the functional gene of
interest. The transfected HEK293T cells then assemble our lentiviral vectors packaged with the functional gene of interest, which bud off into the cell culture
media. The media containing the assembled vectors is harvested, purified, concentrated and formulated prior to freezing for storage. These finished lentiviral
vectors are what is ultimately used to transduce the targeted cells isolated from the patient.
We believe that our lentiviral platform has broad applicability, since the majority of the viral production system can remain the same, while we change
only the therapeutic gene “cassette” depending on the disease. In other words, the vector “backbone” stays the same, while only the therapeutic gene and
related sequences are changed. If we were to undertake drug development in an additional indication, we believe we could rapidly move forward using this
lentiviral vector backbone and associated assays, simply by switching the therapeutic gene insert and associated control elements.
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Additionally, we have developed a proprietary cell-based vector manufacturing process that is both reproducible and scalable. Although we intend to
continue manufacturing our Lenti-D vectors in TTCFs, we are adapting our LentiGlobin, ide-cel and bb21217 vector production technology to scalable
production systems with the potential to produce sufficient quantities to treat an increased number of patients per manufacturing cycle, and we have
demonstrated successful production of our LentiGlobin, ide-cel and bb21217 vectors at the scale we believe will support potential commercial demand. We
intend to use a mix of internal and third-party manufacturing capabilities to accommodate future demand for our drug candidates, if approved, in their current
indications as well as those beyond our initial focus.
Our HSC transduction process in severe genetic disease
In the treatment of severe genetic disease, the ultimate product of our manufacturing processes is the patient’s own gene-modified cells, which we refer to
as our drug product. The process for producing 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 following mobilization (or
previously in SCD, by bone marrow harvest). The process is carried out using existing hospital infrastructure and based on standard protocols
currently for stem cell transplant procedures, with enhanced controls for extracting the cells to be used for making our drug product.
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 and
additional 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 harvested cells containing gene-modified HSCs are washed and re-suspended into cell culture
media to remove any residual impurities. A portion of the harvested cells is removed for quality control release testing, which includes ensuring that
transduction was successful and the functional gene delivered by the vector is adequately expressed by the target cells.
5. Formulation and freeze: The remaining cells are appropriately formulated and cryopreserved.
The final step is to return the gene-modified HSCs to the patient via a stem cell transplant.
Our T cell transduction process in cancer
In cancer, 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 for producing 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
existing hospital infrastructure and standard protocols currently in place for blood donation procedures, with enhanced controls for extracting the
cells to be used for making our drug product.
2. Activation: The white blood cell mixture, which includes T cells, is 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 a
period 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 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 the
harvested cells is removed for quality control release testing, which includes ensuring that transduction was successful and the functional gene
delivered 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.
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Manufacturing Arrangements
In November 2017, we purchased a partially completed manufacturing facility located in Durham, North Carolina for $11.5 million. We acquired this
125,000 square foot facility to provide manufacturing capacity for our lentiviral vectors in support of our current and planned gene and cell therapy product
candidates. In March of 2019, we announced the official opening of this facility, of which a portion has been placed into service and the remainder is in the
process of construction. We currently expect that it will begin to produce lentiviral vector in 2021. We have also entered into multi-year agreements with
external manufacturing partners in the United States and Europe (Brammer Bio (now a part of Thermo Fisher Scientific, Inc.), Novasep and SAFC Carlsbad,
Inc., or SAFC, a subsidiary of MilliporeSigma), which are partnering with us on production of lentiviral vector across all of our programs. In addition, we
have entered into multi-year agreements with Lonza Houston, Inc. and apceth Biopharma, or apceth, to produce drug product for Lenti-D, LentiGlobin and
bb21217. Currently, SAFC is the sole manufacturer of the lentiviral vector and apceth is the sole manufacturer of the drug product to support
commercialization of ZYNTEGLO in Europe for the treatment of TDT. In our manufacturing agreement with SAFC, we are required to provide rolling
forecasts for products on a quarterly basis, a portion of which will be considered a binding, firm order, subject to a purchase commitment. In our
manufacturing agreement with apceth, we reserve production capacity for the manufacture of our drug product. In April 2019, apceth was acquired by Hitachi
Chemical Co. Ltd. In December 2019, Hitachi Chemical Co. Ltd. announced that it has reached agreement to be acquired by Showa Denko. BMS
manufactures drug product for ide-cel. We believe our team of technical personnel has extensive manufacturing, analytical and quality experience as well as
strong project management discipline to effectively oversee these contract manufacturing and testing activities, and to compile manufacturing and quality
information for our regulatory submissions and potential commercial launch. We are engaging apheresis centers that will be the centers for collection of HSCs
from the patient and for infusion of drug product to the patient. For the treatment of patients with our drug product in the commercial setting, we are
partnering with participating apheresis centers, which we refer to as qualified treatment centers. With the launch of ZYNTEGLO in Europe for the treatment
of TDT, we are executing agreements with qualified treatment centers in place in Germany, and expect to engage qualified treatment centers in additional
markets in 2020.
Commercial Operations
We are commercializing ZYNTEGLO in the European Union, following our receipt of conditional marketing approval by the European Commission in
June 2019. We expect to begin generating product revenue in the first half of 2020. As we transition into a commercial-stage company, we have established
commercial operations in Europe, and have begun to build commercial operations in the United States, with a goal of delivering our gene therapies, once
approved, to patients through qualified treatment centers. In the course of preparing for treating our first commercial patients in 2020, we have continued a
staged build of commercial capabilities by adding employees with broad experience in quality assurance and compliance, medical education, marketing,
supply chain, sales, public policy, patient services, market access and product reimbursement. We expect to continue expansion of these capabilities
throughout 2020 and beyond as we continue to implement appropriate quality systems, compliance policies, systems and procedures, as well as internal
systems and infrastructure in order to support our complex supply chain, qualify and train treatment centers, establish patient-focused programs, educate
healthcare professionals, and secure reimbursement. In addition, we expect to extend these capabilities as we complete our submissions to regulatory
authorities for marketing approval in additional geographies and for additional potential future products. The timing and conduct of these commercial
activities will be dependent upon regulatory approvals and on agreements we have made or may make in the future with strategic collaborators. As part of the
commercialization process, we are engaged in discussions with stakeholders across the healthcare system, including public and private payers, patient
advocates and organizations, professional societies, and healthcare providers, to explore new payment models that we hope will enable access to more
patients. Ultimately, we intend to utilize the commercial infrastructure that we build to support the potential for multiple product launches sequentially across
multiple geographies. For many territories and countries, we may also elect to utilize strategic partners, distributors, or contract field-based teams to assist in
the commercialization of our product and potential future products.
Strategic Collaborations
Our objective is to develop and commercialize products based on the transformative potential of gene therapy to treat patients with severe genetic
diseases and cancer. To access the substantial funding and other resources required to develop and commercialize gene therapy products in these diseases, we
have formed, and intend to seek other opportunities to form, strategic collaborations with third parties who can augment our industry leading gene therapy, T
cell immunotherapy, lentiviral vector and gene-editing expertise. To date, we have focused on forging a limited number of significant strategic collaborations
with leading pharmaceutical companies and academic research centers where both parties contribute expertise to enable the discovery and development of
potential product candidates.
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Our strategic collaborations include relationships with:
•
•
BMS, in the development of ide-cel and bb21217 product candidates in multiple myeloma;
Regeneron, in the discovery, development, and commercialization of novel cell therapies for cancer;
• Medigene AG, to discover TCR product candidates in the field of cancer;
• Gritstone Oncology, Inc., to validate targets and discover TCR product candidates in the field of cancer;
• Novo Nordisk A/S, to jointly develop next-generation in vivo genome editing treatments for genetic diseases, including hemophilia;
•
•
Forty Seven, Inc., to pursue clinical proof-of-concept for an antibody-based conditioning regimen in combination with our ex vivo lentiviral gene
therapy platform; and
TC BioPharm Limited, in the research and development of gamma delta CAR T cells directed at hematologic and solid tumor targets.
Our collaboration with BMS
In March 2013, we began a strategic collaboration with Celgene, now BMS, to discover, develop and commercialize chimeric antigen receptor-modified
T cells, or CAR T cells, as potentially disease-altering gene therapies in oncology, which was amended and restated in June 2015, and amended again in
February 2016 and in September 2017. The multi-year research and development collaboration focused on applying our expertise in gene therapy technology
to CAR T cell-based therapies, to target and destroy cancer cells. The research collaboration term ended in June 2018, with ide-cel and bb21217 product
candidates arising from the collaboration.
In February 2016, BMS exercised its option with respect to the ide-cel product candidate, and we exclusively licensed to BMS the worldwide rights to
develop and commercialize the ide-cel product candidate, while retaining an option to co-develop and co-promote the ide-cel product candidate in the United
States. In connection with its exercise of its option to obtain an exclusive license, BMS paid to us an option fee in the amount of $10.0 million. In March
2018, we exercised our option to co-develop and co-promote the ide-cel product candidate in the United States. Under the terms of the co-development and
co-promotion agreement that we have with BMS for the development and commercialization of ide-cel, we 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. In 2019, BMS
paid us a $10.0 million clinical milestone payment. We are also entitled to receive up to an additional $54.0 million in regulatory milestone payments and up
to $36.0 million in commercial milestone payments for sales outside of the United States. In addition, to the extent that ide-cel is commercialized, we are
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 certain reductions, including any royalty payments required to be made by BMS to acquire patent rights, with
an aggregate minimum floor.
Effective as of September 2017, BMS has exercised its option with respect to the bb21217 product candidate, and we have exclusively licensed to BMS
the worldwide rights to develop and commercialize the bb21217 product candidate, while retaining an option to co-develop and co-promote the bb21217
product candidate in the United States on terms substantially similar to the co-development and co-promotion arrangement for the ide-cel product candidate.
In connection with its exercise of its option to obtain an exclusive license, BMS paid to us an option fee in the amount of $15.0 million. Under the terms of
the license agreement with BMS for the exclusive rights to the development and commercialization of bb21217, we are and will be responsible for conducting
and funding all research and development activities performed up through completion of the CRB-402 study. In 2019, the protocol was amended to enroll
additional patients and BMS has agreed to reimburse us a specified amount for the additional patients. In addition, if we do not exercise our option to co-
develop and co-promote the bb21217 product candidate in the United States, we will also 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 milestone payments, as well as a percentage of net
sales as a royalty in a range from the mid-single digits to low-teens. The royalties payable to us are subject to certain reductions, including for any royalty
payments required to be made by BMS to acquire patent rights, with an aggregate minimum floor. BMS will assume certain development obligations and
must report on their progress in achieving these milestones on a quarterly basis.
Our collaboration with BMS is governed by a joint governance committee, or JGC, formed by representatives from us and BMS. The JGC, among other
activities, reviews and approves development and commercialization plans and budgets for activities in the United States. The parties share responsibility for
the manufacture and supply of the ide-cel product candidate and, if we exercise our option to co-develop and co-promote, of the bb21217 product candidate.
Prior to the exercise of our
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option to co-develop and co-promote the bb21217 product candidate, BMS is solely responsible for all costs and expenses of manufacturing and supplying
the bb21217 product candidate beyond the requirements for conducting the CRB-402 study. Subject to customary “back-up” supply rights granted to BMS,
we have the sole right to manufacture or have manufactured supplies of vectors and associated payloads manufactured for incorporation into the optioned
product candidates. BMS will reimburse us for our costs to manufacture and supply such vectors and associated payloads, plus a mark-up.
We received an initial up-front payment of $75.0 million from BMS in connection with the collaboration, plus an additional $25.0 million in connection
with the amendment in June 2015. Either party may terminate the agreements upon written notice to the other party in the event of the other party’s uncured
material breach. BMS may terminate the agreement for any reason upon prior written notice to us. If the agreements are terminated, rights to product
candidates in development at the time of such termination will be allocated to the parties through a mechanism included in the agreements. In addition, if
BMS has the right to terminate any co-development and co-promotion agreement or license agreement for our breach, BMS may elect to continue such
agreement however, any amounts payable by BMS to us under such agreement will be reduced.
The acquisition of Celgene by BMS may result in organizational and personnel changes, shifts in business focus or other developments that may have a
material adverse effect on our collaboration. There is no guarantee that BMS will place the same emphasis on the collaboration or on the development and
commercialization of ide-cel or the bb21217 product candidate.
Intellectual property
We strive to protect and enhance the proprietary technology, inventions, and improvements that are commercially important to the development of our
business, including seeking, maintaining, and defending patent rights, whether developed internally or licensed from third parties. We also rely on trade
secrets 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 rely
on 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 important
technology, inventions and know-how related to our business; defend and enforce our patents; preserve the confidentiality of our trade secrets; and operate
without infringing the valid enforceable patents and proprietary rights of third parties. Our ability to stop third parties from making, using, selling, offering to
sell or importing our products may depend on the extent to which we have rights under valid and enforceable patents or trade secrets that cover these
activities. With respect to both licensed and company-owned intellectual property, we cannot be sure that patents will be granted with respect to any of our
pending 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 any
patents 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 the
development and commercialization of gene therapy products. Our proprietary intellectual property, including patent and non-patent intellectual property, is
generally directed to, for example, certain genes, transgenes, methods of transferring genetic material into cells, genetically modified cells, processes to
manufacture our lentivirus-based product candidates and other proprietary technologies and processes related to our lead product development candidates. As
of January 31, 2020, our patent portfolio includes the following:
•
•
•
•
•
approximately 232 patents or patent applications that we own or have exclusively in-licensed from third parties related to lentiviral vectors and
vector systems;
approximately 40 patents or patent applications that we have non-exclusively in-licensed from third parties related to lentiviral vectors and vector
systems;
approximately 81 patents or patent applications that we own or have exclusively in-licensed from third parties, including eight that are co-owned
with MIT, related to vector manufacturing or production;
approximately 120 patents or patent applications that we own or have exclusively or co-exclusively in-licensed from third parties related to
therapeutic cellular product candidates;
approximately 440 patents or patent applications that we own or have exclusively in-licensed or optioned from third parties related to oncology
product candidates, including CAR T cell vector systems and manufacturing, T cell manufacturing, and therapeutic T cells;
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•
•
approximately 217 patents or patent applications that we own or have exclusively or co-exclusively in-licensed from third parties related to gene
editing compositions and methods; and
approximately 44 patent applications that we have non-exclusively in-licensed from third parties related to gene editing compositions and methods.
Our objective is to continue to expand our portfolio of patents and patent applications in order to protect our gene therapy product candidates
manufacturing processes. Examples of the products and technology areas covered by our intellectual property portfolio are described below. See also “—
License agreements.” From time to time, we also evaluate opportunities to sublicense our portfolio of patents and patent applications that we own or
exclusively license, and we may enter into such licenses from time to time.
β-thalassemia/SCD
The β-thalassemia/SCD program includes the following patent portfolios described below.
•
Pasteur Institute. The Pasteur patent portfolio contains patent applications directed to FLAP/cPPT elements and lentiviral vectors utilized to
produce our LentiGlobin product candidate for β-thalassemia and SCD. As of January 31, 2019, we had an exclusive license to four issued U.S.
patents. Corresponding foreign patents include issued patents in Australia, Canada, China, Europe, Hong Kong, Israel, and Japan. We expect the
issued composition of matter patents to expire from 2020-2023 in the United States, and in 2020 in the rest of the world (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 to
aspects of our lentiviral vectors utilized to produce our LentiGlobin product candidate for β-thalassemia and SCD. As of January 31, 2020, we had
an exclusive license (from RDF) to eight issued U.S. patents related to our lentiviral vector platform. Corresponding foreign patents and patent
applications related to our lentiviral vector platform include pending applications or issued patents in Canada, Europe, and Israel. We expect the
issued composition of matter patents to expire from 2021-2027 in the United States, and in 2022 in the rest of the world (excluding possible patent
term extensions). 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 from 2021-2022 (excluding possible patent term extensions). We
expect any other patents and patent applications in this portfolio other than composition of matter patents, if issued, and if the appropriate
maintenance, renewal, annuity, or other governmental fees are paid, to expire from 2021-2022 (worldwide, excluding possible patent term
extensions).
• MIT/bluebird bio. This co-owned patent portfolio contains patents and patent applications directed to certain specific compositions of matter for
lentiviral β-globin expression vectors. As of January 31, 2020, we co-owned three issued U.S. patents and one pending U.S. patent application, as
well as corresponding foreign patents issued in Europe and Hong Kong. We expect the issued composition of matter patents to expire in 2023
(excluding possible patent term extensions). 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 2023 (excluding possible patent term
extensions). We expect any 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 2023 (worldwide, excluding possible patent term extensions). We note that we have an exclusive
license to MIT’s interest in this co-owned intellectual property.
• Children’s Medical Center Corporation (CMCC)/bluebird bio. This co-owned patent portfolio contains patent applications directed to certain
specific compositions of matter for treating β-thalassemia/SCD. As of January 31, 2020, we co-owned one pending U.S. patent application, as well
as nine corresponding foreign patent applications. We expect any composition of matter or methods patents, if issued from the pending patent
applications, and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, to expire in 2038 (worldwide, excluding
possible patent term extensions). We expect any 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 2038 (worldwide, excluding possible patent term extensions). We note that we
have an option to exclusively license CMCC’s interest in this co-owned intellectual property.
Our β-thalassemia/SCD research program also includes the additional patent portfolio described below.
•
β-thalassemia/SCD Product Candidate Licenses. We have in-licensed patents and patent applications that are directed to certain specific
compositions of matter and methods for treating β-thalassemia/SCD. As of January 31, 2020, we had an exclusive license to one issued U.S. patent
and one pending U.S. patent application and as well as 17
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corresponding foreign patents and 22 pending corresponding foreign applications. We expect the issued composition of matter patents to expire in
2035 in the United States and in the rest of the world (excluding possible patent term extensions). Further, we expect any composition of matter or
method patents, if issued from the pending patent applications, if applicable, and if the appropriate maintenance, renewal, annuity or other
governmental fees are paid, to expire in 2035 (worldwide, excluding possible patent term extensions). We expect any other patents in this portfolio,
if issued, and if the appropriate maintenance, renewal, annuity, or other governmental fees are paid, to expire from 2035 (worldwide, excluding
possible patent term extensions). In addition, as of January 31, 2020, we had a non-exclusive license to four issued U.S. patents, one pending U.S.
patent application, and six pending corresponding foreign patent applications and 29 issued foreign patents. We expect the issued composition of
matter and method patents to expire in 2029 in the United States and in the rest of the world (excluding possible patent term extensions). We expect
any composition of matter or method patents, if issued from the pending patent applications, if applicable, and if the appropriate maintenance,
renewal, annuity or other governmental fees are paid, to expire in 2029 (worldwide, excluding possible patent term extensions). We expect any other
patents in this portfolio, if issued, and if the appropriate maintenance, renewal, annuity, or other governmental fees are paid, to expire in 2029
(worldwide, excluding possible patent term extensions.
Cerebral Adrenoleukodystrophy (CALD)
The CALD program includes the following patent portfolios described below.
•
Pasteur Institute. The in-licensed Pasteur patent portfolio contains the patents and patent applications described above directed towards aspects of
our 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 lentiviral
vectors utilized to produce our Lenti-D product candidate for CALD.
•
bluebird bio. The bluebird bio patent portfolio contains patents and patent applications directed to compositions of matter for CALD gene therapy
vectors and compositions and methods of using the vectors and compositions in cell-based gene therapy of adrenoleukodystrophy or
adrenomyeloneuropathy. As of January 31, 2020, we owned three U.S. patents and 26 issued foreign patents. We expect the issued composition of
matter patents for CALD gene therapy vectors to expire in 2032 (excluding possible patent term extensions). Further, 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 in 2032 (worldwide, excluding possible patent term extensions). We expect any other patents in this portfolio, if issued, and
if the appropriate maintenance, renewal, annuity, or other governmental fees are paid, to expire in 2032 (worldwide, excluding possible patent term
extensions).
Multiple Myeloma
The multiple myeloma program includes the following patent portfolios described below.
•
Pasteur Institute. The in-licensed Pasteur patent portfolio contains patents and patent applications described above that are directed towards
aspects of our lentiviral vectors utilized to produce our product candidates for multiple myeloma.
• RDF. The in-licensed RDF patent portfolio contains the patents and patent applications described above directed towards aspects of our lentiviral
vectors utilized to produce our product candidates for multiple myeloma. In addition, the RDF portfolio contains additional patent applications
directed to aspects of our oncology program. As of January 31, 2020, we had an exclusive license (from RDF) to five issued patents and two
pending U.S. patent applications related to our oncology platform. We expect the issued patents to expire from 2021-2022 (excluding possible patent
term extensions). Further, we expect composition of matter or methods patents, if issued from the pending patent applications and if the appropriate
maintenance, renewal, annuity or other governmental fees are paid, to expire from 2021-2022 (excluding possible patent term extensions). We expect
any 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 from 2021-2022 (worldwide, excluding possible patent term extensions).
•
Biogen. The in-licensed patent portfolio from Biogen Inc., formerly Biogen Idec MA Inc. and referred to herein as Biogen, contains patents and
patent applications directed towards aspects of T cell-based products that target BCMA. As of January 31, 2020, we had a co-exclusive license to ten
issued U.S. patents and one pending U.S. patent application and five pending corresponding foreign applications and 114 issued corresponding
foreign patents related to bb2121. We expect the issued patents to expire from 2020-2030 (excluding possible patent term extensions). Further, we
expect composition of matter or methods patents, if issued from the pending patent applications and if the appropriate maintenance, renewal, annuity
or other governmental fees are paid, to expire from
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2020-2032 (excluding possible patent term extensions). We expect any 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 from 2020-2030 (worldwide, excluding possible patent
term extensions).
• NIH. The in-licensed patent portfolio from NIH contains patents and patent applications directed towards aspects of T cell-based products that target
BCMA. As of January 31, 2020, we had an exclusive license to one issued U.S. Patent, 12 pending U.S. patent applications and 20 corresponding
foreign patent applications and 15 issued corresponding foreign patents related to bb2121. We expect the issued composition of matter patents to
expire from 2033-2034 (excluding possible patent term extensions). We expect any other composition of matter and methods patents, if issued from
the 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 any 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. The bluebird bio patent portfolio contains patents and patent applications directed to certain specific compositions of matter for
generating CAR T cells. As of January 31, 2020, we owned two issued U.S. patents, ten pending U.S. patent applications, 114 corresponding foreign
patent applications, 53 foreign patents and two pending U.S. provisional applications. We expect the issued composition of matter and methods
patents to expire in 2035 (excluding possible patent term extensions). We expect any composition of matter or methods patents, if issued from a
corresponding nonprovisional 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 from 2035-2040 (worldwide, excluding possible patent term
extensions). We expect any 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 from 2035-2040 (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 β-thalassemia, SCD, CALD, oncology and other potential programs, includes the following
patent portfolios 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.
•
•
SIRION. The in-licensed patent portfolio from SIRION Biotech GmbH, or SIRION, contains patents and patent applications directed to methods of
manufacturing ex vivo gene therapy products with a lentiviral vector. As of January 31, 2020, we had an exclusive license to one issued U.S. Patent,
one pending U.S. patent application and three corresponding foreign patent applications and one issued corresponding foreign patent. We expect the
issued method patents to expire in 2033 (excluding possible patent term extensions). We expect any other composition of matter and methods
patents, if issued from the 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 any 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. Another component of the bluebird bio patent portfolio includes the vector manufacturing platform and is potentially applicable to the
CALD, β-thalassemia, SCD, oncology, and other programs. This portion of the portfolio contains patents and patent applications directed to
improved methods for transfection and transduction of therapeutic cells. As of January 31, 2020, we owned two issued U.S. patents, three pending
U.S. patent applications and 41 corresponding foreign patent applications and 51 issued corresponding foreign patents. We expect the issued method
patents to expire in 2032 (excluding possible patent term extensions). We expect composition of matter and 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 2032-2037
(excluding possible patent term extensions). We expect any 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 from 2032-2037 (worldwide, excluding possible patent term
extensions).
Oncology platform (e.g., vectors, manufacturing, and T cell-based products)
Our T cell-based oncology platform and oncology research program, which is applicable to our multiple myeloma program and other potential programs
in cancer, includes the following patent portfolios described below.
•
Pasteur Institute. The Pasteur patent portfolio contains the patents and patent applications described above.
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• RDF. The in-licensed RDF patent portfolio described above contains patents and patent applications that are also applicable to our oncology
platform. In addition, the RDF portfolio contains additional patent applications directed to aspects of our oncology program. As of January 31,
2020, we had an exclusive license (from RDF) to five issued patents and two pending U.S. patent applications related to our oncology platform. We
expect the issued patents to expire from 2021-2022 (excluding possible patent term extensions). Further, we expect composition of matter or
methods patents, if issued from the pending patent applications and if the appropriate maintenance, renewal, annuity or other governmental fees are
paid, to expire from 2021-2022 (excluding possible patent term extensions). We expect any 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 from 2021-2022 (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 for
generating CAR T cells directed against various cancers and improved CAR T cell compositions. As of January 31, 2020, we owned three issued
U.S. patents, six pending U.S. patent applications and 45 corresponding foreign patent applications and 2 foreign patents; four families of pending
U.S. provisional applications; and 11 pending PCT applications. We expect the issued composition of matter patent to expire in 2034 (excluding
possible patent term extensions). We expect any composition of matter or methods patents, if issued from a corresponding nonprovisional
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 from 2034-2040 (worldwide, excluding possible patent term extensions). We expect any 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
from 2034-2040 (worldwide, excluding possible patent term extensions).
T Cell Manufacturing Methods License. We have in-licensed patents and patent applications that are directed to certain specific methods for
generating CAR T cells. As of January 31, 2020, we had a nonexclusive license to two issued U.S. patents, one pending U.S. patent application, and
30 corresponding issued foreign patents. We expect the issued method patents to expire in 2026 (excluding possible patent term
extensions). Further, we expect methods patents, if issued from the pending patent applications and if the appropriate maintenance, renewal, annuity
or other governmental fees are paid, to expire in 2026 (excluding possible patent term extensions). We expect any 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 2026
(worldwide, excluding possible patent term extensions).
T Cell Immunotherapy Product Candidate Licenses. We have in-licensed patents and patent applications that are directed to certain specific
compositions of matter for generating CAR T cells directed against various cancers and related methods of treatment. As of January 31, 2020, we
have an exclusive license to one issued U.S. patent and ten corresponding foreign patents and co-own a pending US application and seven
corresponding foreign patent applications to a particular target antigen. We expect the issued composition of matter patent to expire in 2025
(excluding possible patent term extensions). We expect any composition of matter or methods patents, if issued from a corresponding nonprovisional
application or 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 any 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 2036 (worldwide, excluding possible patent term
extensions). In addition, as of January 31, 2020, we have an exclusive license to three families of U.S. provisional applications directed to
compositions and methods for treating cancers that express particular target antigens. We expect the issued method of use patents to expire in 2029
(excluding possible patent term extensions). We expect any composition of matter or methods patents, if issued from a corresponding nonprovisional
application or corresponding foreign applications, if applicable, and if the appropriate maintenance, renewal, annuity or other governmental fees are
paid, to expire in 2029 (worldwide, excluding possible patent term extensions). We expect any 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 2029 (worldwide, excluding possible
patent term extensions). Also as of January 31, 2020, we co-own a foreign patent application directed to compositions and methods for treating
cancers that express a particular antigen. We expect any composition of matter or methods patents, if issued from a corresponding nonprovisional
applications or foreign applications, if applicable, and if the appropriate, renewal, annuity or other governmental fees are paid, to expire in 2040
(worldwide, excluding possible patent term extensions). We expect any 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 2040 (worldwide, excluding possible patent term
extensions). Also as of January 31, 2020, we co-own three families of U.S. provisional patent applications directed to compositions and methods for
treating cancers that express a particular antigen. We expect any composition of matter or methods patents, if issued from a corresponding
nonprovisional application or foreign applications, if applicable, and if the appropriate maintenance, renewal, annuity or other governmental fees are
paid, to expire in 2040
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(worldwide, excluding possible patent term extensions). We expect any 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 from 2040 (worldwide, excluding possible patent term
extensions). Also as of January 31, 2020, we have an option to exclusively license two patent families that are directed to compositions and methods
for treating cancers that express a particular antigen. We expect any composition of matter or methods patents, if issued from corresponding
nonprovisional applications or foreign applications, if applicable, and if the appropriate maintenance, renewal, annuity or other governmental fees
are paid, to expire from 2037-2039 (worldwide, excluding possible patent term extensions). We expect any 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 from 2037-2039
(worldwide, excluding possible patent term extensions).
Gene editing platform (e.g., homing endonucleases, chimeric endonucleases, megaTALs, genetically modified cells)
The gene editing platform includes the following patent portfolios described below.
•
Pasteur Institute. The Pasteur patent portfolio described above may contain patents and patent applications that are potentially applicable to our
gene editing platform.
• RDF. The in-licensed RDF patent portfolio described above may contain patents and patent applications that are potentially applicable to our gene
editing platform.
• Gene Editing License. We in-licensed patent portfolios that contain patents and patent applications directed to aspects of our gene editing platform
to produce genome modifying enzymes and genetically modified cells that are potentially applicable to our β-thalassemia, SCD, oncology and other
programs. As of January 31, 2020, we had an exclusive/co-exclusive license to six issued U.S. patents and one pending U.S. patent application and
33 corresponding foreign patents and three corresponding patent applications related to our gene editing platform. We expect the issued composition
of matter patents to expire in 2030 (excluding possible patent term extensions). Further, we expect composition of matter or methods patents, if
issued from 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 any 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 2030 (worldwide, excluding possible patent term
extensions). In addition, as of January 31, 2020, we had an exclusive license to two issued U.S. patents and six corresponding foreign patents related
to our gene editing platform. We expect the issued composition of matter patent to expire from 2027-2031 in the United States (excluding possible
patent term extensions) and in 2027 in the rest of the world.
• Academic Gene Editing Licenses. We in-licensed patent portfolios from multiple academic medical centers, each portfolio containing patents and
patent applications directed to aspects of our gene editing platform to produce genome modifying enzymes and genetically modified cells that are
potentially applicable to our β-thalassemia, SCD, oncology and other programs. As of January 31, 2020, we had an exclusive license to one issued
U.S. patent and six pending U.S. patent applications and 14 corresponding foreign patents and three corresponding patent applications related to our
gene editing platform. We expect the issued patent to expire in 2027 (excluding possible patent term extensions) in the U.S. and from 2027-3032 in
the rest of the 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
any 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 from 2027-2032 (worldwide, excluding possible patent term extensions). As of January 31, 2020, we also had a non-exclusive
license to one issued U.S. patent application and two pending U.S. patent application related to our gene editing platform. We expect the issued
composition of matter patent to expire in 2035 (excluding possible patent term extensions). We expect any other composition of matter or methods
patents, if issued from corresponding nonprovisional applications or foreign applications, if applicable, and if the appropriate maintenance, renewal,
annuity or other governmental fees are paid, to expire in 2035 (worldwide, excluding possible patent term extensions). We expect any 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
from 2035 (worldwide, excluding possible patent term extensions). In addition, as of January 31, 2020, we had an exclusive license to two pending
U.S. applications and 19 corresponding issued foreign patents and 17 corresponding foreign patent applications related to our gene editing platform.
We expect the issued composition of matter patents to expire in 2033 (excluding possible patent term extensions). We expect other 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 2031-2033 (excluding possible patent term extensions). We expect any other patents and patent applications in this
portfolio, if issued, and if the appropriate maintenance, renewal, annuity, or other governmental
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fees are paid, to expire in 2031-2033 (worldwide, excluding possible patent term extensions). As of January 31, 2020, we also had a non-exclusive
license to two issued U.S. patents, one pending U.S. application, 13 corresponding foreign patent applications, and 25 corresponding foreign patents
related to our gene editing platform. We expect the issued composition of matter patents to expire in 2033 (excluding possible patent term
extensions). Further, 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 2033 (excluding possible patent term extensions). We expect any
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 gene
editing platform to produce genome modifying enzymes and genetically modified cells that are potentially applicable to our oncology and other
programs. As of January 31, 2020, we owned nine patent families that include 11 pending U.S. patent applications and 64 corresponding foreign
patent applications related to our gene editing platform. We expect any composition of matter or methods patents, if issued from a corresponding
nonprovisional 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 from 2037-2038 (worldwide, excluding possible patent term extensions). We expect
any 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 from 2037-2038 (worldwide, excluding possible patent term extensions). As of January 31, 2020, we owned six PCT
applications related to our gene editing platform. We expect any composition of matter or methods patents, if issued from a corresponding
nonprovisional 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 from 2038-2039 (worldwide, excluding possible patent term extensions). We expect
any 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 from 2038-2039 (worldwide, excluding possible patent term extensions). As of January 31, 2020, we co-owned (with Cellectis
SA) two issued U.S. patents, three corresponding foreign patent applications, and 16 corresponding foreign patents related to our gene editing
platform. 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 in 2034(excluding possible 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
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 term
adjustment, which compensates a patentee for administrative delays by the U.S. Patent and Trademark Office in granting a patent, or may be shortened if a
patent is terminally disclaimed over an earlier-filed patent.
The term of a patent that covers an FDA-approved drug may also be eligible for patent term extension, which permits patent term restoration of a U.S.
patent as compensation for the patent term lost during the FDA regulatory review process. The Hatch-Waxman Act permits a patent term extension of up to
five 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. A
patent 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 patent
applicable to an approved drug may be extended. Moreover, a patent can only be extended once, and thus, if a single patent is applicable to multiple products,
it can only be extended based on one product. Similar provisions are available in Europe and other foreign jurisdictions to extend the term of a patent 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 expect to 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 our
proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and third
parties. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical 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 trade secrets may otherwise become known or
be independently 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.
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License agreements
Inserm-Transfert
In 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 la
recherche médicale, for use of certain patents and know-how related to the ABCD1 gene and corresponding protein, for use in the field of human ALD
therapy. Inserm-Transfert is referred to herein as Inserm. The last patent in the Inserm licensed patent portfolio expired in February of 2016. Inserm retains
the right to practice the intellectual property licensed under the agreement for educational, clinical and preclinical studies purposes.
Upon commercialization of our products covered by the in-licensed intellectual property, which we expect would include our Lenti-D product candidate,
we will be obligated to pay Inserm a percentage of net sales as a royalty for the longer of the life of any patents covering the product or 10 years from first
commercial 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 be
made, 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 as
practical, consistent with our reasonable business practices and judgment in compliance with an agreed upon development plan. We have assumed certain
development, regulatory and commercial milestone obligations and must report on our progress in achieving these milestones on an annual basis.
We may unilaterally terminate the license agreement at any time. Either party may terminate the agreement in the event of the other party’s material
breach which remains uncured after 60 days of receiving written notice of such breach or in the event the other party becomes the subject of a voluntary or
involuntary petition in bankruptcy and such petition is not dismissed with prejudice within 120 days after filing. In addition, Inserm may terminate the license
agreement in the event that we cannot prove within 60 days of written notice from Inserm that we have been diligent in developing the licensed products and
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 the
patent 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 in
connection with any such termination. The longest lived patent rights licensed to us under the agreement expired in 2016.
Institut Pasteur
We have entered into a license with Institut Pasteur for certain patents relating to the use of DNA sequences, lentiviral vectors and recombinant cells in
the 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 52 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 2020 and 2023. The license is exclusive
for products containing human and non-human lentiviral vectors. Institut Pasteur retains the right, on behalf of itself, its licensees and research partners, to
conduct 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 SCD) or ALD (including CALD and AMN), we must pay Institut Pasteur an additional payment of €3.0 million. If
we receive any income (cash or non-cash) in connection with sublicenses for products targeting indications other than β-hemoglobinopathies (including TDT
and SCD) or ALD (including CALD and AMN), we must pay Institut Pasteur a percentage of such income varying from low single digits if the sublicense
also includes licenses to intellectual property controlled by us, and a percentage of sublicense income in the mid-range double digits if 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, Lenti-D, ide-
cel and bb21217 product 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 the product but in any event is in the low single digits. In addition, starting in 2016 we must make under this agreement an annual maintenance
payment which is 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 is higher than a pre-specified percentage, we may ask Institut Pasteur to re-negotiate our royalty rates under this relationship.
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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
more products in the license field and to obtain any necessary governmental approvals in respect of, and market the products in license field, if any.
Additionally, we have assumed certain development and regulatory milestone obligations. We must report on our progress towards achieving these milestones
on an annual basis. We may unilaterally terminate the license agreement at any time by sending Institut Pasteur 90 days prior written notice. Either party may
terminate 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 market
authorization of the first product, whichever occurs later. In the event the agreement is terminated, while the license grant would cease, we would retain the
right to manufacture, import, use and sell licensed products for a certain period of time post-termination. In addition, our ownership stake in certain jointly
made improvements covered by the licensed patents would survive termination of the agreement. The longest lived patent rights licensed to us under the
agreement are currently expected to expire in 2023.
Stanford University
In July 2002, we entered into a non-exclusive license agreement with the Board of Trustees of the Leland Stanford Junior University, referred to herein as
Stanford, 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 or
non-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
(unless the sublicense is to a collaborating partner, contract manufacturer or contract research organization).
Upon commercialization of our products covered by the in-licensed intellectual property, which we expect would include our LentiGlobin, Lenti-D, ide-
cel and bb21217 product candidates, 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 is reduced 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 a specified percentage which is less than one percent. Since April 2013, we have been paying Stanford an annual
maintenance fee, which will be creditable against 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 30
days of providing notice we are delinquent on any report or payment, are not using commercially reasonable efforts to develop, manufacture and/or
commercialize one or more licensed products, are in material breach of any provision or provide any false report. Termination of this agreement may require
us 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 a
commercial product on the market at that time and we are in material compliance with the license agreement.
Massachusetts Institute of Technology
In December 1996, we entered into an exclusive license with the Massachusetts Institute of Technology, referred to herein as MIT, for use of certain
patents in any field. This license agreement was amended in December 2003, May 2004 and June 2011. The licensed patent portfolio includes at least 12 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 from in
2023. This license also has been amended to include a case jointly owned by MIT and us wherein we received the exclusive license to MIT’s rights in this
case. 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 a
percentage 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 product
candidate, we will be obligated to pay MIT a percentage of net sales by us or our sublicensees as a
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royalty. This royalty is in the low single digits and is reduced 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 licensed
products during the term of the agreement. We have assumed certain milestones with respect to raising capital investment and regulatory progress. We must
report 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 our
business, 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 of
nonpayment). In the event the agreement is terminated, while the license grant would cease, we would retain a right to complete manufacture of any licensed
products in process and sell then-existing inventory. In addition, MIT would grant our sublicensees a direct license following such termination. With respect
to jointly owned intellectual property, any termination would allow MIT to grant licenses to any third party to such intellectual property, without our approval,
unless a sublicensee was already in place, in which case, MIT would grant our sublicensees a direct license.
Research Development Foundation
In December 2011, we entered into an exclusive license with RDF to use certain patents that involve lentiviral vectors. The RDF licensed patent portfolio
includes at least 31 U.S. and foreign patents and patent applications. Any patents within this portfolio that have issued or may yet issue would have an
expected statutory expiration date between 2021 and 2027. RDF retains the right, on behalf of itself and other nonprofit academic research institutions, to
practice and use the licensed patents for any academic, non-clinical research and educational 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, LentiGlobin,
ide-cel and bb21217 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 by half if during the following ten years from the first marketing approval the last valid claim within the licensed patent that covers the licensed
product expires or 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 more
licensed products, including our first licensed product by 2016 and a second licensed product by 2018. These diligence efforts include minimum annual
royalty 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 (30
days 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 or
trustee, we institute or suffer to be instituted any procedure in bankruptcy court for reorganization or rearrangement of our financial affairs, make a general
assignment for the benefit of creditors, or if we or an affiliate or a sublicensee institutes any procedure challenging the validity or patentability of any patent
or 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 or
the 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-year
royalty period described above. In the event the agreement is terminated, while the license grant would cease, RDF will grant our sublicensees a direct
license. The longest lived patent rights licensed to us under the agreement are in one U.S. patent currently expected to expire in 2027.
Biogen
In August 2014, we entered into a license agreement with Biogen, pursuant to which we co-exclusively licensed certain patents and patent applications
directed towards aspects of T cell-based products that target BCMA. Any patents within this portfolio that have issued or may yet issue would have an
expected statutory expiration date between 2020 and 2032. Biogen retains the right to practice and use the licensed patents in the licensed field and
territory. We have the right to grant sublicenses to third parties, subject to certain conditions. Upon commercialization of our products covered by the in-
licensed intellectual property, which we expect would include our ide-cel and bb21217 product candidates, we will be obligated to pay Biogen a percentage of
net sales as a royalty in the low single digits. We are required to use commercially reasonable efforts to
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research and develop one or more licensed products in the license field during the term of the agreement. Additionally, we have assumed certain development
and regulatory milestone obligations and must report on our progress in achieving those milestones on a periodic basis. We may be obligated to pay up to
$24.0 million in the aggregate for each licensed product upon the achievement of these milestones. We may unilaterally terminate the license agreement at
any time with prior written notice to Biogen. Either party may terminate the license in the event of the other party’s material breach upon notice and an
opportunity for the breaching party to cure. Either party may also terminate the agreement in the event bankruptcy proceedings are opened against the other
party and are not dismissed within a specified period of time. Absent early termination, the agreement will automatically terminate upon the expiration of all
patent rights covered by the agreement or ten years from the date of first commercial sale of a licensed product, whichever is later. The longest lived patent
rights licensed to us under the Agreement are in a U.S. patent, currently expected to expire in 2032.
NIH
In August 2015, we entered into a license agreement with the NIH, pursuant to which we exclusively licensed certain patents and patent applications
directed towards aspects of T cell-based products that target BCMA. Any patents within this portfolio that have issued or may yet issue would have an
expected statutory expiration date in 2033. NIH retains the right to practice the intellectual property licensed under the agreement on behalf of the government
of the United States. We have the right to grant sublicenses to third parties, subject to certain conditions. For each such sublicense we grant we must pay the
NIH a fee. Upon commercialization of our products covered by the in-licensed intellectual property, which we expect would include our ide-cel and bb21217
product candidates, we will be obligated to pay the NIH a percentage of net sales as a royalty in the low single digits. We are required to use commercially
reasonable efforts to research and develop one or more licensed products in the license field during the term of the agreement. Additionally, we have assumed
certain development and regulatory milestone obligations and must report on our progress in achieving those milestones on a periodic basis. We may be
obligated to pay up to $9.7 million in the aggregate for a licensed product upon the achievement of these milestones. We may unilaterally terminate the
license agreement at any time with prior written notice to the NIH. The NIH may terminate the license in the event of our material breach upon notice and
following an opportunity for us to cure the material breach. The NIH may also terminate the agreement in the event bankruptcy proceedings are opened
against us and are not dismissed within a specified period of time. Absent early termination, the agreement will automatically terminate upon the expiration
of the patent rights covered by the agreement. The longest lived patent rights licensed to us under the Agreement are currently expected to expire in 2033.
SIRION
In December 2015, we entered into a license agreement with SIRION, pursuant to which we exclusively licensed certain patents and patent applications
directed towards aspects of manufacturing gene therapy products. Any patents within this portfolio that have issued or may yet issue would have an expected
statutory expiration date in 2033. We have the right to grant sublicenses to third parties, subject to certain conditions. Upon commercialization of our products
covered by the in-licensed intellectual property, which we expect would include our LentiGlobin product candidate, we will be obligated to pay SIRION a
percentage of net sales as a royalty in the low single digits. We are required to use commercially reasonable efforts to research and develop one or more
licensed products in the license field during the term of the agreement, and we must report on our progress in achieving those milestones on a periodic basis.
We may be obligated to pay up to $13.4 million in the aggregate upon the achievement of certain development and regulatory milestones. We may unilaterally
terminate the license agreement at any time with prior written notice to SIRION. SIRION may terminate the license in the event of our material breach upon
notice and following an opportunity for us to cure the material breach. SIRION may also terminate the agreement in the event bankruptcy proceedings are
opened against us and are not dismissed within a specified period of time. Absent early termination, the agreement will automatically terminate upon the
expiration of the patent rights covered by the agreement. The longest lived patent rights licensed to us under the Agreement are currently expected to expire in
2033.
Orchard Therapeutics Limited
In April 2017, we entered into a license agreement with GlaxoSmithKline Intellectual Property Development Limited, or GSK, pursuant to which GSK
non-exclusively licensed certain of our patent rights related to lentiviral vector technology to develop and commercialize gene therapies for Wiscott-Aldrich
syndrome and metachromatic leukodystrophy, two rare genetic diseases. Effective April 2018, this license agreement was assigned by GSK to Orchard
Therapeutics Limited, or Orchard. Financial terms of the agreement include an upfront payment to us as well as potential development and regulatory
milestone payments and low single digit royalties on net sales of covered products.
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Novartis Pharma AG
In April 2017, we entered into a license agreement with Novartis Pharma AG, or Novartis, pursuant to which Novartis non-exclusively licensed certain of
our patent rights related to lentiviral vector technology to develop and commercialize chimeric antigen receptor T cell (CAR T) therapies for oncology,
including Novartis’ approved CAR T therapy Kymriah. Financial terms of the agreement include an upfront payment to us as well as potential development
and regulatory milestone payments and low single digit royalties on net sales of covered products.
Competition
The biotechnology and pharmaceutical industries are characterized by intense and rapidly changing competition to develop new technologies and
proprietary products. We face potential competition from many different sources, including larger and better-funded pharmaceutical and biotechnology
companies. Not only must we compete with other companies that are focused on gene therapy products but any products that we may commercialize will
have 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 how
successful these efforts are, it is possible they may increase the barriers to adoption and success for our product candidates, and our preclinical T cell-based
cancer immunotherapy product candidates. These efforts include the following:
•
•
β-thalassemia: The current standard of care for the treatment of β-thalassemia in the developed world is chronic blood transfusions to address the
patient’s anemia. In addition, such patients often receive iron chelation therapy to help manage the iron overload associated with their chronic blood
transfusions. Novartis and ApoPharma Inc., who provide the leading iron chelation therapy, are seeking to develop improvements to their product
profile and accessibility. A number of different approaches are under investigation that seek to improve the current standard of care treatment
options, including, a protein that aims to improve red blood cell production and fetal hemoglobin regulators. Luspatercept (ACE-536), a
subcutaneously-delivered protein therapeutic that targets molecules in the TGF-β superfamily, was recently approved in the United States for the
treatment of anemia in adult patients with beta thalassemia who require regular red blood cell (RBC) transfusions. Acceleron Pharma, Inc. and BMS
also filed regulatory submissions of luspatercept in Europe in the first half of 2019. In addition, some patients with β-thalassemia receive HSCT
treatment, particularly if a sufficiently well-matched source of donor cells is identified. In addition, there are a number of academic and industry-
sponsored research and development programs to improve the outcomes of allogeneic HSCT, or the tolerability and safety of haploidentical HSCT,
while increasing the availability of suitable donors. These programs include a modified donor T cell therapy to be used in conjunction with
haploidentical HSCT that is in a phase 1/2 study supported by Bellicum Pharmaceuticals, Inc. though the program is currently on hold while the
company identifies a partner. There are also several different groups developing other approaches for β-thalassemia, including one that uses a similar
ex vivo autologous gene therapy approach, but uses a different vector and different cell processing techniques and two that use gene editing
approaches. These include: the San Raffaele Telethon Institute for Gene Therapy (in collaboration with Orchard Therapeutics) is currently
investigating its gene therapy in a phase 2 study of adults and pediatric patients with in transfusion dependent β-thalassemia (TDT); Sangamo
BioSciences Inc. (in collaboration with Bioverativ Inc., a Sanofi company) is investigating ST-400, using a zinc finger nuclease-mediated gene-
editing approach currently in an ongoing phase 1/2 study; and CRISPR Therapeutics AG (in collaboration with Vertex Pharmaceuticals
Incorporated) is conducting an ongoing phase 1/2 study for its CTX-001, which leverages the CRISPR/Cas9 gene editing platform to disrupt the
BCL11A erythroid enhancer.
Sickle cell disease: The current standard of care for the treatment of SCD in the developed world is chronic blood transfusions or hydroxyurea (a
generic drug). In addition, patients treated with chronic blood transfusions often receive iron chelation therapy to help manage the iron overload.
Emmaus Life Sciences, Inc. received FDA approval for and have launched Endari (L-glutamine). We are aware of ongoing studies that continue to
evaluate the efficacy and safety of hydroxyurea in various populations. In addition, a limited number of patients with SCD receive allogeneic HSCT
treatment, particularly if a sufficiently well-matched source of donor cells is identified. In addition, there are a number of academic and industry-
sponsored research and development programs to improve the tolerability and safety of allogeneic HSCT with less well-matched sources of donor
cells, while increasing the availability of suitable donors. These programs include a modified donor T cell therapy to be used in conjunction with
haploidentical HSCT that is in a phase 1/2 study supported by Bellicum Pharmaceuticals, Inc., though the program is currently on hold while the
company identifies a partner. In addition to the recently approved hemoglobin S (HbS) polymerization inhibitor (voxelotor, Global Blood
Therapeutics, Inc.) and the antibody to p-selectin (crizanlizumab, Novartis), a number of different therapeutic approaches are under investigation
targeting the various aspects of SCD pathophysiology,
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including: guanylate cyclase stimulator and mediator of nitric oxide currently, Olinciguat, in a phase 2 study supported by Cyclerion, a pyruvate
kinase receptor activator, mitapivat, in a phase 1 study supported by Agios Pharmaceuticals, Inc.. ; and also gene editing approaches being supported
by Intellia Therapeutics, Inc. (in collaboration with Novartis), Editas Medicine, Inc. and CRISPR Therapeutics AG (in collaboration with Vertex
Pharmaceuticals Incorporated); and Sangamo BioSciences Inc. (in collaboration with Bioverativ). There are also several different groups developing
gene therapy approaches for SCD. Some of 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 1 gene therapy study for SCD; and Aruvant Sciences, Inc.’s ARU-1801, currently in a phase 1/2 gene therapy study for SCD.
• CALD: The current standard of care for the treatment of CALD is allogeneic HSCT. We understand that various academic centers around the world
are seeking to develop improvements to allogeneic HSCT, such as Magenta Therapeutic, Inc.’s cord blood expansion technology which is currently
being investigated in a phase 2 clinical trial for the treatment of inherited metabolic disorders, including adrenoleukodystrophy. Other possible
treatments being investigated include Orpheris, Inc.’s OP-101.
• Multiple Myeloma: The current standard of care for relapsed and refractory multiple myeloma includes IMIDs (e.g., thalidomide, lenalidomide,
pomalidomide), proteasome inhibitors (e.g., bortezomib, carfilzomib, ixazomib), monoclonal antibodies (e.g., daratumamab, elotuzumab), cytotoxic
agents, and HSCT. There are several groups developing autologous T cell therapies for relapsed and refractory multiple myeloma that use a similar
autologous ex vivo approach, but a different target antigen, BCMA single-chain variable fragment or, we believe, cell processing techniques. These
programs include: an anti-BCMA CAR T cell therapy that is in a phase 1b/2 study in the United States (Nanjing Legend in collaboration with
Janssen Biotech); an anti-BCMA CAR T cell therapy that is in phase 1 study (Poseida Therapeutics, Inc.); an anti-BCMA CAR T cell therapy in
clinical development (phase 1/2) sponsored by BMS following the completion of its acquisition of Juno Therapeutics, Inc and an anti-BCMA CAR T
cell therapy that is in phase I study (Innovent Biologics Inc). In addition to these autologous T cell-based approaches, Allogene Therapeutics, Inc.,
Poseida, and CRISPR Therapeutics have disclosed preclinical programs for allogeneic BCMA CAR T cell therapies. There are also therapies using
other modalities being developed by several groups, including multiple bispecific T cell engagers, including programs currently in clinical studies
supported by Amgen Inc., Regeneron, Janssen Research and Development, LLC, BMS, as well as a specific antibody therapy currently in a phase 1
study supported by Pfizer, Inc., and an antibody drug conjugate therapy supported by GSK that underwent a BLA submission, and those being
developed in preclinical programs.
• Merkel Cell Carcinoma: Merkel cell carcinoma, or MCC, is a rare, highly aggressive endocrine tumor of the skin. A majority of MCC are driven
by infections from the Merkel cell polyoma virus, with a small fraction triggered by ultraviolet mutations. At diagnosis, MCC is treated with a
combination of therapy and radiotherapy for primary or loco-regional tumors with the goal of preventing recurrence and subsequent metastatic
disease. Advanced forms of MCC are treated with cytotoxic chemotherapy (platinum-based regimens, etoposide, anthracyclines and taxanes, in
different combinations or alone) with very short-lived responses, rapid relapse and disease progression. Checkpoint inhibitors, such as avelumab,
developed by Merck KGaA and Pfizer Inc., and pembrolizumab, developed by Merck & Co., Inc. are now replacing the prior generation of
therapies. Several clinical trials are exploring checkpoint inhibitors in combination therapies as well as in combination with vaccines, particularly in
the post checkpoint inhibitor setting. Some small molecules including VEGF inhibitors and PARP inhibitors are being evaluated in the clinic as well
but no molecule has received regulatory approval thus far.
• MAGE-A4 Positive Solid Tumors: There a several groups developing autologous TCR-T cell therapies targeting MAGE-A4 that use a similar
autologous ex vivo approach, but different MAGE-A4 targeting TCRs, cell processing techniques, and/or peptide-MHC target. These programs
include: an anti-MAGE-A4 T cell therapy targeting a MAGE-A4 peptide presented in the HLA-A*02:01 allele that is in phase 1 and phase 2 studies
in the US, Canada, and Europe (Adaptimmune Therapeutics plc); an anti-MAGE-A4 TCR therapy targeting a MAGE-A4 peptide presented in the
HLA-A*24:02 allele that is in 2 phase I studies in China and Japan (Tianjin Medical University Cancer Institute and Hospital, Mie University). In
addition to these autologous T cell-based approaches, there is also a therapy targeting MAGE-A4 using bi-specific T cell engagers including
Immunocore Ltd’s program currently in a phase 1/2 study. Ultimately, MAGE-A4 positive solid tumors describes cancers including melanoma,
bladder, head and neck, oral, and lung cancers that express the antigen. The competitive landscape for a TCR-cell therapy targeting MAGE-A4 will
also be determined by the indication for which it is developed and commercialized.
• Diffuse Large B cell Lymphoma: The current standard of care for majority of Non-Hodgkin lymphoma, including diffuse large B cell lymphoma,
or DLBCL, is focused around CD20 immunotherapy, mainly rituximab, combined with chemotherapy agents such as bendamustine or the four-drug
cyclophosphamide, doxorubicin, vincristine and prednisone (CHOP) regimen as the first-line option; patients with certain mutations may receive a
different
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chemotherapy cocktail called EPOCH. As patients fail these therapies and reach the relapsed/refractory setting, patients who are eligible for stem
cell transplant typically receive CD20 antibodies and high-dose chemotherapy followed by autologous stem cell transplantation. The
immunomodulatory drug lenalidomide may be used in combination with rituximab for such patients who are not eligible for high-dose
chemotherapy. CD19 chimeric antigen receptor (CAR-T) cell therapies tisagenlecleucel and axicabtagene ciloleucel were both approved in 2017 as
therapies for DLBCL. As many as 60 development programs for DLBCL therapies are in phase 1 through phase 3 trials, including eleven CAR-T
cell therapies, most of which target CD19. Among these programs are the following: The CD19 CAR T-cell therapy lisocabtagene maraleucel in a
pivotal phase 1 trial being developed by BMS, which is expected to enter the market as early as 2020. Autolus Therapeutics plc is developing
AUTO3, a CD19/22 dual targeting CAR-T is evaluating R/R DLBCL patients in an ongoing phase 1/2 trial in the US and UK with other targets
emerging beyond CD-19. Beyond cell therapies, F. Hoffmann-La Roche Ltd.’s anti-body drug conjugate, polatuzumab received approval in
relapsed/refractory DLBCL in the US in 2019 and a broader EMA approval in patients not eligible for stem cell transplant. Bispecific antibody
therapies including Regeneron’s REGN1979 (CD20 X CD3) are also attracting interest with recent promising data in a phase 1 trial.
• Acute myeloid leukemia: The current standard of care for acute myeloid leukemia, or AML, is changing rapidly following a host of new small
molecule and monoclonal antibody approvals since 2017: midostaurin (commercialized by Novartis), daunorubicin and cytarabine (commercialized
by Jazz Pharmaceuticals), enasidenib (commercialized by BMS and Agios Therapeutics, Inc.), gemtuzumab ozogamicin (commercialized by Pfizer
Inc.), ivosidenib (commercialized by Agios Pharmaceuticals, Inc.), gilteritinib (commercialized by Astellas Pharma US Inc.), venetoclax
(commercialized by AbbVie Inc. and Genentech USA), and glasdegib (commercialized by Pfizer Inc.). Many of these drugs are first in class and
some are biomarker driven, leading to the potential for more segmentation in the AML treatment paradigm. There are a number of groups exploring
autologous CAR-T therapies in phase 1 trials for relapsed and refractory AML, some against targets that have approved monoclonal antibody
competitors on the market already, while others have novel targets. Dual targeting CAR-T cell-based approaches are also starting to enter the clinic,
including the ICG-144 program by iCell Gene Therapeutics, LLC. Other groups are exploring TCR-based autologous therapies against novel targets.
In addition to autologous cell therapies, there are allogeneic CAR-T cell therapies in early trials for AML, including MB-102 in a phase 1 trial being
developed by Mustang Bio, Inc and UCART123 in a phase 1 trial being developed by Cellectis Therapies of other modalities, such as bispecific
antibodies and antibody-drug conjugates are also in development across a wide range of targets.
Many of our competitors, either alone or with their strategic partners, have substantially greater financial, technical and human resources than we do and
significantly greater experience in the discovery and development of product candidates, obtaining FDA and other regulatory approvals of treatments and the
commercialization of those treatments. Accordingly, our competitors may be more successful than us in obtaining approval for treatments and achieving
widespread market acceptance. Our competitors’ treatments may be more effective, or more effectively marketed and sold, than any treatment we may
commercialize and may render our treatments obsolete or non-competitive before we can recover the expenses of developing and commercializing any of our
treatments.
These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical study sites
and patient registration for clinical studies, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage
companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
We anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available. We
expect any treatments that we develop and commercialize to compete on the basis of, among other things, efficacy, safety, convenience of administration and
delivery, price, the level of generic competition and the availability of reimbursement from government and other third-party payers.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have
fewer 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 or
other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong
market 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-party
payers seeking to encourage the use of generic products. If our therapeutic product candidates are approved, we expect that they will be priced at a significant
premium over competitive generic products.
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Government regulation
In the United States, biological products, including gene therapy products, are subject to regulation under the Federal Food, Drug, and Cosmetic Act, or
FD&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
PHS Act and their corresponding regulations govern, among other things, the testing, manufacturing, safety, efficacy, labeling, packaging, storage, record
keeping, distribution, reporting, advertising and other promotional practices involving biological products. FDA approval must be obtained before clinical
testing of biological products, and each clinical study protocol for a gene therapy product is reviewed by the FDA. FDA approval also must be obtained
before marketing of biological products. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local
and foreign statutes and regulations require the expenditure of substantial time and financial resources and we may not be able to obtain the required
regulatory approvals.
Within the FDA, the Center for Biologics Evaluation and Research, or the CBER, regulates gene therapy products. The CBER works closely with the
NIH. The FDA and the NIH have published guidance documents with respect to the development and submission of gene therapy protocols. The FDA also
has published guidance documents related to, among other things, gene therapy products in general, their preclinical assessment, observing subjects involved
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 prohibiting
the processes we may use. Federal and state agencies, congressional committees and foreign governments have expressed interest in further regulating
biotechnology. More restrictive regulations or claims that our products are unsafe or pose a hazard could prevent us from commercializing any products. New
government requirements may be established that could delay or prevent regulatory approval of our product candidates under development. It is impossible to
predict whether legislative changes will be enacted, regulations, policies or guidance changed, or interpretations by agencies or courts changed, or what the
impact of such changes, if any, may be.
U.S. biological products development process
The process required by the FDA before a biological product may be marketed in the United States generally involves the following:
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completion of nonclinical laboratory tests and animal studies according to good laboratory practices, or GLPs, and applicable requirements for the
humane 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 clinical
practices, or GCPs, and any additional requirements for the protection of human research subjects and their health information, to establish the safety
and 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, and
potency from results of nonclinical testing and clinical studies;
satisfactory completion of an FDA inspection of the manufacturing facility or facilities where the biological product is produced to assess
compliance with GMP, to assure that the facilities, methods and controls are adequate to preserve the biological product’s identity, strength, quality
and purity and, if applicable, the FDA’s current good tissue practices, or GTPs, for the use of human cellular and tissue products;
potential FDA audit of the nonclinical and clinical study sites that generated the data in support of the BLA; and
FDA review and approval, or licensure, of the BLA.
Before testing any biological product candidate, including a gene therapy product, in humans, the product candidate enters the preclinical testing stage.
Preclinical tests, also referred to as nonclinical studies, include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies
to assess the potential safety and activity of the product candidate. The conduct of the preclinical tests must comply with federal regulations and requirements
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
of an IND to the FDA, in the past, a protocol and related documentation was submitted to and the study was registered with the NIH Office of Biotechnology
Activities, or OBA, pursuant to the NIH Guidelines for Research Involving Recombinant DNA Molecules, or NIH Guidelines. Pursuant to the current NIH
Guidelines, research
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involving recombinant or synthetic nucleic acid molecules must be approved by an institutional biosafety committee, or IBC, a local institutional committee
that reviews and oversees basic and clinical research conducted at that institution. The IBC assesses the safety of the research and identifies any potential risk
to public health or the environment. Compliance with the NIH Guidelines is mandatory for investigators at institutions receiving NIH funds for research
involving recombinant DNA, however many companies and other institutions not otherwise subject to the NIH Guidelines voluntarily follow them. Such
trials remain subject to FDA and other clinical trial regulations, and only after FDA, IBC, and other relevant approvals are in place can these protocols
proceed.
The clinical study sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical
data or literature and a proposed clinical protocol, to the FDA as part of the IND. Some preclinical testing may continue even after the IND is submitted. The
IND 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 time
period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical study can begin. The FDA may also impose
clinical holds on a biological product candidate at any time before or during clinical studies due to safety concerns or non-compliance. If the FDA imposes a
clinical hold, studies may not recommence without FDA authorization and then only under 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, or that, 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 qualified
investigators, generally physicians not employed by or under the study sponsor’s control. Clinical studies are conducted under protocols detailing, among
other things, the objectives of the clinical study, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject
safety, including stopping rules that assure a clinical study will be stopped if certain adverse events should occur. Each protocol and any amendments to the
protocol must be submitted to the FDA as part of the IND. Clinical studies must be conducted and monitored in accordance with the FDA’s regulations
comprising the GCP requirements, including the requirement that all research subjects provide informed consent. Further, each clinical study must be
reviewed and approved by an 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 the clinical studies are minimized and are
reasonable in relation to anticipated benefits. The IRB also approves the form and content of the informed consent that must be signed by each clinical study
subject or his or her legal representative and must monitor the clinical study until completed.
Human clinical studies are typically conducted in three sequential phases that may overlap or be combined:
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phase 1. 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
testing is often conducted in patients.
phase 2. The biological product is evaluated in a limited patient population to identify possible adverse effects and safety risks, to preliminarily
evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance, optimal dosage and dosing schedule.
phase 3. Clinical studies are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patient population at
geographically dispersed clinical study sites. These clinical studies are intended to establish the overall risk/benefit ratio of the product and provide
an adequate basis for product labeling.
Post-approval clinical studies, sometimes referred to as phase 4 clinical studies, may be conducted after initial marketing approval. These clinical studies
are used to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety follow-up. The
FDA recommends that sponsors observe subjects for potential gene therapy-related delayed adverse events for a 15-year period, including a minimum of five
years of annual examinations followed by ten years of annual queries, either in person or by questionnaire, of study subjects.
During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and
clinical study investigators. Annual progress reports detailing the results of the clinical studies must be submitted to the FDA. Written IND safety reports
must be promptly submitted to the FDA, the NIH and the investigators for serious and unexpected adverse events, any findings from other studies, tests in
laboratory animals or in vitro testing that suggest a significant risk for human subjects, or any clinically important increase in the rate of a serious suspected
adverse reaction over that listed in the protocol or investigator brochure. The sponsor must submit an IND safety report within 15 calendar days after the
sponsor determines that the information qualifies for reporting. The sponsor also must notify the FDA of any unexpected fatal or life-threatening suspected
adverse reaction within seven calendar days after the sponsor’s initial receipt of the information. Phase 1, phase 2 and phase 3 clinical studies may not be
completed successfully within any specified period,
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if at all. The FDA or the sponsor or its data safety monitoring board may suspend a clinical study at any time on various grounds, including a finding that the
research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspend 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 if the 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 establish the
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 support
marketing approval. The NIH has a publicly accessible database, the Genetic Modification Clinical Research Information System which includes information
on gene transfer studies and serves as an electronic tool to facilitate the reporting and analysis of adverse events on these studies.
Concurrent with clinical studies, companies usually complete additional animal studies and must also develop additional information about the physical
characteristics of the biological product as well as finalize a process for manufacturing the product in commercial quantities in accordance with GMP
requirements. To help reduce the risk of the introduction of adventitious agents with use of biological products, the PHS Act emphasizes the importance of
manufacturing control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing
quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength, quality, potency and
purity of the final biological product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate
that the biological product candidate does not undergo unacceptable deterioration over its shelf life.
U.S. review and approval processes
After the completion of clinical studies of a biological product, FDA approval of a BLA, must be obtained before commercial marketing of the biological
product. The BLA must include results of product development, laboratory and animal studies, human studies, information on the manufacture and
composition of the product, proposed labeling and other relevant information. In addition, under the Pediatric Research Equity Act, or PREA, as amended, a
BLA or supplement to a BLA must contain data to assess the safety and effectiveness of the biological product for the claimed indications in all relevant
pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. The FDA may
grant deferrals for submission of data or full or partial waivers. Unless otherwise required by regulation, PREA does not apply to any biological product for
an indication for which orphan designation has been granted. The testing and approval processes require substantial time and effort and there can be no
assurance 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 agency
accepts 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 request
additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application also is subject to review
before 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 reviews
the BLA to determine, among other things, whether the proposed product is safe and potent, or effective, for its intended use, and has an acceptable purity
profile, and whether the product is being manufactured in accordance with GMP to assure and preserve the product’s identity, safety, strength, quality,
potency and purity. The FDA may refer applications for novel biological products or biological products that present difficult questions of safety or efficacy
to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the
application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such
recommendations carefully when making decisions. During the biological product approval process, the FDA also will determine whether a Risk Evaluation
and 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 the
BLA 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 it
determines that the manufacturing processes and facilities are in compliance with GMP requirements and adequate to assure consistent production of the
product within required specifications. For a gene therapy product, the FDA also will not approve the product if the manufacturer is not in compliance with
the GTPs. These are FDA regulations that govern the methods used in, and the facilities and controls used for, the manufacture of human cells, tissues, and
cellular and tissue based products, or HCT/Ps, which are human cells or tissue intended for implantation, transplant, infusion, or transfer into a human
recipient. The primary intent of the GTP requirements is to ensure that cell and tissue based
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products are manufactured in a manner designed to prevent the introduction, transmission and spread of communicable disease. FDA regulations also require
tissue establishments to register and list their HCT/Ps with the FDA and, when applicable, to evaluate donors through screening and testing. Additionally,
before approving a BLA, the FDA will typically inspect one or more clinical sites to assure that the clinical studies were conducted in compliance with IND
study requirements and GCP requirements. To assure GMP, GTP and GCP compliance, an applicant must incur significant expenditure of time, money and
effort in the areas of training, record keeping, production, and quality control.
Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria for
approval and deny approval. Data obtained from clinical studies are not always conclusive and the FDA may interpret data differently than we interpret the
same 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 the
specific deficiencies in the BLA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major, for
example, requiring additional clinical studies. Additionally, the complete response letter may include recommended actions that the applicant might take to
place the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the BLA, addressing all of the
deficiencies identified in the letter, withdraw the application, or request a hearing.
If a product receives regulatory approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may
otherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings or
precautions be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in the
form of a risk management plan, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical studies, sometimes
referred to as phase 4 clinical studies, designed to further assess a biological product’s safety and effectiveness, and testing and surveillance programs to
monitor 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 six
months, whereupon a review decision is to be made. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs and its review
goals are subject to change from time to time. The review process and the PDUFA goal date may be extended by three months if the FDA requests or the
BLA sponsor otherwise provides additional information or clarification regarding information already provided in the submission within the last three months
before the PDUFA goal date.
Orphan drug designation
Under 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 is
generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States and for
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 type of
disease or condition will be recovered from sales of the product. Orphan product designation must be requested before submitting an NDA or BLA. After the
FDA grants orphan product designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan product
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, the
product is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same drug or biological
product for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan
exclusivity. Competitors, however, may receive approval of different products for the indication for which the orphan product has exclusivity or obtain
approval for the same product but for a different indication for which the orphan product has exclusivity. Orphan product exclusivity also could block the
approval 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 product
candidate is determined to be contained within the competitor’s product for the same indication or disease. If a drug or biological product designated as an
orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan product exclusivity. Orphan
drug status in the European Union has similar, but not identical, benefits.
Expedited development and review programs
The FDA has a Fast Track program that is intended to expedite or facilitate the process for reviewing new drugs and biological products that meet certain
criteria. Specifically, new drugs and biological products are eligible for Fast Track
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designation if they are intended to treat a serious or life-threatening condition and demonstrate the potential to address unmet medical needs for the condition.
Fast Track designation applies to the combination of the product and 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 a Fast 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 of the marketing application on a rolling basis before the complete application is submitted,
if the sponsor provides a schedule for the submission of the sections of the application, the FDA agrees to accept sections of the application and determines
that the schedule is acceptable, and the sponsor pays any required 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 to
expedite development and review, such as priority review and accelerated approval. Under the Breakthrough Therapy program, products intended to treat a
serious or life-threatening disease or condition may be eligible for the benefits of the Fast Track program when preliminary clinical evidence demonstrates
that such product may have substantial improvement on one or more clinically significant endpoints over existing therapies. Additionally, FDA will seek to
ensure the sponsor of a breakthrough therapy product receives timely advice and interactive communications to help the sponsor design and conduct a
development program as efficiently as possible. Any product is eligible for priority review if it has the potential to provide safe and effective therapy where
no 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 in
an effort to facilitate the review. Additionally, a product may be eligible for accelerated approval. Drug or biological products studied for their safety and
effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated
approval, which means that they may be approved on the basis of adequate and well-controlled clinical studies establishing that the product has an effect on a
surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on a clinical endpoint other than survival or irreversible
morbidity. As a condition of approval, the FDA may require that a sponsor of a drug or biological product receiving accelerated approval perform adequate
and well-controlled post-marketing clinical studies. In addition, the FDA currently requires as a condition for accelerated approval pre-approval of
promotional materials, which could adversely impact the timing of the commercial launch of the product. Fast Track designation, Breakthrough Therapy
designation, priority review and accelerated approval do not change the standards for approval but may expedite the development or approval process.
Regenerative medicine advanced therapies (RMAT) designation
As part of the 21st Century Cures Act, Congress amended the FD&C Act to facilitate an efficient development program for, and expedite review of
regenerative medicine advanced therapies, which include cell and gene therapies, therapeutic tissue engineering products, human cell and tissue products, and
combination products using any such therapies or products. Regenerative medicine advanced therapies do not include those human cells, tissues, and cellular
and tissue based products regulated solely under section 361 of the Public Health Service Act and 21 CFR Part 1271. This program is intended to facilitate
efficient development and expedite review of regenerative medicine therapies, which are intended to treat, modify, reverse, or cure a serious or life-
threatening disease or condition and qualify for RMAT designation. A drug sponsor may request that FDA designate a drug as a RMAT concurrently with or
at any time after submission of an IND. FDA has 60 calendar days to determine whether the drug meets the criteria, including whether there is preliminary
clinical evidence indicating that the drug has the potential to address unmet medical needs for a serious or life-threatening disease or condition. A BLA for a
regenerative medicine therapy that has received RMAT designation may be eligible for priority review or accelerated approval through use of surrogate or
intermediate endpoints reasonably likely to predict long-term clinical benefit, or reliance upon data obtained from a meaningful number of sites. Benefits of
RMAT designation also include early interactions with FDA to discuss any potential surrogate or intermediate endpoint to be used to support accelerated
approval. A regenerative medicine therapy with RMAT designation that is granted accelerated approval and is subject to post-approval requirements may
fulfill such requirements through the submission of clinical evidence from clinical studies, patient registries, or other sources of real world evidence, such as
electronic health records; the collection of larger confirmatory data sets; or post-approval monitoring of all patients treated with such therapy prior to its
approval.
Post-approval requirements
Maintaining compliance with applicable federal, state, and local statutes and regulations requires the expenditure of substantial time and financial
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 ZYNTEGLO and any other 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 assurance and maintenance of records and documentation. Other post-approval requirements applicable to biological products,
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include reporting of GMP deviations that may affect the identity, potency, purity and overall safety of a distributed product, record-keeping requirements,
reporting of adverse effects, reporting updated safety and efficacy information, and complying with electronic record and signature requirements. After a
BLA is approved, the product also may be subject 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 is released 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 together with 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. The FDA also may perform certain confirmatory tests on lots of some products, such as viral vaccines, before
releasing the lots for distribution by the manufacturer. In addition, the FDA conducts laboratory research related to the regulatory standards on the safety,
purity, potency, and effectiveness of biological products.
Biological product manufacturers and other entities involved in the manufacture and distribution of approved biological products are required to register
their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for
compliance with GMPs and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality
control to maintain GMP compliance. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of
an approved BLA, including withdrawal of the product from the market. In addition, changes to the manufacturing process or facility generally require prior
FDA 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. In addition, companies that manufacture or distribute drug or biological products or that hold approved
BLAs must comply with other regulatory requirements, including submitting annual reports, reporting information about adverse drug experiences, and
maintaining certain records. Newly discovered or developed safety or effectiveness data may require changes to a drug’s approved labeling, including the
addition of new warnings and contraindications, and also may require the implementation of other risk management measures, including a REMS or the
conduct of post-marketing studies to assess a newly-discovered safety issue.
We also must comply with the FDA’s and other jursidictions' advertising and promotion requirements, such as those related to direct-to-consumer
advertising and advertising to healthcare professionals, the prohibition on promoting 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 failure to comply with the applicable regulatory requirements may result in restrictions on the
marketing of a product or withdrawal of the product from the market as 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. Consequences 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 corrective advertising or communications with healthcare professionals, debarment, restitution,
disgorgement of profits, or civil or criminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.
U.S. patent term restoration and marketing exclusivity
Depending 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 for
limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman
Amendments. The Hatch-Waxman Amendments permit a patent restoration term of up to five years as compensation for patent term lost during product
development and the FDA regulatory review process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14
years 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 the
submission 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 an
approved biological product is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent. The U.S.
PTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we may intend to apply
for restoration of patent term for one of our currently owned or licensed patents to add patent life beyond its current expiration date, depending on the
expected length of the clinical studies and other factors involved in the filing of the relevant BLA.
A biological product can obtain pediatric market exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existing exclusivity
periods and patent terms. This six-month exclusivity, which runs from the end of other exclusivity protection or patent term, may be granted based on the
voluntary completion of a pediatric study in accordance with an FDA-issued “Written Request” for such a study.
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The Patient Protection and Affordable Care Act, or Affordable Care Act, signed into law on March 23, 2010, includes a subtitle called the Biologics Price
Competition and Innovation Act of 2009 which created an abbreviated approval pathway for biological products shown to be similar to, or interchangeable
with, an FDA-licensed reference biological product. This amendment to the PHS Act attempts to minimize duplicative testing. Biosimilarity, which requires
that there be no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency, can be
shown through analytical studies, animal studies, and a clinical study or studies. Interchangeability requires that a product is biosimilar to the reference
product and the product must demonstrate that it can be expected to produce the same clinical results as the reference product and, for products administered
multiple times, the biologic and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of
diminished efficacy relative to exclusive use of the reference biologic. However, complexities associated with the larger, and often more complex, structure of
biological products, as well as the process by which such products are manufactured, pose significant hurdles to implementation that are still being worked
out 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 submitted
under the abbreviated approval pathway that is determined to be interchangeable with the reference product has exclusivity against other biologics submitting
under the abbreviated approval pathway for the lesser of (i) one year after the first commercial marketing, (ii) 18 months after approval if there is no legal
challenge, (iii) 18 months after the resolution in the applicant’s favor of a lawsuit challenging the biologics’ patents if an application has been submitted, or
(iv) 42 months after the application has been approved if a lawsuit is ongoing within the 42-month period.
Healthcare and Privacy Laws
In addition to restrictions on marketing of pharmaceutical products, several other types of state/ federal laws and trade association membership codes of
conduct have been applied to restrict certain marketing practices in the pharmaceutical industry in recent years. These laws include Anti-Kickback and false
claims statutes. The U.S. federal healthcare program Anti-Kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting
or receiving remuneration, directly or indirectly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging for or recommending
the purchase, lease or order of any healthcare item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federally financed
healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers,
purchasers, and formulary managers on the other. A person or entity need not have actual knowledge of the federal Anti-Kickback Statute or specific intent to
violate it in order to have committed a violation. Violations are subject to civil and criminal fines and penalties for each violation, plus up to three times the
remuneration involved, imprisonment, and exclusion from government healthcare programs. Although there are a number of statutory exemptions and
regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly and practices that involve
remuneration to those who prescribe, purchase, or recommend pharmaceutical and biological products, including certain discounts, or engaging healthcare
professionals or patients as speakers or consultants, may be subject to scrutiny if they do not fit squarely within the exemption or safe harbor. Our practices
may not in all cases meet all of the criteria for safe harbor protection from anti-kickback liability. Moreover, there are no safe harbors for many common
practices, such as educational and research grants or patient assistance programs.
The U.S. federal civil False Claims Act prohibits, among other things, any person from knowingly presenting, or causing to be presented, a false or
fraudulent claim for payment of government funds, or knowingly making, using, or causing to be made or used, a false record or statement material to an
obligation to pay money to the government or knowingly concealing or knowingly and improperly avoiding, decreasing, or concealing an obligation to pay
money to the federal government. Manufacturers can be held liable under the False Claims Act even when they do not submit claims directly to government
payers if they are deemed to “cause” the submission of false or fraudulent claims. The False Claims Act also permits a private individual acting as a
“whistleblower” to bring actions on behalf of the federal government alleging violations of the False Claims Act and to share in any monetary recovery. In
recent years, several pharmaceutical and other healthcare companies have faced enforcement actions under the federal False Claims Act for, among other
things, allegedly submitting false or misleading pricing information to government health care programs and providing free product to customers with the
expectation that the customers would bill federal programs for the product. Other companies have faced enforcement actions for causing false claims to be
submitted because of the company’s marketing the product for unapproved, and thus non-reimbursable, uses. Federal enforcement agencies also have showed
increased interest in pharmaceutical companies’ product and patient assistance programs, including reimbursement and co-pay support services, and a number
of investigations into these programs have resulted in significant civil and criminal settlements. In addition, the Affordable Care Act amended federal law to
provide that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback statute constitutes a
false or fraudulent claim for purposes of the federal civil False Claims Act. Criminal prosecution is possible for making or presenting a false or fictitious or
fraudulent claim to the federal government.
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The Health Insurance Portability and Accountability Act of 1996, or HIPAA, also created several new federal crimes, including healthcare fraud and false
statements relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit
program, including private third-party payers. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material
fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to
have committed a violation.
The U.S. federal Physician Payment Sunshine Act, being implemented as the Open Payments Program, requires certain manufacturers of drugs, devices,
biologics and medical supplies to engage in extensive tracking of payments and other transfers of value to prescribers and teaching hospitals, including
physician ownership and investment interests, and public reporting of such data. Effective January 1, 2022, these reporting obligations will extend to include
transfers of value made to certain non-physician providers such as physician assistants and nurse practitioners. Pharmaceutical and biological manufacturers
with products for which payment is available under Medicare, Medicaid or the State Children’s Health Insurance Program are required to track such
payments, and must submit a report on or before the 90th day of each calendar year disclosing reportable payments made in the previous calendar year. A
number of other countries, states and municipalities have also implemented additional payment tracking and reporting requirements, which if not done
correctly may result in additional penalties.
In addition, the U.S. Foreign Corrupt Practices Act, or the FCPA, prohibits corporations and individuals from engaging in certain activities to obtain or
retain 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 any
official of another country, government staff member, political party or political candidate in an attempt to obtain or retain business or to otherwise influence a
person working in that capacity. In many other countries, healthcare professionals who prescribe pharmaceuticals are employed by government entities, and
the purchasers of pharmaceuticals are government entities. Our dealings with these prescribers and purchasers may be subject to the FCPA.
Other countries, including a number of EU member states, have laws of similar application, including anti-bribery or anti-corruption laws such as the UK
Bribery Act. The UK Bribery Act prohibits giving, offering, or promising bribes to any person, as well as requesting, agreeing to receive, or accepting bribes
from any person. Under the UK Bribery Act, a company that carries on a business or part of a business in the United Kingdom may be held liable for bribes
given, offered or promised to any person in any country by employees or other persons associated with the company in order to obtain or retain business or a
business advantage for the company. Liability under the UK Bribery Act is strict, but a defense of having in place adequate procedures designed to prevent
bribery is available.
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH and their respective
implementing regulations, including the Final Omnibus Rule published in January 2013, impose requirements on certain covered healthcare providers, health
plans, and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of,
individually identifiable health information, relating to the privacy, security and transmission of individually identifiable health information. HITECH also
created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state
attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees
and costs associated with pursuing federal civil actions. In California the California Consumer Protection Act (“CCPA”), which went into effect on January 1,
2020, establishes a new privacy framework for covered businesses by creating an expanded definition of personal information, establishing new data privacy
rights for consumers in the State of California, imposing special rules on the collection of consumer data from minors, and creating a new and potentially
severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to
prevent data breaches. While clinical trial data and information governed by HIPAA are currently exempt from the current version of the CCPA, other
personal information may be applicable and possible changes to the CCPA may broaden its scope.
The majority of states also have statutes or regulations similar to the federal anti-kickback and false claims laws, which apply to items and services
reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer. Several states now require pharmaceutical companies
to report expenses relating to the marketing and promotion of pharmaceutical products in those states and to report gifts and payments to individual health
care providers in those states. Some of these states also prohibit certain marketing-related activities including the provision of gifts, meals, or other items to
certain health care providers. In addition, some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary
compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring manufacturers to report
information related to payments to physicians and other healthcare providers, marketing expenditures, and drug pricing information. Certain state and local
laws require the registration of pharmaceutical
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sales representatives. State and foreign laws, including for example the European Union General Data Protection Regulation, also govern the privacy and
security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus
complicating compliance efforts.
Because of the breadth of these various healthcare and privacy laws, it is possible that some of our business activities could be subject to challenge under
one or more of such laws. Such a challenge could have material adverse effects on our business, financial condition and results of operations. In the event
governmental authorities conclude that our business practices do not comply with current or future statutes, regulations or case law involving applicable fraud
and abuse or other healthcare and privacy laws and regulations, they may impose sanctions under these laws, which are potentially significant and may
include civil monetary penalties, damages, exclusion of an entity or individual from participation in government health care programs, criminal fines and
imprisonment, as well as the potential curtailment or restructuring of our operations. Even if we are not determined to have violated these laws, government
investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could harm our financial
condition and divert the attention of our management from operating our business.
Government regulation outside of the United States
In addition to regulations in the United States, we will be subject to a variety of regulations in other jurisdictions governing, among other things, clinical
studies 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 the
commencement of clinical studies or marketing of the product in those countries. Certain countries outside of the United States have a similar process that
requires the submission of a clinical trial application, or CTA, much like the IND prior to the commencement of human clinical studies. In the European
Union, for example, a CTA must be submitted for each clinical trial to each country’s national health authority and an independent ethics committee, much
like the FDA and the IRB, respectively. Once the CTA is approved in accordance with a country’s requirements, 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 all
cases, the clinical studies are conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in
the Declaration of Helsinki.
To obtain regulatory approval of an investigational product under European Union regulatory systems, we must submit a marketing authorization
application. The application used to file the BLA in the United States is similar to that required in the European Union, with the exception of, among other
things, region-specific document requirements. The EMA has established the Adaptive Pathways pilot program intended to expedite or facilitate either an
initial approval of a medicinal product in a well-defined patient subgroup with a high medical need and subsequent iterative expansion 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 medicinal product’s use in patients. The approach builds in regulatory processes already in place within the
existing EU legal framework.
The European Union also provides opportunities for market exclusivity. For example, in the European Union, upon receiving marketing authorization,
innovative medicinal products generally receive eight years of data exclusivity and an additional two years of market exclusivity. If granted, data exclusivity
prevents regulatory authorities in the European Union from referencing the innovator’s data to assess a generic or biosimilar application during such eight-
year period starting from the date of grant of the innovative medicinal product's marketing authorization. During the additional two-year period of market
exclusivity, a generic or biosimilar marketing authorization application can be submitted, and the innovator’s data may be referenced, but no generic or
biosimilar product can be marketed until the expiration of the market exclusivity (and the grant of the relevant generic or biosimilar marketing authorization).
However, there is no guarantee that a product will be considered by the European Union’s regulatory authorities to be an innovative medicinal product, and
products may not qualify for data exclusivity. Products receiving orphan designation in the European Union and being granted a marketing authorization for
an orphan medicinal product can receive ten years of market exclusivity, during which time no similar medicinal product for the same indication may be
placed on the market. An orphan product can also obtain an additional two years of market exclusivity in the European Union where the application for a
marketing authorization includes the results of all studies conducted in accordance with an agreed pediatric investigation plan for pediatric studies. No
extension to any supplementary protection certificate can be granted on the basis of pediatric studies for orphan indications.
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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 of
Regulation (EC) 141/2000, a medicinal product may be designated as orphan if (1) it is intended for the diagnosis, prevention or treatment of a life-
threatening or chronically debilitating condition; (2) either (a) such condition affects no more than five in 10,000 persons in the European Union when the
application is made, or (b) the product, without the benefits derived from orphan status, would not generate sufficient return in the European Union to justify
investment; and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the European
Union, 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 the
application for marketing authorization. The applicant will receive a fee reduction for the marketing authorization application if the orphan drug designation
has been granted, but not if the designation is still pending at the time the marketing authorization is submitted. Orphan drug designation itself does not
convey any 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 for
orphan designation, for example, if the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, marketing
authorization may be granted to a similar product for the same indication at any time if:
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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.
In the EU, the advertising and promotion of our products will also be subject to EU member states’ laws concerning promotion of medicinal products,
interactions with physicians, misleading and comparative advertising and unfair commercial practices, as well as other EU member state legislation that may
apply to the advertising and promotion of medicinal products. These laws require that promotional materials and advertising in relation to medicinal products
comply with the product’s approved labeling. The off-label promotion of medicinal products is prohibited in the EU. The applicable laws at the EU level and
in the individual EU member states also prohibit the direct-to-consumer advertising of prescription-only medicinal products. Violations of the
rules governing the promotion of medicinal products in the EU could be penalized by administrative measures, fines and imprisonment. These laws may
further limit or restrict communications concerning the advertising and promotion of our products to the general public and may also impose limitations on
our promotional activities with healthcare professionals.
Failure to comply with the EU member state laws implementing the Community Code on medicinal products, and EU rules governing the promotion of
medicinal products, interactions with physicians, misleading and comparative advertising and unfair commercial practices, with the EU member state laws
that apply to the promotion of medicinal products, statutory health insurance, bribery and anti-corruption or with other applicable regulatory requirements can
result in enforcement action by the EU member state authorities (or in addition, in some member states, enforcement action from industry bodies or legal
action from competitors), which may include any of the following: fines, imprisonment, orders forfeiting products or prohibiting or suspending their supply to
the market, or requiring the manufacturer to issue public warnings, or to conduct a product recall.
The national laws of certain EU member states require payments made to physicians to be publicly disclosed. Moreover, the European Federation of
Pharmaceutical Industries and Associations, or EFPIA, Code on disclosure of transfers of value from pharmaceutical companies to healthcare professionals
and healthcare organizations imposes a general obligation on members of the EFPIA or related national industry bodies to disclose transfers of value to
healthcare professionals. In addition, agreements with physicians must often be the subject of prior notification and approval by the physician’s employer,
his/her competent professional organization, and/or the competent authorities of the individual EU member states. These requirements are provided in the
national laws, industry codes, or professional codes of conduct, applicable in the EU member states.
For other countries outside of the EU, such as countries in Eastern Europe, Central and South America or Asia, the requirements governing the conduct
of clinical trials, product licensing, pricing and reimbursement vary from country to country. This act could have implications for our interactions with
physicians in and outside the UK. In all cases, again, the clinical trials are conducted in accordance with GCP, applicable regulatory requirements, and ethical
principles that have their origin in the Declaration of Helsinki.
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If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, warning letters or untitled letters,
injunctions, civil, administrative, or criminal penalties, monetary fines or imprisonment, suspension or withdrawal of regulatory approvals, suspension of
ongoing clinical studies, refusal to approve pending applications or supplements to applications filed by us, suspension or the imposition of restrictions on
operations, product recalls, the refusal to permit the import or export of our products or the seizure or detention of products.
Pricing, Coverage and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any drug products for which we obtain regulatory approval. In the United
States, sales of any products for which we may receive regulatory approval for commercial sale will depend in part on the availability of reimbursement from
third-party payers and/or governments. In the United States, no uniform policy of coverage and reimbursement for drug products exists among third-party
payers. Therefore, coverage and reimbursement for drug products can differ significantly from payer to payer. Third-party payers can include government
healthcare systems, managed care providers, private health insurers and other organizations. The process for determining whether a payer will provide
coverage for a drug product may be separate from the process for setting the price or reimbursement rate that the payer will pay for the drug product. Third-
party payers may limit coverage to specific drug products on an approved list, or formulary, which might not include all of the FDA-approved drugs for a
particular indication. Third-party payers may provide coverage, but place stringent limitations on such coverage, such as requiring alternative treatments to be
tried first. These third-party payers are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and
services, in addition to their safety, efficacy, and overall value. In addition, significant uncertainty exists as to the reimbursement status of newly approved
healthcare products. We may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of
our products, in addition to incurring the costs required to obtain FDA approvals. Our product candidates may not be considered medically reasonable or
necessary or cost-effective. Even if a drug product is covered, a payer’s decision to provide coverage for a drug product does not imply that an adequate
reimbursement rate will be approved. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an
appropriate return on our investment in product development.
Federal, state and local governments in the United States and foreign governments continue to consider legislation to limit the growth of healthcare costs,
including the cost of prescription drugs. Specifically, there have been several recent U.S. Congressional inquiries and proposed federal and state legislation
designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship
between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. On January 2, 2013, the
American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers and
increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Future legislation could limit
payments for pharmaceuticals such as the drug candidates that we are developing.
Different pricing and reimbursement schemes exist in other countries. In the EU, governments influence the price of drug products through their pricing
and reimbursement rules and control of national health care systems that fund a large part of the cost of those products to consumers. Some jurisdictions
operate systems under which products may be marketed only after a reimbursement price has been agreed. To obtain reimbursement or pricing approval,
some of these countries may require the completion of studies or analyses of clinical trials that compare the cost-effectiveness of a particular product
candidate to currently available therapies. Other member states allow companies to set their own prices for medicines, but exert cost controls in other ways,
including but not limited to, placing revenue caps on product sales, providing reimbursement for only a subset of eligible patients, mandating price
negotiations after a set period of time, or mandating that prices not exceed an average basket of prices in other countries. The downward pressure on health
care costs in general, particularly treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products. In
addition, European governments may periodically review and decrease prices based on factors, including but not limited to, years-on-market, price in other
countries, competitive entry, new clinical data, lack of supporting clinical data, or other factors.
The marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government and third-party payers fail
to provide adequate coverage and reimbursement. In addition, the emphasis on managed care in the United States has increased and we expect will continue
to exert downward pressure on pharmaceutical pricing. Coverage policies, third-party reimbursement rates and pharmaceutical pricing regulations may
change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less
favorable coverage policies and reimbursement rates may be implemented in the future.
We have proposed novel payment models, including outcomes-based arrangements with payments over time, to assist with realizing the value and
sharing the risk of a potential one-time treatment, such as our LentiGlobin product candidate. While we
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are engaged in discussions with potential payers, there is no assurance that these payment models will be widely adopted by payers. Even with these payment
models, there may be substantial resistance to the cost of our products by payers and the public generally. These payment models may not be sufficient for
payers to grant coverage, and if we are unable to obtain adequate coverage for our products, the adoption of our products and access for patients may be
limited. In addition, to the extent reimbursement for our products is subject to outcomes-based arrangements, our future revenues from product sales will be
more at risk. These factors could affect our ability to successfully commercialize our products and adversely impact our business, financial condition, results
of operations and prospects.
Healthcare Reform
In the United States, there have been a number of federal and state proposals during the last few years regarding the pricing of pharmaceutical products,
limiting coverage and the amount of reimbursement for drugs and other medical products, government control and other changes to the healthcare system in
the United States. For example, in March 2010, the United States Congress enacted the Affordable Care Act, which, among other things, includes provisions
for coverage and payment for products under government health care programs. The Affordable Care Act includes provisions of importance to our potential
product candidates, including among other things, that:
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created an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic products,
apportioned among these entities according to their market share in certain government healthcare programs;
expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with
income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;
expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for both branded and generic
drugs and revising the definition of “average manufacturer price,” or AMP, for calculating and reporting Medicaid drug rebates on outpatient
prescription drug prices;
addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are
inhaled, infused, instilled, implanted or injected;
expanded the types of entities eligible for the 340B drug discount program;
established the Medicare Part D coverage gap discount program by requiring manufacturers to provide a 50% point-of-sale-discount, which was
increased to 70% by the Bipartisan Budget Act of 2018 (as of January 1, 2019), off the negotiated price of applicable brand drugs to eligible
beneficiaries during their coverage gap period as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D; and
created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness
research, along with funding for such research.
Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the Affordable Care
Act, and we expect there will be additional challenges and amendments to the Affordable Care Act in the future. Various portions of the Affordable Care Act
are currently undergoing legal and constitutional challenges in the Fifth Circuit Court and the United States Supreme Court. Additionally, the Trump
Administration has issued various Executive Orders which eliminated cost sharing subsidies and various provisions that would impose a fiscal burden on
states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical
devices, and Congress has introduced several pieces of legislation aimed at significantly revising or repealing the Affordable Care Act. It is unclear whether
the Affordable Care Act will be overturned, repealed, replaced, or further amended. Other legislative changes have been proposed and adopted in the United
States since the Affordable Care Act was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending
reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the
years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This
includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013 and, due to subsequent
legislative amendments to the statute, will remain in effect through 2029 unless additional Congressional action is taken. In January 2013, President Obama
signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several categories of providers,
including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments
to providers from three to five years.
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In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their commercial products,
which has resulted in several Congressional inquiries and proposed and enacted state and federal legislation designed to, among other things, bring more
transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement
methodologies for pharmaceutical products. For example, at the federal level, the Trump administration released a “Blueprint” to lower drug prices and
reduce out of pocket costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiating power of certain
federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs of drug products paid by
consumers. While some proposed measures may require additional authorization to become effective, Congress and the Trump administration have each
indicated that they will continue to seek new legislative and/or administrative measures to control drug costs. For example, on September 25, 2019, the Senate
Finance Committee introduced the Prescription Drug Pricing Reduction Action of 2019, a bill intended to reduce Medicare and Medicaid prescription drug
prices. The proposed legislation would restructure the Part D benefit, modify payment methodologies for certain drugs, and impose an inflation cap on drug
price increases. An even more restrictive bill, the Lower Drug Costs Now Act of 2019, was passed in the House of Representatives on December 12, 2019
and sent to the Senate, and would require the U.S. Department of Health and Human Services, or HHS, to directly negotiate drug prices with manufacturers. It
is unclear whether either of these bills will make it through both chambers and be signed into law, and if either is enacted, what effect it would have on our
business. Individual states in the United States have also increasingly passed legislation and implemented regulations designed to control pharmaceutical
product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and
transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
Employees
As of January 31, 2020, we had 1,090 full-time employees, 218 of whom have Ph.D., M.D. or Pharm.D. degrees. Of these full-time employees, 726
employees are engaged in research and development activities and 364 employees are engaged in commercial, finance, legal, business development, human
resources, information technology, facilities and other general administrative functions. We have no collective bargaining agreements with our employees and
we have not experienced any work stoppages. We consider our relations with our employees to be good.
Corporate Information
We 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 60 Binney Street, 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 make with the Securities and Exchange Commission, or SEC.
We make available on or through our website certain reports and amendments to those reports that we file with or furnish to the SEC in accordance with
the 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
reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. We make this information
available on or through our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC.
Item 1A. Risk Factors
An 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, financial
condition, results of operations and future growth prospects. In these circumstances, the market price of our common stock could decline, and you may lose
all or part of your investment.
Risks related to commercialization
We have limited experience as a commercial company and the marketing and sale of ZYNTEGLO or future products may be unsuccessful or less
successful than anticipated.
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We are beginning to commercialize ZYNTEGLO in the European Union as a treatment for adult and adolescent patients with TDT and a non-β0/β0
genotype, following our receipt of conditional marketing approval by the European Commission in June 2019. We have limited experience as a commercial
company and there is limited information about our ability to overcome many of the risks and uncertainties encountered by companies commercializing
products in the biopharmaceutical industry. We also have several programs in late-stage clinical development. To execute our business plan, in addition to
successfully marketing and selling ZYNTEGLO, we will need to successfully:
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establish and maintain our relationships with qualified treatment centers who will be treating the patients who receive our product and any future
products;
obtain adequate pricing and reimbursement for ZYNTEGLO and any future products in each of the jurisdictions in which we plan to commercialize
approved products;
gain regulatory acceptance for the development and commercialization of the product candidates in our pipeline;
develop and maintain successful strategic alliances; and
• manage our spending as costs and expenses increase due to clinical trials, marketing approvals, and commercialization for any additional indications
of ZYNTEGLO, and for any future products.
If we are not successful in accomplishing these objectives, we may not be able to develop product candidates, commercialize ZYNTEGLO or any future
products, raise capital, expand our business, or continue our operations.
The commercial success of ZYNTEGLO, and of any future products, will depend upon the degree of market acceptance by physicians, patients, third-
party payers and others in the medical community.
The commercial success of ZYNTEGLO and of any future products will depend in part on the medical community, patients, and third-party or
governmental payers accepting gene therapy products in general, and ZYNTEGLO and any future products in particular, as medically useful, cost-effective,
and safe. ZYNTEGLO and any other products that we may bring to the market may not gain market acceptance by physicians, patients, third-party payers and
others in the medical community. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may
not become profitable. The degree of market acceptance of ZYNTEGLO and of any future products will depend on a number of factors, including:
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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
which our product and any future products 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 product and of any future products;
publicity concerning our product, any future 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 be
known until after it is launched. Our efforts to educate the medical community and payers on the benefits of our products may require significant resources
and may never be successful. Our efforts to educate the marketplace may require more resources than are required by the conventional technologies marketed
by our competitors. Any of these factors may cause ZYNTEGLO, or any future products, to be unsuccessful or less successful than anticipated.
If the market opportunities for our product or any future products are smaller than we believe they are, and if we are not able to successfully identify
patients and achieve significant market share, our revenues may be adversely affected and our business may suffer.
We focus our research and product development on treatments for severe genetic diseases and cancer. Our projections of both the number of people who
have these diseases, as well as the subset of people with these diseases who have the potential to
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benefit from treatment with our product or any future products, are based on estimates. These estimates have been derived from a variety of sources, including
scientific literature, surveys of clinics, patient foundations, or market research, and may prove to be incorrect. Further, new studies may change the estimated
incidence or prevalence of these diseases. The number of patients may turn out to be lower or more difficult to identify than expected. For instance, because
newborn screening for CALD is limited, and it can be difficult to diagnose CALD in the absence of a genetic screen, we may have difficulty reaching patients
who would benefit from treatment from our Lenti-D product candidate. Additionally, the potentially addressable patient population for our product and any
future products may be limited or may not be amenable to treatment with our products. For instance, we received conditional marketing approval in Europe of
ZYNTEGLO for the treatment of adult and adolescent patients with TDT who do not have a β0/β0 genotype. We do not have any assurance whether or when
LentiGlobin for β-thalassemia may be commercially available to pediatric patients or patients with all genotypes of TDT or types of β-thalassemia.
Even if we obtain significant market share for a product within an approved indication, because the potential target populations for our product and for
the product candidates in our pipeline are small, we may never achieve profitability without obtaining marketing approval for additional indications. For
instance, in the field of cancer, the FDA often approves new therapies initially only for use in patients with relapsed or refractory advanced disease. We
expect to initially seek approval of our T cell-based product candidates in cancer in this context. Subsequently, for those products that prove 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 no guarantee that our
product candidates, even if approved, would be approved for earlier lines of therapy, and, prior to any such approvals, we may have to conduct additional
clinical trials.
Any of these factors may negatively affect our ability to generate revenues from sales of our product and any future products and our ability to achieve
and maintain profitability and, as a consequence, our business may suffer.
We rely on a complex supply chain for ZYNTEGLO and our product candidates. The manufacture and delivery of our lentiviral vector and drug products
present significant challenges for us, and we may not be able to produce our vector and drug products at the quality, quantities, locations or timing
needed to support commercialization and clinical programs. In addition, we may encounter challenges with engaging or coordinating with qualified
treatment centers needed to support commercialization.
In order to commercialize ZYNTEGLO and any future products, we will need to develop, contract for, or otherwise arrange for the necessary
manufacturing capabilities. We currently rely on third parties to manufacture the vector and the drug product in the commercial setting and for any clinical
trials that we initiate. Currently, SAFC is the sole manufacturer of the lentiviral vector and apceth is the sole manufacturer of the drug product to support
commercialization of ZYNTEGLO in Europe for the treatment of patients with TDT. Although we intend to eventually rely on a mix of internal and third-
party manufacturers to support our commercialization efforts, we are still in the process of completing construction and qualification of our internal capacity
and we have not secured commercial-scale manufacturing capacity in all of the regions where we intend to commercialize ZYNTEGLO or future products.
By building our own internal manufacturing facility, we have incurred substantial expenditures and expect to incur significant additional expenditures in the
future. In addition, there are many risks inherent in the construction of a new facility that could result in delays and additional costs, including the need to
obtain access to necessary equipment and third-party technology, if any. Also, we have had to, and will continue to, hire and train qualified employees to staff
our manufacturing facility. We may not be able to timely or successfully build out our internal capacity or negotiate binding agreements with third-party
manufacturers at commercially reasonable terms.
The manufacture of our lentiviral vector and drug product is complex and requires significant expertise. Even with the relevant experience and expertise,
manufacturers of cell therapy products often encounter difficulties in production, particularly in scaling out and validating initial production, and ensuring that
the product meets required specifications. These problems include difficulties with production costs and yields, quality control, including stability of the
product, quality assurance testing, operator error, shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign
regulations. We cannot make any assurances that these problems will not occur in the future, or that we will be able to resolve or address problems that occur
in a timely manner or with available funds. Because of the complexity of manufacturing our product and product candidates, transitioning production of either
lentiviral vector or drug products to backup or second source manufacturing, or to internal manufacturing capacity, requires a lengthy technology transfer
process and may require additional significant financial expenditures. Furthermore, our cost of goods development is at an early stage. The actual cost to
manufacture our lentiviral vector and drug product could be greater than we expect and could materially and adversely affect the commercial viability of our
product and any future products. If we or such third-party manufacturers are unable to produce the necessary quantities of lentiviral vector and our drug
product, or in compliance with GMP or other pertinent regulatory requirements, and within our planned time frame and cost parameters, the development and
commercialization of our product and any future products may be materially harmed. Furthermore, if we or our third-party manufacturers are unable to
produce
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our viral vectors or our drug products in quantities, in accordance with regulatory requirements, including quality requirements, or within the time frames that
we need to support our development and commercialization activities, it may result in delays in our plans or increased capital expenditures.
In addition, any significant disruption in our supplier relationships could harm our business. We source key materials from third parties, either directly
through agreements with suppliers or indirectly through our manufacturers who have agreements with suppliers. There are a small number of suppliers for
certain key materials that are used to manufacture our product and product candidates. Such suppliers may not sell these key materials to us or to our
manufacturers at the times we 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 our manufacturers. Moreover, we currently do not have agreements for the commercial supply for all of these key materials.
Additionally, since the HSCs and T cells used as starting material for our drug products have a limited window of stability following procurement from a
patient, we must establish transduction facilities in the regions where we wish to commercialize our product and any future products. Currently, we rely on
third-party contract manufacturers in the United States and Europe to produce drug product for commercialization and for our clinical studies. Since a portion
of our target patient populations will be outside the United States and Europe, we will need to establish additional transduction facilities that can replicate our
transduction process in order to address those patient populations. Establishment of such facilities may be financially impractical or impeded by technical,
quality, or regulatory issues related to these new sites and we may also run into technical or scientific issues related to transfer of our transduction process or
other developmental issues that we may be unable to resolve in a timely manner or with available funds.
Our commercial plan is to engage apheresis centers in our key launch regions as qualified treatment centers for the collection of patient HSCs and
infusion of the drug product once manufactured. To ensure that the qualified treatment centers are prepared to collect patient HSCs and to ship them to our
transduction facilities in accordance with our specifications and regulatory requirements, we plan to train and conduct quality assessments of each center as
part of engagement. We intend for these qualified treatment centers to be the first and last points on our complex supply chain to reach patients in the
commercial setting. We may not be able to engage qualified treatment centers in all of the regions in our commercial launch strategy, or we may encounter
other challenges or delays in engaging qualified treatment centers. We may fail to manage the logistics of collecting and shipping patient material to the
manufacturing site and shipping the drug product back to the patient. Logistical and shipment delays and problems caused by us, our third-party vendors, and
other factors not in our control, such as weather, could prevent or delay the delivery of product to patients. If our qualified treatment centers fail to perform
satisfactorily, we may suffer reputational, operational, and business harm. We anticipate having to maintain a complex chain of identity and chain of custody
with respect to patient material as it moves through the manufacturing process, from the qualified treatment center to the transduction facility, and back to the
patient. Failure to maintain chain of identity and chain of custody could result in adverse patient outcomes, loss of product or regulatory action.
Although we are continuing to build out our commercial capabilities, we have no prior sales or distribution experience and limited capabilities for
marketing and market access. We expect to invest significant financial and management resources to establish these capabilities and infrastructure to
support commercial operations. If we are unable to establish these commercial capabilities and infrastructure or to enter into agreements with third
parties to market and sell our product or any future products, we may be unable to generate sufficient revenue to sustain our business.
Although we are continuing to build out our field team as part of our first commercial launch in Europe, we have no prior sales or distribution experience
and limited capabilities for marketing and market access. To successfully commercialize ZYNTEGLO and any other products that may result from our
development programs, we will need to develop these capabilities and further expand our infrastructure to support commercial operations in the United States,
Europe and other regions, either on our own or with others. Commercializing an autologous gene therapy such as ZYNTEGLO is resource-intensive and will
require substantial investment in commercial capabilities. We will be competing with many companies that currently have extensive and well-funded
marketing and sales operations. Without a significant internal team or the support of a third party to perform these functions, including marketing and sales
functions, we may be unable to compete successfully against these more established companies. Furthermore, a significant proportion of the patient
populations for ZYNTEGLO and our potential products lies outside of the United States and Europe. We may not be able to establish our global capabilities
and infrastructure in a timely manner or at all. The cost of establishing such capabilities and infrastructure may not be justifiable in light of the potential
revenues generated by any particular product and/or in any specific geographic region. We currently expect to rely heavily on third parties to launch and
market ZYNTEGLO and our potential products in certain geographies, if approved. We may enter into collaborations with third parties to utilize their mature
marketing and distribution capabilities, but we may be unable to enter into agreements on favorable terms, if at all. If our future collaborative partners do not
commit sufficient
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resources to commercialize ZYNTEGLO or our future products, if any, and we are unable to develop the necessary commercial and manufacturing
capabilities on our own, we may be unable to generate sufficient product revenue to sustain our business.
The insurance coverage and reimbursement status of newly-approved products is uncertain. Due to the novel nature of our technology and the potential
for our product to offer lifetime therapeutic benefit in a single administration, we face additional uncertainty related to pricing and reimbursement for
our product. Failure to obtain or maintain adequate coverage and reimbursement for any new or current product 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 payers is essential for most patients to be able to afford expensive treatments,
such as gene therapy products. In addition, because our therapies represent new treatment approaches, the estimation of potential revenues will be complex.
Sales of our product and any future products will depend substantially, both domestically and abroad, on the extent to which the costs of our product and any
future products will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by
government health administration authorities, private health coverage insurers and other third-party payers.
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products, including gene therapies that are
potential one-time treatments. In the United States, the principal decisions about reimbursement for new medicines are typically made by the Centers for
Medicare & Medicaid Services, or CMS, an agency within the U.S. Department of Health and Human Services, or HHS, as CMS decides whether and to what
extent a new medicine will be covered and reimbursed under Medicare. Private payers tend to follow CMS to a substantial degree. It is difficult to predict
what CMS will decide with respect to reimbursement 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. A number of cancer drugs have been approved
for reimbursement in the United States and have not been approved for reimbursement in certain European countries. In addition, costs or difficulties with the
reimbursement experienced by the initial gene therapies to receive marketing authorization may create an adverse environment for reimbursement of other
gene therapies.
Outside the United States, certain countries, including a number of member states of the European Union, set prices and reimbursement for
pharmaceutical products, or medicinal products, as they are commonly referred to in the European Union, with limited participation from the marketing
authorization holders. We cannot be sure that such prices and reimbursement will be acceptable to us or our collaborators. If the regulatory authorities in these
foreign jurisdictions set prices or reimbursement levels that are not commercially attractive for us or our collaborators, the revenues from sales by us or our
collaborators, and the potential profitability of our product and any future products, in those countries would be negatively affected. An increasing number of
countries are taking initiatives to attempt to reduce large budget deficits by focusing cost-cutting efforts on pharmaceuticals for their state-run health care
systems. These international price control efforts have impacted all regions of the world, but have been most drastic in the European Union. Additionally,
some countries require approval of the sale price of a product before it can be marketed. In many countries, the pricing review period begins after marketing
or product licensing approval is granted. As a result, we might obtain marketing approval for a product in a particular country, but then may experience delays
in the reimbursement approval of our product or be subject to price regulations that would delay our commercial launch of the product, possibly for lengthy
time periods, which could negatively impact the revenues we are able to generate from the sale of the product in that particular country.
Moreover, increasing efforts by governmental and third-party payers, in the United States and abroad, to cap or reduce healthcare costs may cause such
organizations to limit both coverage and level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment
for our product or any future products. We expect to experience pricing pressures in connection with the sale of our product and any future products, due to
the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. Net prices for drugs
may be reduced by mandatory discounts or rebates required by government or private payers and by any future relaxation of laws that presently restrict
imports of drugs from countries where they may be sold at lower prices than in the United States. The downward pressure on healthcare costs in general,
particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected
to the entry of new products.
Furthermore, because our target patient populations are relatively small, the pricing and reimbursement of our product and any future products must be
adequate to cover the costs to treat and support the treatment of patients. If we are unable to obtain adequate levels of reimbursement, our ability to
successfully market and sell our product and any future products will be adversely affected. 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 our investment.
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In addition, the administration of our products requires procedures for the collection of HSCs from the patient, followed by chemotherapy and
myeloablative treatments, before infusion of the engineered cell therapy product. The manner and level at which reimbursement is provided for these services
is also important. Inadequate reimbursement for such services may lead to physician resistance and adversely affect our ability to market or sell our product.
We have proposed novel payment models, including outcomes-based arrangements with payments over time, to assist with realizing the value and
sharing the risk of a potential one-time treatment, such as ZYNTEGLO. While we are engaged in discussions with potential payers, there is no assurance that
any payers will adopt these payment models. These payment models may not be sufficient for payers to grant coverage, and if we are unable to obtain
adequate coverage for our product or any future products, the adoption of our product or any future products may be limited. In addition, to the extent
reimbursement for our product is subject to outcomes-based arrangements, the total payments received from product sales may vary, our cash collection of
future payments and revenue assumptions from product sales will be at risk, and the timing of revenue recognition may not correspond to the timing of cash
collection. We plan on commercializing our product candidates in the United States once approved, and will be subject to price reporting obligations set forth
by CMS. To the extent reimbursement for our product or any future products by U.S. governmental payers is subject to outcomes-based arrangements, the
increased complexity increases the risk that CMS may disagree with the assumptions and judgments that we use in our price reporting calculations, which
may result in significant fines and liability.
Collectively, these factors could affect our ability to successfully commercialize our product and any future products and generate revenues, which would
adversely impact our business, financial condition, results of operations and prospects.
Risks related to the research and development of our product candidates
We cannot predict when or if we will obtain marketing approval to commercialize our product candidates, and the marketing approval of our product and
any future products may ultimately be for more narrow indications than we expect.
Before obtaining marketing approval from regulatory authorities for the commercialization of our product candidates, we must conduct extensive clinical
studies to demonstrate the safety, purity and potency, or efficacy, of the product candidates in humans. Clinical testing is expensive, time-consuming and
uncertain as to outcome. There is a high failure rate for drugs and biologics proceeding through clinical studies. A number of companies in the pharmaceutical
and biotechnology industries have suffered significant setbacks in later stage clinical studies even after achieving promising results in earlier stage clinical
studies. 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 clinical
studies can occur at any stage of testing. Events that may prevent successful or timely completion of clinical development include:
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delays in reaching a consensus with regulatory agencies on study design;
imposition of a clinical hold by regulatory agencies, after an inspection of our clinical study operations or study sites or due to unforeseen safety
issues;
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.
Furthermore, the timing of our clinical studies depends on the speed at which we can recruit eligible patients to participate in testing our product
candidates. The conditions for which we plan to evaluate our current product candidates in severe genetic diseases are rare disorders with limited patient
pools from which to draw for clinical studies. The eligibility criteria of our clinical studies will further limit the pool of available study participants, and the
process of finding and diagnosing patients may prove costly. Patients may be unwilling to participate in our studies because of negative publicity from
adverse events in the biotechnology or gene therapy industries or for other reasons, including competitive clinical studies for similar patient populations. 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 a study,
to complete our clinical studies in a timely manner. We have experienced delays in some of our clinical studies in the past, and we may experience similar
delays in the future. In addition, if we make
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manufacturing or formulation changes to our product or product candidates, we may need to conduct additional studies to demonstrate comparability of the
modified versions to earlier versions.
Results from previous or ongoing studies are not necessarily predictive of our future clinical study results, and initial or interim results may not continue
or be confirmed upon completion of the study. There is limited data concerning long-term safety and efficacy following treatment with our gene therapy and
T cell-based product candidates. These data, or other positive data, may not continue or occur for these patients or for any future patients 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
SCD who have been treated with LentiGlobin may experience a reduction of vaso-occlusive events following successful engraftment, there can be no
assurance that they will not experience vaso-occlusive events in the future. Similarly, patients with relapsed and refractory multiple myeloma who have been
treated with ide-cel or the bb21217 product candidate may experience disease progression. We have experienced unexpected results in the past, and we may
experience unexpected results in the future. For instance, initial results from our clinical studies of ZYNTEGLO suggested that patients with TDT who do not
have a β0/β0 genotype experienced better outcomes to treatment than patients with TDT who have a β0/β0 genotype. Consequently, we received conditional
approval in the European Union, and we expect to seek FDA approval in the United States, initially for the treatment of patients with TDT who do not have a
β0/β0 genotype. In order to support an application for marketing approval of ZYNTEGLO in patients with TDT who have a β0/β0 genotype, we initiated the
HGB-212 study, but we do not know if or when ZYNTEGLO may be commercially available to all genotypes of patients with TDT, or types of β-
thalassemia. Furthermore, our product candidates may also fail to show the desired safety and efficacy in later stages of clinical development despite having
successfully advanced through initial clinical studies. There can be no assurance that any of these studies will ultimately be successful or support further
clinical advancement or marketing approval of our product candidates.
Even if our product candidates demonstrate safety and efficacy in clinical studies, regulatory delays or rejections may be encountered as a result of many
factors, including changes in regulatory policy during the period of product development. We may experience delays or rejections based upon additional
government regulation from future legislation or administrative action, changes in regulatory agency policy, or additional regulatory feedback or guidance
during the period of product development, clinical studies and the review process. Regulatory agencies also may approve a treatment candidate for fewer or
more limited indications than requested or may grant approval subject to the performance of post-marketing studies. In addition, regulatory agencies may not
approve the labeling claims that are necessary or desirable for the successful commercialization of our treatment candidates. For example, the development of
our product candidates for pediatric use is an important part of our current business strategy, and if we are unable to obtain marketing approval for the desired
age ranges, our business may suffer. Furthermore, approvals by the EMA and the European Commission may not be indicative of what the FDA may require
for approval.
In general, the FDA requires the successful completion of two pivotal trials to support approval of a biologics licensing application, or BLA, but in
certain circumstances, will approve a BLA based on only one pivotal trial. Because LentiGlobin for β-thalassemia has been granted the FDA’s Fast Track and
Breakthrough Therapy designations, we are engaged in discussions with the FDA regarding the development plans for LentiGlobin for β-thalassemia to
enable a submission of a BLA prior to the completion of our ongoing studies. Based on these discussions, we believe the results from our ongoing Northstar-2
study, together with data from our Northstar study and completed HGB-205 study, could be sufficient to form the basis for a BLA submission for
ZYNTEGLO to treat adult and adolescent patients with TDT who do not have a β0/β0 genotype. In addition, if successful, we believe the results from our
Northstar-3 study, together with data from our Northstar study and ongoing Northstar-2 study, could be sufficient to form the basis for a BLA supplement
submission for ZYNTEGLO to treat patients with TDT who have a β0/β0 genotype. However, it should be noted that our ability 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 the available data may not be sufficiently
robust from a safety and/or efficacy perspective to support the submission or approval of a BLA. Depending on the outcome of these ongoing clinical studies,
the FDA may require that we conduct additional or larger pivotal trials before we can submit or obtain approval for a BLA for ZYNTEGLO for the treatment
of TDT adult and adolescent patients with TDT who do not have a β0/β0 genotype. In addition, to support approval of a BLA, FDA requires information on
the manufacture and composition of LentiGlobin for β-thalassemia. The FDA may permit us to provide, post-submission during the FDA’s substantive review
of the BLA, certain information regarding various release assays designed to confirm the quality, purity and strength (including potency) of LentiGlobin for
β-thalassemia. However, the FDA may also require us to include such information in the BLA as a condition for completing the submission and filing, which
could delay our ability to complete the BLA submission from our current plan in the second half of 2020, with the consequence of delaying potential approval
and commercial launch of LentiGlobin for β-thalassemia in the United States.
Based on our discussions with the FDA and EMA, we believe that we may be able to seek approval for our Lenti-D product candidate for the treatment
of patients with CALD on the basis of safety and efficacy data from our ongoing Starbeam study, safety data from our ongoing ALD-104 study, and the
ongoing ALD-103 observational study. Our regulatory submission
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plans are contingent upon our Lenti-D product candidate demonstrating sufficient efficacy and safety in the Starbeam study. Whether our Lenti-D product
candidate is eligible for approval will ultimately be determined at the discretion of the FDA and EMA, and will be dependent upon the data available at such
time, and the available data may not be sufficiently robust from a safety and/or efficacy perspective to support approval. Depending on the outcome of our
ongoing studies, the FDA in the United States and EMA and European Commission in the European Union may require that we conduct additional or larger
clinical trials before our Lenti-D product candidate is eligible for approval.
In the development of our LentiGlobin product candidate for the treatment of patients with SCD, we are exploring efficacy endpoints for globin response
based on βA-T87Q expression and total hemoglobin, and the relationship such endpoints have with clinical outcomes. Our development plans in the United
States are contingent upon our LentiGlobin product candidate demonstrating sufficient efficacy and safety in the ongoing HGB-206 study and HGB-210
study. Whether our LentiGlobin product candidate is eligible for approval will ultimately be determined at the discretion of the FDA and will be dependent
upon the data available at such time, and the available data may not be sufficiently robust from a safety and/or efficacy perspective to support approval. For
instance, the FDA may not accept globin response based on βA-T87Q expression and total hemoglobin as a surrogate endpoint for other SCD clinical outcomes
such as frequency of vaso-occlusive events. Depending on the outcome of our ongoing and planned studies, the FDA may require that we conduct additional
or larger clinical trials before our LentiGlobin product candidate is eligible for approval for the treatment of patients with SCD. In addition, we are engaged
with the EMA in discussions regarding our proposed development plans for LentiGlobin in SCD in Europe, and we cannot be certain that our HGB-206 study
and HGB-210 study will be sufficient to form the basis for an initial MAA submission in Europe for the treatment of patients with SCD.
Based on our discussions with the FDA, we and BMS believe that we may be able to seek approval for ide-cel for the treatment of patients with relapsed
and refractory multiple myeloma on the basis of the clinical data from our ongoing CRB-401 and KarMMa studies. Our regulatory submission plans are
contingent upon ide-cel demonstrating sufficient efficacy and safety in these studies. Whether ide-cel is eligible for approval will ultimately be determined at
the discretion of the FDA, and will be dependent upon the data available at such time, and the available data may not be sufficiently robust from a safety
and/or efficacy perspective to support approval. Depending on the outcome of our ongoing studies, the FDA may require that we conduct additional or larger
clinical trials before ide-cel is eligible for approval.
We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are more advanced or
effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our product and any future products.
If our competitors obtain orphan drug exclusivity for products that regulatory authorities determine constitute the same drug and treat the same
indications as our product or any future products, we may not be able to have competing products approved by the applicable regulatory authority for a
significant period of time.
We are engaged in the development of gene therapies for severe genetic diseases and cancer, and both fields are competitive and rapidly changing. We
have competitors both in the United States and internationally, including major multinational pharmaceutical companies, biotechnology companies and
universities and other research institutions. Many of our competitors have substantially greater financial, technical and other resources, such as larger research
and development staff, manufacturing capabilities, experienced marketing and manufacturing organizations. Competition may increase further as a result of
advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in
developing, acquiring or licensing on an exclusive basis, products that are more effective, safer, or less costly than any products that we may develop, or
achieve patent protection, marketing approval, product commercialization and market penetration earlier than us. Additionally, technologies developed by our
competitors may render our potential products uneconomical or obsolete, and we may not be successful in marketing our product candidates against
competitors. For additional information regarding our competition, see “Item 1. Business—Competition” in our Annual Report on Form 10-K.
Even if we are successful in achieving marketing approval to commercialize a product candidate faster than our competitors, we may face competition
from biosimilars due to the changing regulatory environment. In the United States, the Biologics Price Competition and Innovation Act of 2009 created an
abbreviated 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 time
of 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 already
approved, 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 the
first eight of those 10 years, the marketing authorization holder obtains an approval for one or more new therapeutic indications that bring significant clinical
benefits
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compared with existing therapies. In addition, companies may be developing biosimilars in other countries that could compete with our products. If
competitors are able to obtain marketing approval for biosimilars referencing our products, our products may become subject to competition from such
biosimilars, with the attendant competitive pressure and consequences. Expiration or successful challenge of our applicable patent rights could also trigger
competition from other products, assuming any relevant exclusivity period has expired.
In addition, although ZYNTEGLO and our product candidates have been granted orphan drug status by the FDA and EMA, there are limitations to the
exclusivity. In the United States, the exclusivity period for orphan drugs is seven years, while pediatric exclusivity adds six months to any existing patents or
exclusivity periods. 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
qualifying pediatric studies. However, orphan exclusivity may be reduced to six years if the drug no longer satisfies the original designation criteria.
Additionally, a marketing authorization holder may lose its orphan exclusivity if it consents to a second orphan drug application or cannot supply enough
drug. Orphan drug exclusivity also can be lost when a second applicant demonstrates its drug is “clinically superior” to the original orphan drug. Generally, if
a product with an orphan drug designation receives the first marketing approval for the indication for which it has such designation, the product is entitled to a
period of marketing exclusivity, which precludes the FDA or the European Commission from approving another marketing application for a product that
constitutes the same drug treating the same indication for that marketing exclusivity period, except in limited circumstances. If another sponsor receives such
approval before we do (regardless of our orphan drug designation), we will be precluded from receiving marketing approval for our product for the
exclusivity period for the applicable indication.
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 of
patents relating to our competitors’ products. The availability of our competitors’ products could limit the demand, and the price we are able to charge, for
any products that we may develop and commercialize.
We may not be successful in our efforts to identify or discover additional product candidates.
The success of our business depends primarily upon our ability to identify, develop and commercialize products based on our platform technologies,
including our gene editing technology and cancer immunotherapy capabilities. Our research programs in oncology and severe genetic diseases may fail to
identify other potential product candidates for clinical development for a number of reasons. We may be unsuccessful in identifying potential product
candidates or our potential product candidates may be shown to have harmful side effects or may have other characteristics that may make the products
unmarketable or unlikely to receive marketing approval. 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. If any of these
events occur, we may be forced to abandon our research, development or commercialization efforts for a program or programs, which would have a material
adverse effect on our business and could potentially cause us to cease operations.
In previous clinical studies involving viral vectors for gene therapy, some subjects experienced serious adverse events, including the development of
leukemia due to vector-related insertional oncogenesis. If our vectors demonstrate a similar effect, we may be required to halt or delay further clinical
development of our product candidates, and the commercial potential of our product and any future products will be materially and negatively impacted.
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 to
uncontrolled clonal proliferation of mature cancer cells in the patient. In published studies, lentiviral vectors have demonstrated an improved safety profile
over gamma-retroviral vectors used in early gene therapy studies, with no disclosed events of gene therapy-related adverse 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 that control gene expression, as well as their lack of
strong viral enhancers. However, it should be noted that in a phase 1/2 study of HPV569, which utilized an earlier generation lentiviral vector of the vector
used in ZYNTEGLO and in LentiGlobin for SCD, we initially observed in one subject that a disproportionate number of the cells expressing our functional
gene had the same insertion site. Tests showed that this partial clonal dominance contained an insertion 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 the observed clonal dominance might represent a pre-leukemic
event, there have been no adverse clinical consequences of this event, or any signs of cancer, in over 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 no longer 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 a
significant concern for gene therapy and we cannot assure that it will not occur in any of our clinical studies or in the commercial setting. There is also the
potential risk of delayed adverse events following exposure to gene
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therapy products due to persistent biological activity of the genetic material or other components of products used to carry the genetic material. The FDA has
stated that lentiviral vectors possess characteristics that may pose high risks of delayed adverse events. If any such adverse events occur, further advancement
of our clinical studies could be halted or delayed, and we may be unable to continue to commercialize our approved product.
Furthermore, treatment with our gene therapy product and product candidates involve chemotherapy or myeloablative treatments, which can cause side
effects or adverse events that are unrelated to our product and product candidates but may still impact the perception of the potential benefits of our product
and any future products. For instance, in our ongoing HGB-206 study, a serious adverse event of myelodysplasia syndrome, or MDS, was reported in a patient
treated with LentiGlobin for SCD, for which there was no evidence of lentiviral-mediated oncogenesis, however MDS is a known risk of certain
myeloablative regimens, and other patients receiving our product or product candidates may develop MDS in the future, which may negatively impact the
commercial prospects of our product or product candidates. Additionally, our product and any future products, or procedures associated with the
administration of our product or collection of patients' cells, could potentially cause 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 adverse medical events due to other therapies or medications that such patients may
be using, or the progression of their disease. Any of these events could impair our ability to commercialize our product and any future products and the
commercial potential of our products will be materially and negatively impacted.
Patients receiving T cell-based immunotherapies, such as ide-cel and the bb21217 product candidate, may experience serious adverse events, including
neurotoxicity and cytokine release syndrome. If our product candidates are revealed to have high and unacceptable severity and/or prevalence of side
effects or unexpected characteristics, their clinical development, marketing approval, and commercial potential will be negatively impacted, which will
significantly harm our business, financial condition and prospects.
Ide-cel and the bb21217 product candidate are chimeric antigen receptor, or CAR, T cell-based immunotherapies. In previous and ongoing clinical
studies involving CAR T cell products, including those involving ide-cel and the bb21217 product candidate, patients experienced side effects such as
neurotoxicity and cytokine release syndrome. There have been life threatening events related to severe neurotoxicity and cytokine release syndrome, requiring
intense medical intervention such as intubation or pressor support, and in several cases, resulted in death. Severe neurotoxicity is a condition that is currently
defined clinically by cerebral edema, confusion, drowsiness, speech impairment, tremors, seizures, or other central nervous system side effects, when such
side effects are serious enough to lead to intensive care. In some cases, severe neurotoxicity was thought to be associated with the use of certain
lymphodepletion regimens used prior to the administration of the CAR T cell products. Cytokine release syndrome is a condition that is currently defined
clinically by certain symptoms related to the release of cytokines, which can include fever, chills, low blood pressure, when such side effects are serious
enough to lead to intensive care with mechanical ventilation or significant vasopressor support. The exact cause or causes of cytokine release syndrome and
severe neurotoxicity in connection with treatment of CAR T cell products is not fully understood at this time. In addition, patients have experienced other
adverse events in these studies, such as a reduction in the number of blood cells (in the form of neutropenia, thrombocytopenia, anemia or other cytopenias),
febrile neutropenia, chemical laboratory abnormalities (including elevated liver enzymes), and renal failure.
Undesirable side effects caused by ide-cel or the bb21217 product candidate, other CAR T product candidates targeting BCMA, or our other T cell-based
immunotherapy product candidates, could cause us or regulatory authorities to interrupt, delay or halt clinical studies and could result in a more restrictive
label or the delay or denial of marketing approval by the FDA or other comparable foreign regulatory authorities. In some cases, side effects such as
neurotoxicity or cytokine release syndrome have resulted in clinical holds of ongoing clinical trials and/or discontinuation of the development of the product
candidate. Results of our studies could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics. Treatment-related
side effects could also affect patient recruitment or the ability of enrolled patients to complete the studies or result in potential product liability claims. In
addition, these side effects may not be appropriately recognized or managed by the treating medical staff, as toxicities resulting from T cell-based
immunotherapies are not normally encountered in the general patient population and by medical personnel. Medical personnel may need additional training
regarding T cell-based immunotherapy product candidates to understand their side effects. Inadequate training in recognizing or failure to effectively manage
the potential side effects of T cell-based immunotherapy product candidates could result in patient deaths. Any of these occurrences may harm our business,
financial condition and prospects significantly.
Negative public opinion and increased regulatory scrutiny of gene therapy and genetic research may damage public perception of our product and any
future products or adversely affect our ability to conduct our business or obtain and maintain marketing approvals for our product and product
candidates.
Public perception may be influenced by claims that gene therapy, including gene editing technologies, is unsafe or unethical, and research activities and
adverse events in the field, even if not ultimately attributable to us or our product or
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product candidates, could result in increased governmental regulation, unfavorable public perception, challenges in recruiting patients to participate in our
clinical studies, potential regulatory delays in the testing or approval of our potential products, stricter labeling requirements for those product candidates that
are approved, and a decrease in demand for any such product. More restrictive government regulations or negative public opinion would have a negative
effect on our business or financial condition and may delay or impair the development and commercialization of our product candidates or demand for any
approved products.
Risks related to our reliance on third parties
We are dependent on BMS for the successful development and commercialization of ide-cel and bb21217. If BMS does not devote sufficient resources to
the development of ide-cel and bb21217, is unsuccessful in its efforts, or chooses to terminate its agreements with us, our business will be materially
harmed.
We are co-developing and co-promoting ide-cel in the United States with BMS under our amended and restated co-development and co-promotion
agreement with BMS, or the Ide-cel CCPS. Under the Ide-cel CCPS, we and BMS share the obligation to develop and commercialize ide-cel in the United
States, and we will be solely dependent on BMS to develop and commercialize ide-cel outside of the United States. In addition, we have exclusively licensed
to BMS the right to develop and commercialize the bb21217 product candidate, and we retain an option to co-develop and co-promote bb21217 in the United
States under our license agreement with BMS. With respect to bb21217, we are responsible for completing the ongoing CRB-402 study, but BMS is
responsible for further clinical development and commercialization costs, unless we choose to exercise our option to co-develop and co-promote bb21217 in
the United States. If we exercise our option to co-develop and co-promote bb21217 in the United States, we and BMS will share the obligation to develop and
commercialize bb21217 in the United States, and we will be solely dependent on BMS to develop and commercialize bb21217 outside of the United States.
In our partnership with BMS, BMS is obligated to use commercially reasonable efforts to develop and commercialize ide-cel and bb21217. BMS may
determine however, that it is commercially reasonable to de-prioritize or discontinue the development of ide-cel and bb21217. These outcomes may occur for
many reasons, including internal business reasons (including due to the existence of other BMS programs that are potentially competitive with ide-cel and
bb21217), results from clinical trials or because of unfavorable regulatory feedback. Further, on review of the safety and efficacy data, the FDA may impose
requirements on one or both of the programs that render them commercially nonviable. In addition, under our agreements with BMS, BMS has certain
decision-making rights in determining the development and commercialization plans and activities for the programs. We may disagree with BMS about the
development strategy it employs, but we will have limited rights to impose our development strategy on BMS. Similarly, BMS may decide to seek marketing
approval for, and limit commercialization of, ide-cel or bb21217 to narrower indications than we would pursue. More broadly, if BMS elects to discontinue
the development of ide-cel or bb21217, we may be unable to advance the product candidate ourselves. We would also be prevented from developing or
commercializing another CAR T cell-based product candidate that targets BCMA outside of our collaboration with BMS.
This partnership may not be scientifically or commercially successful for us due to a number of important factors, including the following:
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BMS has wide discretion in determining the efforts and resources that it will apply to its partnership with us. The timing and amount of any
development milestones, and downstream commercial profits, milestones and royalties that we may receive under such partnership will depend on,
among other things, BMS’s efforts, allocation of resources and successful development and commercialization of ide-cel, bb21217 and other product
candidates that are the subject of its collaboration with us.
BMS may develop and commercialize, either alone or with others, products that are similar to or competitive with ide-cel, bb21217 and other
product candidates that are the subject of its collaboration with us. For example, BMS is currently commercializing a number of its existing products,
including lenalidomide and pomalidomide, for certain patients with relapsed and refractory multiple myeloma and is also developing JCAR-H125,
another CAR-T product candidate targeting BCMA that it obtained through its acquisition of Juno Therapeutics, Inc. in March 2018.
BMS may terminate its partnership with us without cause and for circumstances outside of our control, which could make it difficult for us to attract
new strategic partners or adversely affect how we are perceived in scientific and financial communities.
BMS may develop or commercialize our product candidates in such a way as to elicit litigation that could jeopardize or invalidate our intellectual
property rights or expose us to potential liability.
BMS may not comply with all applicable regulatory requirements, or may fail to report safety data in accordance with all applicable regulatory
requirements.
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•
If BMS were to breach its arrangements with us, we may need to enforce our right to terminate the agreement in legal proceedings, which could be
costly and cause delay in our ability to receive rights back to the relevant product candidates. If we were to terminate an agreement with BMS due to
BMS's breach or BMS terminated the agreement without cause, the development and commercialization of ide-cel or bb21217 product candidates
that are the subject of its collaboration with us could be delayed, curtailed or terminated because we may not have sufficient financial resources or
capabilities to continue development and commercialization of these product candidates on our own if we choose not to, or are unable to, enter into a
new collaboration for these product candidates.
BMS may enter into one or more transactions with third parties, including a merger, consolidation, reorganization, sale of substantial assets, sale of
substantial stock or other change in control, which could divert the attention of its management and adversely affect BMS’s ability to retain and motivate key
personnel who are important to the continued development of the programs under the strategic partnership with us. In addition, the third-party to any such
transaction could determine to reprioritize BMS’s development programs such that BMS ceases to diligently pursue the development of our programs and/or
cause the respective collaboration with us to terminate. There is no guarantee that BMS will place the same emphasis on the collaboration or on the
development and commercialization of the ide-cel or bb21217 product candidates following the completion of its acquisition of Celgene in November 2019.
The acquisition of Celgene by BMS may result in organizational and personnel changes, shifts in business focus or other developments that may have a
material adverse effect on our collaboration.
We rely on third parties to conduct some or all aspects of our lentiviral vector production, drug product manufacturing, and testing, and these third
parties may not perform satisfactorily.
We do not independently conduct all aspects of our lentiviral vector production, drug product manufacturing, and testing. We currently rely, and expect to
continue to rely, on third parties with respect to these items, including manufacturing and testing in the commercial context.
Our reliance on these third parties for manufacturing, testing, research and development activities reduce our control over these activities but will not
relieve us of our responsibility to ensure compliance with all required regulations and study protocols. For example, for products that we develop and
commercialize on our own, we will remain responsible for ensuring that each of our IND-enabling studies and clinical studies are conducted in accordance
with the study plan and protocols, and that our lentiviral vectors and drug products are manufactured in accordance with GMP as applied in the relevant
jurisdictions.
If these third parties do not successfully carry out their contractual duties, meet expected deadlines, conduct our studies in accordance with regulatory
requirements or our stated study plans and protocols, or manufacture our lentiviral vectors and drug products in accordance with GMP, we will not be able to
complete, or may be delayed in completing, the preclinical and clinical studies and manufacturing process validation activities required to support future IND,
MAA and BLA submissions and approval of our product candidates, or to support commercialization of our products, if approved. Many of our agreements
with these third parties contain termination provisions that allow these third parties to terminate their relationships with us at any time. If we need to enter into
alternative arrangements, our product development and commercialization activities could be delayed.
Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured the products ourselves, including:
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the inability to negotiate manufacturing agreements with third parties under commercially reasonable terms;
reduced control as a result of using third-party manufacturers for all aspects of manufacturing activities;
the risk that these activities are not conducted in accordance with our study plans and protocols;
termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us; and
disruptions to the operations of our third-party manufacturers or suppliers caused by conditions unrelated to our business or operations, including the
bankruptcy of the manufacturer or supplier.
We may be forced to manufacture lentiviral vector and drug product ourselves, for which we may not have the capabilities or resources, or enter into an
agreement with a different manufacturer, which we may not be able to do on reasonable terms, if at all. In some cases, the technical skills required to
manufacture our lentiviral vector or drug product candidates may be unique or proprietary to the original manufacturer, and we may have difficulty or there
may be contractual restrictions prohibiting us from, transferring such skills to a back-up or alternate supplier, or we may be unable to transfer such skills at
all. Any of these
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events could lead to clinical study delays or failure to obtain marketing approval, or impact our ability to successfully commercialize our product or any
future products. Some of these events could be the basis for FDA action, including injunction, recall, seizure or total or partial suspension of production.
We and our contract manufacturers are subject to significant regulation with respect to manufacturing our product and product candidates. The
manufacturing facilities on which we rely may not continue to meet regulatory requirements and have limited capacity.
All entities involved in the preparation of therapeutics for clinical studies or commercial sale, including our existing contract manufacturers for our
product and product 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
record keeping) and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved
for sale. Poor control of production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in the
properties or stability of our product and product candidates that may not be detectable in final product testing. We or our contract manufacturers must supply
all necessary documentation 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, or GLP, and GMP regulations enforced by the FDA or other regulator through facilities inspection programs. Some of our contract
manufacturers have not produced a commercially-approved product and therefore have not obtained the requisite FDA or other marketing approvals to do so.
Our facilities and quality 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 the applicable regulations as a condition of marketing approval of our product and potential products. In addition, the regulatory authorities
may, at any time, audit or inspect a manufacturing facility involved with the preparation of our products or 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 marketing 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 applicable regulations
occurs independent of such an inspection or audit, we or the relevant regulatory authority may require remedial measures that may be costly and/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 commercial sales or the
temporary or permanent closure of a facility. Any such remedial measures imposed upon us or third parties with whom we contract could materially 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 sanctions
including, among other things, refusal to approve a pending application for a biologic product, or revocation of a pre-existing approval. As a result, our
business, 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 of
manufacturers with the necessary manufacturing capabilities is limited. In addition, an alternative manufacturer would need to be qualified through a BLA
supplement or similar regulatory submission which could result in further delay. The regulatory agencies may also require additional studies if a new
manufacturer is relied upon for commercial production. Switching manufacturers may involve substantial costs and is likely to result in a delay in our desired
clinical and commercial timelines.
These factors could cause the delay of clinical studies, regulatory submissions, required approvals or commercialization of our product and any future
products, cause us 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 or we could lose potential revenues.
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, it
may harm our business.
We expect to rely on CROs and clinical study sites to ensure our clinical studies are conducted properly and on time. While we will have agreements
governing 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
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studies is conducted in accordance with the applicable protocol, legal, regulatory and 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 and other regulatory authorities’ GCPs for conducting, recording and reporting the results of
clinical studies to assure that the data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical study
participants are protected. If we or our CROs fail to comply with applicable GCPs, the clinical data generated in our future clinical studies may be deemed
unreliable and the FDA and other regulatory authorities may require us to perform additional clinical studies before approving any marketing applications.
If our CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the 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 for any other reasons, our clinical
studies may be extended, delayed or terminated, and we may not be able to obtain marketing approval for, or successfully commercialize our product
candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase, and our
ability to generate revenues could be delayed.
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 trade
secrets will be misappropriated or disclosed.
Because we rely on third parties to manufacture our vectors and our drug products, and because we collaborate with various organizations and academic
institutions on the advancement of our gene therapy platform, we must, at times, share trade secrets with them. We seek to protect our proprietary technology
in part by entering into confidentiality agreements and, if applicable, material transfer agreements, collaborative research agreements, consulting agreements
or other similar agreements with our collaborators, advisors, employees and consultants prior to beginning research or disclosing proprietary information.
These agreements typically limit the rights of the third parties to use or disclose our confidential information, such as trade secrets. Despite the contractual
provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade
secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these
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 or other
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 to
our trade secrets. Our academic collaborators typically have rights to publish data, provided that we are notified in advance and may delay publication for a
specified time in order to secure our intellectual property rights arising from the collaboration. In other cases, publication rights are controlled exclusively by
us, although in some cases we may share these rights with other parties. We also conduct joint research and development programs that may require us to
share trade secrets under the terms of our research and development partnerships or similar agreements. Despite our efforts to protect our trade secrets, our
competitors may discover our trade secrets, either through breach of these agreements, independent development or publication of information including our
trade 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 secrets
would impair our competitive position and have an adverse impact on our business.
Risks related to our financial condition and capital requirements
We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.
We have incurred net losses in each year since our inception in 1992, including net losses of $789.6 million for the year ended December 31, 2019. As of
December 31, 2019, we had an accumulated deficit of $2.28 billion. The amount of our future net losses will depend, in part, on the rate of our future
expenditures and our ability to generate revenues. We have devoted significant financial resources to research and development, including our clinical and
preclinical development activities, which we expect to continue for the foreseeable future. To date, we have financed our operations primarily through the sale
of equity securities and, to a lesser extent, through collaboration agreements and grants from governmental agencies and charitable foundations. We do not
expect to generate any product revenues until the first half of 2020 from ZYNTEGLO in the European Union for the treatment of adult and adolescent
patients with TDT who do not have a β0/β0 genotype. Following marketing approval, our future revenues will depend upon the size of any markets in which
our product and any future products have received approval, and our ability to achieve sufficient market acceptance, reimbursement from third-party payers
and adequate market share for our product and any future products in those markets.
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We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. We anticipate that our expenses will
increase substantially if and as we:
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continue our research and preclinical and clinical development of our product candidates, including ide-cel, which we are co-developing with BMS;
establish capabilities to support our commercialization efforts, including establishing a sales, marketing and distribution infrastructure in the United
States and Europe, and to commercialize ZYNTEGLO and any other products for which we may obtain marketing approval;
obtain, build and expand manufacturing capacity, including capacity at third-party manufacturers and our own manufacturing facility;
initiate additional research, preclinical, clinical or other programs as we seek to identify and validate additional product candidates;
acquire or in-license other product candidates and technologies;
• maintain, protect and expand our intellectual property portfolio;
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attract and retain skilled personnel; 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 of
operations may not be a good indication of our future performance. In any particular quarter or quarters, our operating results could be below the expectations
of 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 revenues and achieve profitability depends on our ability, alone or with strategic collaboration partners, to successfully complete
the development of, and obtain the regulatory, pricing and reimbursement approvals necessary to commercialize our product and any future products. Our
ability to generate revenues from product sales depends heavily on our success in:
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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 drug products;
establishing and maintaining supply and manufacturing relationships with third parties that can provide adequate (in amount and quality) products
and services to support clinical development for our product candidates and commercial demand for any approved product;
launching and commercializing any approved product, either by collaborating with a partner or, if launched independently, by establishing a field-
based team, marketing and distribution infrastructure;
obtaining sufficient pricing and reimbursement for any approved product from private and governmental payers;
obtaining market acceptance and adoption of any approved product and gene therapy as a viable treatment option;
addressing any competing technological and market developments;
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.
We expect to continue to incur significant expenditures for the foreseeable future, and we expect these expenditures to increase as we commercialize
ZYNTEGLO in the European Union, which costs may increase with any increased competition. Our expenses could increase beyond expectations if we are
required by the FDA, the EMA, or other regulatory agencies, domestic or foreign, to perform clinical and other studies in addition to those that we currently
anticipate. Even if we are able to generate product revenues, we may not become profitable and may need to obtain additional funding to continue operations.
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From time to time, we will need to raise additional funding, which may not be available on acceptable terms, or at all. Failure to obtain this necessary
capital when needed may force us to delay, limit or terminate our product development efforts or other operations.
We are currently advancing our programs in β-thalassemia, SCD, CALD, and multiple myeloma through clinical development and other product
candidates through preclinical development. Developing and commercializing gene therapy products is expensive, and we expect our research and
development expenses and our commercialization expenses to increase substantially in connection with our ongoing activities, particularly as we advance our
product candidates and progress our commercialization efforts.
As of December 31, 2019, our cash, cash equivalents and marketable securities were $1.24 billion. We expect cash, cash equivalents, and marketable
securities, anticipated collaboration payments, and payments from sales of our current and potential future product candidates to fund planned operations into
the second half of 2021. However, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional
funds sooner than planned, through public or private equity or debt financings, government or other third-party funding, marketing and distribution
arrangements and other collaborations, strategic alliances and licensing arrangements or a combination of these approaches. In any event, we will require
additional capital to obtain marketing approval for, and to commercialize, our product candidates. Even if we 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 have specific strategic objectives.
Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and
commercialize our approved product and product candidates. In addition, we cannot guarantee that future financing will be available in sufficient amounts or
on terms acceptable to 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 additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our shares to decline. The sale of
additional equity or convertible securities would dilute all of our stockholders. The incurrence of indebtedness would result in increased fixed payment
obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our
ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.
We could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable
and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which
may have a material adverse effect on 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 or
development programs or the commercialization of any product candidates or be unable to expand our operations or otherwise capitalize on our business
opportunities, as desired, which could materially affect our business, financial condition and results of operations.
If the estimates we make, or the assumptions on which we rely, in preparing our consolidated financial statements are incorrect, our actual results may
vary from those reflected in our projections and accruals.
Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America,
or GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of our
assets, liabilities, revenues and expenses, the amounts of charges accrued by us and related disclosure of contingent assets and liabilities. We base our
estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We cannot assure you,
however, that our estimates, or the assumptions underlying them, will be correct. We may be incorrect in our assumptions regarding the applicability of drug
pricing programs and rebates that may be applicable to our product or any future products, which may result in our under- or over-estimating our anticipated
product revenues especially as applicable laws and regulations governing pricing evolve over time. In addition, to the extent payment for our product or any
future products is subject to outcomes-based arrangements over time, the total payments received from product sales may vary, our cash collection of future
payments and revenue assumptions from product sales will be at risk, and the timing of revenue recognition may not correspond to the timing of cash
collection.
Further, from time to time we issue financial guidance relating to our expectations for our cash, cash equivalents, and marketable securities available for
operations, which guidance is based on estimates and the judgment of management. If, for any reason, our expenses differ materially from our guidance or we
utilize our cash more quickly than anticipated, we may have to adjust our publicly announced financial guidance. If we fail to meet, or if we are required to
change or update any element of, our publicly disclosed financial guidance or other expectations about our business, our stock price could decline.
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Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to
fall below expectations or our guidance.
Our operating results are difficult to predict and will likely fluctuate from quarter to quarter and year to year. Due to the recent approval by the European
Commission of ZYNTEGLO and the absence of historical sales data, our product sales will be difficult to predict from period to period.
In addition, we have entered into licensing and collaboration agreements with other companies that include research and development funding and
milestone payments to us, and we expect that amounts earned from our collaboration agreements will continue to be an important source of our revenues.
Accordingly, our revenues will also depend on research and development funding and the achievement of development and clinical milestones under our
existing collaboration and license agreements, including, in particular, our collaborations with BMS and Regeneron, as well as entering into potential new
collaboration and license agreements. These payments may vary significantly from quarter to quarter and any such variance could cause a significant
fluctuation in our operating results from one quarter to the next.
Further, changes in our operations, such as increased development, manufacturing and clinical trial expenses in connection with our expanding pipeline
programs, or our undertaking of additional programs, or business activities, or entry into strategic transactions, including potential future acquisitions of
products, technologies or businesses may also cause significant fluctuations in our expenses.
The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result,
comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future
performance. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any
period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the
forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock
price decline could occur even when we have met any previously publicly stated revenue or earnings guidance we may provide.
Risks related to our business operations
We are commercializing ZYNTEGLO outside of the United States, and therefore we will be subject to the risks of doing business outside of the United
States.
Because we are commercializing ZYNTEGLO outside of the United States, our business is subject to risks associated with doing business outside of the
United States. Accordingly, our business and financial results in the future could be adversely affected due to a variety of factors, including:
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efforts to develop an international commercial and supply chain organization may increase our expenses, divert our management’s attention from the
acquisition or development of product candidates or cause us to forgo profitable licensing opportunities in these geographies;
requirements or limitations imposed by a specific country or region on potential qualified treatment centers or other aspects of commercialization
applicable to autologous gene therapies such as ours;
changes in a specific country’s or region’s political and cultural climate or economic condition;
unexpected changes in foreign laws and regulatory requirements;
difficulty of effective enforcement of contractual provisions in local jurisdictions;
inadequate intellectual property protection in foreign countries;
trade-protection measures, import or export licensing requirements such as Export Administration Regulations promulgated by the U.S. Department
of Commerce and fines, penalties or suspension or revocation of export privileges;
the effects of applicable foreign tax structures and potentially adverse tax consequences; and
significant adverse changes in foreign currency exchange rates, including as a result of the United Kingdom's exit from the European Union on
January 31, 2020, or Brexit.
In addition to FDA and related regulatory requirements in the United States and abroad, we are subject to extensive additional federal, state and foreign
anti-bribery regulation, which include the U.S. Foreign Corrupt Practices Act, the U.K.
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Bribery Act, and similar laws in other countries outside of the United States. We have developed and implemented a corporate compliance program based on
what we believe are current best practices in the pharmaceutical industry for companies similar to ours, but we cannot guarantee that we, our employees, our
consultants or our third-party contractors are or will be in compliance with all federal, state and foreign regulations regarding bribery and corruption.
Moreover, our partners and third-party contractors located outside the United States may have inadequate compliance programs or may fail to respect the laws
and guidance of the territories in which they operate. Even if we are not determined to have violated these laws, government investigations into these issues
typically require the expenditure of significant resources and generate negative publicity, which could also have an adverse effect on our business, financial
condition and results of operations.
As we evolve from a U.S.-based company primarily involved in discovery, preclinical research and clinical development into a company that develops and
commercializes multiple drugs with an international presence, we will need to expand our organization and we may experience difficulties in managing
this growth, which could disrupt our operations.
We received conditional marketing authorization for our first product in 2019 and are launching ZYNTEGLO to treat the first patient in the commercial
setting in the first half of 2020, which we hope will be the first of a sequence of marketing approvals and commercial launches for multiple products across
multiple geographies. As we advance multiple product candidates through late-stage clinical research and plan submissions for marketing authorizations, we
are expanding our operations in the United States and Europe. As of December 31, 2019, we had 1,060 full-time employees. As we pursue our development
and commercialization strategy, we expect to expand our full-time employee base and to hire more consultants and contractors in the United States and
Europe. This expected growth may place a strain on our administrative and operational infrastructure. As a result, our management may need to divert a
disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. Our
expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional
product candidates. If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate
and/or grow revenues could be reduced, and we may not be able to implement our business strategy. Recruiting and retaining qualified employees, consultants
and advisors for our business, including scientific and technical personnel, will be critical to our success. Competition for skilled personnel is intense and the
turnover rate can be high. We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and
biotechnology companies for individuals with similar skill sets. We may not be able to effectively manage the expansion of our operations, which may result
in weaknesses in our infrastructure, operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining
employees.
Even if we receive marketing approval for a product candidate, any approved product will remain subject to regulatory scrutiny.
Even if we obtain marketing approval in a jurisdiction, regulatory authorities may still impose significant restrictions on the indicated uses or marketing
of any approved products such as ZYNTEGLO, or impose ongoing requirements for potentially costly post-approval studies, post-market surveillance or
patient or drug restrictions. For example, the FDA typically advises that patients treated with gene therapy undergo follow-up observations for potential
adverse events for a 15-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 the specifications in the BLA. The holder of an approved BLA must also submit new or supplemental applications and obtain FDA approval
for certain changes to the approved product, product labeling or manufacturing process. Advertising and promotional materials must comply with FDA rules
and are subject to FDA review, in addition to other potentially applicable federal and state laws.
In addition, product manufacturers and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and
other regulatory authorities for compliance with good manufacturing practices, or GMP, and adherence to commitments made in the BLA. If we or a
regulatory agency discovers previously unknown problems with a product such as adverse events of unanticipated severity or frequency, or problems with the
facility where the product is manufactured, a regulatory agency may impose restrictions relative to that product or the manufacturing facility, including
requiring recall or withdrawal of the product from the market or suspension of manufacturing.
If we fail to comply with applicable regulatory requirements following marketing approval for a product, a regulatory agency may:
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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 marketing approval;
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suspend any ongoing clinical studies;
refuse to approve a pending marketing application, such as a BLA or supplements to a BLA submitted by us;
seize product; or
refuse to allow us to enter into supply contracts, including government contracts.
Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate
negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize any approved product and generate
revenues.
We are subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws and health information privacy and security
laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties, reputational harm, and diminished
profits and future earnings.
In the United States, the research, manufacturing, distribution, sale, and promotion of drugs and biologic products are subject to regulation by various
federal, state, and local authorities in addition to FDA, including CMS, other divisions of the HHS, (e.g., the Office of Inspector General), the United States
Department of Justice offices of the United States Attorney, the Federal Trade Commission and state and local governments. Our operations are directly, or
indirectly through our prescribers, customers and purchasers, subject to various federal and state fraud and abuse laws and regulations described in more
detail under "Item 1. Business--Government regulation" in our Annual Report. These include the federal Anti-Kickback Statute, federal civil and criminal
false claims laws and civil monetary penalty laws (including False Claims Laws), HIPAA, transparency requirements created under the Affordable Care Act,
as well as analogous state and foreign laws.
These laws apply to, among other things, our sales, marketing and educational programs. State and federal regulatory and enforcement agencies continue
actively to investigate violations of health care laws and regulations, and the United States Congress continues to strengthen the arsenal of enforcement tools.
Most recently, the Bipartisan Budget Act of 2018 increased the criminal and civil penalties that can be imposed for violating certain federal health care laws,
including the Anti-Kickback Statute. Enforcement agencies also continue to pursue novel theories of liability under these laws. In particular, government
agencies have recently increased regulatory scrutiny and enforcement activity with respect to programs supported or sponsored by pharmaceutical companies,
including reimbursement and co-pay support, funding of independent charitable foundations and other programs that offer benefits for patients. Several
investigations into these programs have resulted in significant civil and criminal settlements.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business
activities could be subject to challenge under one or more of such laws. If our operations are found to be in violation of any of the laws described above or
any other government regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from
participation in government health care programs, such as Medicare and Medicaid, imprisonment and the curtailment or restructuring of our operations, any
of which could adversely affect our ability to operate our business and our results of operations. Even if we are not determined to have violated these laws,
government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could harm our
financial condition and divert the attention of our management from operating our business.
In addition, we may be subject to patient privacy laws by both the federal government and the states in which we conduct our business. For example,
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing
regulations, imposes requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business
associates that perform services for them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security
and transmission of individually identifiable health information. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil
and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions
in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions In addition to HIPAA, as
amended by HITECH, and their respective implementing regulations, California recently enacted the California Consumer Privacy Act, or CCPA, which
creates new individual privacy rights for California consumers (as defined in the law) and places increased privacy and security obligations on entities
handling personal data of consumers or households. The CCPA will require covered companies to provide certain disclosures to consumers about its data
collection, use and sharing practices, and to provide affected California residents with ways to opt-out of certain sales or transfers of personal information.
The CCPA went into effect on January 1, 2020, and the California Attorney General will commence enforcement actions against violators beginning July 1,
2020. While
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there is currently an exception for protected health information that is subject to HIPAA, as currently written, the CCPA may impact our business activities.
The California Attorney General has proposed draft regulations, which have not been finalized to date, that may further impact our business activities if they
are adopted. The uncertainty surrounding the implementation of CCPA exemplifies the vulnerability of our business to the evolving regulatory environment
related to personal data and protected health information.
In the European Union, interactions between pharmaceutical companies, healthcare professionals, and patients are also governed by strict laws,
regulations, industry self-regulation codes of conduct and physicians’ codes of professional conduct in the individual EU member states. The provision of
benefits or advantages to healthcare professionals to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of
medicinal products is prohibited in the European Union. Also, direct-to-consumer advertising of prescription-only medicinal products is prohibited at the
European Union level and in the individual member states. In addition, the UK Bribery Act applies to any company incorporated in or “carrying on business”
in the UK, irrespective of where in the world the alleged bribery activity occurs, which could have implications for our interactions with physicians both in
and outside of the UK. Infringement of these laws could result in substantial fines and imprisonment.
Payments made to physicians in certain European Union member states must be publicly disclosed. Moreover, agreements with physicians often must be
the subject of prior notification and approval by the physician’s employer, his or her competent professional organization and/or the regulatory authorities of
the individual European Union member states. These requirements are provided in the national laws, industry codes or professional codes of conduct,
applicable in the European Union member states. Failure to comply with these requirements could result in reputational risk, public reprimands,
administrative penalties, fines or imprisonment.
EU member states, Switzerland and other countries have also adopted data protection laws and regulations, which impose significant compliance
obligations. In the European Union, the collection and use of personal health data is currently governed by the provisions of the General Data Protection
Regulation, or the GDPR. The GDPR, together with the national legislation of the individual EU member states governing the processing of personal data,
impose strict obligations and restrictions on the ability to collect, analyze and transfer personal data, including health data from clinical trials and adverse
event reporting. In particular, these obligations and restrictions concern the consent of the individuals to whom the personal data relates, the information
provided to the individuals for the consent to be considered valid, the transfer of personal data out of the European Economic Area, security breach
notifications, the use of third-party processors in connection with the processing of the personal data, confidentiality of the personal data, as well as
substantial potential fines for breaches of the data protection obligations. Data protection authorities from the different EU member states may interpret the
GDPR and national laws differently and impose additional requirements, which add to the complexity of processing personal data in the European Union. The
GDPR also imposes strict rules on the transfer of personal data to countries outside the European Union, including the United States, and permits data
protection authorities to impose large penalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global revenues,
whichever is greater. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory
authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. Compliance with the GDPR is a rigorous
and time-intensive process that may increase our cost of doing business or require us to change our business practices, and despite those efforts, there is a risk
that we may be subject to fines and penalties, litigation, and reputational harm in connection with any activities falling within the scope of the GDPR. Further,
Brexit has created uncertainty with regard to data protection regulation in the United Kingdom. In particular, it is unclear how data transfers to and from the
United Kingdom will be regulated.
We face potential product liability, and, if successful claims are brought against us, we may incur substantial liability and costs. If the use of our approved
product or product candidates harms patients, or is perceived to harm patients even when such harm is unrelated to our approved product or product
candidates, our marketing approvals could be revoked or otherwise negatively impacted and we could be subject to costly and damaging product liability
claims.
The use of our product candidates in clinical studies and the sale of any products for which we obtain marketing approval exposes us to the risk of
product liability claims. Product liability claims might be brought against us by patients participating in clinical trials, consumers, healthcare providers,
pharmaceutical companies or others selling or otherwise coming into contact with our product or product candidates. There is a risk that our product or
product candidates may induce adverse events. If we cannot successfully defend against product liability claims, we could incur substantial liability and costs.
In addition, regardless of merit or eventual outcome, product liability claims may result in:
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impairment of our business reputation;
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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 develop our product candidates or commercialize any approved product; and
decreased demand for any approved product.
We carry product liability insurance and we believe our product liability insurance coverage is sufficient in light of our current clinical programs and
approved product; however, we may not be able to maintain insurance coverage at commercially reasonable cost or in sufficient amounts to protect us against
losses due to liability. On occasion, large judgments have been awarded in class action lawsuits based on drugs or medical treatments that had unanticipated
adverse effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our
insurance coverage, could adversely affect our results of operations and business.
Patients with the diseases targeted by our approved product and product candidates are often already in severe and advanced stages of disease and have
both known and unknown significant pre-existing and potentially life-threatening health risks. During the course of treatment, patients may suffer adverse
events, including death, for reasons that may be related to our approved product or product candidates. Such events could subject us to costly litigation,
require us to pay substantial amounts of money to injured patients, delay, negatively impact or end our opportunity to receive or maintain marketing approval
for any approved product, or require us to suspend or abandon our commercialization efforts. Even in a circumstance in which we do not believe that an
adverse event is related to our products the investigation into the circumstance may be time-consuming or inconclusive. These investigations may interrupt
our sales efforts, delay our marketing approval process in other countries, or impact and limit the type of marketing approval our product candidates may
receive or any approved product maintains. As a result of these factors, a product liability claim, even if successfully defended, could have a material adverse
effect on our business, financial condition or results of operations.
Healthcare legislative reform measures may have a material adverse effect on our business and results of operations.
The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system that could
prevent or delay marketing approval of our product candidates or any future product candidates, restrict or regulate post-approval activities and affect our
ability to profitably sell any product for which we obtain marketing approval. Changes in regulations, statutes or the interpretation of existing regulations
could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product
labeling; (iii) the recall or discontinuation of our products; or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could
adversely affect the operation of our business.
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, the
Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or the Affordable Care Act, was
passed, which substantially changed the way health care is financed by both governmental and private insurers, and significantly impacts the U.S.
pharmaceutical industry. The Affordable Care Act, among other things, addressed a new methodology by which rebates owed by manufacturers under the
Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebates
owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care
organizations, established annual fees and taxes on manufacturers of certain branded prescription drugs, expanded the types of entities eligible for the 340B
drug discount program, and a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% (increased pursuant to
the Bipartisan Budget Act of 2018, effective as of 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during
their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.
Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to
certain aspects of the Affordable Care Act, and we expect there will be additional challenges and amendments to the Affordable Care Act in the future.
Various portions of the Affordable Care Act are currently undergoing legal and constitutional challenges in the Fifth Circuit Court and the United States
Supreme Court. Additionally, the Trump Administration has issued various Executive Orders which eliminated cost sharing subsidies and various provisions
that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or
manufacturers of
pharmaceuticals or medical devices, and Congress has introduced several pieces of legislation aimed at significantly
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revising or repealing the Affordable Care Act. It is unclear whether the Affordable Care Act will be overturned, repealed, replaced, or further amended. We
cannot predict what affect further changes to the Affordable Care Act would have on our business
In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. In August 2011, President Obama
signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to
Congress proposals in spending reductions. The Joint Select Committee on Deficit Reduction did not achieve a targeted deficit reduction, which triggered the
legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of, on average, 2%
per fiscal year through 2025 unless Congress takes additional action. These reductions were extended through 2029 through subsequent legislative
amendments. In January 2013, the American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to several providers,
including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from
three to five years.
There has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically, there
have been several recent U.S. Congressional inquiries and proposed federal and state legislation designed to, among other things, bring more transparency to
drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform
government program reimbursement methodologies for drugs. At the federal level, the Trump administration’s budget proposal for fiscal years 2019 and 2020
contain further drug price control measures that could be enacted during the budget process or in other future legislation, including, for example, measures to
permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and
to eliminate cost sharing for generic drugs for low-income patients. Additionally, the Trump administration released a “Blueprint” to lower drug prices and
reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase the negotiating power of certain federal
healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers.
HHS has already started the process of soliciting feedback on some of these measures and, at the same time, is immediately implementing others under its
existing authority. For example in May 2019, CMS issued a final rule to allow Medicare Advantage Plans the option of using step therapy, a type of prior
authorization, for Part B drugs beginning January 1, 2020. This final rule codified CMS’s policy change that was effective January 1, 2019. Although a
number of these, and other proposed measures will require authorization through additional legislation to become effective, Congress and the Trump
administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. For example, on
September 25, 2019, the Senate Finance Committee introduced the Prescription Drug Pricing Reduction Act of 2019, a bill intended to reduce Medicare and
Medicaid prescription drug prices. The proposed legislation would restructure the Part D benefit, modify payment methodologies for certain drugs, and
impose an inflation cap on drug price increases. An even more restrictive bill, the Lower Drug Costs Now Act of 2019, was passed in the House of
Representatives on December 12, 2019 and sent to the Senate, and would require the Department of Health and Human Services (HHS) to directly negotiate
drug prices with manufacturers. It is unclear whether either of these bills will make it through both chambers and be signed into law, and if either is enacted,
what effect it would have on our business. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control
pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and
marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
We expect that the healthcare reform measures that have been adopted and may be adopted in the future, may result in more rigorous coverage criteria
and in additional downward pressure on the price that we receive for any approved product and could seriously harm our future revenues. Any reduction in
reimbursement from Medicare or other government programs may result in a similar reduction in payments from private third-party payers.
The delivery of healthcare in the European Union, including the establishment and operation of health services and the pricing and reimbursement of
medicines, is almost exclusively a matter for national, rather than EU, law and policy. National governments and health service providers have different
priorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context. In general, however, the healthcare
budgetary constraints in most EU member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service
providers. Coupled with ever-increasing EU and national regulatory burdens on those wishing to develop and market products, this could prevent or delay
marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to commercialize ZYNTEGLO and any other
products for which we obtain marketing approval.
There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the
availability of healthcare and containing or lowering the cost of healthcare. The implementation of
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cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product.
Such reforms could have an adverse effect on anticipated revenue from product candidates that we may successfully develop and for which we may obtain
marketing approval and may affect our overall financial condition and ability to develop product candidates.
The increasing use of social media platforms presents new risks and challenges.
Social media is increasingly being used to communicate about our clinical development programs and the diseases our product candidates are being
developed to treat. We intend to utilize appropriate social media in connection with our commercialization efforts following approval of our product
candidates. Social media practices in the biopharmaceutical industry continue to evolve and regulations relating to such use are not always clear. This
evolution creates uncertainty and risk of noncompliance with regulations applicable to our business. For example, patients may use social media channels to
report an alleged adverse event. When such disclosures occur, there is a risk that we fail to monitor and comply with applicable adverse event reporting
obligations, or we may not be able to defend our business or the public’s legitimate interests in the face of the political and market pressures generated by
social media due to restrictions on what we may say about our investigational products. There is also a risk of inappropriate disclosure of sensitive
information or negative or inaccurate posts or comments about us on any social networking website, or a risk that a post on a social networking website by
any of our employees may be construed as inappropriate promotion. If any of these events were to occur or we otherwise fail to comply with applicable
regulations, we could incur liability, face regulatory actions, or incur other harm to our business.
Our computer systems, or those of our third-party collaborators, service providers, contractors or consultants, may fail or suffer security breaches,
which could result in a material disruption of our product candidates’ development programs and have a material adverse effect on our reputation,
business, financial condition or results of operations.
Our computer systems and those of our current or future third-party collaborators, service providers, contractors and consultants may fail and are
vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. The size
and complexity of our information technology systems, and those of our collaborators, service providers, contractors and consultants, and the large amounts
of information stored on those systems make those systems vulnerable to service interruptions, security breaches, or other failures, resulting from inadvertent
or intentional actions by our employees or those of third-party business partners, or from cyber-attacks by malicious third parties. Attacks on information
technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and they are being conducted by increasingly
sophisticated and organized groups and individuals with a wide range of motives and expertise. In addition to extracting sensitive information, such attacks
could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and
threaten the confidentiality, integrity and availability of information. The prevalent use of mobile devices also increases the risk of data security incidents. If
we experience a material system failure, accident or security breach that causes interruptions in our operations or the operations of third-party collaborators,
service providers, contractors and consultants, it could result in significant reputational, financial, legal, regulatory, business or operational harm. For
example, the loss of clinical trial data for our product candidates could result in delays in our marketing approval efforts and significantly increase our costs to
recover or reproduce the data. To the extent that any disruption or security breach results in a loss of or damage to our data or applications or other data or
applications relating to our technology or product candidates, or inappropriate disclosure of confidential or proprietary information, we could incur liabilities
and the further development of our product candidates could be delayed. We also rely on third-party service providers for aspects of our internal control over
financial reporting and such service providers may experience a material system failure or fail to carry out their obligations in other respects, which may
impact our ability to produce accurate and timely financial statements, thus harming our operating results, our ability to operate our business, and our
investors’ view of us. In addition, our liability insurance may not be sufficient in type or amount to cover us against claims related to material failures,
security breaches, cyberattacks and other related breaches.
Any failure or perceived failure by us or any third-party collaborators, service providers, contractors or consultants to comply with our privacy,
confidentiality, data security or similar obligations to third parties, or any data security incidents or other security breaches that result in the unauthorized
access, release or transfer of sensitive information, including personally identifiable information, may result in governmental investigations, enforcement
actions, regulatory fines, litigation or public statements against us. These events could cause third parties to lose trust in us or could result in claims by third
parties asserting that we have breached our privacy, confidentiality, data security or similar obligations, any of which could have a material adverse effect on
our reputation, business, financial condition or results of operations. Moreover, data security incidents and other security breaches can be difficult to detect,
and any delay in identifying them may lead to increased harm. While we have implemented data security measures intended to protect our information
technology systems and infrastructure, there can be no assurance that such measures will successfully prevent service interruptions or data security incidents.
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Risks related to our intellectual property
If we are unable to obtain or protect intellectual property rights related to our product candidates, we may not be able to compete effectively in our
markets.
We rely upon a combination of patents, trade secret protection and confidentiality agreements to protect the intellectual property related to our product
candidates. The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. The
patent 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 other
foreign countries. There is no assurance that all of the potentially relevant prior art relating to our patents and patent applications has been found, which can
invalidate a patent or prevent a patent from issuing from a pending patent application. Even if patents do successfully issue and even if such patents cover our
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 for
our product candidates or prevent others from designing around our claims. Any of these outcomes could impair our ability to prevent competition from third
parties, 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 of
protection is threatened, or if they fail to provide meaningful exclusivity for our product candidates, it could dissuade companies from collaborating with us to
develop product candidates, and threaten our ability to commercialize, future products. Several patent applications covering our product candidates have been
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 will be
found invalid and unenforceable or 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 rights necessary for the successful commercialization of any product candidates that we may develop. Further, if we encounter delays
in regulatory approvals, the period of time during which we could market a product candidate under patent protection could be reduced. Since patent
applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be
certain that we were the first to file any patent application related to a product candidate. Furthermore, if third parties have filed such patent applications, an
interference proceeding in the United States can be initiated by a third party to determine who was the first to invent any of the subject matter covered by the
patent claims of our applications. In addition, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years after
it is filed. Various extensions may be available however the life of a patent, and the protection it affords, is limited. Even if patents covering our product
candidates are obtained, once the patent life has expired for a product, we may be open to competition from generic medications.
In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is
not patentable or that we elect not to patent, processes for which patents are difficult to enforce and any other elements of our product candidate discovery and
development processes that involve proprietary know-how, and information or technology that is not covered by patents. However, trade secrets can be
difficult 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 maintaining physical
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 trade
secrets 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 third
parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, we cannot provide any assurances
that all such agreements have been duly executed or that our trade secrets and other confidential proprietary information will not be disclosed or that
competitors 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 our
business. Additionally, if the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for
misappropriating the trade secret. In addition, others may independently discover our trade secrets and proprietary information. For example, the FDA, as part
of its Transparency Initiative, is currently considering whether to make additional information publicly available on a routine basis, including information that
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 change in
the future, if at all.
Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As
a result, we may encounter significant problems in protecting and defending our intellectual
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property both in the United States and abroad. If we are unable to prevent material disclosure of the non-patented intellectual property related to our
technologies to third parties, and there is no guarantee that we will have any such enforceable trade secret protection, we may not be able to establish or
maintain a competitive advantage in our market, which could materially adversely 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 amount
of litigation, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology and pharmaceutical
industries, including patent infringement lawsuits, interferences, oppositions, ex parte reexaminations, post-grant review, and inter partes review proceedings
before the U.S. Patent and Trademark Office, or U.S. PTO, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending
patent applications, which are owned by third parties, exist in the fields in which we are pursuing development candidates. As the biotechnology and
pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of infringement of the
patent 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 applications
with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Because
patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our product
candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any
third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed
during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product
candidate unless we obtained a license under the applicable patents, or until such patents expire. Similarly, if any third-party patents were held by a court of
competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy, the holders of any
such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtained a license or until such patent
expires. In either case, such a license may not be available on commercially reasonable terms or at all.
Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further develop and
commercialize one or more of our product candidates. Defense of these claims, regardless of their merit, would involve substantial litigation expense and
would 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 pay
substantial damages, including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or
more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
We may not be successful in obtaining or maintaining necessary rights to gene therapy product components and processes for our development pipeline
through acquisitions and in-licenses.
Presently we have rights to the intellectual property, through licenses from third parties and under patents that we own, to develop our product candidates
and commercialize our approved product. Because our programs may involve additional product candidates that may require the use of proprietary rights held
by third parties, the growth 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 may require specific formulations to work effectively and efficiently and these rights may be held by others. We may be unable to acquire
or in-license any compositions, methods of use, processes or other third-party intellectual property rights from third parties that we identify. The licensing and
acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing strategies to license
or acquire third-party intellectual property rights that we may consider attractive. These established companies may have a competitive advantage over us due
to their size, 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 written
agreements with these institutions. Typically, these institutions provide us with an option to negotiate a license to any of the institution’s rights in technology
resulting from the collaboration. Regardless of such right of first negotiation for intellectual property, we may be unable to negotiate a license within 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 to other
parties, potentially blocking our ability to pursue our program.
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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 acquire
third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment. If we are unable to successfully obtain
rights 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 experience
disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.
We are a party to a number of intellectual property license agreements that are important to our business and expect to enter into additional license
agreements in the future. Our existing license agreements impose, and we expect that future license agreements will impose, various diligence, milestone
payment, 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 licensor
may 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 the development of our product candidates or allow commercialization of our approved
product, and we have done so from 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 expend significant time and resources to develop or license replacement technology. If we are unable to do so, we may be unable to
develop or commercialize the affected product candidates, which could harm our business significantly. We cannot provide any assurances that third-party
patents do not exist which might be enforced against our current product candidates, approved product, or future products, resulting in either an injunction
prohibiting our sales, or, with respect to our sales, an obligation on our part to pay royalties and/or other forms of compensation to third parties.
In many cases, patent prosecution of our licensed technology is controlled solely by the licensor. If our licensors fail to obtain and maintain patent or
other protection for the proprietary intellectual property we license from them, we could lose our rights to the intellectual property or our exclusivity with
respect to those rights, and our competitors could market competing products using the intellectual property. In certain cases, we control the prosecution of
patents resulting from licensed technology. In the event we breach any of our obligations related to such prosecution, we may incur significant liability to our
licensing partners. Licensing of intellectual property is of critical importance to our business and involves complex legal, business and scientific issues and is
complicated by the rapid pace of scientific discovery in our industry. Disputes may arise regarding intellectual property subject to a licensing agreement,
including:
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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 acceptable
terms, we may be unable to successfully develop and commercialize the affected approved product or 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 and
unsuccessful.
Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to file
infringement claims, 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 is not valid, is unenforceable and/or is not infringed, or may refuse to stop the other party from using the technology at issue on the grounds that our
patents do not cover the technology in question. 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 meet any of several statutory requirements, including patent eligible subject
matter, lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with
prosecution of the patent withheld relevant
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information from the U.S. PTO, or made a misleading statement, during prosecution. Third parties may also raise similar claims before administrative bodies
in the United States or abroad, even outside the context of litigation. 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 product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity
question, for example, we cannot 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 prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our
approved product and/or product candidates. Such a loss of patent protection would have a material adverse impact on our business.
Interference proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions with respect to our patents
or patent applications or those of our licensors. An unfavorable outcome could require us to cease using the related technology or to attempt to license rights
to it 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
of litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distract our management and other employees. We
may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not
protect 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 our
confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of
hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a
material adverse effect on the price of our common stock.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of
third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
We employ individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or
potential competitors. Although we try to ensure that our employees, consultants and independent contractors do not use the proprietary information or know-
how of others in their work for us, we may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or
otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of any of our employee’s former employer or other
third parties. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we
may lose valuable intellectual property rights or personnel, which could adversely impact 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 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 intellectual
property. We have had in the past, and we may also have in the future, ownership disputes arising, for example, from conflicting obligations of consultants or
others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship
or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, 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 other employees.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other
requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these
requirements.
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 have
systems 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. patent
agencies. The U.S. PTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and
other
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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 which non-
compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant
jurisdiction. In such an event, our competitors might be able to enter the market and this circumstance would have a material adverse effect 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 and
enforcing patents in the biotechnology industry involve both technological and legal complexity, and is therefore costly, time-consuming and inherently
uncertain. In addition, the United States has recently enacted and is currently implementing wide-ranging patent reform legislation. Recent U.S. Supreme
Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations.
In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect
to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the U.S. PTO, the laws and regulations governing
patents could change 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 the future.
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 our
intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some
foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able
to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our
inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent
protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but
enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other intellectual property rights
may not be effective or sufficient to prevent them from competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal
systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property
protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of
competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial
costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and 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 that we initiate and the
damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property 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 stock
The 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 purchase
them.
Companies trading in the stock market in general, and The NASDAQ Global Select Market in particular, have experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and biotechnology and
pharmaceutical 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, including
the following:
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reports of adverse events in our product, product candidates or other gene therapy products, or in clinical studies of such products;
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inability to obtain additional funding;
any delay in filing an IND, MAA or BLA for any of our product candidates and any adverse development or perceived adverse development with
respect to the FDA’s review of that IND, MAA or BLA;
failure to successfully manage the commercial launch of ZYNTEGLO, or our product candidates following marketing approval, including failure to
manage our supply chain operations in the coordination and delivery of drug product to patients at qualified treatment centers;
failure to obtain sufficient pricing and reimbursement for ZYNTEGLO or our product candidates from private and governmental payers;
failure to obtain market acceptance and adoption of ZYNTEGLO or any other potential product following marketing approval;
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 ZYNTEGLO or our product candidates or the inability to do so at acceptable prices;
adverse regulatory decisions;
introduction of new products, services or technologies by our competitors;
failure to meet or exceed financial projections we may provide to the public;
failure to meet or exceed the financial projections of the investment community;
the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community;
announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us, our strategic collaboration partner or
our competitors;
disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our
technologies;
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 could
cause our stock price to fall or prevent it from increasing for numerous reasons, and actual or potential sales by such persons could be viewed negatively
by other investors.
In accordance with the guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, and our policies regarding stock
transactions, a number of our employees, including executive officers and members of our board of directors, have adopted and may continue to adopt stock
trading 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 by
our executive officers and directors require public filings. Actual or potential sales of our common stock by such persons could cause the price of our
common stock to fall or prevent it 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 in
additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.
Additional capital will be needed in the future to continue our planned operations. To the extent we raise additional capital by issuing equity securities,
our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions
at prices and in a manner we determine from time to time. If we
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sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales.
These sales may also result in material dilution to our existing stockholders, and new investors 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-based
awards to our employees, directors and consultants. The number of shares available for future grant under the 2013 Plan automatically increases each year by
up 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 or
compensation committee to take action to reduce the size of the increase in any given year. Currently, we plan to register the increased number of shares
available for issuance under the 2013 Plan each year. If our board of directors or compensation committee elects to increase the number of shares available for
future grant by the maximum amount each year, our stockholders may experience additional dilution, which could cause our stock price to fall. We also have
an 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 is
especially relevant for us because biotechnology and pharmaceutical companies have experienced significant stock price volatility in recent years. If we face
such 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 greater
than 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) to offset its post-change income may be limited. We have completed several
financings since our inception which we believe have resulted in a change in control 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 a result, 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 to limitations, 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 of NOLs 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 stockholders
will therefore be limited to the appreciation of their stock.
Provisions in our amended and restated certificate of incorporation and by-laws, as well as provisions of Delaware law, could make it more difficult for a
third party to acquire us or increase the cost of acquiring us, even if doing so would benefit our stockholders or remove our current management.
Our amended and restated certificate of incorporation, amended and restated by-laws and Delaware law contain provisions that may have the effect of
delaying or preventing a change in control of us or changes in our management. Our amended and restated certificate of incorporation and by-laws, include
provisions 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 chief
executive 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 proposed
nominations of persons for election to our board of directors;
provide that our directors may be removed only for cause;
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•
•
•
•
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
incorporation and amended and restated by-laws.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law,
which limits 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
or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also
affect the price that some investors are willing to pay for our common stock.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
Below is a summary of our owned and leased properties as of December 31, 2019:
Massachusetts
Our corporate headquarters encompasses approximately 253,108 square feet of office and laboratory space and is located at 60 Binney Street, Cambridge,
Massachusetts. The lease commenced on October 1, 2016 and will continue until March 31, 2027. We have the option to extend the 60 Binney Street lease for
two successive five-year terms.
In April 2019, we entered into a sublease agreement for approximately 267,278 square feet of office space located at 50 Binney Street, Cambridge,
Massachusetts. The lease will commence when the space is available for use, which is anticipated to be in the second half of 2021, and is expected to
terminate on December 31, 2030.
Washington
We lease office and laboratory space in Seattle, Washington, totaling approximately 58,314 square feet. The lease commenced on January 1, 2019 and
will continue through April 2028. We have the option to extend the lease for one five-year term.
North Carolina
In November 2017, we purchased a 125,000 square foot manufacturing facility located in Durham, North Carolina to provide manufacturing capacity for
lentiviral vector in support of our current and planned gene and cell therapies.
Switzerland
Our European headquarters encompasses 1,136 square meters of office space and is located in Zug, Switzerland. The lease for our European headquarters
commenced on January 1, 2019 and will continue for 60 months with the option to renew for 2 successive 60 month terms.
We believe that our existing facilities are adequate for our current needs.
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Item 3. Legal Proceedings
In the ordinary course of business, we are from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating to
intellectual property, commercial arrangements, employment and other matters. While the outcome of these proceedings and claims cannot be predicted with
certainty, as of December 31, 2019, we were not party to any legal or arbitration proceedings that may have, or have had in the recent past, significant effects
on our financial position or profitability. We believe no governmental proceedings are pending or, to our knowledge, contemplated against us. We are not a
party to any material 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 a material interest adverse to us or our subsidiaries.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock has been traded on the Nasdaq Global Select Market under the symbol “BLUE.” On February 13, 2020, the last reported sale price
for our common stock on the Nasdaq Global Select Market was $89.50 per share.
Stock Performance Graph
The graph set forth below compares the cumulative total stockholder return on our common stock between December 31, 2014 and December 31, 2019,
with the cumulative total return of (a) the Nasdaq Biotechnology Index and (b) the Nasdaq Composite Index, over the same period. This graph assumes the
investment of $100 on December 31, 2014 of our common stock, the Nasdaq Biotechnology Index and the Nasdaq Composite Index and assumes the
reinvestment of dividends, if any.
The comparisons shown in the graph below are based upon historical data. We caution that the stock price performance shown in the graph below is not
necessarily indicative of, nor is it intended to forecast, the potential future performance of our common stock.
Holders
As of February 13, 2020, there were approximately 9 holders of record of our common stock. The actual number of stockholders is greater than this
number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. This
number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
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Dividends
We have not paid any cash dividends on our common stock since inception and do not anticipate paying cash dividends in the foreseeable future.
Securities Authorized for Issuance Under Equity Compensation Plans
Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report on Form 10-K.
Item 6. Selected Financial Data
The following selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition
and Results of Operations”, the consolidated financial statements and related notes, and other financial information included in this Annual Report on
Form 10-K.
We derived the consolidated financial data for the years ended December 31, 2019, 2018 and 2017 and as of December 31, 2019 and 2018 from our
audited consolidated financial statements, which are included elsewhere in this Annual Report on Form 10-K. We derived the consolidated financial data for
the years ended December 31, 2016 and 2015 and as of December 31, 2017, 2016 and 2015 from our audited consolidated financial statements that are not
included elsewhere in this Annual Report on Form 10-K. Historical results are not necessarily indicative of the results to be expected in future periods.
Year ended December 31,
Consolidated statements of operations data:
2019
2018 (2)
2017 (1) (2)
(in thousands, except per share amounts)
2016 (1) (2)
2015 (1) (2)
Revenue:
Collaboration revenue
License and royalty revenue
Total revenues
Operating expenses:
Research and development
Selling, general and administrative
Cost of license and royalty revenue
Change in fair value of contingent
consideration
Total operating expenses
Loss from operations
Interest income (expense), net
Other (expense) income, net
Income tax benefit (expense)
Net loss
Net loss per share - basic and diluted
Weighted-average number of common shares
used in computing net loss per share - basic
and diluted
$
36,469 $
52,353 $
22,207 $
6,155 $
14,079
8,205
44,674
2,226
54,579
13,220
35,427
—
6,155
582,413
271,362
2,978
2,747
859,500
(814,826)
34,761
(10,088)
545
448,589
174,129
885
2,999
626,602
(572,023)
14,624
1,961
(187)
273,040
93,550
1,527
(525)
367,592
(332,165)
(2,001)
(1,267)
(210)
204,775
65,119
—
4,091
273,985
(267,830)
3,782
(71)
612
—
14,079
134,038
46,209
—
2,869
183,116
(169,037)
1,591
723
(60)
$
$
(789,608) $
(555,625) $
(335,643) $
(263,507) $
(166,783)
(14.31) $
(10.68) $
(7.71) $
(7.07) $
(4.81)
55,191
52,032
43,535
37,284
34,669
(1) Effective January 1, 2018, the Company adopted Accounting Standards Codification, Topic 606, Revenue from Contracts with Customers ("Topic 606") using the modified retrospective
transition method. Therefore, amounts disclosed for collaboration revenue and research and development expense in the table above pertaining to the years ended December 31, 2017, 2016,
and 2015 are presented under previous accounting guidance and are therefore not comparable to the amounts disclosed for the years ended December 31, 2019 and 2018 under Topic 606.
(2) Effective January 1, 2019, the Company adopted Accounting Standards Codification, Topic 842, Leases ("Topic 842") using the required modified retrospective transition method. Therefore,
amounts disclosed in the table above pertaining to the years ended December 31, 2018, 2017, 2016, and 2015 are presented under previous accounting guidance and are therefore not
comparable to the amounts disclosed for the year ended December 31, 2019 under Topic 842. For further information regarding the adoption of Topic 842 and the impact on our consolidated
financial statements, refer to Note 2, Summary of significant accounting policies and basis of presentation, in the Notes to Consolidated Financial Statements.
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Consolidated balance sheet data:
Cash, cash equivalents and marketable
securities
Total assets
Total current liabilities
Total long-term liabilities
Total stockholders' equity
2019
2018 (1)
As of December 31,
2017 (1)
(in thousands)
2016 (1)
2015 (1)
$
1,237,966 $
1,891,427 $
1,614,302 $
884,830 $
865,763
1,727,424
2,242,844
1,900,567
1,118,122
1,002,337
223,580
218,851
146,431
211,343
95,612
181,523
74,533
174,149
$
1,284,993 $
1,885,070 $
1,623,432 $
869,440 $
40,368
111,473
850,496
(1) Effective January 1, 2019, the Company adopted Accounting Standards Codification, Topic 842, Leases ("Topic 842") using the required modified retrospective transition
method. Therefore, amounts disclosed in the table above pertaining to the years ended December 31, 2018, 2017, 2016, and 2015 are presented under previous accounting guidance and are
therefore not comparable to the amounts disclosed for the year ended December 31, 2019 under Topic 842. For further information regarding the adoption of Topic 842 and the impact on
our consolidated financial statements, refer to Note 2, Summary of significant accounting policies and basis of presentation, in the Notes to Consolidated Financial Statements.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following information should be read in conjunction with the consolidated financial statements and related notes thereto included in this Annual
Report on Form 10-K.
In addition to historical information, this report contains forward-looking statements that involve risks and uncertainties which may cause our actual
results to differ materially from plans and results discussed in forward-looking statements. We encourage you to review the risks and uncertainties discussed
in the sections entitled Item 1A. “Risk Factors” and “Forward-Looking Statements” included at the beginning of this Annual Report on Form 10-K. The risks
and uncertainties can cause actual results to differ significantly from those forecast in forward-looking statements or implied in historical results and trends.
We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We
disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change
in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results
will differ from those set forth in the forward-looking statements.
Overview
We are a biotechnology company committed to researching, developing, and commercializing potentially transformative gene therapies for severe genetic
diseases and cancer. We have built an integrated product platform with broad therapeutic potential in a variety of indications based on our lentiviral gene
addition platform, gene editing and cancer immunotherapy capabilities. We believe that gene therapy for severe genetic diseases has the potential to change
the way patients living with these diseases are treated by addressing the underlying genetic defect that is the cause of their disease, rather than offering
treatments that only address their symptoms. Our gene therapy programs include LentiGlobin for β-thalassemia; LentiGlobin for SCD; and Lenti-D for
CALD. Our programs in oncology are focused on developing novel T cell-based immunotherapies, including CAR and TCR T cell therapies. bb2121
(idecabtagene vicleucel, or ide-cel), and bb21217 are CAR-T cell product candidates for the treatment of multiple myeloma and partnered under our
collaboration arrangement with Bristol-Myers Squibb, or BMS.
We are commercializing ZYNTEGLO in the European Union and expect to begin to generate product revenue in the first half of 2020. We are engaged
with the U.S. Food and Drug Administration, or FDA, and the European Medicines Agency, or EMA, in discussions regarding our proposed development
plans for ZYNTEGLO in patients with TDT and a β0/β0 genotype. We are engaged with the FDA in discussions regarding the requirements and timing for
providing certain information regarding various release assays for LentiGlobin for β-thalassemia, and subject to these ongoing discussions, we are currently
planning to complete the BLA submission in the second half of 2020.
We are engaged with the FDA and EMA in discussions regarding our proposed development plans, and anticipate a potential first submission in 2022 for
marketing approval of LentiGlobin for the treatment of patients with SCD on the basis of our clinical data from our ongoing HGB-206 and HGB-210 studies.
Based on our discussions with the FDA and EMA, we believe that we may be able to seek approval for our Lenti-D product candidate for the treatment
of patients with CALD on the basis of our clinical data from our ongoing Starbeam study, and the ongoing ALD-103 observational study. We anticipate a
potential first submission in 2020 for regulatory approval of our Lenti-D product candidate for the treatment of patients with CALD.
In collaboration with BMS (which acquired Celgene in November 2019), we are developing ide-cel and the bb21217 product candidates as treatments for
multiple myeloma, a hematologic malignancy that develops in the bone marrow and is fatal if untreated. We are co-developing and co-promoting ide-cel in
the United States with BMS and we have exclusively licensed to BMS the development and commercialization rights for ide-cel outside of the United States.
We and BMS anticipate a potential first submission in the first half of 2020 for regulatory approval of ide-cel as a treatment for relapsed and refractory
multiple myeloma. We have exclusively licensed the development and commercialization rights for the bb21217 product candidate to BMS, with an option
for us to elect to co-develop and co-promote bb21217 within the United States.
Since our inception in 1992, we have devoted substantially all of our resources to our development efforts relating to our product candidates, including
activities to manufacture product candidates in compliance with good manufacturing practices, or GMP, to conduct clinical studies of our product candidates,
to provide selling, general and administrative support for these operations and to protect our intellectual property. We have not generated any revenue from
product sales. We have funded our
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operations primarily through the sale of common stock in our public offerings, private placements of preferred stock and warrants and through collaborations.
As of December 31, 2019, we had cash, cash equivalents and marketable securities of approximately $1.24 billion. We have never been profitable and
have incurred net losses in each year since inception. Our net losses were $789.6 million for the year ended December 31, 2019 and our accumulated deficit
was $2.28 billion as of December 31, 2019. Substantially all of our net losses resulted from costs incurred in connection with our research and development
programs and from selling, general and administrative costs associated with our operations. We expect to continue to incur significant expenses and operating
losses for at least the next several years. We expect our expenses will increase substantially in connection with our ongoing and planned activities, as we:
•
•
•
conduct clinical studies for our clinical programs in β-thalassemia, SCD, and ALD, fund our share of the costs of clinical studies for our program in
multiple myeloma in collaboration with BMS, and advance our preclinical programs into clinical development;
increase research and development-related activities for the discovery and development of product candidates in severe genetic diseases and
oncology;
continue our research and development efforts internally and through our collaborations with external partners, such as with Regeneron;
• manufacture clinical study materials and establish the infrastructure necessary to support and develop large-scale manufacturing capabilities;
•
•
•
seek regulatory approval for our product candidates;
add personnel to support our product development and commercialization efforts; and
increase activities associated with the commercial launch of ZYNTEGLO in multiple markets.
We do not expect to generate revenue from product sales until the first half of 2020. While we are in the process of completing construction and
qualification of our internal lentiviral vector manufacturing capacity, currently all of our manufacturing activities are contracted out to third parties.
Additionally, we currently utilize third-party contract research organizations, or CROs, to carry out our clinical development activities. As we seek to obtain
regulatory approval for our product candidates and begin to commercialize ZYNTEGLO, we expect to incur significant commercialization expenses, in
addition to our significant and increasing research and development expenses, as we prepare for product sales, marketing, manufacturing, and distribution.
Accordingly, until we generate significant revenues from product sales, we will seek to fund our operations through public or private equity or debt
financings, strategic collaborations, or other sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed
on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our
financial condition and our ability to develop our products.
Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased
expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenues from the sale of our products, we may not
become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our
operations at planned levels and be forced to reduce our operations.
Financial operations overview
Revenue
To date, we have not generated any revenues from the sale of products. Our revenues have been derived from collaboration arrangements, out-licensing
arrangements, research fees, and grant revenues. Effective January 1, 2018, we adopted Accounting Standards Codification (“ASC”), Topic 606, Revenue
from Contracts with Customers (“Topic 606”), using the modified retrospective transition method.
To date, our collaboration revenue has been primarily generated from our collaboration arrangement with BMS. The terms of the arrangement with
respect to ide-cel contain multiple promised goods or services, which include at inception: (i) research and development services, (ii) a license to ide-cel, and
(iii) manufacture of vectors and associated payload for incorporation into ide-cel under the license. As of September 2017, the collaboration also included the
following promised goods or services with respect to bb21217: (i) research and development services, (ii) a license to bb21217, and (iii) manufacture of
vectors and associated payload for incorporation into bb21217 under the license. In March 2018, we entered into an agreement with BMS
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to co-develop and co-promote ide-cel in which both parties will share equally in U.S. costs and profits. Collaboration revenue is recognized as the
performance obligations are satisfied.
We analyze our collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements (“ASC 808”) to
determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to
significant risks and rewards dependent on the commercial success of such activities. This assessment is performed throughout the life of the arrangement
based on changes in the responsibilities of all parties in the arrangement. For collaboration arrangements within the scope of ASC 808, we first determine
which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and
therefore within the scope of Topic 606. For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition
method is determined and applied consistently, generally by analogy to Topic 606. Amounts that are owed to collaboration partners are recognized as an
offset to collaboration revenues as such amounts are incurred by the collaboration partner. Where amounts owed to a collaboration partner exceed our
collaboration revenues in a quarterly period, such amounts in excess are classified as research and development expense. For those elements of the
arrangement that are accounted for pursuant to Topic 606, we apply the five-step model prescribed in Topic 606.
Nonrefundable license fees are recognized as revenue upon delivery of the license provided there are no unsatisfied performance obligations in the
arrangement. License revenue has historically been generated from our out-license agreements with Novartis Pharma AG, or Novartis, and Orchard
Therapeutics Limited, or Orchard. Under our out-licensing agreements we may also recognize revenue from potential future milestone payments and
royalties.
For arrangements with licenses of intellectual property that include sales-based royalties, including milestone payments based on the level of sales, and
the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii)
when the performance obligation to which the royalty has been allocated has been satisfied.
Research and development expenses
Research 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 inventory, which includes pre-launch inventory;
reimbursable costs to our partners for collaborative activities;
facilities, depreciation, and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, information
technology, insurance, and other supplies in support of research and development activities;
costs associated with our research platform and preclinical activities;
• milestones and upfront license payments to acquire and maintain intellectual property rights pertaining to aspects of our technologies;
•
•
costs associated with our regulatory, quality assurance and quality control operations; and
amortization of certain intangible assets.
Research and development costs are expensed as incurred. Costs for certain development activities are recognized based on an evaluation of the progress
to completion of specific tasks using information and data provided to us by our vendors and our clinical sites. We cannot determine with certainty the
duration 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 from
the commercialization and sale of any of our product candidates that obtain regulatory approval. We may not succeed in achieving regulatory approval for all
of our product candidates. The duration, costs, and timing of clinical studies and development of our product candidates will depend on a variety of factors,
any of which could mean a significant change in the costs and timing associated with the development of our product candidates including:
•
the advancement of our preclinical programs into clinical development;
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•
•
•
•
•
the scope, rate of progress, and expense of our ongoing as well as any additional clinical studies and other research and development activities we
undertake;
future clinical study results;
uncertainties in clinical study enrollment rates;
changing standards for regulatory approval; and
the timing and receipt of any regulatory approvals.
We plan to increase our research and development expenses for the foreseeable future as we continue to conduct our clinical development programs in β-
thalassemia, SCD, CALD, and multiple myeloma (including funding our share of the costs in our collaboration with BMS), advance our preclinical programs
in severe genetic diseases and oncology into clinical development, and continue the research and discovery of new product candidates in the fields of severe
genetic diseases and oncology. Our research and development expenses include expenses associated with the following activities:
• Northstar-2 Study (HGB-207) – a multi-site, international phase 3 study to examine the safety and efficacy of LentiGlobin for TDT in the treatment
of patients with TDT and a non-β0/β0 genotype.
• Northstar-3 Study (HGB-212) – a multi-site, international phase 3 study to examine the safety and efficacy of LentiGlobin for TDT in the treatment
of patients with TDT and a β0/β0 genotype or an IVS-I-110 mutation.
• HGB-206 study – a multi-site phase 1/2 study in the United States to study the safety and efficacy of LentiGlobin for SCD in the treatment of
patients with SCD.
• HGB-210 study – our multi-site, international phase 3 study of LentiGlobin for SCD in the treatment of patients with SCD and a history of vaso-
occlusive events.
• HGB-211 study - our planned multi-site phase 3 study of LentiGlobin for SCD in the treatment of patients with SCD and elevated stroke risk We
plan to initiate this study in 2020.
•
Starbeam Study (ALD-102) – a multi-site, international phase 2/3 study to examine the safety and efficacy of our Lenti-D product candidate in the
treatment of patients with CALD.
• ALD-104 study – our multi-site, international phase 3 study to examine the safety and efficacy of our Lenti-D product candidate in the treatment of
patients with CALD after myeloablative conditioning using busulfan and fludarabine .
•
CRB-401 study – an open label, single-arm, multi-center, phase 1 study to examine the safety and efficacy of ide-cel in the treatment of patients with
relapsed and refractory multiple myeloma.
• KarMMA study – an open label, single-arm, multi-center phase 2 study to examine the efficacy and safety of ide-cel in the treatment of patients with
relapsed and refractory multiple myeloma.
• KarMMa-2 study – a multi-cohort, open-label, multicenter phase 2 study to examine the safety and efficacy of ide-cel in the treatment of patients
with relapsed and refractory multiple myeloma and in high-risk multiple myeloma.
• KarMMa-3 study – a multicenter, randomized, open-label phase 3 study comparing the efficacy and safety of ide-cel versus standard triplet regimens
in patients with relapsed and refractory multiple myeloma.
• KarMMa-4 study –, a multi-cohort, open-label, multicenter phase 1 study intended to determine the optimal target dose and safety of ide-cel in
subjects with newly-diagnosed multiple myeloma.
•
•
•
•
CRB-402 study – an open label, single-arm, multicenter, phase 1 study to examine the safety and efficacy of the bb21217 product candidate in the
treatment of patients with relapsed and refractory multiple myeloma.
Costs related to the manufacture of clinical study materials in support of our clinical studies.
Support for strategic collaborations in early pipeline activities, including in our severe genetic disease and oncology programs.
Support for academic collaborations in early pipeline activities, including investigator-initiated proof-of-concept clinical trials in our severe genetic
disease and oncology programs.
Our direct research and development expenses consist principally of external costs, such as fees paid to investigators, consultants, central laboratories and
CROs in connection with our clinical studies, and costs related to acquiring and manufacturing clinical study materials. We allocate salary and benefit costs
directly related to specific programs. We do not allocate personnel-related discretionary bonus or stock-based compensation costs, costs associated with our
general discovery
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platform improvements, depreciation or other indirect costs that are deployed across multiple projects under development and, as such, the costs are
separately classified as other research and development expenses in the table below:
2019
Year ended December 31,
2018
(in thousands)
2017
$
124,692 $
125,058 $
LentiGlobin (including ZYNTEGLO)(1)
Lenti-D
Ide-cel
bb21217(2)
Preclinical programs(2)
Total direct research and development expense
Employee- and contractor-related expenses
Stock-based compensation expense
Platform-related expenses
Facility expenses
Other expenses
Total other research and development expenses
Total research and development expense
40,352
121,182
19,827
49,700
355,753
52,617
80,139
19,229
67,274
7,401
38,244
75,667
15,624
50,115
35,697
54,422
18,187
32,158
3,417
226,660
143,881
$
582,413 $
448,589 $
85,710
16,223
32,144
7,402
40,167
23,698
26,633
15,414
24,700
949
91,394
273,040
304,708
181,646
(1) Following our receipt of conditional approval for the marketing authorization of ZYNTEGLO by the European Commission in June 2019, all manufacturing costs associated with the
production of LentiGlobin for use in the commercial sale of ZYNTEGLO in the European Union will be evaluated for capitalization as inventory on our consolidated balance sheets.
(2) The costs associated with our bb21217 program were included in preclinical programs in the table shown above through June 30, 2017. The costs associated with our bb21217 program are
presented separately in the table above beginning in the third quarter of 2017 as we initiated the first clinical study for bb21217 in the third quarter of 2017.
Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of salaries and related costs for personnel, including stock-based compensation and travel
expenses for our employees in executive, operational, finance, legal, business development, commercial, information technology, and human resource
functions. Other selling, general and administrative expenses include facility-related costs, professional fees for accounting, tax, legal and consulting services,
directors’ fees and expenses associated with obtaining and maintaining patents.
We anticipate that our selling, general and administrative expenses, including payroll and sales and marketing expenses, will increase in the future as we
increase our headcount and continue to develop and commercialize our product candidates.
Cost of license and royalty revenue
Cost of license and royalty revenue represents expense associated with amounts owed to third party licensors as a result of revenue recognized under our
out-license arrangements with Novartis and Orchard.
We anticipate that our cost of license and royalty revenue will increase in the future contingent upon the achievement of regulatory milestones by
Novartis or Orchard. Additionally, we anticipate that our cost of license and royalty revenue will increase in the future as we expect to continue to recognize
royalty revenue related to Novartis’ commercial sale of tisagenlecleucel.
Change in fair value of contingent consideration
On June 30, 2014, we acquired Precision Genome Engineering, Inc., or Pregenen. The agreement provided for up to $135.0 million in future contingent
cash payments by us upon the achievement of certain preclinical, clinical and commercial milestones related to the Pregenen technology.
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As of December 31, 2019, there are $120.0 million in future contingent cash payments, of which $20.1 million relates to clinical milestones and $99.9
million relates to commercial milestones. We estimate future contingent cash payments have a fair value of $8.0 million as of December 31, 2019, all of
which is classified as a non-current liability on our consolidated balance sheet.
Interest income (expense), net
For the year ended December 31, 2019, interest income (expense), net consists primarily of interest income earned on investments. For the years ended
December 31, 2018 and 2017, interest income (expense), net consisted primarily of interest income earned on investments and interest expense on the
financing lease obligation for our headquarters at 60 Binney Street in Cambridge, Massachusetts. Upon adoption of ASU 2016-02, Leases (Topic 842) (“ASU
2016-02” or “ASC 842”) on January 1, 2019, we de-recognized the financing lease obligation and, as a result, no longer recognize interest expense associated
with the financing lease obligation. Please refer to Note 2, Summary of significant accounting policies and basis of presentation, and Note 8, Leases, in the
Notes to Consolidated Financial Statements for further information.
Other (expense) income, net
Other (expense) income, net consists primarily of unrealized gains and losses on equity securities, gains and losses on disposal of fixed assets, realized
gains and losses on debt securities, and gains and losses on foreign currency transactions.
Critical accounting policies and significant judgments and estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been
prepared in accordance with generally accepted accounting principles in the U.S. The preparation of these financial statements requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial
statements. On an ongoing basis, we evaluate our estimates and judgments, including expected business and operational changes, sensitivity and volatility
associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. We base our
estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions. In making estimates and 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 recognition
Revenue recognition
Effective January 1, 2018, we adopted Accounting Standards Codification (“ASC”), Topic 606, Revenue from Contracts with Customers (“Topic 606”),
using the modified retrospective transition method. Under this method, we have recognized the cumulative effect of the adoption as an adjustment to the
opening balance of accumulated deficit in the current period consolidated balance sheet. We have not revised our consolidated financial statements for prior
periods. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as collaboration
arrangements and leases.
Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the
consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity
determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the
performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the
performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step
model to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it transfers to
the customer.
Once a contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract and determine those
that are performance obligations. Arrangements that include rights to additional goods or services
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that are exercisable at a customer’s discretion are generally considered options. We assess if these options provide a material right to the customer and if so,
they are considered performance obligations. The identification of material rights requires judgments related to the determination of the value of the
underlying license relative to the option exercise price, including assumptions about technical feasibility and the probability of developing a candidate that
would be subject to the option rights. The exercise of a material right is accounted for as a contract modification for accounting purposes.
We assess whether each promised good or service is distinct for the purpose of identifying the performance obligations in the contract. This assessment
involves subjective determinations and requires management to make judgments about the individual promised goods or services and whether such are
separable from the other aspects of the contractual relationship. Promised goods and services are considered distinct provided that: (i) the customer can
benefit from the good or service either on its own or together with other resources that are readily available to the customer (that is, the good or service is
capable of being distinct) and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the
contract (that is, the promise to transfer the good or service is distinct within the context of the contract). In assessing whether a promised good or service is
distinct, we consider factors such as the research, manufacturing and commercialization capabilities of the collaboration partner and the availability of the
associated expertise in the general marketplace. We also consider the intended benefit of the contract in assessing whether a promised good or service is
separately identifiable from other promises in the contract. If a promised good or service is not distinct, an entity is required to combine that good or service
with other promised goods or services until it identifies a bundle of goods or services that is distinct.
The transaction price is then determined and allocated to the identified performance obligations in proportion to their standalone selling prices (“SSP”)
on a relative SSP basis. SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance
obligations are satisfied. Determining the SSP for performance obligations requires significant judgment. In developing the SSP for a performance obligation,
we consider applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the
customer and estimated costs. We validate the SSP for performance obligations by evaluating whether changes in the key assumptions used to determine the
SSP will have a significant effect on the allocation of arrangement consideration between multiple performance obligations.
If the consideration promised in a contract includes a variable amount, we estimate the amount of consideration to which we will be entitled in exchange
for transferring the promised goods or services to a customer. We determine the amount of variable consideration by using the expected value method or the
most likely amount method. We include the unconstrained amount of estimated variable consideration in the transaction price. The amount included in the
transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of
each subsequent reporting period, we re-evaluate the estimated variable consideration included in the transaction price and any related constraint, and if
necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment.
If an arrangement includes development and regulatory milestone payments, we evaluate whether the milestones are considered probable of being
reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue
reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or the
licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.
For arrangements with licenses of intellectual property that include sales-based royalties, including milestone payments based on the level of sales, and
the license is deemed to be the predominant item to which the royalties relate, we recognize royalty revenue and sales-based milestones at the later of (i) when
the related sales occur, or (ii) when the performance obligation to which the royalty has been allocated has been satisfied.
In determining the transaction price, we adjust consideration for the effects of the time value of money if the timing of payments provides us with a
significant benefit of financing. We do not assess whether a contract has a significant financing component if the expectation at contract inception is such that
the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or less. We assessed each of
our revenue generating arrangements in order to determine whether a significant financing component exists and concluded that a significant financing
component does not exist in any of our arrangements.
We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each
performance obligation is satisfied, either at a point in time or over time, and if over time recognition is based on the use of an output or input method.
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Collaboration revenue
To date, collaboration revenue has been primarily generated from our collaboration arrangement with BMS, which was originally entered into in March
2013 and was subsequently amended in June 2015, as further described in Note 11, Collaborative arrangements in the Notes to Consolidated Financial
Statements. In August 2018, we entered into a collaboration arrangement with Regeneron, and began recognizing collaboration revenue under this
arrangement in the fourth quarter of 2018.
We analyze our collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements (“ASC 808”) to
determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to
significant risks and rewards dependent on the commercial success of such activities. This assessment is performed throughout the life of the arrangement
based on changes in the responsibilities of all parties in the arrangement. For collaboration arrangements within the scope of ASC 808 that contain multiple
elements, we first determine which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a
vendor-customer relationship and therefore within the scope of Topic 606. For elements of collaboration arrangements that are accounted for pursuant to ASC
808, an appropriate recognition method is determined and applied consistently, generally by analogy to Topic 606. Amounts that are owed to collaboration
partners are recognized as an offset to collaboration revenues as such amounts are incurred by the collaboration partner. Where amounts owed to a
collaboration partner exceed our collaboration revenues in each quarterly period, such amounts are classified as research and development expense. For those
elements of the arrangement that are accounted for pursuant to Topic 606, we apply the five-step model described above.
The recognition of collaboration revenue (expense) requires management judgment due to the fact that the terms of our collaboration arrangements are
complicated and the nature of the collaborative activities change over time. This process includes the identification of costs that we incur that relate to each
particular collaboration arrangement, evaluating the nature of these costs (for example, whether the costs relate to a particular geography or territory or
whether the costs relate to clinical or commercial activities), and applying the terms of the respective collaborative arrangement to determine the portion of
such costs that are the responsibility of the collaboration partner, which in certain circumstances requires significant judgment.
Leases
Effective January 1, 2019, we adopted ASU 2016-02, Leases (Topic 842), (“ASU 2016-02” or “ASC 842”), using the required modified retrospective
approach and utilizing the effective date as the date of initial application. As a result, prior periods are presented in accordance with the previous guidance in
ASC 840, Leases (“ASC 840”).
At the inception of an arrangement, we determine whether the arrangement is or contains a lease based on the unique facts and circumstances present in
the arrangement. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease
liabilities, as applicable. We do not have material financing leases.
Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected
remaining lease term. Certain adjustments to the right-of-use asset may be required for items such as incentives received. The interest rate implicit in lease
contracts is typically not readily determinable. As a result, we utilize our incremental borrowing rate to discount lease payments, which reflects the fixed rate
at which we could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic
environment. To estimate our incremental borrowing rate, a credit rating applicable to us is estimated using a synthetic credit rating analysis since we do not
currently have a rating agency-based credit rating. Prospectively, we will adjust the right-of-use assets for straight-line rent expense or any incentives received
and remeasure the lease liability at the net present value using the same incremental borrowing rate that was in effect as of the lease commencement or
transition date.
We have elected not to recognize leases with an original term of one year or less on the balance sheet. We typically only includes an initial lease term in
our assessment of a lease arrangement. Options to renew a lease are not included in our assessment unless there is reasonable certainty that we will renew.
Assumptions that we made at the commencement date are re-evaluated upon occurrence of certain events, including a lease modification. A lease
modification results in a separate contract when the modification grants the lessee an additional right of use not included in the original lease and when lease
payments increase commensurate with the standalone price for the additional right of use. When a lease modification results in a separate contract, it is
accounted for in the same manner as a new lease.
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ASC 842 transition practical expedients and application of transition provisions to leases at the transition date
We elected the following practical expedients, which must be elected as a package and applied consistently to all of our leases at the transition date
(including those for which we are a lessee or a lessor): i) we did not reassess whether any expired or existing contracts are or contain leases; ii) we did not
reassess the lease classification for any expired or existing leases (that is, all existing leases that were classified as operating leases in accordance with ASC
840 are classified as operating leases, and all existing leases that were classified as capital leases in accordance with ASC 840 are classified as finance leases);
and iii) we did not reassess initial direct costs for any existing leases.
For leases that existed prior to the date of initial application of ASC 842 (which were previously classified as operating leases), a lessee may elect to use
either the total lease term measured at lease inception under ASC 840 or the remaining lease term as of the date of initial application of ASC 842 in
determining the period for which to measure its incremental borrowing rate. In transition to ASC 842, we utilized the remaining lease term of its leases in
determining the appropriate incremental borrowing rates.
Application of ASC 842 policy elections to leases post adoption
We have made certain policy elections to apply to our leases executed post adoption, or subsequent to January 1, 2019, as further described below.
In accordance with ASC 842, components of a lease should be split into three categories: lease components, non-lease components, and non-components.
The fixed and in-substance fixed contract consideration (including any consideration related to non-components) must be allocated based on the respective
relative fair values to the lease components and non-lease components.
Entities may elect not to separate lease and non-lease components. Rather, entities would account for each lease component and related non-lease
component together as a single lease component. We have elected to account for lease and non-lease components together as a single lease component for all
underlying assets and allocate all of the contract consideration to the lease component only.
ASC 842 allows for the use of judgment in determining whether the assumed lease term is for a major part of the remaining economic life of the
underlying asset and whether the present value of lease payments represents substantially all of the fair value of the underlying asset. We apply the bright line
thresholds referenced in ASC 842-10-55-2 to assist in evaluating leases for appropriate classification. The aforementioned bright lines are applied consistently
to our entire portfolio of leases.
Accrued research and development expenses
As part of the process of preparing our financial statements, we are required to estimate our accrued expenses. This process involves reviewing open
contracts and purchase orders, communicating with our personnel to identify services that have been performed 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 or otherwise notified of the actual cost. The majority of
our service providers invoice us monthly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued
expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time.
We recognize expenses related to clinical studies based on our estimates of the services received and efforts expended pursuant to contracts with multiple
CROs that conduct and manage clinical studies on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to
contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided
and result in a prepayment of the clinical expense. Payments under some of these contracts depend on factors such as the successful enrollment of subjects
and the completion of clinical study milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of
effort to be expended in each period and adjust accordingly.
Other examples of estimated accrued research and development expenses include fees paid to:
•
•
•
investigative sites in connection with clinical studies;
vendors in connection with preclinical development activities; and
vendors related to the development, manufacturing, and distribution of clinical trial materials.
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Stock-based compensation
We 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
to employees, including grants of employee stock options and modifications to existing stock options, to be recognized in the consolidated statements of
operations and comprehensive loss based on their fair values. Prior to the adoption of Accounting Standards Update (“ASU”) No. 2018-07, Compensation -
Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), the measurement date for non-
employee awards was generally the date the services are completed, resulting in financial reporting period adjustments to stock-based compensation during
the vesting terms for changes in the fair value of the awards. After the adoption of ASU 2018-07, the measurement date for non-employee awards is the date
of grant without changes in the fair value of the award. Stock-based compensation costs for non-employees are recognized as expense over the vesting period
on a straight-line basis.
Our stock-based awards are subject to either service or performance-based vesting conditions. Compensation expense related to awards to employees,
non-employees, and directors, with service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the
associated service period of the award, which is generally the vesting term. Compensation expense related to awards to employees and non-employees with
performance-based vesting conditions is recognized based on the grant date fair value over the requisite service period using the accelerated attribution
method to the extent achievement of the performance condition is probable. We estimate the probability that certain performance criteria will be met and do
not recognize compensation expense until it is probable that the performance-based vesting condition will be achieved.
We estimate the fair value of our stock-based awards to employees, non-employees, and directors, using the Black-Scholes option pricing model, which
requires the input of 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 company specific historical and implied volatility data, we based our estimate of expected volatility on
the estimate and expected volatilities of a representative group of publicly traded companies. For these analyses, we select companies with comparable
characteristics to ours including enterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the
expected life of the stock-based awards. We compute the historical volatility data using the daily closing prices for the selected companies’ shares during the
equivalent period of the calculated expected term of our stock-based awards. We will continue to apply this process until a sufficient amount of historical
information regarding the volatility of our own stock price becomes available. We estimate the expected life of our employee stock options using the
“simplified” method, whereby, the expected life equals the average of the vesting term and the original contractual term of the option. The risk-free interest
rates for periods within the expected life of the option were based on the U.S. Treasury yield curve in effect during the period the options were granted.
Recent accounting pronouncements
See Note 2, Summary of significant accounting policies and basis of presentation, in the Notes to Consolidated Financial Statements for a description of
recent accounting pronouncements applicable to our business.
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Results of Operations
Comparison of the years ended December 31, 2019 and 2018:
Revenue:
Collaboration revenue
License and royalty revenue
Total revenues
Operating expenses:
Research and development
Selling, general and administrative
Cost of license and royalty revenue
Change in fair value of contingent consideration
Total operating expenses
Loss from operations
Interest income (expense), net
Other (expense) income, net
Loss before income taxes
Income tax benefit (expense)
Net loss
Year ended December 31,
2019
2018
(in thousands)
Change
$
36,469 $
52,353 $
8,205
44,674
582,413
271,362
2,978
2,747
859,500
(814,826)
34,761
(10,088)
(790,153)
545
2,226
54,579
448,589
174,129
885
2,999
626,602
(572,023)
14,624
1,961
(555,438)
(187)
(15,884)
5,979
(9,905)
133,824
97,233
2,093
(252)
232,898
(242,803)
20,137
(12,049)
(234,715)
732
$
(789,608) $
(555,625) $
(233,983)
Revenue. Total revenue was $44.7 million for the year ended December 31, 2019, compared to $54.6 million for the year ended December 31, 2018. The
decrease of $9.9 million was primarily attributable to a decrease in collaboration revenue recognized for the ide-cel license and manufacturing services under
our agreement with BMS. This decrease was partially offset by an increase in license and royalty revenue and an increase in collaboration revenue under our
agreement with Regeneron.
Research and development expenses. Research and development expenses were $582.4 million for the year ended December 31, 2019, compared to
$448.6 million for the year ended December 31, 2018. The increase of $133.8 million was primarily attributable to the following:
•
•
•
•
•
•
$66.1 million of increased employee compensation, benefit, and other headcount related expenses, which is primarily driven by an increase in
research and development headcount to support overall growth, including an increase of $25.7 million in stock-based compensation expense. Refer
to Note 14, Stock-based compensation, in the Notes to Consolidated Financial Statements for discussion of stock-based compensation expense
recognized on the performance-based restricted stock units;
$34.8 million of increased IT and facility related costs, which includes the impact of adopting ASU 2016-02;
$26.3 million of increased collaboration research funding costs;
$13.1 million of increased laboratory expenses, material production, and other platform costs;
$9.7 million of increased research consulting and medical research costs; and
$3.6 million of increased clinical trial costs.
These increased costs were partially offset by $20.6 million of decreased license and milestone fees.
Selling, general and administrative expenses. Selling, general and administrative expenses were $271.4 million for the year ended December 31, 2019,
compared to $174.1 million for the year ended December 31, 2018. The increase of $97.2 million was primarily due to the following:
•
$65.3 million of increased employee compensation, benefit, and other headcount related expenses, which is primarily driven by an increase in
selling, general, and administrative headcount to support overall growth, including an increase of $24.1 million in stock-based compensation
expense. Refer to Note 14, Stock-based compensation, in the Notes to
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Consolidated Financial Statements for discussion of stock-based compensation expense recognized on the performance-based restricted stock units;
•
•
$18.4 million of increased costs related to commercial-readiness activities; and
$13.2 million of increased consulting fees.
Cost of license and royalty revenue. Cost of license and royalty revenue was $3.0 million for the year ended December 31, 2019, compared to
$0.9 million for the year ended December 31, 2018. The increase is attributable to increased royalty revenue in the same periods.
Change in fair value of contingent consideration. The change in fair value of contingent consideration is driven by changes in assumptions related to
estimated milestone achievement dates or probabilities of achievement.
Interest income (expense), net. The change in interest income (expense), net was primarily related to increased interest income earned on investments, as
well as a decrease in interest expense incurred due to the de-recognition of the financing lease obligation associated with our corporate headquarters at 60
Binney Street related to the adoption of ASU 2016-02 on January 1, 2019.
Other (expense) income, net. The change in other (expense) income, net was primarily related to changes in fair value on equity securities.
Comparison of the years ended December 31, 2018 and 2017:
Revenue:
Collaboration revenue
License and royalty revenue
Total revenues
Operating expenses:
Research and development
Selling, general and administrative
Cost of license and royalty revenue
Change in fair value of contingent consideration
Total operating expenses
Loss from operations
Interest income (expense), net
Other income (expense), net
Loss before income taxes
Income tax benefit (expense)
Net loss
Year ended December 31,
2018
2017
(in thousands)
Change
$
52,353 $
22,207 $
2,226
54,579
448,589
174,129
885
2,999
626,602
(572,023)
14,624
1,961
13,220
35,427
273,040
93,550
1,527
(525)
367,592
(332,165)
(2,001)
(1,267)
30,146
(10,994)
19,152
175,549
80,579
(642)
3,524
259,010
(239,858)
16,625
3,228
(555,438)
(335,433)
(220,005)
(187)
(210)
23
$
(555,625) $
(335,643) $
(219,982)
Revenue. Total revenue was $54.6 million for the year ended December 31, 2018, compared to $35.4 million for the year ended December 31, 2017. The
increase of $19.2 million was primarily attributable to collaboration revenue recognized associated with the ide-cel license and manufacturing services under
our agreement with BMS, of which $13.9 million is attributable to differences resulting from the application of Topic 606 and ASC 605 to our arrangement
with BMS during the year ended December 31, 2018 and 2017, respectively, offset by a decrease in license and royalty revenue.
Research and development expenses. Research and development expenses were $448.6 million for the year ended December 31, 2018, compared to
$273.0 million for the year ended December 31, 2017. The increase of $175.5 million was primarily attributable to the following:
•
$84.5 million of increased costs incurred for material production, laboratory expenses, and collaboration research;
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•
•
•
•
$61.1 million of increased employee compensation, benefit, and other headcount related expenses, of which $27.8 million is stock based
compensation expense, primarily due to an increase in headcount to support overall growth;
$17.8 million of increased facility related costs and professional and consulting fees;
$10.5 million of increased clinical trial-related costs to support the advancement of our clinical programs; and
$1.3 million of increased license and milestone fees (exclusive of any costs recorded in cost of license and royalty revenue) and increased grants and
scholarships.
Selling, general and administrative expenses. Selling, general and administrative expenses were $174.1 million for the year ended December 31, 2018,
compared to $93.6 million for the year ended December 31, 2017. The increase of approximately $80.6 million was primarily due to the following:
•
•
•
•
•
$47.4 million of increased employee compensation and benefits, inclusive of $29.8 million of increased stock-based compensation expense;
$10.1 million of increased commercial-related costs, primarily attributed to market research costs;
$14.6 million due to increased consultant and professional services expenses;
$5.7 million in other headcount related costs; and
$4.3 million of increased office expenses.
These increases were offset by decreased facility-related costs of $1.7 million.
Cost of license and royalty revenue. Cost of license and royalty revenue was $0.9 million for the year ended December 31, 2018, compared to $1.5
million for the year ended December 31, 2017. The decrease is attributable to decreased license and royalty revenue in the same periods.
Change in fair value of contingent consideration. The change in fair value of contingent consideration is driven by changes in assumptions related to
estimated milestone achievement dates or probabilities of achievement.
Interest income (expense), net. The change in interest income (expense), net was primarily related to increased interest income earned on investments
due to the increase in investment in marketable securities, partially offset by interest expense on the 60 Binney financing obligation.
Other income (expense), net. Other income, net was $2.0 million for the year ended December 31, 2018, compared to other expense, net of $1.3 million
for the year ended December 31, 2017. The change is primarily related to an unrealized gain recognized on equity securities as well as fluctuations in foreign
currency exchange rates.
Liquidity and Capital Resources
As of December 31, 2019, we had cash, cash equivalents and marketable securities of approximately $1.24 billion. We expect cash, cash equivalents,
marketable securities, anticipated collaboration payments, and payments from sales of our current and potential future product candidates to fund planned
operations into the second half of 2021. 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, 2019, our funds are primarily held in U.S. Treasury securities, U.S. government agency securities,
equity securities, certificates of deposit, corporate bonds, commercial paper, and money market accounts.
We have incurred losses and cumulative negative cash flows from operations since our inception in April 1992, and as of December 31, 2019, we had an
accumulated deficit of $2.28 billion. We expect that our research and development and selling, general and administrative expenses will continue to increase
and, as a result, we will need additional capital to fund our operations, which we may raise through public or private equity or debt financings, strategic
collaborations, or other sources. The likelihood of our long-term success must be considered in light of the expenses, difficulties, and potential delays to be
encountered in the development and commercialization of new pharmaceutical products, competitive factors in the marketplace and the complex regulatory
environment in which we operate. We may never achieve significant revenue or profitable operations.
We have funded our operations principally from the sale of common stock in public offerings and through our collaborations with BMS and Regeneron
as outlined below:
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•
•
•
•
•
In June 2017, we sold 4.4 million shares of common stock (inclusive of 0.6 million shares of common stock sold by us pursuant to the full exercise
of an overallotment option granted to the underwriters in connection with the offering) through an underwritten public offering at a price of $105.00
per share for aggregate net proceeds to us of $436.8 million.
In December 2017, we sold 3.2 million shares of common stock (excluding any shares sold by us pursuant to an overallotment option granted to the
underwriters in connection with the offering) through an underwritten public offering at a price of $185.00 per share for aggregate net proceeds to us
of $569.8 million.
In January 2018, we sold 0.3 million shares of common stock pursuant to the partial exercise of an overallotment option granted to the underwriters
in connection with the December 2017 underwritten public offering at a price of $185.00 per share for aggregate net proceeds of $48.7 million.
In July 2018, we sold 3.9 million shares of common stock through an underwritten public offering at a price of $162.50 per share for aggregate net
proceeds to us of $600.6 million.
In August 2018, we sold 0.4 million shares of common stock to Regeneron in connection with our collaboration arrangement at a price of $238.10
per share for aggregate net proceeds to us of $100.0 million, of which $45.5 million was attributed to a prepayment of joint research activities. See
Note 11, Collaborative arrangements, in the Notes to Consolidated Financial Statements for more information.
Sources of Liquidity
Cash Flows
The following table summarizes our cash flow activity:
Net cash used in operating activities
Net cash provided by (used in) investing activities
Net cash provided by financing activities
(Decrease) increase in cash, cash equivalents and restricted cash
2019
Year ended December 31,
2018
(in thousands)
(564,384) $
(413,426) $
507,807
21,187
(679,435)
737,692
2017
(280,553)
(316,630)
1,076,174
(35,390) $
(355,169) $
478,991
$
$
Operating Activities. The net cash used in operating activities was $564.4 million for the year ended December 31, 2019 and primarily consisted of a net
loss of $789.6 million adjusted for non-cash items including stock-based compensation of $160.6 million and depreciation and amortization of $17.4 million,
as well as the change in our net working capital.
The net cash used in operating activities was $413.4 million for the year ended December 31, 2018 and primarily consisted of a net loss of $555.6 million
adjusted for non-cash items including stock-based compensation of $110.8 million and depreciation and amortization of $17.2 million, as well as the change
in our net working capital.
The net cash used in operating activities was $280.6 million for the year ended December 31, 2017 and primarily consisted of a net loss of $335.6 million
adjusted for non-cash items including stock-based compensation of $53.3 million and depreciation and amortization of $13.5 million, as well as the change in
our net working capital.
Investing Activities. Net cash provided by investing activities for the year ended December 31, 2019 was $507.8 million and was primarily due to
proceeds from the maturities of available-for-sale marketable securities of $1.34 billion offset by the purchase of $756.6 million of marketable securities and
the purchase of $71.0 million of property, plant and equipment.
Net cash used in investing activities for the year ended December 31, 2018 was $679.4 million and was primarily due to the purchase of $1.52 billion of
marketable securities and the purchase of $55.7 million of property, plant and equipment offset by proceeds from the maturities of available-for-sale
marketable securities of $894.3 million.
Net cash used in investing activities for the year ended December 31, 2017 was $316.6 million and was primarily due to the purchase of $686.2 million
of available-for-sale marketable securities and the purchase of $62.2 million of property, plant and equipment offset by proceeds from the maturities of
available-for-sale marketable securities of $431.8 million.
Financing Activities: Net cash provided by financing activities for the year ended December 31, 2019 was $21.2 million and was primarily due to net
cash proceeds from employee option exercises and ESPP contributions.
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Net cash provided by financing activities for the year ended December 31, 2018 was $737.7 million and was primarily due to net cash proceeds from our
January 2018 and July 2018 common stock offerings, as well as our issuance of common stock to Regeneron.
Net cash provided by financing activities for the year ended December 31, 2017 was $1.1 billion and was primarily due to net cash proceeds from our
June 2017 and December 2017 common stock offerings.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations at December 31, 2019, which excludes potential milestone payments.
Operating leases
Contract manufacturing
Total contractual obligations(1)
Total
2020
2021
through
2022
(in thousands)
2023
through
2024
2025
and
after
$
$
251,553 $
33,257 $
66,868 $
63,092 $
88,336
247,947
129,950
46,907
71,090
—
499,500 $
163,207 $
113,775 $
134,182 $
88,336
(1) We are subject to several in-licenses that include annual license maintenance fee payments and minimum royalties. The future obligations related to maintenance fee
payments and minimum royalties in license agreements are not considered material and are not included in the table above.
Operating leases
60 Binney Street lease
On September 21, 2015, we entered into a lease agreement for office and laboratory space located at 60 Binney Street, Cambridge, Massachusetts. Under
the terms of the lease, starting on October 1, 2016, we leased approximately 253,108 square feet of office and laboratory space 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 operating expenses and taxes. The
Company currently maintains a $13.8 million collateralized letter of credit and, subject to the terms of the lease and certain reduction requirements specified
therein, including market capitalization requirements, this amount may decrease to $9.2 million over time. The lease will continue until March 31, 2027.
Pursuant to a work letter entered into in connection with the lease, the landlord contributed an aggregate of $42.4 million toward the cost of construction and
tenant improvements for the building.
50 Binney Street sublease
In April 2019, we entered into a sublease agreement for office space located at 50 Binney Street in Cambridge, Massachusetts (the “50 Binney Street
Sublease”) to supplement our corporate headquarters located at 60 Binney Street in Cambridge, Massachusetts. Under the terms of the 50 Binney Street
Sublease, we will lease 267,278 square feet of office space for $99.95 per square foot, or $26.7 million per year in base rent subject to certain operating
expenses, taxes and annual rent increases of approximately 3%. The lease will commence when the space is available for use, which is anticipated to be in the
second half of 2021, and end on December 31, 2030, unless we earlier occupy the premises or other conditions specified in the 50 Binney Street Sublease
occur. The sublessor has the right to postpone the commencement date until January 1, 2022 by providing us not less than nine months’ prior written notice.
Upon signing the 50 Binney Street Sublease, we executed a $40.1 million cash-collateralized letter of credit, which may be reduced in the future subject to the
terms of the 50 Binney Street Sublease and certain reduction requirements specified therein. The $40.1 million of cash collateralizing the letter of credit is
classified as restricted cash and other non-current assets on our consolidated balance sheets. Payments will commence at the earlier of (i) the date which is 90
days following the commencement date and (ii) the date we take occupancy of all or any portion of the premises. In connection with the execution of the 50
Binney Street Sublease, we also entered into a Purchase Agreement for furniture and equipment (the “Furniture Purchase Agreement”) located on the
premises upon lease commencement. Upon execution of the Furniture Purchase Agreement, we made an upfront payment of $7.5 million, all of which was
recorded within restricted cash and other non-current assets on our consolidated balance sheets as of December 31, 2019.
Seattle, Washington leases
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In July 2018, we entered into a lease agreement for office and laboratory space located in a portion of a building in Seattle, Washington. The lease was
amended in October 2018 to increase the total rentable space to approximately 36,126 square feet at $54.00 per square foot in base rent per year, which is
subject to scheduled annual rent increases of 2.5% plus certain operating expenses and taxes. The lease commenced on January 1, 2019 and the lease term
will continue through January 31, 2027. The Company moved into the facility in June 2019. The lease allowed for a tenant improvement allowance of up to
$215.00 per square foot, or approximately $8.0 million. We utilized the $8.0 million tenant improvement allowance and it has been fully reimbursed by the
landlord as of December 31, 2019.
In September 2019, we entered into a second amendment to the lease (the “Second Amendment”). The Second Amendment added approximately 22,188
square feet to the existing space and extended the lease term of the entire premises by 16 months, or until April 2028. Fixed monthly rent for the expanded
space will be incurred at a rate of $62.80 per square foot per year beginning in January 2021, subject to annual increases of 2.5%. The Second Amendment
includes a five-year option to extend the term.
Embedded leases
On June 3, 2016, we entered into a manufacturing agreement for the future commercial production of our Lenti-D and LentiGlobin product candidates
with a contract manufacturing organization. Under this 12 year agreement, the contract manufacturing organization will complete the design, construction,
validation and process validation of the leased suites prior to anticipated commercial launch of the product candidates. During construction, we were required
to pay $12.5 million upon the achievement of certain contractual milestones, and may pay up to $8.0 million in additional contractual milestones if we elect
our option to lease additional suites. We paid $5.0 million for the achievement of the first and second contractual milestones during 2016 and paid $5.5
million for the third and fourth contractual milestones achieved during 2017. In March 2018, $1.5 million of the possible $2.0 million related to the fifth
contractual milestone was achieved and was paid in the second quarter of 2018. Given that construction was completed in March 2018, beginning in April
2018 we will pay $5.1 million per year in fixed suite fees as well as certain fixed labor, raw materials, testing and shipping costs for manufacturing services,
and may pay additional suite fees if it elects its option to reserve or lease additional suites.
We may terminate this agreement at any time upon payment of a one-time termination fee and up to 24 months of fixed suite and labor fees. We
concluded that this agreement contains an embedded lease as the suites are designated for our exclusive use during the term of the agreement. We concluded
that we are not the deemed owner during construction nor is it a capital lease under ASC 840-10, Leases – Overall. As a result, in prior periods we accounted
for the agreement as an operating lease under ASC 840 and recognized straight-line rent expense over the non-cancellable term of the embedded lease. As
part of our adoption of ASC 842, effective January 1, 2019, we carried forward the existing lease classification under ASC 840. Additionally, we recorded a
right-of-use asset and lease liability for this operating lease on the effective date and are recognizing rent expense on a straight-line basis throughout the
remaining term of the embedded lease.
Contingent Consideration Related to Business Combinations
In connection with the Pregenen acquisition, we agreed to make contingent cash payments to the former equity holders of Pregenen. In accordance with
accounting guidance for business combinations, these contingent cash payments are recorded as contingent consideration liabilities on our consolidated
balance sheets at fair value. During the second quarter of 2017, a $5.0 million preclinical milestone was achieved, which resulted in a $5.0 million payment to
the former equityholders of Pregenen during the third quarter of 2017. The aggregate remaining undiscounted amount of contingent consideration potentially
payable is $120.0 million. We have not included these payments in the table above because the achievement and timing of these milestones is not fixed and
determinable. As of December 31, 2019, and 2018, $8.0 million and $5.2 million, respectively, is reflected as a non-current liability in the consolidated
balance sheet, which represents the fair value of our contingent consideration obligations as of this date.
Contingent Milestone and Royalty Payments
We also have obligations to make future payments to third parties that become due and payable on the achievement of certain development, regulatory
and 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 these
commitments on our balance sheet or in the table above because the achievement and timing of these milestones is not fixed and determinable.
Based on our development plans as of December 31, 2019, we may be obligated to make future development, regulatory and commercial milestone
payments and royalty payments on future sales of specified products associated with our
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collaboration and license agreements. Payments under these agreements generally become due and payable upon achievement of such milestones or sales.
Because the achievement of these milestones or sales had not occurred as of December 31, 2019, such contingencies have not been recorded in our financial
statements. Amounts related to contingent milestone payments and sales-based royalties are not yet considered contractual obligations as they are contingent
upon success.
• 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-
licensed intellectual property. The maximum aggregate payments we may be obligated to pay for each of these milestone categories per product is
€0.3, €0.2 and €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 the low single digits. The royalty is subject to reduction for any third-party payments required to be made, with a minimum floor in the
low 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 to
make 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 milestone
categories 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 to
sublicense our rights under this agreement, and we will be required to pay a percentage of such license income varying from the low single digits to
mid-range double digits depending on the nature of the sublicense and stage of development. We are required to make an annual maintenance
payment, which is creditable against royalty payments on a year-by-year basis. On April 1, 2015, we amended this license agreement with Institut
Pasteur, which resulted in a payment of €3.0 million that was paid during the second quarter of 2015. During the year ended December 31, 2019 we
paid Institut Pasteur €0.5 million in connection with amounts owed to us by sublicensees and €0.5 million for milestones reached.
• Under a license agreement with the Board of Trustees of the Leland Stanford Junior University, or Stanford, pursuant to which we license the
HEK293T 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 intellectual
property 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
respect to 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
paying Stanford 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 required
to make a payment of $0.1 million based upon a regulatory filing milestone. We will also be required to pay a royalty on net sales of products
covered by 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 third parties, 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 rights under 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. We are 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 be
required to make payments of $1.0 million based upon a regulatory milestone for each product covered by the in-licensed intellectual property. 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 is
reduced by half if during the ten years following first marketing approval the last valid claim within the licensed patent that covers the licensed
product expires or ends. During the year ended December 31, 2019 we paid Research Development Foundation $1.0 million upon receiving
milestones reached for a product covered by in-licensed intellectual property.
• Under a license agreement with Biogen Inc., pursuant to which we license certain patents and patent applications related to our ide-cel and bb21217
product candidates, we will be required to make certain payments related to certain development milestone obligations and must report on our
progress in achieving these milestones on a periodic basis. We may be obligated to pay up to $23.0 million in the aggregate for each licensed product
upon the achievement of remaining milestones. Upon commercialization of our products covered by the in-licensed intellectual property, we will be
obligated to pay a percentage of net sales as a royalty in the low single digits.
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• Under a license agreement with the National Institutes of Health, or NIH, pursuant to which we license certain patent applications related to our ide-
cel and bb21217 product candidates, we have agreed to certain development and regulatory milestone obligations and must report on our progress in
achieving these milestones on a periodic basis. We may be obligated to pay up to $9.7 million in the aggregate for a licensed product upon the
achievement of these milestones. Upon commercialization of our products covered by the in-licensed intellectual property, we will be obligated to
pay NIH a percentage of net sales as a royalty in the low single digits. The royalties payable under this license agreement are subject to reduction for
any third party payments required to be made, with a minimum floor in the low single digits. During the year ended December 31, 2019 we paid NIH
$0.9 million upon milestones reached for a product covered by in-licensed intellectual property.
• Under a license agreement with SIRION Biotech GmbH, or Sirion, pursuant to which we license certain patents directed to manufacturing related to
our LentiGlobin product candidate, we will be required to make certain payments related to certain development milestone obligations and must
report on our progress in achieving these milestones on a periodic basis. We may be obligated to pay up to $13.4 million in the aggregate for each
product covered by the in-licensed intellectual property. Upon commercialization of our products covered by the in-licensed intellectual property, we
will be obligated to pay Sirion a percentage of net sales as a royalty in the low single digits. The royalties payable under this license agreement are
subject to reduction for any third party payments required to be made, with a minimum floor in the low single digits. During the year ended
December 31, 2019 we paid Sirion $4.0 million upon milestones reached for a product covered by in-licensed intellectual property.
Other Funding Commitments
We enter into contracts in the normal course of business with CROs for preclinical research studies and clinical trials, research supplies and other services
and products for operating purposes. We have also entered into multi-year agreements with manufacturing partners in the United States and Europe
(Brammer Bio, now part of Thermo Fisher Scientific, Inc., Novasep and SAFC Carlsbad, Inc., or SAFC, a subsidiary of MilliporeSigma), which are
partnering with us on production of lentiviral vector across all of our programs. In addition, we have entered into multi-year agreements with Lonza Houston,
Inc. and apceth Biopharma, or apceth, to produce drug product for Lenti-D, LentiGlobin and bb21217. Currently, SAFC is the sole manufacturer of the
lentiviral vector and apceth is the sole manufacturer of the drug product to support commercialization of ZYNTEGLO in Europe for the treatment of TDT. In
our manufacturing agreement with SAFC, we are required to provide rolling forecasts for products on a quarterly basis, a portion of which will be considered
a binding, firm order, subject to a purchase commitment. In our manufacturing agreement with apceth, we reserve production capacity for the manufacture of
our drug product. BMS manufactures drug product for ide-cel. We believe our team of technical personnel has extensive manufacturing, analytical and
quality experience as well as strong project management discipline to effectively oversee these contract manufacturing and testing activities, and to compile
manufacturing and quality information for our regulatory submissions and potential commercial launch. We are engaging with apheresis centers, which we
refer to as qualified treatment centers, that will be the centers for collection of HSCs from the patient and for infusion of drug product to the patient. For the
treatment of patients with our drug product in the commercial setting, we are entering into agreements with participating qualified treatment centers in the
jurisdictions where we plan to commercialize our products. These contracts generally provide for termination on notice. Wherever contracts include
stipulated commitment payments, we have included such payments in the table of contractual obligations and commitments.
Off-Balance Sheet Arrangements
As of December 31, 2019, we did not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risks
We are exposed to market risk related to changes in interest rates. As of December 31, 2019 and 2018, we had cash, cash equivalents and marketable
securities of $1.24 billion and $1.89 billion, respectively, primarily invested in U.S. Treasury securities, U.S. government agency securities, equity securities,
federally insured certificates of deposit, corporate bonds, commercial paper and money market accounts. Our primary exposure to market risk is interest rate
sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in short-term securities. Our
available for sale securities are subject to interest rate risk 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 one percentage point, from levels at December 31, 2019, the net fair value of our interest-sensitive
marketable securities would have resulted in a hypothetical decline of $4.0 million.
Item 8. Financial Statements and Supplementary Data
The 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 Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rules 13(a)- 15(e) and 15(d)- 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as
of the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our principal executive officer and principal financial officer
have concluded that as of such date, our disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial
reporting is defined in Rules 13(a)-15(f) and 15(d)-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our
principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting 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 generally
accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management
and directors; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a
material effect on the financial statements.
Under the supervision and with the participation of management, including our principal executive and financial officers, we assessed our internal control
over financial reporting as of December 31, 2019, based on criteria for effective internal control over financial reporting established in Internal Control —
Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our management’s assessment
of the effectiveness of our internal control over financial reporting included testing and evaluating the design and operating effectiveness of our internal
controls. In our management’s opinion, we have maintained effective internal control over financial reporting as of December 31, 2019, based on criteria
established in the COSO 2013 framework.
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The effectiveness of our internal control over financial reporting as of December 31, 2019 has been audited by Ernst & Young LLP, an independent
registered public accounting firm, as stated in their report which is included herein.
Inherent Limitations of Internal Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our
internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be
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 any
system 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 will
succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may deteriorate. Projections of any evaluation of effectiveness to future periods are subject to the
risk 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 Reporting
There have been no changes in our internal control over financial reporting, as such term is defined in Rules 13(a)-15(f) and 15(d)-15(f) promulgated
under the Securities Exchange Act of 1934, during the fourth quarter of 2019 that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
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To the Stockholders and the Board of Directors of bluebird bio, Inc.
Opinion on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm
We have audited bluebird bio, Inc.’s internal control over financial reporting as of December 31, 2019, 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). In our
opinion, bluebird bio, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,
based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of operations and comprehensive loss, stockholders’
equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and our report dated February 18, 2020
expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness
of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely 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 evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 18, 2020
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Item 9B. Other Information
Our policy governing transactions in our securities by our directors, officers, and employees permits our officers, directors and certain other persons to
enter into trading plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. We have been advised that our Chief Business
Officer, Joanne Smith-Farrell, has entered into a trading plan covering periods after the date of this annual report on Form 10-K in accordance with Rule
10b5-1 and our policy governing transactions in our securities. Generally, under these trading plans, the individual relinquishes control over the transactions
once the trading plan is put into place. Accordingly, sales under these plans may occur at any time, including possibly before, simultaneously with, or
immediately after significant events involving our company. We do not undertake to report Rule 10b5-1 trading plans that may be adopted by any officers or
directors in the future, or to report any modifications or termination of any publicly announced trading plan, except to the extent required by law.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
Incorporated by reference from the information in our Proxy Statement for our 2020 Annual Meeting of Stockholders, which we will file with the SEC
within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates.
Item 11. Executive Compensation
Incorporated by reference from the information in our Proxy Statement for our 2020 Annual Meeting of Stockholders, which we will file with the SEC
within 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 Matters
Incorporated by reference from the information in our Proxy Statement for our 2020 Annual Meeting of Stockholders, which we will file with the SEC
within 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 Independence
Incorporated by reference from the information in our Proxy Statement for our 2020 Annual Meeting of Stockholders, which we will file with the SEC
within 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 Services
Incorporated by reference from the information in our Proxy Statement for our 2020 Annual Meeting of Stockholders, which we will file with the SEC
within 120 days of the end of the fiscal year to which this Annual Report on Form 10-K relates.
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PART IV
Item 15. Exhibits and Financial Statement 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 or
Notes thereto set forth under Item 8 above.
(a)(3) Exhibits.
See the Exhibit Index immediately before the signature page of this Annual Report on Form 10-K. The exhibits listed in the Exhibit Index are filed or
incorporated by reference as part of this Annual Report on Form 10-K.
Item 16. Form 10-K Summary
Not applicable.
105
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bluebird bio, Inc.
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
F-1
Pages
F-2
F-5
F-6
F-7
F-8
F-9
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of bluebird bio, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of bluebird bio, Inc. (the Company) as of December 31, 2019 and 2018, the related
consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December
31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2019, 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) (PCAOB), the
Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 18, 2020 expressed an
unqualified opinion thereon.
Adoption of ASU No. 2016-02
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the
adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), and the related amendments.
Adoption of ASU No. 2014-09
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for revenue in 2018 due to the
adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), and the related amendments.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on
the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the
critical audit matters or on the accounts or disclosures to which they relate.
F-2
Table of Contents
Description of the
Matter
Collaboration Arrangements
As discussed in Notes 2 and 11 to the consolidated financial statements, the Company recognizes amounts received pursuant to
collaboration arrangements in which both parties are active participants in the activities and exposed to significant risks and rewards
dependent on the commercial success of those activities as a component of collaboration revenue, with an offset for amounts owed
to the collaboration partner. Where amounts owed to a collaboration partner exceed the Company’s collaboration revenues from the
collaboration partner in a quarterly period, such amounts are classified as research and development expense. The process of
recognizing collaboration revenue (expense) includes the identification of costs incurred by the Company that relate to a particular
collaboration arrangement, evaluating the nature of such costs, and applying the terms of the respective collaborative arrangement to
determine the portion of such costs that are the responsibility of the collaboration partner. The process also includes an assessment
of the costs incurred and reported by the collaboration partner, as well as the determination of the appropriate financial statement
presentation in each quarterly reporting period. The Company recorded collaboration revenue of $5.7 million, net of collaborative
partner amounts, and collaboration expense (included as a component of research and development expense) of $32.4 million, net of
collaboration revenue, for the year ended December 31, 2019.
Auditing collaboration revenue (expense) is especially complex due to the fact that the contractual terms of the Company’s
collaboration arrangements are complicated, the information necessary to determine collaboration revenue (expense) is accumulated
from multiple sources and, in certain circumstances, the determination of (i) whether amounts incurred are eligible to be included in
the determination of collaboration revenue (expense) or (ii) the portion of costs incurred that are the responsibility of the
collaboration partner requires judgment.
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls that addressed the
information used in and the identified risks related to the Company’s process for recording collaboration revenue (expense).
To test the Company’s collaboration revenue (expense), our procedures included, among others, inspecting the Company’s
collaboration agreements, comparing the Company’s computations of collaboration revenue (expense) to the contractual terms of its
collaboration arrangements, testing the accuracy and completeness of the underlying data used in the computation of collaboration
revenue (expense), and evaluating the costs included in the computation of collaboration revenue (expense) based on the nature of
the costs and the relevant contractual terms. We also obtained information directly from certain of the Company’s collaboration
partners regarding the costs incurred by the collaboration partner during the period and agreed those amounts to the Company’s
computation of collaboration revenue (expense).
Accrued Clinical and Contract Research Organization Costs and Manufacturing Costs
Description of the
Matter
As discussed in Notes 2 and 7 to the consolidated financial statements, the Company records costs for clinical trial activities and
manufacturing activities based upon estimates of costs incurred through the balance sheet date that have yet to be invoiced by the
contract research organizations, clinical study sites, laboratories, consultants, contract manufacturing organizations or other vendors.
The Company's accruals for clinical and contract research organization costs and manufacturing costs totaled $39.9 million at
December 31, 2019.
Auditing the Company’s accruals for clinical and contract research organization costs and manufacturing costs is especially complex
due to the fact that information necessary to estimate the accruals is accumulated from multiple sources. In addition, in certain
circumstances, the determination of the nature and level of services that have been received during the reporting period requires
judgment because the timing and pattern of vendor invoicing does not correspond to the level of services provided and there may be
delays in invoicing from clinical study sites and other vendors.
F-3
Table of Contents
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls that addressed the
information used in and the identified risks related to the Company’s process for recording accrued clinical and contract research
organization costs and manufacturing costs.
To test the completeness and valuation of the accruals for clinical and contract research organization costs and manufacturing costs,
we performed audit procedures that included, among others, reading certain contracts with contract research organizations, contract
manufacturing organizations, and clinical study sites to evaluate financial and certain other contractual terms, and testing the
accuracy and completeness of the underlying data used in the accrual computations. We also compared the progress of clinical trials
and the progress of manufacturing completed through the balance sheet date with information provided by the Company’s
operations personnel that oversee the clinical trials and manufacturing activities. Additionally, we obtained information directly
from certain clinical study sites and contract manufacturing organizations which indicated the progress of clinical trials and the
progress of manufacturing completed through the balance sheet date and compared that to the Company’s accrual computations.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2012.
Boston, Massachusetts
February 18, 2020
F-4
Table of Contents
bluebird bio, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Prepaid expenses
Receivables and other current assets
Total current assets
Marketable securities
Property, plant and equipment, net
Intangible assets, net
Goodwill
Operating lease right-of-use assets
Restricted cash and other non-current assets
Total assets
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Operating lease liability, current portion
Deferred revenue, current portion
Collaboration research advancement, current portion
Total current liabilities
Deferred revenue, net of current portion
Collaboration research advancement, net of current portion
Contingent consideration
Operating lease liability, net of current portion
Financing lease obligation, net of current portion
Other non-current liabilities
Total liabilities
Commitments and contingencies Note 9
Stockholders' equity:
Preferred stock, $0.01 par value, 5,000 shares authorized; 0 shares issued and
outstanding at December 31, 2019 and December 31, 2018
Common stock, $0.01 par value, 125,000 shares authorized; 55,368 and 54,738 shares
issued and outstanding at December 31, 2019 and December 31, 2018, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders' equity
Total liabilities and stockholders' equity
See accompanying notes to consolidated financial statements.
F-5
As of December 31,
2019
2018
$
327,214 $
779,246
32,888
12,826
402,579
982,725
19,762
13,931
1,152,174
1,418,997
131,506
151,176
14,326
13,128
185,885
79,229
506,123
246,622
13,169
13,128
—
44,805
1,727,424 $
2,242,844
42,995 $
141,556
20,175
8,474
10,380
223,580
9,791
27,834
7,977
170,812
—
2,437
17,831
99,393
—
18,602
10,605
146,431
16,338
33,349
5,230
—
153,319
3,107
442,431 $
357,774
— $
554
—
547
3,568,184
3,386,958
(1,893)
(3,627)
(2,281,852)
(1,498,808)
1,284,993
1,885,070
$
$
$
$
$
1,727,424 $
2,242,844
Table of Contents
bluebird bio, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share amounts)
Year ended December 31,
2019
2018
2017
Revenue:
Collaboration revenue
License and royalty revenue
Total revenues
Operating expenses:
Research and development
Selling, general and administrative
Cost of license and royalty revenue
Change in fair value of contingent consideration
Total operating expenses
Loss from operations
Interest income (expense), net
Other (expense) income, net
Loss before income taxes
Income tax benefit (expense)
Net loss
Net loss per share - basic and diluted
Weighted-average number of common shares used in computing net loss per
share - basic and diluted
Other comprehensive income (loss):
Other comprehensive income (loss), net of tax expense of $1.2,
$0.4 and $0.0 million for the years ended December 31, 2019,
2018 and 2017, respectively
Total other comprehensive income (loss)
Comprehensive loss
$
36,469 $
52,353 $
2,226
54,579
448,589
174,129
885
2,999
626,602
(572,023)
14,624
1,961
22,207
13,220
35,427
273,040
93,550
1,527
(525)
367,592
(332,165)
(2,001)
(1,267)
8,205
44,674
582,413
271,362
2,978
2,747
859,500
(814,826)
34,761
(10,088)
(790,153)
545
(555,438)
(335,433)
(187)
(210)
(789,608) $
(555,625) $
(335,643)
(14.31) $
(10.68) $
(7.71)
55,191
52,032
43,535
1,734
1,734
578
578
(3,056)
(3,056)
$
(787,874) $
(555,047) $
(338,699)
See accompanying notes to consolidated financial statements.
F-6
Table of Contents
bluebird bio, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands)
Balances at December 31, 2016
40,691 $
407 $
Common stock
Shares
Amount
Additional
paid-in
capital
1,447,856 $
Accumulated
other
comprehensive
loss
(1,149) $
Accumulated
deficit
(577,674) $
Total
stockholders'
equity
869,440
Retroactive adjustment to beginning
accumulated deficit and additional
paid-in capital resulting from
adoption of ASU 2016-09
Vesting of restricted stock units
Issuance of common stock upon
public offering, net of issuance
costs of $53,487
Exercise of stock options
Purchase of common stock under
ESPP
Stock-based compensation
Other comprehensive loss
Net loss
—
88
7,625
981
21
—
—
—
—
1
76
10
—
—
—
—
491
(1)
1,006,494
31,676
1,153
53,282
—
—
—
—
—
—
—
—
(3,056)
(491)
—
—
—
—
—
—
—
—
1,006,570
31,686
1,153
53,282
(3,056)
—
(335,643)
(335,643)
Balances at December 31, 2017
49,406 $
494 $
2,540,951 $
(4,205) $
(913,808) $
1,623,432
Adjustment to beginning
accumulated deficit from adoption
of ASU 2014-09
Vesting of restricted stock units
Issuance of common stock upon
public offering, net of issuance
costs of $34,588
Issuance of common stock to
Regeneron
Exercise of stock options
Purchase of common stock under
ESPP
Stock-based compensation
Other comprehensive income
Net loss
—
152
—
2
—
(2)
4,169
42
649,326
420
575
16
—
—
—
4
5
—
—
—
—
54,480
29,763
1,604
110,836
—
—
—
—
—
—
—
—
—
578
—
(29,375)
(29,375)
—
—
—
—
—
—
—
—
649,368
54,484
29,768
1,604
110,836
578
(555,625)
(555,625)
Balances at December 31, 2018
54,738 $
547 $
3,386,958 $
(3,627) $ (1,498,808) $
1,885,070
Adjustment to beginning
accumulated deficit from adoption
of ASU 2016-02
Vesting of restricted stock units
Exercise of stock options
Purchase of common stock under
ESPP
Stock-based compensation
Other comprehensive income
Net loss
—
251
354
25
—
—
—
—
3
4
—
—
—
—
—
(3)
17,834
2,766
160,629
—
—
—
—
—
—
—
1,734
—
6,564
—
—
—
—
—
6,564
—
17,838
2,766
160,629
1,734
(789,608)
(789,608)
Balances at December 31, 2019
55,368 $
554 $
3,568,184 $
(1,893) $ (2,281,852) $
1,284,993
See accompanying notes to consolidated financial statements.
F-7
Table of Contents
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating
activities:
Change in fair value of contingent consideration
Depreciation and amortization
Stock-based compensation expense
Unrealized loss (gain) on equity securities
Other non-cash items
Changes in operating assets and liabilities:
Prepaid expenses and other assets
Operating lease right-of-use assets
Accounts payable
Accrued expenses and other liabilities
Operating lease liabilities
Deferred revenue
Collaboration research advancement
Net cash used in operating activities
Cash flows from investing activities:
Purchase of property, plant and equipment
Purchases of marketable securities
Proceeds from maturities of marketable securities
Purchase of intangible assets
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Cash paid for contingent purchase price consideration
Reimbursement of assets under financing lease obligation
Payments on financing lease obligation
Proceeds from public offering of common stock, net of issuance costs
Proceeds from exercise of stock options and ESPP contributions
Proceeds from issuance of common stock to Regeneron
Net cash provided by financing activities
(Decrease) increase in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents
Restricted cash included in receivables and other current assets
Restricted cash included in restricted cash and other non-current assets
Total cash, cash equivalents and restricted cash
Supplemental cash flow disclosures:
Assets acquired under financing lease obligation
Purchases of property, plant and equipment included in accounts
payable and accrued expenses
Right-of-use assets obtained in exchange for operating lease liabilities
Cash paid during the period for interest
Cash paid during the period for income taxes
bluebird bio, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Year ended December 31,
2019
2018
2017
$
(789,608)
$
(555,625)
$
(335,643)
2,747
17,434
160,629
9,297
(11,000)
(13,913)
22,496
23,600
46,291
(9,944)
(16,674)
(5,739)
2,999
17,158
110,836
(2,154)
(5,880)
(24,288)
—
3,614
37,832
—
(41,872)
43,954
(2,189)
13,538
53,282
—
3,153
(20,092)
—
526
5,848
—
1,024
—
(564,384)
(413,426)
(280,553)
(71,028)
(756,570)
1,340,629
(5,224)
507,807
(55,737)
(1,517,982)
894,284
—
(679,435)
—
—
—
—
21,187
—
21,187
(35,390)
417,099
381,709
327,214
—
54,495
381,709
—
5,286
23,939
—
637
$
$
$
$
$
$
$
$
$
$
—
3,098
(1,017)
649,368
31,759
54,484
737,692
(355,169)
772,268
417,099
402,579
364
14,156
417,099
—
7,449
—
15,494
358
$
$
$
$
$
$
$
$
$
$
(62,242)
(686,204)
431,816
—
(316,630)
(1,074)
38,021
(574)
1,006,570
33,231
—
1,076,174
478,991
293,277
772,268
758,505
—
13,763
772,268
3,271
2,566
—
11,411
91
$
$
$
$
$
$
$
$
$
$
See accompanying notes to consolidated financial statements.
F-8
Table of Contents
bluebird bio, Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2019, 2018 and 2017
1. Description of the business
bluebird bio, Inc. (the “Company” or “bluebird”) was incorporated in Delaware on April 16, 1992, and is headquartered in Cambridge, Massachusetts.
The Company is a biotechnology company committed to researching, developing and commercializing potentially transformative gene therapies for severe
genetic diseases and cancer. Since its inception, the Company has devoted substantially all of its resources to its research and development efforts relating to
its product candidates, including activities to manufacture product candidates, conduct clinical studies of its product candidates, perform preclinical research
to identify new product candidates and provide selling, general and administrative support for these operations, including commercial-readiness activities.
The Company’s programs in severe genetic diseases include its programs in β-thalassemia (TDT), sickle cell disease (SCD), and cerebral
adrenoleukodystrophy (CALD). The Company’s programs in oncology are focused on developing novel T cell-based immunotherapies, including chimeric
antigen receptor (CAR) and T cell receptor (TCR) T cell therapies. Idecabtagene vicleucel, or ide-cel, and bb21217, which are product candidates in oncology
under the Company’s collaboration arrangement with Bristol-Myers Squibb ("BMS"), formerly Celgene Corporation (prior to its acquisition by BMS in
November 2019), are CAR T cell product candidates for the treatment of multiple myeloma. Please refer to Note 11, Collaborative arrangements, for further
discussion of the Company’s collaboration with BMS.
In June 2019, the Company received conditional marketing authorization from the European Commission for ZYNTEGLOTM gene therapy (autologous
CD34+ cells encoding βA-T87Q-globin gene), also referred to as LentiGlobin for TDT, for the treatment of patients 12 years and older with TDT who do not
have a β0/β0 genotype, for whom hematopoietic stem cell (HSC) transplantation is appropriate but a human leukocyte-matched related HSC donor is not
available. Since receiving conditional marketing authorization for ZYNTEGLO, the Company has continued to advance its commercial readiness activities.
Through December 31, 2019, the Company had not generated any revenue from product sales.
In accordance with Accounting Standards Codification ("ASC") 205-40, Going Concern, the Company evaluated whether there are conditions and
events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the
consolidated financial statements are issued. The Company has incurred losses since inception and to date has financed its operations primarily through the
sale of equity securities and, to a lesser extent, through collaboration agreements and grants from governmental agencies and charitable foundations. As of
December 31, 2019, the Company had an accumulated deficit of $2.28 billion. During the year ended December 31, 2019, the Company incurred a loss of
$789.6 million and used $564.4 million of cash in operations. The Company expects to continue to generate operating losses and negative operating cash
flows for the next few years and will need additional funding to support its planned operating activities through profitability. The transition to profitability is
dependent upon the successful development, approval, and commercialization of the Company’s products and product candidates and the achievement of a
level of revenues adequate to support its cost structure.
As of December 31, 2019, the Company had cash, cash equivalents and marketable securities of $1.24 billion. The Company expects its cash, cash
equivalents and marketable securities will be sufficient to fund current planned operations for at least the next twelve months from the date of issuance of
these financial statements, though it may pursue additional cash resources through public or private equity or debt financings or by establishing additional
collaborations with other companies. Management's expectations with respect to its ability to fund current planned operations is based on estimates that are
subject to risks and uncertainties. If actual results are different from management's estimates, the Company may need to seek additional strategic or financing
opportunities sooner than would otherwise be expected. However, there is no guarantee that any of these strategic or financing opportunities will be executed
or executed on favorable terms, and some could be dilutive to existing stockholders. If the Company is unable to obtain additional funding on a timely basis,
it may be forced to significantly curtail, delay, or discontinue one or more of its planned research or development programs or be unable to expand its
operations or otherwise capitalize on its commercialization of its product candidates.
F-9
Table of Contents
2. Summary of significant accounting policies and basis of presentation
Basis of presentation
The accompanying consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in
the United States (“GAAP”) as found in the ASC and Accounting Standards Updates (“ASUs”) of the Financial Accounting Standards Board (“FASB”). Any
reference in these notes to applicable guidance is meant to refer to the authoritative United States GAAP as found in the ASC and ASUs of the FASB.
Certain items in the prior year’s consolidated financial statements have been reclassified to conform to the current presentation. No subtotals in the prior
year consolidated financial statements were impacted by these reclassifications.
Amounts reported are computed based on thousands, except percentages, per share amounts or as otherwise noted. As a result, certain totals may not sum
due to rounding.
Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances
and transactions have been eliminated in consolidation.
The Company continually assesses whether it is the primary beneficiary of a variable interest entity as changes to existing relationships or future
transactions may result in consolidation or deconsolidation of one or more collaborators or partners. In determining whether it is the primary beneficiary of an
entity in which the Company has a variable interest, management applies a qualitative approach that determines whether the Company has both (1) the power
to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that
could potentially be significant to that entity.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts in the financial statements and accompanying notes. Actual results could materially differ from those estimates. Management considers many factors
in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these
financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including: expected
business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are
expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future
outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing
materially from those estimated amounts used in the preparation of the financial statements.
Estimates and judgments are used in the following areas, among others: future undiscounted cash flows and subsequent fair value estimates used to
assess potential and measure any impairment of long-lived assets, including goodwill and intangible assets, and the measurement of right-of-use assets and
lease liabilities, contingent consideration, stock-based compensation expense, accrued expenses, income taxes, and the assessment of the Company's ability to
fund its operations for at least the next twelve months from the date of issuance of these financial statements. In addition, estimates and judgments are used in
the Company’s accounting for its revenue-generating arrangements, in particular as it relates to determining the standalone selling price of performance
obligations, evaluating whether an option to acquire additional goods and services represents a material right, estimating the total transaction price, including
estimating variable consideration and the probability of achieving future potential development and regulatory milestones, and the period of performance over
which revenue may be recognized.
Foreign currency translation
The financial statements of the Company’s subsidiaries with functional currencies other than the U.S. dollar are translated into U.S. dollars using period-
end exchange rates for assets and liabilities, historical exchange rates for stockholders’ equity and weighted average exchange rates for operating results.
Translation gains and losses are included in accumulated other comprehensive income (loss) in stockholders’ equity. Foreign currency transaction gains and
losses are included in other income (expense), net in the results of operations.
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Segment information
The Company operates in a single segment, focusing on researching, developing and commercializing potentially transformative gene therapies for
severe genetic diseases and cancer. Consistent with its operational structure, its chief operating decision maker manages and allocates resources at a global,
consolidated level. Therefore, results of the Company's operations are reported on a consolidated basis for purposes of segment reporting. All material long-
lived assets of the Company reside in the United States.
Cash and cash equivalents
The Company considers all highly liquid investments purchased with original final maturities of 90 days or less from the date of purchase to be cash
equivalents. Cash and cash equivalents comprise marketable securities with maturities of less than 90 days when purchased. Cash equivalents are reported at
fair value.
Marketable securities
The Company classifies marketable securities with a remaining maturity when purchased of greater than three months as available-for-sale. Marketable
securities with a remaining maturity date greater than one year are classified as non-current. The Company’s marketable securities are maintained by
investment managers and consist of U.S. Treasury securities, U.S. government agency securities, equity securities, certificates of deposit, corporate bonds,
and commercial paper. Debt securities are carried at fair value with the unrealized gains and losses included in other comprehensive income (loss) as a
component of stockholders’ equity until realized. Any premium arising at purchase is amortized to the earliest call date and any discount arising at purchase is
accreted to maturity. Amortization and accretion of premiums and discounts are recorded in interest income and/or expense. Equity securities with readily
determinable fair values are also carried at fair value with unrealized gains and losses included in other (expense) income, net. Realized gains and losses on
both debt and equity securities are determined using the specific identification method and are included in other income (expense), net.
The Company classifies equity securities with readily determinable fair values, which would be available for use in its current operations, as current
assets even though the Company may not dispose of such marketable securities within the next 12 months. Equity securities are included in the balance of
marketable securities on the Company's consolidated balance sheet.
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 which
the decline is “other-than-temporary” and, if so, marks the investment to market through a charge to the Company’s statement of operations and
comprehensive loss.
Concentrations of credit risk and off-balance sheet risk
Financial instruments that subject the Company to credit risk primarily consist of cash and cash equivalents and available-for-sale securities. The
Company maintains its cash and cash equivalent balances with high-quality financial institutions and, consequently, the Company believes that such funds are
subject to minimal credit risk. The Company’s marketable securities primarily consist of U.S. Treasury securities, U.S. government agency securities,
certificates of deposit, corporate bonds, and commercial paper, and potentially subject the Company to concentrations of credit risk. The Company has
adopted an investment policy that 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+/Aa1 rated, thereby reducing credit risk exposure.
Fair value of financial instruments
The Company has certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy
as described in the accounting standards for fair value measurements
Level 1—Fair values are determined utilizing quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the
ability to access at the measurement date.
Level 2—Fair values are determined utilizing quoted prices for identical or similar assets or liabilities in active markets or other market observable inputs
such as interest rates, yield curves and foreign currency spot rates.
Level 3—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
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 requires
more judgment. Accordingly, the degree of judgment exercised by the Company in
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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 (see Note 3, Marketable securities, and Note 4, Fair value measurements)
and contingent consideration (see Note 4, Fair value measurements). The carrying amounts of accounts payable and accrued expenses approximate their fair
values due to their short-term nature.
Business combinations
Business combinations are accounted for using the acquisition method of accounting. Using this method, the tangible and intangible assets acquired and
the liabilities assumed are recorded as of the acquisition date at their respective fair values. The Company evaluates a business as an integrated set of
activities and assets that is capable of being managed for the purpose of providing a return in the form of dividends, lower costs or other economic benefits
and consists of inputs and processes that provide or have the ability to provide outputs. In an acquisition of a business, the excess of the fair value of the
consideration transferred over the fair value of the net assets acquired is recorded as goodwill. In an acquisition of net assets that does not constitute a
business, no goodwill is recognized.
The consolidated financial statements include the results of operations of an acquired business after the completion of the acquisition. See Note 4, Fair
value measurements, for additional information.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net assets acquired when accounted for using the acquisition method of
accounting for business combinations. Goodwill is not amortized but is evaluated for impairment within the Company’s single reporting unit on an annual
basis, 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 the
Company’s reporting unit below its carrying amount. During the fourth quarter of 2019, the Company early adopted ASU 2017-04, which removes the second
step of the goodwill impairment test. Under this ASU, the Company will now perform a one-step quantitative test and record the amount of goodwill
impairment, if any, as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting
unit. The Company has not recognized any impairment charges related to goodwill to date.
Intangible assets, net
Intangible assets, net consist of acquired core technology and in-licensed rights with finite lives, net of accumulated amortization. The Company
amortizes its intangible assets using the straight-line method over their estimated economic lives and periodically reviews for impairment.
Contingent consideration
Each reporting period, the Company revalues the contingent consideration obligations associated with business combinations to their fair value and
records within operating expenses increases in their fair value as contingent consideration expense and decreases in the fair value as contingent consideration
income. Changes in contingent consideration result from changes in the assumptions regarding probabilities of successful achievement of related milestones,
the estimated timing in which the milestones may be achieved, and the discount rate used to estimate the fair value of the liability. Contingent consideration
may change significantly as development of the Company’s programs in certain indications progress and additional data are obtained, impacting the
Company’s assumptions. The assumptions used in estimating fair value require significant judgment. The use of different assumptions and judgments could
result in a materially different estimate of fair value. See Note 4, Fair value measurements, for additional information.
Property, plant and equipment
Property, plant and equipment is stated at cost. Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed to
operations as incurred. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of the assets, which are as
follows:
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Asset
Building
Computer equipment and software
Furniture and fixtures
Laboratory equipment
Leasehold improvements
Estimated useful life
40 years
3 years
2-5 years
2-5 years
Shorter of the useful life or remaining lease term
Prior to the adoption of ASU 2016-02, Leases (Topic 842) (“ASU 2016-02” or “ASC 842”), on January 1, 2019 (discussed further below), the Company
recorded certain costs incurred and reported by a landlord as a building asset and corresponding financing lease obligation on the consolidated balance sheets.
See Note 8, Leases, for additional information.
Impairment of long-lived assets
The 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. If
such 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 fair
value, which is measured based on the projected discounted future net cash flows arising from the assets.
Leases
Effective January 1, 2019, the Company adopted ASC 842 using the required modified retrospective approach and utilizing the effective date as its date
of initial application. As a result, prior periods are presented in accordance with the previous guidance in ASC 840, Leases (“ASC 840”).
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances
present in the arrangement. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and short-term and long-term
lease liabilities, as applicable. The Company does not have material financing leases.
Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected
remaining lease term. Certain adjustments to the right-of-use asset may be required for items such as incentives received. The interest rate implicit in lease
contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate to discount lease payments, which reflects the
fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar
economic environment. To estimate its incremental borrowing rate, a credit rating applicable to the Company is estimated using a synthetic credit rating
analysis since the Company does not currently have a rating agency-based credit rating. Prospectively, the Company will adjust the right-of-use assets for
straight-line rent expense or any incentives received and remeasure the lease liability at the net present value using the same incremental borrowing rate that
was in effect as of the lease commencement or transition date.
The Company has elected not to recognize leases with an original term of one year or less on the balance sheet. The Company typically only includes an
initial lease term in its assessment of a lease arrangement. Options to renew a lease are not included in the Company’s assessment unless there is reasonable
certainty that the Company will renew.
Assumptions made by the Company at the commencement date are re-evaluated upon occurrence of certain events, including a lease modification. A lease
modification results in a separate contract when the modification grants the lessee an additional right of use not included in the original lease and when lease
payments increase commensurate with the standalone price for the additional right of use. When a lease modification results in a separate contract, it is
accounted for in the same manner as a new lease.
ASC 842 transition practical expedients and application of transition provisions to leases at the transition date
The Company elected the following practical expedients, which must be elected as a package and applied consistently to all of its leases at the transition
date (including those for which the entity is a lessee or a lessor): i) the Company did not reassess whether any expired or existing contracts are or contain
leases; ii) the Company did not reassess the lease classification for any expired or existing leases (that is, all existing leases that were classified as operating
leases in accordance with ASC 840 are
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classified as operating leases, and all existing leases that were classified as capital leases in accordance with ASC 840 are classified as finance leases); and iii)
the Company did not reassess initial direct costs for any existing leases.
For leases that existed prior to the date of initial application of ASC 842 (which were previously classified as operating leases), a lessee may elect to use
either the total lease term measured at lease inception under ASC 840 or the remaining lease term as of the date of initial application of ASC 842 in
determining the period for which to measure its incremental borrowing rate. In transition to ASC 842, the Company utilized the remaining lease term of its
leases in determining the appropriate incremental borrowing rates.
Application of ASC 842 policy elections to leases post adoption
The Company has made certain policy elections to apply to its leases executed post adoption, or subsequent to January 1, 2019, as further described below.
In accordance with ASC 842, components of a lease should be split into three categories: lease components, non-lease components, and non-components.
The fixed and in-substance fixed contract consideration (including any consideration related to non-components) must be allocated based on the respective
relative fair values to the lease components and non-lease components.
Entities may elect not to separate lease and non-lease components. Rather, entities would account for each lease component and related non-lease
component together as a single lease component. The Company has elected to account for lease and non-lease components together as a single lease
component for all underlying assets and allocate all of the contract consideration to the lease component only.
ASC 842 allows for the use of judgment in determining whether the assumed lease term is for a major part of the remaining economic life of the
underlying asset and whether the present value of lease payments represents substantially all of the fair value of the underlying asset. The Company applies
the bright line thresholds referenced in ASC 842-10-55-2 to assist in evaluating leases for appropriate classification. The aforementioned bright lines are
applied consistently to the Company’s entire portfolio of leases.
Revenue recognition
Effective January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”), using the modified
retrospective transition method. Under this method, the Company has recognized the cumulative effect of the adoption as an adjustment to the opening
balance of accumulated deficit in the current period consolidated balance sheet. The Company has not revised its consolidated financial statements for prior
periods. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as collaboration
arrangements and leases.
Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the
consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity
determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the
performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the
performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the
five-step model to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it
transfers to the customer.
Once a contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and
determines those that are performance obligations. Arrangements that include rights to additional goods or services that are exercisable at a customer’s
discretion are generally considered options. The Company assesses if these options provide a material right to the customer and if so, they are considered
performance obligations. The identification of material rights requires judgments related to the determination of the value of the underlying license relative to
the option exercise price, including assumptions about technical feasibility and the probability of developing a candidate that would be subject to the option
rights. The exercise of a material right is accounted for as a contract modification for accounting purposes.
The Company assesses whether each promised good or service is distinct for the purpose of identifying the performance obligations in the contract. This
assessment involves subjective determinations and requires management to make judgments about the individual promised goods or services and whether
such are separable from the other aspects of the contractual
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relationship. Promised goods and services are considered distinct provided that: (i) the customer can benefit from the good or service either on its own or
together with other resources that are readily available to the customer (that is, the good or service is capable of being distinct) and (ii) the entity’s promise to
transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the promise to transfer the good or service is
distinct within the context of the contract). In assessing whether a promised good or service is distinct, the Company considers factors such as the research,
manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. The
Company also considers the intended benefit of the contract in assessing whether a promised good or service is separately identifiable from other promises in
the contract. If a promised good or service is not distinct, an entity is required to combine that good or service with other promised goods or services until it
identifies a bundle of goods or services that is distinct.
The transaction price is then determined and allocated to the identified performance obligations in proportion to their standalone selling prices (“SSP”)
on a relative SSP basis. SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance
obligations are satisfied. Determining the SSP for performance obligations requires significant judgment. In developing the SSP for a performance obligation,
the Company considers applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the
agreement with the customer and estimated costs. The Company validates the SSP for performance obligations by evaluating whether changes in the key
assumptions used to determine the SSP will have a significant effect on the allocation of arrangement consideration between multiple performance
obligations.
If the consideration promised in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in
exchange for transferring the promised goods or services to a customer. The Company determines the amount of variable consideration by using the expected
value method or the most likely amount method. The Company includes the unconstrained amount of estimated variable consideration in the transaction
price. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue
recognized will not occur. At the end of each subsequent reporting period, the Company re-evaluates the estimated variable consideration included in the
transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a
cumulative catch-up basis in the period of adjustment.
If an arrangement includes development and regulatory milestone payments, the Company evaluates whether the milestones are considered probable of
being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue
reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or
the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.
For arrangements with licenses of intellectual property that include sales-based royalties, including milestone payments based on the level of sales, and
the license is deemed to be the predominant item to which the royalties relate, the Company recognizes royalty revenue and sales-based milestones at the later
of (i) when the related sales occur, or (ii) when the performance obligation to which the royalty has been allocated has been satisfied.
In determining the transaction price, the Company adjusts consideration for the effects of the time value of money if the timing of payments provides the
Company with a significant benefit of financing. The Company does not assess whether a contract has a significant financing component if the expectation at
contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year
or less. The Company assessed each of its revenue generating arrangements in order to determine whether a significant financing component exists and
concluded that a significant financing component does not exist in any of its arrangements.
The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each
performance obligation is satisfied, either at a point in time or over time, and if over time recognition is based on the use of an output or input method.
Collaboration revenue
To date, the Company’s collaboration revenue has been generated from its collaboration arrangements with BMS and Regeneron Pharmaceuticals, Inc.
(“Regeneron”), as further described in Note 11, Collaborative arrangements.
The Company analyzes its collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements (“ASC
808”) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and
exposed to significant risks and rewards dependent on the
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commercial success of such activities. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all
parties in the arrangement. For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which
elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and
therefore within the scope of Topic 606. For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition
method is determined and applied consistently, generally by analogy to Topic 606. Amounts that are owed to collaboration partners are recognized as an
offset to collaboration revenues as such amounts are incurred by the collaboration partner. Where amounts owed to a collaboration partner exceed the
Company’s collaboration revenues in each quarterly period, such amounts are classified as research and development expense. For those elements of the
arrangement that are accounted for pursuant to Topic 606, the Company applies the five-step model described above.
License and royalty revenue
The Company enters into out-licensing agreements that are within the scope of Topic 606. The Company does not have any material license
arrangements that contain more than one performance obligation. The terms of such out-license agreements include the license of functional intellectual
property, given the functionality of the intellectual property is not expected to change substantially as a result of the licensor’s ongoing activities, and
typically include payment of one or more of the following: non-refundable up-front license fees; development and regulatory milestone payments and
milestone payments based on the level of sales; and royalties on net sales of licensed products. Nonrefundable up-front license fees are recognized as revenue
at a point in time when the licensed intellectual property is made available for the customer’s use and benefit, which is generally at the inception of the
arrangement. Development and regulatory milestone fees, which are a type of variable consideration, are recognized as revenue to the extent that it is
probable that a significant reversal will not occur. The Company recognizes royalty revenue and sales-based milestones at the later of (i) when the related
sales occur, or (ii) when the performance obligation to which the royalty has been allocated has been satisfied.
For a complete discussion of accounting for collaboration and other revenue-generating arrangements, see Note 11, Collaborative arrangements, and
Note 12, License and royalty revenue.
Research and development expenses
Research and development costs are charged to expense as costs are incurred in performing research and development activities, including salaries and
benefits, facilities costs, overhead costs, clinical study and related clinical manufacturing costs, license and milestone fees, contract services, manufacturing
costs for pre-launch inventory that did not qualify for capitalization, and other related costs. Up-front fees and milestones paid to third parties in connection
with technologies which have not reached technological feasibility and do not have an alternative future use are expensed as research and development
expense as incurred. In circumstances where amounts have been paid in excess of costs incurred, the Company records a prepaid expense. The Company
accrues costs for clinical trial activities based upon estimates of the services received and related expenses incurred that have yet to be invoiced by the
contract research organizations, clinical study sites, laboratories, consultants, or other clinical trial vendors that perform the activities. The Company
recognizes the reimbursement associated with collaborative activities to its collaborative partners as research and development expense in the period the
services are provided.
Cost of license and royalty revenue
Cost of license and royalty revenue represents expense associated with amounts owed to third parties as a result of revenue recognized under the
Company’s out-license arrangements.
Stock-based compensation
The Company’s share-based compensation programs grant awards that have included stock options, restricted stock units, restricted stock awards, and
shares issued under its employee stock purchase plan. Grants are awarded to employees and non-employees, including the Company's board of directors.
The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation—Stock Compensation (“ASC
718”). ASC 718 requires all stock-based payments, including grants of stock options and restricted stock units and modifications to existing stock options, to
be recognized in the consolidated statements of operations and comprehensive loss based on their fair values.
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The Company’s stock-based awards are subject to either service or performance-based vesting conditions. Compensation expense related to awards with
service-based vesting conditions is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which
is generally the vesting term. Compensation expense related to awards with performance-based vesting conditions is recognized based on the grant date fair
value over the requisite service period using the accelerated attribution method to the extent achievement of the performance condition is probable.
The Company estimates the fair value of its option awards using the Black-Scholes option pricing model, which requires the input of subjective
assumptions, including (i) the expected stock price volatility, (ii) the calculation of expected term of the award, (iii) the risk-free interest rate, and (iv)
expected dividends. Due to the lack of complete company-specific historical and implied volatility data for the full expected term of the stock-based awards,
the Company bases its estimate of expected volatility on a representative group of publicly traded companies in addition to its own volatility data. For these
analyses, the Company selected companies with comparable characteristics to its own, including enterprise value, risk profiles, position within the industry,
and with historical share price information sufficient to meet the expected life of the stock-based awards. The Company computes historical volatility data
using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards. The
Company will continue to apply this process until a sufficient amount of historical information regarding 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 its lack 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 a maturity date commensurate with the expected term of the
associated award. The Company has never paid, and does not expect to pay, dividends in the foreseeable future.
The Company accounts for forfeitures as they occur. Stock-based compensation expense recognized in the financial statements is based on awards for
which performance or service conditions are expected to be satisfied.
Prior to the adoption of ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment
Accounting (“ASU 2018-07”), the measurement date for non-employee awards was generally the date the services are completed, resulting in financial
reporting period adjustments to stock-based compensation during the vesting terms for changes in the fair value of the awards. After adoption of ASU 2018-
07, the measurement date for non-employee awards is the date of grant without changes in the fair value of the award.
Interest income (expense), net
Interest income (expense), net consists primarily of interest income earned on investments, net of amortization of premium and accretion of discount.
Interest income was approximately $34.8 million, $30.1 million, and $9.5 million for the years ended December 31, 2019, 2018, and 2017,
respectively. Interest expense was $0.0 million, $15.5 million, and $11.4 million for the years ended December 31, 2019, 2018, and 2017, respectively. Please
refer to Note 8, Leases, for further discussion of interest expense incurred on the 60 Binney Street lease.
Other (expense) income, net
Other (expense) income, net consists primarily of unrealized gains and losses on equity securities, gains and losses on the disposal of fixed assets,
realized gains and losses on debt securities, and gains and losses on foreign currency transactions.
Net loss per share
Basic net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of common shares
outstanding during the period. Diluted net income per share is calculated by dividing the net income attributable to common stockholders by the 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. Given that the Company recorded a net loss for each of
the periods presented, there is no difference between basic and diluted net loss per share since the effect of common stock equivalents would be anti-dilutive
and are, therefore, excluded from the diluted net loss per share calculation.
The Company follows the two-class method when computing net loss per share in periods when issued shares that meet the definition of participating
securities are outstanding. The two-class method determines net loss per share for each class of common and participating securities according to dividends
declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the
period to be allocated between common and participating securities based upon their respective rights to received dividends as if all income for the period had
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been distributed. Accordingly, in periods in which the Company reports a net loss attributable to common stockholders when participating securities are
outstanding, losses are not allocated to the participating securities.
Income taxes
Income taxes are recorded in accordance with FASB ASC Topic 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and
liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in
the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if
based 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 Company
recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit
will 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.
The Company accrues for potential interest and penalties related to unrecognized tax benefits in income tax expense.
Comprehensive loss
Comprehensive loss is composed of net loss and other comprehensive income (loss). Other comprehensive income (loss) consists of unrealized gains and
losses on debt securities, foreign currency translation adjustments and other items.
Recent accounting pronouncements
Recently adopted
ASU No. 2016-02, Leases (Topic 842), ASU No. 2018-10 Codification Improvements to Topic 842, Leases, ASU No. 2018-11, Leases (Topic 842):
Targeted Improvements, and ASU No. 2019-01 Leases (Topic 842): Codification Improvements
In February 2016, the FASB issued ASU 2016-02, as amended, which superseded the lease accounting requirements in ASC 840 and created ASC 842.
ASC 842 requires a lessee to recognize assets and liabilities on the balance sheet for most leases and changes many key definitions, including the definition of
a lease. The new standard includes a short-term lease exception for leases with a term of one year or less, as part of which a lessee can make an accounting
policy election not to recognize lease assets and lease liabilities for those leases. Lessees will continue to differentiate between finance leases (previously
referred to as capital leases) and operating leases using classification criteria that are substantially similar to the previous guidance.
Effective January 1, 2019, the Company adopted ASU 2016-02, using the required modified retrospective approach and utilizing the effective date as its
date of initial application. As a result, prior periods are presented in accordance with the previous guidance in ASC 840.
The adoption of this standard resulted in the recognition of operating lease right-of-use assets and operating lease liabilities of $184.4 million and
$177.0 million, respectively, on the Company’s consolidated balance sheet at adoption relating to its leases for its corporate headquarters at 60 Binney Street
in Cambridge, Massachusetts (the “60 Binney Street Lease”), its office and laboratory space in Seattle, Washington, its office space in Zug, Switzerland, and
its embedded leases associated with certain of the Company’s contract manufacturing agreements. The application of the standard’s transition guidance
required the de-recognition of the 60 Binney Street Lease building asset, financing lease obligation, current portion, and financing lease obligation, net of
current portion in the amounts of $149.3 million, $1.4 million, and $153.3 million, respectively, as well as certain other adjustments to related account
balances. In adopting ASU 2016-02, the Company recorded a total one-time adjustment of $6.6 million to the opening balance of accumulated deficit as of
January 1, 2019 primarily relating to the de-recognition of the 60 Binney Street Lease building asset and related finance lease obligation.
As a result of adopting ASU 2016-02, the Company recorded an increase to deferred tax assets and deferred tax liabilities of $5.3 million and $7.1 million,
respectively. The $1.8 million net increase to deferred tax liabilities and an offsetting valuation allowance adjustment was recorded through the accumulated
deficit as of January 1, 2019, such that there was no tax impact on the Company’s consolidated financial statements as a result of adoption.
ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment
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In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU
2017-04"). To address concerns over the cost and complexity of the two-step goodwill impairment test, the amendments in this ASU remove the second step
of the test. An entity will instead apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying
amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional
qualitative assessment of goodwill impairment. The new standard will be effective beginning January 1, 2020 and the Company early adopted the provisions
of this ASU for purposes of performing its annual goodwill impairment test for 2019 during the fourth quarter of 2019. The adoption of this standard did not
have a material impact on the Company’s financial position or results of operations upon adoption.
ASU No. 2017-08, Receivables – Nonrefundable Fees and Other Costs (Topic 310-20): Premium Amortization on Purchased Callable Debt Securities
In April 2017, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Topic 310-20): Premium Amortization on Purchased
Callable Debt Securities (“Subtopic 310-20”). The new standard amends the amortization period for certain purchased callable debt securities held at a
premium by shortening the amortization period for the premium to the earliest call date. Subtopic 310-20 calls for a modified retrospective application under
which a cumulative-effect adjustment will be made to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The
Company adopted this standard on January 1, 2019 and it did not have a material impact on the Company’s financial position or results of operations upon
adoption.
ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other
Comprehensive Income
In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax
Effects from Accumulated Other Comprehensive Income. The new standard allows for a reclassification from accumulated other comprehensive income to
retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The Company adopted this standard on January 1, 2019 and it did not
have a material impact on the Company’s financial position and results of operations upon adoption.
ASU No. 2019-07, Codification Updates to SEC Sections – Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases
In July 2019, the FASB issued ASU 2019-07, Codification Updates to SEC Sections, which clarifies or improves the disclosure and presentation
requirements of a variety of codification topics by aligning them with the SEC’s regulations, thereby eliminating redundancies and making the codification
easier to apply. The Company prospectively adopted this update upon issuance, and it did not have a material impact on its financial position and results of
operations.
Not yet adopted
ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 362): Measurement of Credit Losses on Financial Statements, ASU No. 2019-05 Financial
Instruments – Credit Losses (Topic 326): Targeted Transition Relief, ASU No. 2019-11, Codification Improvements to Topic 326, Financial Instruments -
Credit Losses
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 362): Measurement of Credit Losses on Financial Statements
("ASU 2016-13"). The new standard requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale
debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt
securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases.
The targeted transition relief standard allows filers an option to irrevocably elect the fair value option of ASC 825-10, Financial Instruments-Overall, applied
on an instrument-by-instrument basis for eligible instruments. The new standard will be effective beginning January 1, 2020. The Company is currently
evaluating the potential impact ASU 2016-13, and related updates, will have on its financial position and results of operations upon adoption.
ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements
for Fair Value Measurement (“ASU 2018-13”). The new standard removes certain disclosures,
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modifies certain disclosures and adds additional disclosures related to fair value measurement. The new standard will be effective beginning January 1, 2020.
The adoption of ASU 2018-13 is not expected to have a material impact on the Company's financial position or results of operations upon adoption.
ASU No. 2018-15, Intangibles-Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred
in a Cloud Computing Arrangement That Is a Service Contract
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for
Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). The amendments in this update align the
requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing
implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The
accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update. The new standard will
be effective beginning January 1, 2020. The amendments in this update should be applied either retrospectively or prospectively to all implementation costs
incurred after the date of adoption. The Company is currently evaluating the potential impact ASU 2018-15 may have on its financial position and results of
operations upon adoption.
ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606
In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606
(“ASU 2018-18”). The amendments in this update clarify that certain transactions between collaborative arrangement participants should be accounted for as
revenue when the collaborative arrangement participant is a customer in the context of a unit of account and precludes recognizing as revenue consideration
received from a collaborative arrangement participant if the participant is not a customer. The new standard will be effective beginning January 1, 2020. The
Company is currently evaluating the potential impact ASU 2018-18 may have on its financial position and results of operations upon adoption.
ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825,
Financial Instruments
In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and
Hedging, and Topic 825, Financial Instruments (“ASU 2019-04”). This update provides clarifications for three topics related to financial instruments
accounting, some of which apply to the Company. The amendments in this update will be effective beginning January 1, 2020. The adoption of ASU 2019-04
is not expected to have a material impact on the Company’s financial position or results of operations upon adoption.
ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"), which is
intended to simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and
amends existing guidance to improve consistent application. The new standard will be effective beginning January 1, 2021. The Company is currently
evaluating the potential impact ASU 2019-12 may have on its financial position and results of operations upon adoption.
3. Marketable securities
The following table summarizes the marketable securities held at December 31, 2019 and 2018 (in thousands):
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December 31, 2019
Amortized cost /
cost
Unrealized gains
Unrealized losses
Fair value
U.S. government agency securities and treasuries
$
633,970 $
2,014 $
(48) $
635,936
Certificates of deposit
Corporate bonds
Commercial paper
Equity securities
Total
December 31, 2018
U.S. government agency securities and treasuries
Certificates of deposit
Equity securities
Total
960
185,827
74,378
20,017
—
824
—
—
—
(43)
—
(7,147)
960
186,608
74,378
12,870
915,152 $
2,838 $
(7,238) $
910,752
1,459,649 $
963 $
(3,011) $
1,457,601
9,080
20,017
—
2,150
—
—
9,080
22,167
$
$
$
1,488,746 $
3,113 $
(3,011) $
1,488,848
No available-for-sale debt securities held as of December 31, 2019 or 2018 had remaining maturities greater than three years.
4. Fair value measurements
The following table sets forth the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2019 and 2018
(in thousands):
December 31, 2019
Assets:
Cash and cash equivalents
Marketable securities:
U.S. government agency securities and treasuries
Certificates of deposit
Commercial paper
Corporate bonds
Equity securities
Total assets
Liabilities:
Contingent consideration
Total liabilities
December 31, 2018
Assets:
Cash and cash equivalents
Marketable securities:
U.S. government agency securities
Certificates of deposit
Equity securities
Total assets
Liabilities:
Contingent consideration
Total liabilities
Quoted
prices in
active
markets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Total
$
327,214 $
311,245 $
15,969 $
635,936
960
74,378
186,608
12,870
—
—
—
—
12,870
635,936
960
74,378
186,608
—
1,237,966 $
324,115 $
913,851 $
—
—
—
—
—
—
—
7,977 $
7,977 $
— $
— $
— $
— $
7,977
7,977
402,579 $
348,638 $
53,941 $
1,457,601
9,080
22,167
—
—
22,167
1,457,601
9,080
—
1,891,427 $
370,805 $
1,520,622 $
—
—
—
—
—
5,230 $
5,230 $
— $
— $
— $
— $
5,230
5,230
$
$
$
$
$
$
$
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Cash and cash equivalents
The Company considers all highly liquid securities with original final maturities of 90 days or less from the date of purchase to be cash equivalents. As of
December 31, 2019, cash and cash equivalents comprise funds in cash, commercial paper, and money market accounts. As of December 31, 2018, cash and
cash equivalents comprise funds in cash, U.S. Treasury securities, U.S. government agency securities, and money market accounts.
Marketable securities
Marketable securities classified as Level 2 within the valuation hierarchy generally consist of certificates of deposit, U.S. Treasury securities and
government agency securities, corporate bonds, and commercial paper. The Company estimates the fair values of these marketable securities by taking into
consideration valuations obtained from third-party pricing sources. These pricing sources utilize industry standard valuation models, including both income
and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include market
pricing based on real-time trade data for the same or similar securities, issuer credit spreads, benchmark yields, and other observable inputs. The Company
validates the prices provided by its third-party pricing sources by understanding the models used, obtaining market values from other pricing sources and
analyzing pricing data in certain instances.
The amortized cost of available-for-sale debt securities is adjusted for amortization of premiums and accretion of discounts to the earliest call date for
premiums or to maturity for discounts. At December 31, 2019 and 2018, the balance in the Company’s accumulated other comprehensive loss was composed
primarily of activity related to the Company’s debt securities. There were no material realized gains or losses recognized on the sale or maturity of available-
for-sale securities during the year ended December 31, 2019 or 2018, and as a result, the Company did not reclassify any amounts out of accumulated other
comprehensive loss for the same periods.
The aggregate fair value of debt securities held by the Company in an unrealized loss position for less than twelve months as of December 31, 2019 and
2018 was $67.2 million and $787.5 million, respectively. As of December 31, 2019, and 2018, there were $79.6 million and $315.3 million in securities held
by the Company in an unrealized loss position for more than twelve months, respectively. The aggregate unrealized loss on securities held by the Company
for less than twelve months as of December 31, 2019 and 2018 was less than $0.1 million and $0.9 million, respectively. The aggregate unrealized loss on
securities held by the Company for more than twelve months as of December 31, 2019 and 2018 was less than $0.1 million and $2.1 million, respectively.
The Company has the intent to hold such securities until recovery and it is not more likely than not that the Company will be required to sell the securities
before recovery of their amortized costs bases, which may be maturity. The Company determined that there was no 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, 2019
and 2018.
The Company holds equity securities with an aggregate fair value of $12.9 million and $22.2 million at December 31, 2019 and 2018, respectively within
short-term marketable securities on its consolidated balance sheet. The Company recorded a $9.3 million unrealized loss and a $2.2 million unrealized gain
during the year ended December 31, 2019 and 2018, respectively, related to its equity securities, which is included in other (expense) income, net on the
consolidated statements of operations and comprehensive loss.
Contingent consideration
In connection with its prior acquisition of Precision Genome Engineering, Inc. (“Pregenen”), the Company may be required to pay future consideration
that is contingent upon the achievement of specified development, regulatory approvals or sales-based milestone events. Contingent consideration is
measured at fair value and is based on significant inputs not observable in the market, which represents a Level 3 measurement within 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 of contingent consideration related to
updated assumptions and estimates are recognized within the consolidated statements of operations and comprehensive loss.
Contingent consideration may change significantly as development progresses and additional data are obtained, impacting the Company’s assumptions
regarding probabilities of successful achievement of related milestones used to estimate the fair value of the liability and the timing in which they are
expected to be achieved. In evaluating the fair value information, considerable judgment is required to interpret the market data used to develop the estimates.
The estimates of fair value may not
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be indicative of the amounts that could be realized in a current market exchange. Accordingly, the use of different 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 successful
achievement of clinical and commercial milestones, the period in which these milestones are expected to be achieved ranging from 2021 to 2028 and discount
rates ranging from 12.7% to 14.3%. Significant increases or decreases in any of these inputs would result in a significantly higher or lower fair value
measurement.
The table below provides a roll-forward of fair value of the Company’s contingent consideration obligations which include Level 3 inputs (in thousands):
Beginning balance
Additions
Changes in fair value
Payments
Ending balance
Please refer to Note 9, Commitments and contingencies, for further information.
5. Property, plant and equipment, net
Property, plant and equipment, net, consists of the following (in thousands):
Land
Building
Computer equipment and software
Office equipment
Laboratory equipment
Leasehold improvements
Construction-in-progress
Total property, plant and equipment
Less accumulated depreciation and amortization
Property, plant and equipment, net
Year ended December 31,
2019
2018
5,230 $
—
2,747
—
7,977 $
2,231
—
2,999
—
5,230
$
$
As of December 31,
2019
2018
$
1,210 $
15,664
6,947
7,599
44,560
33,788
77,981
187,749
(36,573)
$
151,176 $
1,210
180,094
6,365
5,584
35,693
183
46,669
275,798
(29,176)
246,622
Depreciation and amortization expense related to property, plant and equipment was $13.4 million, $13.4 million, and $9.8 million for the years ended
December 31, 2019, 2018, and 2017, respectively.
North Carolina manufacturing facility
In November 2017, the Company acquired a manufacturing facility in Durham, North Carolina for the future manufacture of lentiviral vector for the
Company’s gene therapies. As of December 31, 2019, a portion of the facility has been placed into service and the remainder of the facility is still in process
of construction. Construction-in-progress as of December 31, 2019, and 2018, includes $74.2 million and $40.4 million, respectively, related to the North
Carolina manufacturing facility.
60 Binney Street Lease
As a result of the adoption of ASU 2016-02, the Company de-recognized $156.0 million of the building asset and $6.7 million of accumulated
depreciation related to its corporate headquarters at 60 Binney Street. Prior to the adoption of ASU 2016-02, the Company classified leasehold improvements
associated with the 60 Binney Street building as building assets. Subsequent to the adoption of ASU 2016-02, the leasehold improvements owned by the
Company associated with the 60 Binney Street building are classified as leasehold improvements. Please refer to Note 2, Summary of significant accounting
policies and basis of presentation, and Note 8, Leases, for further information.
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6. Restricted cash
As of December 31, 2019, and 2018, the Company maintained letters of credit of $54.5 million and $14.5 million, respectively, which are collateralized
with a bank account at a financial institution in accordance with the agreement and consisted of the following (in thousands):
60 Binney Street lease
50 Binney Street sublease
Other leases
Total restricted cash
Refer to Note 8, Leases, for further information on the Company's letters of credit.
7. Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consist of the following (in thousands):
Employee compensation
Manufacturing costs
Clinical and contract research organization costs
Collaboration research costs
Property, plant, and equipment
License and milestone fees
Professional fees
Financing lease obligation, current portion
Other
Total accrued expenses and other current liabilities
8. Leases
As of December 31,
2019
2018
13,763 $
13,763
40,072
660
—
757
54,495 $
14,520
$
$
As of December 31,
2019
2018
$
44,679 $
23,126
16,799
27,142
2,354
300
1,827
—
25,329
$
141,556 $
28,567
21,618
11,891
3,358
5,451
7,739
1,830
1,424
17,515
99,393
The Company leases certain office and laboratory space. Additionally, the Company has embedded leases at contract manufacturing organizations.
60 Binney Street lease
On September 21, 2015, the Company entered into a lease agreement for office and laboratory space located in a building (the “Building”) at 60 Binney
Street, Cambridge, Massachusetts (the “60 Binney Street Lease”), which is now the Company’s corporate headquarters. Under the terms of the 60 Binney
Street Lease, starting on October 1, 2016, the Company leases approximately 253,108 square feet of office and laboratory space 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 operating expenses and taxes. The
Company currently maintains a $13.8 million collateralized letter of credit and, subject to the terms of the lease and certain reduction requirements specified
therein, including market capitalization requirements, this amount may decrease to $9.2 million over time. Pursuant to a work letter entered into in connection
with the 60 Binney Street Lease, the landlord contributed an aggregate of $42.4 million toward the cost of construction and tenant improvements for the
Building.
The Company occupied the Building beginning on March 27, 2017 and the 60 Binney Street Lease will continue until March 31, 2027. The Company has
the option to extend the 60 Binney Street Lease for two successive five-year terms.
Due to the Company’s involvement in the construction project, including having responsibility to pay for a portion of the costs of finish work and
mechanical, electrical, and plumbing elements of the Building, among other items, the Company was deemed for accounting purposes to be the owner of the
Building during the construction period, per ASC 840. Accordingly, under ASC 840, construction costs that were incurred by the landlord directly or
indirectly through reimbursement to the
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Company as part of its tenant improvement allowance were recorded as an asset in property, plant and equipment, net on the Company’s consolidated balance
sheets.
The Company evaluated the 60 Binney Street Lease upon occupancy on March 27, 2017 and determined that the 60 Binney Street Lease did not meet the
criteria for “sale-leaseback” treatment under ASC 840. This determination was based on, among other things, the Company's continuing involvement with the
property in the form of non-recourse financing to the lessor. Accordingly, upon occupancy, the Company commenced depreciating the portion of the building
in service over a useful life of 40 years and incurred interest expense related to the financing obligation.
As part of its adoption of ASC 842, the Company de-recognized the building asset and corresponding financing obligation recorded on the Company’s
consolidated balance sheets as of December 31, 2018, in accordance with the ASC 842 transition guidance. In applying the ASC 842 transition guidance, the
Company classified this lease as an operating lease and recorded a right-of-use asset of $127.3 million and lease liability of $125.8 million on the effective
date. The Company is recognizing rent expense on a straight-line basis throughout the remaining term of the lease.
50 Binney Street sublease
In April 2019, the Company entered into a sublease agreement for office space located at 50 Binney Street in Cambridge, Massachusetts (the “50 Binney
Street Sublease”) to supplement the Company’s corporate headquarters located at 60 Binney Street in Cambridge, Massachusetts. Under the terms of the 50
Binney Street Sublease, the Company will lease 267,278 square feet of office space for $99.95 per square foot, or $26.7 million per year in base rent subject
to certain operating expenses, taxes and annual rent increases of approximately 3%. The lease will commence when the space is available for use by the
Company, which is anticipated to be in the second half of 2021, and end on December 31, 2030, unless the Company earlier occupies the premises or other
conditions specified in the 50 Binney Street Sublease occur. The sublessor has the right to postpone the commencement date until January 1, 2022 by
providing not less than nine months’ prior written notice to the Company. Upon signing the 50 Binney Street Sublease, the Company executed a $40.1 million
cash-collateralized letter of credit, which may be reduced in the future subject to the terms of the 50 Binney Street Sublease and certain reduction
requirements specified therein. The $40.1 million of cash collateralizing the letter of credit is classified as restricted cash and other non-current assets on the
Company’s consolidated balance sheets. Payments will commence at the earlier of (i) the date which is 90 days following the commencement date and (ii) the
date the Company takes occupancy of all or any portion of the premises. In connection with the execution of the 50 Binney Street Sublease, the Company also
entered into a Purchase Agreement for furniture and equipment (the “Furniture Purchase Agreement”) located on the premises upon lease commencement.
Upon execution of the Furniture Purchase Agreement, the Company made an upfront payment of $7.5 million, all of which was recorded within restricted
cash and other non-current assets on the Company’s consolidated balance sheets as of December 31, 2019.
The Company will assess the lease classification of the 50 Binney Street Sublease and commence recognition of the associated rent expense upon lease
commencement.
Seattle, Washington leases
In July 2018, the Company entered into a lease agreement for office and laboratory space located in a portion of a building in Seattle, Washington. The
lease was amended in October 2018 to increase the total rentable space to approximately 36,126 square feet at $54.00 per square foot in base rent per year,
which is subject to scheduled annual rent increases of 2.5% plus certain operating expenses and taxes. The lease commenced on January 1, 2019 and the lease
term will continue through January 31, 2027 ("the Initial Term"). The Company moved into the facility in June 2019. The lease allowed for a tenant
improvement (“TI”) allowance of up to $215.00 per square foot, or approximately $8.0 million. The Company utilized the $8.0 million TI allowance and it
has been fully reimbursed by the landlord as of December 31, 2019.
The Company determined the classification of this lease to be an operating lease and recorded a right-of-use asset and lease liability at lease
commencement. The Company was determined to be the owner of the tenant improvements and as such recorded the building improvements as property,
plant, and equipment, net, and began to depreciate the building improvements over the remaining lease term at such time the assets were placed into service.
In September 2019, the Company entered into a second amendment to the lease (the “Second Amendment”). The Second Amendment added
approximately 22,188 square feet to the existing space and extended the lease term of the entire premises by 16 months, or until April 2028. Fixed monthly
rent for the expanded space will be incurred at a rate of $62.80 per square foot per year beginning in January 2021, subject to annual increases of 2.5%. The
Second Amendment includes a five-year option to
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extend the term. The Company is recognizing rent expense on a straight-line basis through the remaining extended term of the lease.
Upon the execution of the Second Amendment, which was deemed to be a lease modification, the Company re-evaluated the assumptions made at the
original lease commencement date. The Company determined the Second Amendment consists of two separate contracts under ASC 842. One contract is
related to a new right-of-use for the expanded 22,188 square feet of space, which is to be accounted for as a new lease, and the other is related to the
modification of term for the original 36,126 square feet of space. The Company recorded an additional right-of-use asset and lease liability upon lease
commencement of the expanded space.
Embedded leases
On June 3, 2016, the Company entered into a manufacturing agreement for the future commercial production of the Company’s LentiGlobin and Lenti-D
drug products with a contract manufacturing organization. Under this 12-year agreement, the contract manufacturing organization will complete the design,
construction, validation and process validation of the leased suites prior to anticipated commercial launch of the product candidates. During construction, the
Company paid $12.0 million upon the achievement of certain contractual milestones, and may pay up to $8.0 million in additional contractual milestones if
the Company elects its option to lease additional suites. Construction was completed in March 2018 and beginning in April 2018 the Company pays $5.1
million per year in fixed suite fees, as well as certain fixed labor, raw materials, testing and shipping costs for manufacturing services, and may pay additional
suite fees if it elects its option to reserve or lease additional suites.
The Company may terminate this agreement at any time upon payment of a one-time termination fee and up to 24 months of fixed suite and labor fees.
The Company concluded in prior periods that this agreement contained an embedded lease under ASC 840 as the suites are designated for the Company’s
exclusive use during the term of the agreement. The Company concluded that it was not the deemed owner during construction nor was it a capital lease under
ASC 840. As a result, in prior periods the Company accounted for the agreement as an operating lease under ASC 840 and recognized straight-line rent
expense over the non-cancellable term of the embedded lease. As part of its adoption of ASC 842, effective January 1, 2019, the Company carried forward its
existing lease classification under ASC 840. Additionally, the Company recorded a right-of-use asset and lease liability for this operating lease on the
effective date and is recognizing rent expense on a straight-line basis throughout the remaining term of the embedded lease.
The Company’s other embedded leases are not material to the consolidated financial statements.
Summary of all lease costs recognized under ASC 842
The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating leases
for the year ended December 31, 2019 (in thousands):
Lease cost (1)
Operating lease cost
Total lease cost
Other information
Operating cash flows used for operating leases
Weighted average remaining lease term
Weighted average discount rate
For the
year ended
December 31, 2019
$
$
$
35,346
35,346
31,026
7.4 years
6.70 %
(1) Short-term lease costs and variable lease costs incurred by the Company for the twelve months ended December 31, 2019 were immaterial.
Rent expense is calculated on a straight-line basis over the term of the lease. Rent expense recognized under all leases, including additional charges for
utilities, parking, maintenance, and real estate taxes was $45.3 million, $9.8 million, and $9.0 million for the years ended December 31, 2019, 2018 and 2017,
respectively. Note that the Company adopted ASC 842
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effective January 1, 2019 using the required modified retrospective approach and utilizing the effective date as its date of initial application. Therefore,
amounts disclosed pertaining to the years ended December 31, 2018 and 2017 are presented under previous accounting guidance and are therefore not
comparable to the amounts recorded in the current period under ASC 842.
As of December 31, 2019, future minimum commitments under ASC 842 under the Company’s operating leases were as follows (in thousands):
Maturity of lease liabilities
2020
2021
2022
2023
2024
2025 and thereafter
Total lease payments
Less: imputed interest
Total operating lease liabilities
As of
December 31, 2019
33,257
35,816
31,052
31,540
31,552
88,336
251,553
(60,566)
190,987
$
$
The above table excludes legally binding minimum lease payments for leases executed but not yet commenced as of December 31, 2019.
9. Commitments and contingencies
Lease commitments
The Company leases certain office and laboratory space and has embedded leases at contract manufacturing organizations. Refer to Note 8, Leases, for
further information on the terms of these lease agreements.
Contingent consideration related to business combinations
On June 30, 2014, the Company acquired Pregenen. The Company may be required to make up to an additional $120.0 million in remaining future
contingent cash payments to the former equityholders of Pregenen upon the achievement of certain clinical and commercial milestones related to the
Pregenen technology, of which $20.1 million relates to clinical milestones and $99.9 million relates to commercial milestones. In accordance with accounting
guidance for business combinations, contingent consideration liabilities are required to be recognized on the consolidated balance sheets at fair value.
Estimating the fair value of contingent consideration requires the use of significant assumptions primarily relating to probabilities of successful achievement
of certain clinical and commercial milestones, the expected timing in which these milestones will be achieved and discount rates. The use of different
assumptions could result in materially different estimates of fair value. See Note 4, Fair value measurements, for additional information.
Other funding commitments
The Company is party to various agreements, principally relating to licensed technology, that require future payments relating to milestones that may be
met in subsequent periods or royalties on future sales of specified products, which includes the collaboration agreement entered into with Regeneron in
August 2018. Additionally, the Company is party to various contracts with contract research organizations and contract manufacturers that generally provide
for termination on notice, with the exact amounts in the event of termination to be based on the timing of the termination and the terms of the agreement.
Please refer to Note 11, Collaborative arrangements, for further information on the collaboration agreement with Regeneron.
Based on our development plans as of December 31, 2019, we may be obligated to make future development, regulatory and commercial milestone
payments and royalty payments on future sales of specified products associated with the Company's collaboration and license agreements. Payments under
these agreements generally become due and payable upon achievement of such milestones or sales. When the achievement of these milestones or sales have
not occurred, such contingencies are not recorded in the Company’s financial statements and are excluded from the table below.
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The Company has various manufacturing development and license agreements to support clinical and commercial product needs. The following table
presents non-cancelable contractual obligations arising from these arrangements:
Years ended December 31,
2020
2021
2022
2023
2024
2025 and thereafter
Total purchase commitments
Purchase
commitment
$
129,950
22,597
24,310
25,040
46,050
—
$
247,947
The Company enters into agreements containing standard indemnification provisions in the ordinary course of business. Pursuant to such terms, 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 business partners. The term of these indemnification agreements is generally perpetual any time after execution of the agreement. The maximum
potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company has never
incurred costs to defend lawsuits or settle claims related to these indemnification agreements.
In January 2020, the Company executed an amendment to an existing contract manufacturing arrangement, which extended the term of the contract by
one year, through December 31, 2021, which increases the Company's contractual obligations by an additional $24.7 million to the table above.
10. Common stock and preferred stock
The Company is authorized to issue 125.0 million shares of common stock. Holders of common stock are entitled to one vote per share. Holders of
common stock are entitled to receive dividends, if and when declared by the Company’s board of directors, and to share ratably in the Company’s assets
legally available for distribution to the Company’s shareholders in the event of liquidation. Holders of common stock have no preemptive, subscription,
redemption or conversion rights. As of December 31, 2019, and 2018, the Company had 55.4 million and 54.7 million shares of common stock issued and
outstanding, respectively.
In January 2018, the Company sold 0.3 million shares of common stock pursuant to the partial exercise of an overallotment option granted to the
underwriters in connection with the December 2017 underwritten public offering at a price of $185.00 per share for aggregate net proceeds of $48.7 million.
In July 2018, the Company sold 3.9 million shares of common stock (excluding any shares sold pursuant to an overallotment option granted to the
underwriters in connection with the offering) through an underwritten public offering at a price of $162.50 per share for aggregate net proceeds of $600.6
million. In August 2018, the Company sold 0.4 million shares of common stock to Regeneron in connection with a collaboration arrangement at a price of
$238.10 per share for aggregate net proceeds of $100.0 million, of which $45.5 million was attributed to a prepayment of joint research activities.
The Company is authorized to issue 5.0 million shares of preferred stock in one or more series and to fix the powers, designations, preferences and
relative participating option or other rights thereof, including dividend rights, conversion rights, voting rights, redemption terms, liquidation preferences and
the number of shares constituting any series, without any further vote or action by the Company’s shareholders. As of December 31, 2019 and 2018, the
Company had no shares of preferred stock issued or outstanding.
Reserved for future issuance
The Company has reserved for future issuance the following number of shares of common stock (in thousands):
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Options to purchase common stock
Restricted stock units
2013 Stock Option and Incentive Plan
2013 Employee Stock Purchase Plan
11. Collaborative arrangements
As of December 31,
2019
2018
5,483
1,127
2,007
147
8,764
4,643
931
1,458
172
7,204
To date, the Company’s collaboration revenue has been primarily generated from its collaboration arrangements with Bristol-Myers Squibb ("BMS"),
formerly Celgene Corporation ("Celgene") prior to its acquisition by BMS in November 2019, and Regeneron, each as further described below.
Bristol-Myers Squibb
BMS Original Collaboration Agreement
On March 19, 2013, the Company entered into a Master Collaboration Agreement (the "BMS Collaboration Agreement”) with Celgene (now BMS
following its acquisition of Celgene in November 2019) to discover, develop and commercialize potentially disease-altering gene therapies in oncology. The
collaboration is focused on applying gene therapy 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 BMS pursuant to which the Company obtained a sublicense to certain intellectual property from BMS, originating under
BMS’s license from Baylor College of Medicine, for use in the collaboration.
Under the terms of the BMS Collaboration Agreement, the Company received a $75.0 million up-front, non-refundable cash payment. The Company was
responsible for conducting discovery, research and development activities through completion of phase 1 clinical studies, if any, during the initial term of the
BMS Collaboration Agreement, or three years. The collaboration is governed by a joint steering committee (“JSC”) formed by an equal number of
representatives from the Company and BMS. The JSC, among other activities, reviews the collaboration program, reviews and evaluates product candidates
and approves regulatory plans. In addition to the JSC, the BMS Collaboration Agreement provides that the Company and BMS each appoint representatives
to a patent committee, which is responsible for managing the intellectual property developed and used during the collaboration.
BMS Amended Collaboration Agreement
On June 3, 2015, the Company and BMS amended and restated the BMS Collaboration Agreement (the “Amended BMS Collaboration Agreement”).
Under the Amended BMS Collaboration Agreement, the parties narrowed the focus of the collaboration to exclusively work on anti- B-cell maturation
antigen (“BCMA”) product candidates for a new three-year term. In connection with the Amended BMS Collaboration Agreement, the Company received an
up-front, one-time, non-refundable, non-creditable payment of $25.0 million to fund research and development under the collaboration. The collaboration is
governed by the JSC. Under the terms of the Amended BMS Collaboration Agreement, for up to two product candidates selected for development under the
collaboration, the Company was responsible for conducting and funding all research and development activities performed up through completion of the
initial phase 1 clinical study of such product candidates.
On a product candidate-by-product candidate basis, up through a specified period following enrollment of the first patient in an initial phase 1 clinical
study for such product candidate (the “Option Period”), the Company had granted BMS an option to obtain an exclusive worldwide license to develop and
commercialize such product. Following BMS’s license of each product candidate, the Company is entitled to elect to co-develop and co-promote each product
candidate in the U.S.
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BMS Ide-cel License Agreement
On February 10, 2016, BMS exercised its option to obtain an exclusive worldwide license to develop and commercialize ide-cel, the first product
candidate under the Amended BMS Collaboration Agreement, pursuant to an executed license agreement (“Ide-cel License Agreement”) entered into by the
parties on February 16, 2016 and paid to the Company the associated $10.0 million option fee. Pursuant to the Ide-cel License Agreement, BMS was
responsible for development and related funding of ide-cel after the substantial completion of the phase 1 clinical trial. The Company was responsible for the
manufacture of vector and associated payload throughout development and upon BMS’s request, throughout commercialization, the costs of which were
reimbursable by BMS in accordance with the terms of the Amended and Restated Co-Development, Co-Promote and Profit Share Agreement, as further
described below. BMS was responsible for the manufacture of drug product throughout development and commercialization.
BMS Ide-cel Co-Development, Co-Promote and Profit Share Agreement
On March 28, 2018, the Company elected to co-develop and co-promote ide-cel within the U.S. pursuant to the execution of the Amended and Restated
Co-Development, Co-Promote and Profit Share Agreement (“Ide-cel CCPS”), which replaced the Ide-cel License Agreement. The responsibilities of the
parties remain unchanged from those under the Ide-cel License Agreement, however, the Company will share equally in all profits and losses relating to
developing, commercializing and manufacturing ide-cel within the U.S. and has the right to participate in the development and promotion of ide-cel in the
U.S. BMS is responsible for the costs incurred to manufacture vector and associated payload for use outside of the U.S., plus a markup. Under the Ide-cel
CCPS, the Company may receive up to a total of $70.0 million in development milestone payments for the first indication to be addressed by ide-cel, with the
ability to obtain additional milestone payments for a second indication and modified licensed products. In the second quarter of 2019, a $10.0 million
development milestone was achieved such that as of December 31, 2019, the total remaining potential development milestones on the first indication of ide-
cel is $60.0 million. In addition, to the extent ide-cel is commercialized, the Company is 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 U.S., subject to certain reductions.
BMS bb21217 License Agreement
On September 22, 2017, BMS exercised its option to obtain an exclusive worldwide license to develop and commercialize bb21217, the second product
candidate under the Amended BMS Collaboration Agreement, pursuant to an executed license agreement (“bb21217 License Agreement”) entered into by the
parties on September 28, 2017 and paid the Company an option fee of $15.0 million. Pursuant to the bb21217 License Agreement, BMS is responsible for
development and related funding of bb21217 after the substantial completion of the ongoing phase 1 clinical trial. In 2019, the parties amended the protocol
for the ongoing phase 1 clinical trial to enroll additional patients. The Company is responsible for the manufacture of vector and associated payload
throughout development and upon BMS’s request, throughout commercialization. Expenses incurred by the Company associated with these activities are fully
reimbursable by BMS at cost plus a mark-up. Throughout both development and commercialization, BMS is responsible for the manufacture of drug product.
The Company currently expects it will exercise its option to co-develop and co-promote bb21217 within the U.S. The Company’s election to co-develop
and co-promote bb21217 must be made by the substantial completion of the on-going phase 1 clinical trial of bb21217. If elected, the Company expects the
responsibilities of the parties to remain largely unchanged, however, the Company expects it will share equally in all profits and losses relating to developing,
commercializing and manufacturing bb21217 within the U.S. and to have the right to participate in the development and promotion of bb21217 in the
U.S. BMS would be responsible for the costs incurred to manufacture vector and associated payload for use outside of the U.S., plus a markup. Under this
scenario, the Company expects to receive, per product, up to $70.0 million in development milestone payments for the first indication to be addressed by the
bb21217 product candidate, with the ability to obtain additional milestone payments for a second indication and modified licensed products. In addition, to
the extent bb21217 is commercialized, the Company 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 U.S., subject to certain reductions.
In the event the Company does not exercise its option to co-develop and co-promote bb21217, the Company will receive an additional fee in the amount
of $10.0 million. Under this scenario, the Company may 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 milestone payments. In addition, to the extent bb21217 is commercialized, the
Company would be entitled to receive tiered royalty payments ranging from the mid-single digits to low-teens based on a percentage of net sales, subject to
certain reductions.
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Accounting Analysis – Ide-cel
ASC Topic 606, Revenue from Contracts With Customers ("Topic 606"), allows entities to reflect the aggregate effect of all contract modifications when
identifying the satisfied and unsatisfied performance obligations for contracts that were modified prior to Topic 606 adoption. BMS’s option to in-license the
first product candidate, ide-cel, under the arrangement was considered a material right at the time the Amended BMS Collaboration Agreement was executed
in June 2015 given the product candidate had been formally nominated by the JSC and that substantially all investigational new drug application, or IND,
enabling activities had been completed by that time. In making this determination, the Company also considered the option price relative to the value of the
underlying license. BMS’s exercise of this material right in February 2016 was determined to represent a contract modification and represents the last contract
modification prior to the adoption of Topic 606. As a result, the BMS Collaboration Agreement, Amended BMS Collaboration Agreement, and Ide-cel CCPS
are combined for accounting purposes and treated as a single arrangement. As of February 2016, BMS’s option to license an additional product candidate
under the collaboration did not represent a material right due primarily to the significant uncertainty regarding whether any additional product candidates
would be identified under the Amended BMS Collaboration Agreement. Therefore, the license to the Company’s second product candidate, bb21217, which
was executed in September 2017, is accounted for as a separate contract. Refer below for discussion of the bb21217 accounting analysis.
As of the February 2016 contract modification date, the Company concluded the arrangement contained the following promised goods and services:
(i) research and development services, (ii) a license to ide-cel, and (iii) manufacture of vectors and associated payload for incorporation into ide-cel through
development. The Company determined that the manufacture of commercial vector represented an option to acquire additional goods and services that is not
representative of a material right. In addition, as of the February 2016 contract modification date, BMS had not exercised its option to purchase any
commercial vector. Accordingly, the manufacture of commercial vector was not considered to be a performance obligation at that time.
The Company concluded that the research and development services are distinct from the other promised goods and services under the arrangement given
that BMS can benefit from the research and development services on their own and such services are distinct within the context of the contract. Thus, such
services are considered to be a separate performance obligation. The Company concluded that the license to ide-cel is not distinct from the vector
manufacturing services because the manufacturing is essential to the use of the license. Accordingly, these two promised goods and services are considered a
single combined performance obligation.
Ide-cel transaction price
The following tables summarize the total transaction price, the allocation of the total transaction price to the identified performance obligations under the
arrangement, and the amount of the transaction price unsatisfied as of December 31, 2019 (in thousands):
Up-front non-refundable payment - BMS Collaboration Agreement
Up-front non-refundable payment - Amended BMS Collaboration Agreement
Ide-cel license fee - Ide-cel License Agreement
Ide-cel development milestone
Estimated variable consideration
Ide-cel research and development services
Ide-cel license and manufacturing services
Ide-cel transaction price
as of December 31, 2019
$
$
75,000
25,000
10,000
10,000
87,189
207,189
Allocation of
transaction
price to
performance
obligations
Transaction price
unsatisfied as of
December 31, 2019
$
$
40,912 $
166,277
207,189 $
—
17,815
17,815
The estimated variable consideration of $87.2 million relates to the estimated reimbursement from BMS for the manufacture of vectors and associated
payload through development. The total transaction price has been allocated to the
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performance obligations identified based on a relative standalone selling price ("SSP") basis. The Company estimated the SSP of the license after considering
potential future cash flows under the license. The Company then discounted these probability-weighted cash flows to their present value. The Company
estimated the SSP of each of the research and development services and manufacturing services to be provided based on the Company’s estimated cost of
providing the services plus an applicable profit margin commensurate with observable market data for similar services.
All of the clinical and regulatory milestones which have not been met as of period end are fully constrained and are excluded from the transaction price.
As part of its evaluation of the constraint, the Company considered numerous factors, including the fact that achievement of the milestones is outside the
control of the Company and contingent upon the future success of clinical trials, the licensee’s efforts, or the receipt of regulatory approval. Any consideration
related to sales-based milestones (including royalties) will be recognized when the related sales occur as these amounts have been determined to relate
predominantly to the license granted to BMS and therefore are recognized at the later of when the performance obligation is satisfied, or the related sales
occur. The Company re-evaluates the transaction price, including its estimated variable consideration included in the transaction price and all constrained
amounts, at each reporting period and as uncertain events are resolved or other changes in circumstances occur.
Ide-cel research and development services
The Company allocated $40.9 million of the transaction price to the research and development services. The Company satisfied this performance
obligation as the research and development services were performed. The Company determined that the period of performance of the research and
development services was three years through projected initial phase 1 clinical study substantial completion, or through May 2018. The Company recognized
revenue related to research and development services performed using an input method by calculating costs incurred at each period end relative to total costs
expected to be incurred. Although the Company fully satisfied this performance obligation during the second quarter of 2018, any changes to the total
transaction price following the completion of this performance obligation in May 2018 will be allocated to the performance obligations under the arrangement
based on a relative SSP basis and therefore the allocation of any changes to the total transaction price may impact the revenue recognized for this performance
obligation in the period of change.
The following table summarizes the revenue recognized, or revenue adjustment recorded, related to the ide-cel research and development services for the
years ended December 31, 2019, 2018, and 2017 (in thousands):
Ide-cel research and development services revenue
For the years ended December 31,
2019
2018
2017 (1)
$
$
2,264 $
2,264 $
5,751 $
5,751 $
6,208
6,208
(1) The Company adopted Topic 606 effective January 1, 2018 using the modified retrospective transition method. Therefore, amounts disclosed in the table above pertaining to the year ended
December 31, 2017 are presented under previous accounting guidance and are therefore not comparable to the amounts recorded in the current period under Topic 606.
Ide-cel license and manufacturing services
The Company allocated $166.3 million of the transaction price to the combined unit of accounting which consists of the license and manufacture of
vectors and associated payload for incorporation into ide-cel.
The Company accounts for its vector manufacturing services for development in the U.S. and BMS’s U.S. development efforts within the scope of ASC
808 given that both parties are active participants in the activities and both parties are exposed to significant risks and rewards dependent on the commercial
success of the activities. The Company recognizes collaboration revenue for its U.S. manufacturing services by analogy to Topic 606. The portion of BMS’s
U.S. development costs that the Company is responsible for are recognized as a reduction to its collaboration revenues, or, if in excess of such revenues in a
given quarter, the excess is recorded as research and development expense.
Revenue recognition for the combined unit of accounting commenced during the first quarter of 2017. The Company recognizes revenue associated with
the combined unit of accounting using the proportional performance method, as the Company will satisfy this performance obligation as the manufacturing
services are performed through development. In using this method, the Company estimated its development plan for ide-cel, including expected demand from
BMS, and the costs associated with the manufacture of vectors and associated payload for incorporation into ide-cel. On a quarterly basis, the Company
determines the proportion of effort incurred as a percentage of total effort it expects to expend. This ratio is applied to the transaction price, which includes
variable consideration, allocated to the combined performance obligation consisting of the ide-cel license and manufacturing services. Management has
applied significant judgment in the process of developing its
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budget estimates and any changes to these estimates will be recognized in the period in which they change as a cumulative catch up.
The following table summarizes the net collaboration revenue recognized or expense incurred for the joint ide-cel development efforts in the U.S. under
ASC 808, including revenue or expense related to the combined performance obligation for the license and vector manufacturing of ide-cel in the U.S. for the
years ended December 31, 2019, 2018, and 2017 (in thousands):
ASC 808 ide-cel revenue - U.S. (1)
ASC 808 ide-cel research and development expense - U.S. (1)
For the years ended December 31,
2019
2018
2017 (2)
$
$
— $
32,415 $
6,255 $
8,689 $
4,905
3,037
(1) As noted above, the calculation of collaboration revenue or research and development expense to be recognized for joint ide-cel development efforts in the U.S. is performed on a quarterly
basis. The calculation is independent of previous activity, which may result in fluctuations between revenue and expense recognition period over period, depending on the varying extent of
effort performed by each party during the period.
(2) The Company adopted Topic 606 effective January 1, 2018 using the modified retrospective transition method. Therefore, amounts disclosed in the table above pertaining to the year ended
December 31, 2017 are presented under previous accounting guidance and are therefore not comparable to the amounts recorded in the current period under Topic 606.
Revenue related to the combined unit of accounting for the non-US license and vector manufacturing services is accounted for in accordance with Topic
606. The following table summarizes the revenue recognized related to the combined unit of accounting for the ide-cel non-US license and vector
manufacturing services for the years ended December 31, 2019, 2018, and 2017 (in thousands):
For the years ended December 31
2019
2018
2017 (1)
ASC 606 ide-cel license and manufacturing revenue - outside of U.S.
$
25,522 $
35,900 $
10,372
(1) The Company adopted Topic 606 effective January 1, 2018 using the modified retrospective transition method. Therefore, amounts disclosed in the table above pertaining to the year ended
December 31, 2017 are presented under previous accounting guidance and are therefore not comparable to the amounts recorded in the current period under Topic 606.
As of December 31, 2019, the aggregate amount of the transaction price allocated to the combined performance obligation, which consists of the ide-cel
license and manufacturing services, that is unsatisfied, or partially unsatisfied, is $17.8 million, which the Company expects to recognize as revenue as
manufacturing services are provided through the remaining development period which is estimated to be through 2020. As of December 31, 2019 and 2018,
the Company had $8.5 million and $23.0 million, respectively, of deferred revenue associated with the combined performance obligation consisting of the
ide-cel license and manufacturing services.
Accounting Analysis – bb21217
On September 22, 2017, BMS exercised its option to obtain an exclusive worldwide license to develop and commercialize bb21217, the second optioned
product candidate, pursuant to the bb21217 License Agreement entered into by the parties on September 28, 2017. The bb21217 License Agreement is
considered a separate contract for accounting purposes as the option to obtain an exclusive worldwide license to develop and commercialize bb21217, or any
other product candidate, was not considered a material right to BMS at the time the practical expedient was applied. The Company made this evaluation after
considering the significant uncertainty at that time regarding whether any additional product candidates would be identified under the Amended BMS
Collaboration Agreement. In particular, the Company considered that bb21217 had not been formally nominated as a product candidate under the
collaboration at that time, primarily due to a lack of preclinical data as well as uncertainty surrounding the ability to successfully complete various IND-
enabling activities.
At contract inception, the Company concluded that the arrangement contained the following promised goods and services: (i) research and development
services, (ii) a license to the second product candidate, bb21217, and (iii) manufacture of vectors and associated payload for incorporation into bb21217
through development. The Company determined that the manufacture of commercial vector represents an option to acquire additional goods and services that
is not representative of a material right. In addition, at this time BMS has not exercised its option to purchase any commercial vector. Accordingly, the
manufacture of commercial vector is not considered to be a performance obligation at this time.
The Company concluded that the research and development services for the phase 1 clinical trial as originally contemplated by the parties are distinct
from the other promised goods and services under the arrangement given that BMS can benefit from
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the research and development services on their own and such services are distinct within the context of the contract. Thus, such services are considered to be
a separate performance obligation. Similar to ide-cel, the Company concluded that the license to bb21217 is not distinct from the vector manufacturing
services because the manufacturing is essential to the use of the license. Accordingly, these two promised goods and services are considered a single
combined performance obligation.
The agreement to expand the bb21217 phase 1 trial is treated as a contract modification for accounting purposes because the trial expansion is the
addition of a promised good or service that is distinct and the associated consideration reflects the standalone selling price of the additional promised good or
service. It will be accounted for prospectively as a separate contract from the bb21217 License Agreement. The transaction price associated with these
additional patients consists of variable consideration and is based upon an agreed-upon amount per patient which will be recognized as revenue as the patients
are treated. The related performance obligation remained partially unsatisfied as of December 31, 2019.
bb21217 License Agreement transaction price
The following tables summarize the total transaction price, the allocation of the total transaction price to the identified performance obligations under the
arrangement, and the amount of the transaction price unsatisfied as of December 31, 2019 (in thousands):
bb21217 license fee - bb21217 License Agreement
Estimated variable consideration
bb21217 research and development services
bb21217 license and manufacturing services
bb21217 transaction price
as of December 31, 2019
15,000
$
$
26,687
41,687
Allocation of transaction
price to performance
obligations
Transaction price
unsatisfied as of
December 31, 2019
$
$
5,444 $
36,243
41,687 $
—
36,243
36,243
The estimated variable consideration of $26.7 million relates to reimbursement from BMS for the manufacturing services during development. The total
transaction price has been allocated to the performance obligations identified based on a relative SSP basis. The Company estimated the SSP of the license
after considering potential future cash flows under the license. The Company then discounted these probability-weighted cash flows to their present value.
The Company estimated the SSP of each of the research and development services and manufacturing services to be provided based on the Company’s
estimated cost of providing the services plus an applicable profit margin commensurate with observable market data for similar services.
All of the clinical and regulatory milestones are fully constrained and are excluded from the transaction price. As part of its evaluation of the constraint,
the Company considered numerous factors, including the fact that achievement of the milestones is outside the control of the Company and contingent upon
the future success of its clinical trials, the licensee’s efforts, or the receipt of regulatory approval. Any consideration related to sales-based milestones
(including royalties) will be recognized when the related sales occur as these amounts have been determined to relate predominantly to the license granted to
BMS and therefore are recognized at the later of when the performance obligation is satisfied, or the related sales occur. The Company re-evaluates the
transaction price, including its estimated variable consideration included in the transaction price and all constrained amounts, each reporting period and as
uncertain events are resolved or other changes in circumstances occur.
bb21217 research and development services
The Company allocated $5.4 million of the transaction price to the research and development services under the phase 1 trial as originally contemplated.
The Company satisfied this performance obligation as the research and development services were performed. The Company determined that the period of
performance of the research and development services was two years through projected initial phase 1 clinical study substantial completion for these patients,
or through September 2019. The Company recognized revenue related to research and development services performed using an input method by calculating
costs incurred at each period end relative to total costs expected to be incurred.
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Although the Company fully satisfied this performance obligation during the third quarter of 2019, any changes to the total transaction price following
the completion of this performance obligation in September 2019 will be allocated to the performance obligations under the arrangement based on a relative
SSP basis and therefore the allocation of any changes to the total transaction price may impact the revenue recognized for this performance obligation in the
period of change.
The following table summarizes the revenue recognized related to the bb21217 research and development services for the years ended December 31,
2019, 2018, and 2017 (in thousands):
bb21217 research and development services revenue
For the years ended December 31,
2019
2018
2017 (1)
$
$
2,163 $
2,163 $
2,884 $
2,884 $
721
721
(1) The Company adopted Topic 606 effective January 1, 2018 using the modified retrospective transition method. Therefore, amounts disclosed in the table above pertaining to the year ended
December 31, 2017 are presented under previous accounting guidance and are therefore not comparable to the amounts recorded in the current period under Topic 606.
bb21217 license and manufacturing services
The Company will satisfy its performance obligation related to the manufacture of vectors and associated payload for incorporation into bb21217 through
development as the bb21217 manufacturing services are performed. As of December 31, 2019, the manufacturing services for bb21217 had not yet
commenced. Therefore, no amounts have been recognized for the combined performance obligation in the consolidated statements of operations for the years
ended December 31, 2019, 2018, and 2017.
The aggregate amount of the transaction price allocated to the combined performance obligation, which consists of the bb21217 license and
manufacturing services, is $36.2 million. The Company does not expect that recognition will begin in the next twelve months and has therefore classified
deferred revenue associated with the combined performance obligation as deferred revenue, net of current portion on its consolidated balance sheet. The
Company had $9.8 million of remaining deferred revenue as of December 31, 2019 and 2018 associated with the combined performance obligation consisting
of the bb21217 license and manufacturing services.
Contract assets and liabilities – ide-cel and bb21217
The Company receives payments from its collaborative partners based on billing schedules established in each contract. Up-front payments and fees are
recorded as deferred revenue upon receipt or when due until such time as the Company satisfies its performance obligations under these arrangements. A
contract asset is a conditional right to consideration in exchange for goods or services that the Company has transferred to a customer. Amounts are recorded
as accounts receivable when the Company’s right to consideration is unconditional.
The following table presents changes in the balances of the Company’s BMS receivables and contract liabilities during the twelve months ended
December 31, 2019 (in thousands):
Receivables
Contract liabilities:
Deferred revenue
Balance at
December 31, 2018
Additions
Deductions
Balance at
December 31, 2019
6,528 $
11,250 $
(17,378) $
400
34,939 $
10,000 $
(26,674) $
18,265
$
$
The change in the receivables balance for the year ended December 31, 2019 is primarily driven by amounts collected from BMS in the period, offset by
amounts owed to the Company for a development milestone that was achieved in the second quarter of 2019.
The decrease in deferred revenue during the year ended December 31, 2019 is primarily driven by amounts recognized for the combined performance
obligation consisting of the ide-cel license and manufacturing services. During the year ended December 31, 2019, $17.6 million of the deferred revenue
balance at the beginning of the period was released from deferred revenue.
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Regeneron
Regeneron Collaboration Agreement
On August 3, 2018, the Company entered into a Collaboration Agreement (the “Regeneron Collaboration Agreement”) with Regeneron pursuant to
which the parties will apply their respective technology platforms to the discovery, development, and commercialization of novel immune cell therapies for
cancer. On August 24, 2018, following the completion of required regulatory reviews, the Regeneron Collaboration Agreement became effective. Under the
terms of the agreement, the parties will leverage Regeneron’s proprietary platform technologies for the discovery and characterization of fully human
antibodies, as well as T cell receptors directed against tumor-specific proteins and peptides and the Company will contribute its field-leading expertise in gene
therapy.
In accordance with the Regeneron Collaboration Agreement, the parties jointly selected six initial targets and intend to equally share the costs of research
up to the point of submitting an IND application for a potential gene therapy product directed to a particular target. Additional targets may be selected to add
to or replace any of the initial targets during the five-year research collaboration term as agreed to by the parties.
Regeneron will accrue a certain number of option rights exercisable against targets as the parties reach certain milestones under the terms of the
agreement. Upon the acceptance of an IND for the first product candidate directed to a target, Regeneron will have the right to exercise an option for co-
development/co-commercialization of product candidates directed to such target on a worldwide or applicable opt-in territory basis, with certain exceptions.
Where Regeneron chooses to opt-in, the parties will share equally in the costs of development and commercialization, and will share equally in any profits or
losses therefrom in applicable opt-in territories. Outside of the applicable opt-in territories, the target becomes a licensed target and Regeneron would be
eligible to receive, with respect to any resulting product, milestone payments of up to $130.0 million per product and royalties on net sales outside of the
applicable opt-in territories at a rate ranging from the mid-single digits to low-double digits. A target would also become a licensed target in the event
Regeneron does not have an option to such target, or Regeneron does not exercise its option with respect to such target.
Either party may terminate a given research program directed to a particular target for convenience, and the other party may elect to continue such
research program at its expense, receiving applicable cross-licenses. The terminating party will receive licensed product royalties and milestone payments on
the potential applicable gene therapy products. Where the Company terminates a given research program for convenience, and Regeneron elects to continue
such research program, the parties will enter into a transitional services agreement. Under certain conditions, following its opt-in, Regeneron may terminate a
given collaboration program and the Company may elect to continue the development and commercialization of the applicable potential gene therapy
products as licensed products.
Regeneron Share Purchase Agreement
A Share Purchase Agreement (“SPA”) was entered into by the parties on August 3, 2018. On August 24, 2018, the closing date of the transaction, the
Company issued Regeneron 0.4 million shares of the Company’s common stock, subject to certain restrictions, for $238.10 per share, or $100.0 million in the
aggregate. The purchase price represents $63.0 million worth of common stock plus a $37.0 million premium, which represents a collaboration research
advancement, or credit to be applied to Regeneron’s initial 50 percent funding obligation for collaboration research, after which the collaborators will
continue to fund ongoing research equally. The collaboration research advancement only applies to pre-IND research activities and is not refundable or
creditable against post-IND research activities for any programs where Regeneron exercises their opt-in rights.
Accounting analysis – Regeneron
At the commencement of the arrangement, two units of accounting were identified, which are the issuance of 0.4 million shares of the Company’s
common stock and joint research activities during the five year research collaboration term. The Company determined the total transaction price to be $100.0
million, which comprises $54.5 million attributed to the equity sold to Regeneron and $45.5 million attributed to the joint research activities. In determining
the fair value of the common stock at closing, the Company considered the closing price of the common stock on the closing date of the transaction and
included a lack of marketability discount because Regeneron received shares subject to certain restrictions.
The Company analyzed the joint research activities to assess whether they fall within the scope of ASC 808, and will reassess this throughout the life of
the arrangement based on changes in the roles and responsibilities of the parties. Based on the terms of the arrangement as outlined above, for the
collaboration research performed prior to submission of an IND application for a potential gene therapy product, both parties are deemed to be active
participants in the collaboration. Both
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parties are performing research and development activities and will share equally in these costs through IND. Additionally, Regeneron and the Company are
exposed to significant risks and rewards dependent on the commercial success of any product candidates that may result from the collaboration. As such, the
collaboration arrangement is deemed to be within the scope of ASC 808.
The $45.5 million attributed to the joint research activities includes the $37.0 million creditable against amounts owed to the Company by Regeneron.
The collaboration research advancement will be reduced over time for amounts due to the Company by Regeneron as a result of the parties agreeing to share
in the costs of collaboration research equally. The remainder of the amount attributed to the joint research activities will be recognized over the five-year
research collaboration term.
Consistent with its collaboration accounting policy, the Company will recognize collaboration revenue or research and development expense related to
the joint research activities in future periods depending on the amounts incurred by each party in a given reporting period. That is, if the Company’s research
costs incurred exceed those research costs incurred by Regeneron in a given quarter, the Company will record collaboration revenue and reduce the original
$37.0 million advance by the amount due from Regeneron until such advancement is fully utilized, after which the Company would record an amount due
from Regeneron. If Regeneron’s research costs incurred exceed those research costs incurred by the Company in a given quarter, the Company will record
research and development expense and record a liability for the amount due to Regeneron. As of December 31, 2019 and 2018, the Company has $38.2
million and $44.0 million, respectively, of the amount attributed to the joint research activities remaining to be recognized which is classified as collaboration
research advancement, current portion and collaboration research advancement, net of current portion on the consolidated balance sheet.
The Company recognized $5.7 million of collaboration revenue from the Regeneron Collaboration Agreement during the year ended December 31,
2019. The Company recognized $1.6 million of collaboration revenue from the Regeneron Collaboration Agreement during the year ended December 31,
2018.
12. License and royalty revenue
Novartis Pharma AG
On April 26, 2017, the Company entered into a worldwide license agreement with Novartis. Under the terms of the agreement, Novartis non-exclusively
licensed certain patent rights related to lentiviral vector technology to develop and commercialize CAR T cell therapies for oncology, including Kymriah
(formerly known as CTL19), Novartis’s anti-CD19 CAR T therapy. At contract inception, financial terms of the agreement included a $7.5 million payment
upon execution, $7.5 million of potential future milestone payments associated with regulatory approvals, and $1.1 million of payments for each subsequently
licensed product, as well as low single digit royalty payments on net sales of covered products. In August 2017, Novartis received FDA approval for Kymriah
and paid the Company $2.5 million as a result of the achievement of a related milestone.
Under Topic 606, the Company identified only one performance obligation, consisting of the license, which was satisfied at contract inception.
Accordingly, the nonrefundable license fee of $7.5 million was recognized as revenue upon contract execution in the second quarter of 2017 and a $2.5
million regulatory milestone was recognized as revenue upon milestone achievement, also in the second quarter of 2017, given there were no other unsatisfied
performance obligations in the arrangement. Regulatory approvals are not within the Company’s control or the licensee’s control and are generally not
considered probable of being achieved until those approvals are received. As such, these milestones are constrained until such time as regulatory approvals
are received. Because the single performance obligation was previously satisfied, all regulatory milestones will be recognized as revenue in full in the period
in which the associated milestone is achieved.
The Company began recognizing royalty revenue from sales of Kymriah in the fourth quarter of 2017. As the license was deemed to be the predominant
item to which the royalties relate, the Company recognizes royalties from the sales of Kymriah when the related sales occur. For the year ended December 31,
2019, the Company recognized royalty revenue of $8.2 million and the cost of license and royalty revenue was $3.0 million. During the year ended
December 31, 2018, the Company recognized royalty revenue of $2.2 million and the cost of license and royalty revenue was $0.9 million.
Orchard Therapeutics Limited (assigned by GlaxoSmithKline Intellectual Property Development Limited)
On April 28, 2017, the Company entered into a worldwide license agreement with GlaxoSmithKline Intellectual Property Development Limited
(“GSK”). Under the terms of the agreement, GSK non-exclusively licensed certain patent rights related to lentiviral vector technology to develop and
commercialize gene therapies for Wiscott-Aldrich syndrome and metachromatic leukodystrophy, two rare genetic diseases. Financial terms of the agreement
include a nonrefundable upfront payment of $3.0
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million as well as $1.3 million of potential milestone payments for each marketing authorization for each indication in any country as well as low single digit
royalties on net sales of covered products. This license agreement was assigned by GSK to Orchard Therapeutics Limited, effective as of April 11, 2018.
Under Topic 606, the Company identified only one performance obligation, consisting of the license, which was satisfied at contract inception.
Accordingly, the entire nonrefundable license fee of $3.0 million was recognized as revenue upon contract execution in the second quarter of 2017 given there
were no other unsatisfied performance obligations in the arrangement. Regulatory approvals are not within the Company’s control or the licensee’s control
and are generally not considered probable of being achieved until those approvals are received. As such, these milestones are constrained until such time as
regulatory approvals are received. There was no revenue recognized under this arrangement in the years ended December 31, 2019 and 2018. Because the
single performance obligation was previously satisfied, all regulatory milestones will be recognized as revenue in full in the period in which the associated
milestone is achieved.
Given there was no revenue recognized under this arrangement in the years ended December 31, 2019 and 2018, there was no associated cost of license
and royalty revenue.
The Company adopted Topic 606 effective January 1, 2018 using the modified retrospective transition method. Therefore, amounts disclosed pertaining
to prior periods are presented under previous accounting guidance.
13. Intangible assets
Intangible assets, net of accumulated amortization, are summarized as follows (in thousands):
As of December 31,
2019
Accumulated
amortization
Cost
Net
Cost
As of December 31,
2018
Accumulated
amortization
Net
Developed technology
In-licensed rights
Total
$
$
30,100 $
(20,694) $
9,406 $
30,100 $
(16,931) $
13,169
5,224
(304)
4,920
—
—
—
35,324 $
(20,998) $
14,326 $
30,100 $
(16,931) $
13,169
Amortization expense for intangible assets was $4.1 million, $3.8 million, and $3.8 million for each of the years ended December 31, 2019, 2018 and
2017, respectively.
Developed technology
The Company's developed technology was obtained through its acquisition of Pregenen, a privately-held biotechnology company. As a result, the
Company obtained gene editing and cell signaling technology with a broad range of potential therapeutic applications. The Company considered the
intangible asset acquired to be developed technology, as at the date of the acquisition it could be used the way it was intended to be used in certain ongoing
research and development activities. The gene editing platform intangible asset is being amortized on a straight-line basis over its expected useful life of
approximately eight years from the date of the acquisition. Please refer to Note 4, Fair value measurements, and Note 9, Commitments and contingencies, for
further information.
In-licensed rights
In-licensed rights consist of capitalized milestone payments made to third parties upon receiving regulatory approval of ZYNTEGLO in the EU. The in-
licensed rights are being amortized on a straight-line basis over the remaining life of the related patents of approximately ten years, as the life of the related
patents reflects the expected time period that the Company will benefit from the in-licensed rights.
The following table summarizes the estimated future amortization for intangible assets for the next five years (in thousands):
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2020
2021
2022
2023
2024
Total
As of December 31, 2019
4,285
4,285
2,404
522
522
12,018
$
$
14. Stock-based compensation
On June 3, 2013, the Company’s board of directors adopted its 2013 Stock Option and Incentive Plan (“2013 Plan”), which was subsequently approved
by 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 Grant
Plan (“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 the
Company’s employees, members of the board of directors, and consultants of the Company. The Company initially reserved 1.0 million shares of its common
stock 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 2013
Plan will automatically increase each January 1, beginning on January 1, 2014, by four percent of the outstanding number of shares of common stock on the
immediately preceding December 31 or such lesser number of shares as determined by the Company’s compensation committee. In January 2019 and January
2020, the number of common stock available for issuance under the 2013 Plan was increased by approximately 2.2 million and 2.2 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 and
Restated 2002 Employee, Director and Consultant Stock Plan (“2002 Plan”), at the time of adoption of the 2013 Plan remain outstanding and effective. The
shares of common stock underlying any awards that are forfeited, canceled, repurchased, expired or are otherwise terminated (other than by exercise) under
the 2002 Plan and 2010 Plan are added to the shares of common stock available for issuance under the 2013 Plan. As of December 31, 2019, the total number
of common stock that may be issued under all plans is 2.2 million.
The Company does not currently hold any treasury shares. Upon stock option exercise, the Company issues new shares and delivers them to the
participant.
Stock-based compensation expense
The Company recognized stock-based compensation expense totaling $160.6 million, $110.8 million, and $53.3 million during the years ended
December 31, 2019, 2018 and 2017, respectively. Stock-based compensation expense recognized by award type is as follows (in thousands):
Year Ended December 31,
Stock options
Restricted stock units
Employee stock purchase plan
2019
2018
2017
$
$
95,668 $
83,449 $
63,580
1,381
26,628
759
160,629 $
110,836 $
42,262
10,495
525
53,282
Stock-based compensation expense by classification included within the consolidated statements of operations and comprehensive loss was as follows (in
thousands):
Research and development
Selling, general and administrative
Year Ended December 31,
2019
2018
2017
$
$
80,139 $
54,422 $
80,490
56,414
160,629 $
110,836 $
26,633
26,649
53,282
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In February 2018, the Company issued restricted stock units with service and performance conditions to employees, approximately 0.2 million of which
are outstanding as of December 31, 2019. Vesting of these awards is contingent on the occurrence of a certain regulatory milestone event which was achieved
in June 2019 and fulfillment of any remaining service condition. The Company began recognizing expense for these awards in the second quarter of 2019
when achievement of the regulatory milestone was deemed probable. The Company recognized $20.1 million of expense related to these awards in the second
quarter of 2019 and will continue to recognize stock-based compensation expense related to these awards through June 2021 when the final tranche of the
awards vest.
As of December 31, 2019, the Company had $208.1 million, $105.8 million and less than $0.1 million of unrecognized compensation expense related to
unvested stock options, restricted stock units, and the employee stock purchase plan, respectively, that is expected to be recognized over a weighted-average
period of 2.5 years, 2.6 years, and 0.1 years, respectively.
Stock options
The fair value of each option issued to employees was estimated at the date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions:
Expected volatility
Expected term (in years)
Risk-free interest rate
Expected dividend yield
Year Ended December 31,
2019
2018
2017
70.7 %
6.0
2.3 %
0.0 %
75.5 %
6.0
2.7 %
0.0 %
78.1 %
6.0
2.1 %
0.0 %
The following table summarizes the stock option activity under the Company’s equity awards plans:
Outstanding at December 31, 2018
Granted
Exercised
Canceled or forfeited
Outstanding at December 31, 2019
Exercisable at December 31, 2019
Vested and expected to vest at December 31, 2019
Shares
(in thousands)
Weighted-
average
exercise price
per share
Weighted-
average
contractual
life
(in years)
Aggregate
intrinsic
value (a)
(in thousands)
4,643 $
1,594 $
(354) $
(400) $
5,483 $
2,853 $
5,483 $
108.56
129.76
50.36
138.61
116.30
94.77
116.30
7.3 $
6.0 $
7.3 $
68,511
64,899
68,511
(a) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of the common stock
for the options that were in the money at December 31, 2019.
The weighted-average fair values of options granted during 2019, 2018 and 2017 was $83.44, $125.12, and $62.03, respectively. The intrinsic value of
options exercised during the years ended December 31, 2019, 2018, and 2017, was $29.0 million, $73.1 million and $91.0 million, respectively.
Restricted stock units
The following table summarizes the restricted stock unit activity under the Company’s equity award plans:
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Unvested balance at December 31, 2018
Granted
Vested
Forfeited
Unvested balance at December 31, 2019
Shares
(in thousands)
Weighted-average
grant date
fair value
931 $
570
(251)
(123)
1,127 $
155.99
128.87
138.93
155.68
146.10
The intrinsic value of restricted stock units vested during the years ended December 31, 2019, 2018, and 2017 was $28.4 million, $25.5 million and $8.1
million, respectively.
Employee Stock Purchase Plan
On June 3, 2013, the Company’s board of directors adopted its 2013 Employee Stock Purchase Plan (“2013 ESPP”), which was subsequently approved
by its stockholders and became effective upon the closing of the Company’s IPO on June 24, 2013. The 2013 ESPP authorizes the initial issuance of up to a
total of 0.2 million shares of the Company’s common stock to participating employees. During each of the years ended December 31, 2019 and 2018, less
than 0.1 million shares of common stock were issued under the 2013 ESPP, respectively.
15. 401(k) Savings plan
In 1997, the Company established a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code (“the 401(k) Plan”). The
401(k) Plan covers all employees who meet defined minimum age and service requirements, and allows participants to defer a portion of their annual
compensation on a pretax basis. In March 2020, the Company expects to make matching contributions of approximately $4.6 million related to employee
contributions made during 2019. In February 2019, the Company made $2.4 million of matching contributions related to employee contributions made during
2018. The match contribution is included in accrued expenses and other current liabilities as of December 31, 2019 and 2018. Expense related to the 401(k)
Plan totaled $4.6 million, $2.4 million, $1.5 million for the years ended December 31, 2019, 2018, and 2017, respectively.
16. Income taxes
The components of loss before income taxes were as follows (in thousands):
U.S.
Foreign
Total
The provision for (benefit from) income taxes were as follows (in thousands):
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
$
$
$
Year ended December 31,
2019
(649,172) $
2018
(440,473) $
(140,981)
(114,965)
2017
(266,236)
(69,197)
(790,153) $
(555,438) $
(335,433)
Year ended December 31,
2019
2018
2017
— $
7
612
(966)
(198)
—
— $
324
222
(307)
(52)
—
—
115
95
—
—
—
210
Total income tax (benefit) expense
$
(545) $
187 $
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Table of Contents
A reconciliation of income tax provision (benefit) computed at the statutory federal income tax rate to the Company’s effective income tax rate
(provision) benefit as reflected in the financial statements is as follows:
Federal income tax expense at statutory rate
State income tax, net of federal benefit
Permanent differences
Research and development credit
Foreign differential
Federal tax rate change
Other
Change in valuation allowance
Effective income tax rate benefit (expense)
Year ended December 31,
2019
2018
2017
21.0 %
3.7 %
(1.1) %
5.4 %
(3.7) %
— %
0.4 %
(25.6) %
0.1 %
21.0 %
5.1 %
0.9 %
6.5 %
(4.4) %
0.1 %
(0.1) %
(29.1) %
— %
34.0 %
4.3 %
2.7 %
12.8 %
(6.9) %
(31.6) %
(0.8) %
(14.6) %
(0.1) %
For the years ended December 31, 2019, 2018 and 2017, the Company recognized an income tax (benefit) expense of $(0.5) million or 0.1%, $0.2
million or 0.0%, and $0.2 million or (0.1)%, respectively. The Company did not recognize any significant tax expense for the years ended December 31,
2019, 2018, or 2017 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. The
significant components of the Company’s deferred tax assets and liabilities are composed of the following (in thousands):
Deferred tax assets:
U.S. net operating loss carryforwards (federal and state)
Tax credit carryforwards (federal and state)
Capitalized license fees and research and development expenses
60 Binney Street lease
Deferred revenue
Stock-based compensation
Lease liabilities
Accruals and other
Total deferred tax assets
Intangible assets
Right-of-use assets
Fixed assets
Less valuation allowance
Net deferred taxes
Year ended December 31,
2019
2018
$
439,839 $
213,810
16,295
—
15,119
46,111
52,631
15,432
799,237
(2,518)
(49,480)
(2,670)
(744,569)
$
— $
298,701
167,517
18,083
42,059
21,442
31,858
—
8,886
588,546
(3,579)
—
(41,472)
(543,495)
—
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.
Due to the uncertainty surrounding the realization of the favorable tax attributes in future tax returns, the Company has recorded a full valuation allowance
against the Company’s otherwise recognizable net deferred tax assets. The valuation allowance increased on a net basis by approximately $201.1 million
during the year ended December 31, 2019 due primarily to net operating losses, tax credit carryforwards, and stock-based compensation. Effective January 1,
2019, the Company adopted ASU 2016-02, which resulted in the de-recognition of the 60 Binney Street lease and related fixed assets and the recognition of
lease liabilities and right-of-use assets. The Company adjusted its deferred tax balances as a result of the adoption. Please refer to Note 2, Summary of
significant accounting policies and basis of presentation, and Note 8, Leases, for further information.
As of December 31, 2019, 2018 and 2017, the Company had U.S. federal net operating loss carryforwards of approximately $1.62 billion, $1.10 billion,
and $716.1 million, respectively, which may be available to offset future income tax
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liabilities. Of the amount as of December 31, 2019, $913.8 million will carryforward indefinitely while $711.0 million will expire at various dates through
2037. As of December 31, 2019, 2018 and 2017, the Company also had U.S. state net operating loss carryforwards of approximately $1.56 billion, $1.08
billion, and $692.9 million, respectively, which may be available to offset future income tax liabilities and expire at various dates through 2039. At December
31, 2016, $195.4 million and $195.4 million of federal and state net operating losses, respectively, related to excess equity-based compensation tax
deductions, the benefits for which will be recorded to additional paid-in capital when recognized through a reduction of cash taxes paid. As a result of
adopting FASB ASU 2016-09 in the first quarter of 2017, the Company recorded a cumulative-effect adjustment to retained earnings of $76.7 million to
record a net deferred tax asset relative to these tax attribute carryforwards. The deferred tax asset was offset by a corresponding adjustment to the valuation
allowance.
As of December 31, 2019, 2018 and 2017, the Company had federal research and development and orphan drug tax credit carryforwards of
approximately $203.1 million, $156.2 million, and $124.1 million, respectively, available to reduce future tax liabilities which expire at various dates through
2039. As of December 31, 2019, 2018 and 2017, the Company had state credit carryforwards of approximately $13.6 million, $14.3 million, and $9.1 million,
respectively, available to reduce future tax liabilities which expire at various dates through 2034. During the fourth quarter of 2018, the Company completed
an analysis of prior year estimates of U.S. research and development and orphan drug tax credits for the years 2013 through 2017. The analysis resulted in an
immaterial adjustment to the Company's income tax benefit, which was offset by an adjustment to the valuation allowance. An analysis of the U.S. research
and development and orphan drug credits has not been completed for 2018 and 2019.
Under the provisions of the Internal Revenue Code, the net operating loss and tax credit carryforwards are subject to review and possible adjustment by
the Internal Revenue Service and state tax authorities. Net operating loss and tax credit carryforwards may become subject to an annual limitation in the event
of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50 percent, as defined under Sections
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 be utilized
annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately
prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has completed several
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 or one of its subsidiaries files income tax returns in the United States, and various state and foreign jurisdictions. The federal, state and
foreign income tax returns are generally subject to tax examinations for the tax years ended December 31, 2016 through December 31, 2018. To the extent the
Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue
Service, or state or foreign tax authorities to the extent utilized in a future period.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Balance as of December 31, 2017
Increases for tax positions related to current period
Increases for tax positions related to prior periods
Balance as of December 31, 2018
Increases for tax positions related to current period
Increases for tax positions related to prior periods
Balance as of December 31, 2019
$
Unrecognized tax
benefits
—
3,370
8,725
12,095
3,554
296
15,945
The unrecognized tax benefits at December 31, 2019, if recognized, would not affect the Company’s effective tax rate due to its full valuation allowance
position. The Company does not anticipate that the amount of existing unrecognized tax benefits will significantly increase or decrease within the next 12
months. The Company has elected to include interest and penalties related to uncertain tax positions as a component of its provision for income taxes. For the
years ended December 31, 2019, 2018 and 2017, the Company’s accrued interest and penalties related to uncertain tax positions were not material.
17. Net loss per share
The following common stock equivalents were excluded from the calculation of diluted net loss per share for the periods indicated because including
them would have had an anti-dilutive effect (in thousands):
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Outstanding stock options
Restricted stock units
ESPP shares
Year ended December 31, 2019
2019
2018
2017
5,483
1,127
19
6,629
4,643
931
10
5,584
3,755
477
9
4,241
18. Selected quarterly financial data (unaudited)
The following table contains quarterly financial information for 2019 and 2018. The Company believes that the following information reflects all normal
recurring adjustments necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily
indicative of results for any future period.
Total revenues
Total operating expenses
Loss from operations
Net loss
Net loss per share applicable to common
stockholders - basic and diluted
Total revenues
Total operating expenses
Loss from operations
Net loss
Net loss per share applicable to common
stockholders - basic and diluted
First
quarter
Second
quarter
2019
Third
quarter
Fourth
quarter
(in thousands, except per share data)
12,471 $
13,296 $
8,910 $
9,997 $
183,645
(171,174)
(164,446)
215,998
(202,702)
(195,782)
219,326
(210,416)
(206,033)
240,531
(230,534)
(223,347)
Total
44,674
859,500
(814,826)
(789,608)
(2.99) $
(3.55) $
(3.73) $
(4.04) $
(14.31)
First
quarter
Second
quarter
2018
Third
quarter
Fourth
quarter
(in thousands, except per share data)
15,957 $
7,851 $
11,528 $
19,243 $
132,586
(116,629)
(115,126)
156,465
(148,614)
(145,996)
161,347
(149,819)
(145,480)
176,204
(156,961)
(149,023)
Total
54,579
626,602
(572,023)
(555,625)
(2.31) $
(2.91) $
(2.73) $
(2.72) $
(10.68)
$
$
$
$
F-44
Table of Contents
Exhibit
Number
2.1
3.1
3.2
3.3
4.1
4.2
10.1#
10.2#
10.3#
10.4
10.5†
10.6†
10.7†
10.8†
10.9†
10.10†
10.11†
10.12†
10.13†
10.14†
10.15
10.16
Exhibit Index
Exhibit Title
Stock Purchase Agreement by and between the Registrant and Precision
Genome Engineering, Inc.
Amended and Restated Certificate of Incorporation of the Registrant
Amended and Restated By-laws of the Registrant
Amendment No. 1 to Amended and Restated By-laws of the Registrant
Form
8-K
8-K
8-K
8-K
Specimen Common Stock Certificate
Description of the Registrant's Securities
Second Amended and Restated 2002 Employee, Director and Consultant
Stock Plan, as amended, and forms of award agreement thereunder
2010 Stock Option and Grant Plan, as amended, and forms of award
agreement thereunder
2013 Stock Option and Incentive Plan and forms of award agreement
thereunder
Form of Indemnification Agreement between the Registrant and each of its
Executive Officers and Directors
Patent License Agreement, dated December 11, 1996, by and between the
Registrant (formerly known as Genetix Pharmaceuticals Inc., successor-in-
interest to Innogene Pharmaceuticals, Inc.) and Massachusetts Institute of
Technology, as amended
Fourth Amendment to Patent License Agreement, dated October 28, 2016, by
and between the Registrant and Massachusetts Institute of Technology
Patent and Know-How License Agreement No. 07554F30, dated May 14,
2009, by and between the Registrant (formerly known as Genetix
Pharmaceuticals Inc.) and INSERM-TRANSFERT, as amended
License Agreement, dated September 13, 2011, by and between the
Registrant and Institut Pasteur, as amended
Amendment No. 3 to License Agreement, dated September 10, 2013, by and
between the Registrant and Institut Pasteur
Amendment No. 4 to License Agreement, dated April 1, 2015, by and
between the Registrant and Institut Pasteur
License Agreement, dated December 7, 2011, by and between the Registrant
and Research Development Foundation
Novation Agreement, dated April 2, 2012, by and between the Registrant and
The Board of Trustees of the Leland Stanford Junior University
Master Collaboration Agreement by and between the Registrant and Celgene
Corporation, dated March 19, 2013
Amended and Restated Master Collaboration Agreement by and between the
Registrant and Celgene Corporation, dated June 3, 2015
Amendment No. 1 to Amended and Restated Master Collaboration
Agreement by and between the Registrant and Celgene Corporation, dated
February 17, 2016
Amendment No. 2 to Amended and Restated Master Collaboration
Agreement by and between the Registrant and Celgene Corporation, dated
September 28, 2017
Incorporated by Reference
File no.
001-35966
Exhibit
2.1
Filing Date
June 30, 2014
001-35966
001-35966
001-35966
3.1
3.2
3.1
4.1
—
June 24, 2013
June 24, 2013
February 11, 2016
June 4, 2013
Filed herewith
May 14, 2013
S-1/A
333-188605
—
333-188605
10.1
—
S-1
S-1
333-188605
10.2
May 14, 2013
S-1/A
333-188605
10.3
June 4, 2013
S-1
S-1
333-188605
10.4
May 14, 2013
333-188605
10.6
May 14, 2013
10-K
001-35966
10.7
February 22, 2017
S-1
333-188605
10.7
May 14, 2013
S-1
333-188605
10.8
May 14, 2013
10-Q
001-35966
10-Q
001-35966
10.2
10.1
November 14, 2013
May 6, 2015
S-1
S-1
S-1
333-188605
10.9
May 14, 2013
333-188605
10.1
May 14, 2013
333-188605
10.11
May 14, 2013
10-Q
001-35966
10.14
August 7, 2015
10-Q
001-35966
10.15
May 4, 2016
10-Q
001-35966
10.17
November 1, 2017
Table of Contents
Exhibit
Number
10.17†
10.18†
10.19†
10.20†
10.21†
10.22†
10.23†
10.24††
10.25††
10.26††
10.27#
10.28#
10.29#
10.30#
10.31#
10.32#
10.33#
10.34#
10.35#
10.36#
10.37#
10.38#
10.39#
10.40†
Exhibit Title
Amended and Restated License Agreement by and between the Registrant
and Celgene Corporation, dated February 16, 2016
Amended and Restated License Agreement by and between the Registrant
and Celgene Corporation, dated September 28, 2017
Amended and Restated Co-Development, Co-Promote and Profit Share
Agreement by and between the Registrant and Celgene Corporation and
Celgene European Investment Company LLC, dated March 26, 2018
License Agreement by and between the Registrant and Biogen Idec MA Inc.,
dated August 13, 2014
Letter Agreement by and between the Registrant and Biogen MA Inc., dated
September 29, 2017
Exclusive Patent License Agreement by and between the Registrant and the
National Institutes of Health, dated August 31, 2015
License Agreement, dated December 23, 2015, by and between the
Registrant and SIRION Biotech GmbH
Toll Manufacturing and Service Agreement, dated November 18, 2016 by
and between the Registrant and APCETH Biopharma GmbH, as amended
Clinical and Commercial Supply Agreement – Viral Vector Product, dated
November 27, 2017, by and between the Registrant and SAFC Carlsbad, Inc.,
as amended
Amendment No. 2 to Clinical and Commercial Supply Agreement Viral
Vector Product by and between bluebird bio (Switzerland) GmbH and SAFC
Carlsbad, Inc.
Amended and Restated Employment Agreement by and between the
Registrant and Nick Leschly
Amended and Restated Employment Agreement by and between the
Registrant and Jeffrey T. Walsh
Amended and Restated Employment Agreement by and between the
Registrant and David M. Davidson, M.D.
Employment Agreement, dated February 3, 2014, by and between the
Registrant and Jason F. Cole
Amendment to Employment Agreement, dated March 7, 2016, by and
between the Registrant and Jason F. Cole
Amendment No. 2 to Employment Agreement, dated November 3, 2016, by
and between the Registrant and Jason F. Cole
Employment Agreement, dated May 30, 2015, by and between the Registrant
and Philip D. Gregory
Amendment to Employment Agreement, dated November 3, 2016, by and
between the Registrant and Philip D. Gregory
2013 Employee Stock Purchase Plan
First Amendment of the Bluebird Bio, Inc. 2013 Employee Stock Purchase
Plan
Offer Letter, dated November 16, 2017, by and between the Registrant and
Kory Wentworth
Executive Cash Incentive Bonus Plan
Employment Agreement, dated December 18, 2018, by and between the
Registrant and William (“Chip”) Baird
Lease, dated September 21, 2015, by and between the Registrant and ARE-
MA Region No. 40 LLC
Incorporated by Reference
Form
10-Q/A
File no.
001-35966
Exhibit
10.16
Filing Date
November 2, 2016
10-Q
001-35966
10.19
November 1, 2017
10-Q
001-35966
10.2
May 2, 2018
10-Q/A
001-35966
10.17
November 2, 2016
10-Q
001-35966
10.21
November 1, 2017
10-Q/A
001-35966
10.18
November 2, 2016
10-K
001-35966
10.23
February 21, 2019
10-Q
001-35966
10.24
August 1, 2019
10-Q
001-35966
10.25
August 1, 2019
8-K
001-35966
10.1
January 21, 2020
S-1/A
333-188605
10.12
June 4, 2013
S-1/A
333-188605
10.13
June 4, 2013
S-1/A
333-188605
10.15
June 4, 2013
10-Q
001-35966
10.18
May 13, 2014
10-Q
001-35966
10.25
May 4, 2016
10-K
001-35966
10.27
February 22, 2017
10-Q
001-35966
10.21
August 7, 2015
10-K
001-35966
10.31
February 22, 2017
S-1/A
10-K
333-188605
001-35966
10.17
10.38
June 4, 2013
February 21, 2018
10-K
001-35966
10.39
February 21, 2018
S-1
8-K
333-188605
001-35966
10.18
10.1
May 14, 2013
February 11, 2019
10-Q
001-35966
10.3
November 5, 2015
Table of Contents
Exhibit
Number
10.41
10.42
10.43††
10.44
21.1
23.1
31.1
31.2
32.1
101.INS
Exhibit Title
First Amendment to Lease, dated June 21, 2016, by and between the
Registrant and ARE-MA Region No. 40 LLC
Second Amendment to Lease, dated November 14, 2016, by and between the
Registrant and ARE-MA Region No. 40 LLC
Sublease, dated April 16, 2019, by and between the Registrant and Aventis
Inc.
Amendment to Sublease, dated April 19, 2019, by and between the Registrant
and Aventis Inc.
Subsidiaries of the Registrant
Consent of Ernst & Young LLP
Incorporated by Reference
Form
10-Q
File no.
001-35966
Exhibit
10.37
Filing Date
August 3, 2016
10-K
001-35966
10.44
February 22, 2017
10-Q
001-35966
10.42
August 1, 2019
10-Q
001-35966
10.43
August 1, 2019
—
—
—
—
—
—
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or
Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or
Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Executive Officer and Principal Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its
XBRL tags are embedded within the Inline XBRL document)
—
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—
—
—
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Furnished herewith
101.SCH Inline XBRL Taxonomy Extension Schema Document.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (formatted as Inline XBRL with applicable
taxonomy extension information contained in Exhibits 101)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
______________
† Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment and this exhibit has been submitted
separately to the SEC.
†† Portions of this exhibit (indicated by asterisks) have been omitted in accordance with the rules of the SEC.
# Indicates a management contract or any compensatory plan, contract or arrangement.
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SIGNATURES
bluebird bio, Inc.
By:
/s/ Nick Leschly
Nick Leschly
President, Chief Executive Officer and Director
SIGNATURES AND POWER OF ATTORNEY
We, the undersigned directors and officers of bluebird bio, Inc. (the “Company”), hereby severally constitute and appoint Nick Leschly and Chip Baird,
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 the capacities
indicated below, any and all amendments to this Annual Report on Form 10-K, and to file or cause to be filed the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys, and each of them, full power and authority 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 as each 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, shall do 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 the
registrant and in the capacities and on the dates indicated.
Name
Title
/s/ Nick Leschly
President, Chief Executive Officer and Director
Nick Leschly
/s/ Chip Baird
Chip Baird
/s/ Kory Wentworth
Kory Wentworth
/s/ Daniel S. Lynch
Daniel S. Lynch
(Principal Executive Officer and Duly Authorized Officer)
Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer)
Vice President, Finance and Treasurer
(Principal Accounting Officer)
Director
/s/ John O. Agwunobi, M.D.
Director
John O. Agwunobi, M.D.
/s/ Wendy L. Dixon, Ph.D.
Director
Wendy L. Dixon, Ph.D.
/s/ Douglas A. Melton, Ph.D.
Director
Douglas A. Melton, Ph.D.
/s/ David P. Schenkein, M.D.
Director
David P. Schenkein, M.D.
/s/ William R. Sellers, M.D.
Director
William R. Sellers, M.D.
/s/ Mark Vachon
Mark Vachon
Director
Date
February 18, 2020
February 18, 2020
February 18, 2020
February 18, 2020
February 18, 2020
February 18, 2020
February 18, 2020
February 18, 2020
February 18, 2020
February 18, 2020
Description of the Company’s Capital Stock
Exhibit 4.4
The following is a description of the authorized capital stock of bluebird bio, Inc., a Delaware corporation (“we”, “us”, “our”, or the
“Company”). This summary is not complete and is subject to and qualified by reference to the actual provisions of the Company’s Amended
and Restated Certificate of Incorporation (the “Charter”) and Amended and Restated By-laws (the “By-laws”), both of which have been filed
with the Securities and Exchange Commission and are incorporated by reference herein.
Common Stock
Pursuant to the Company’s Charter, the Company is authorized to issue up to one hundred twenty-five million (125,000,000) shares of
common stock, par value $0.01 per share (the “Common Stock”). The Common Stock is registered under Section 12 of the Securities Exchange
Act of 1934, as amended. As of February 13, 2020, there were 55,611,565 shares of our Common Stock outstanding.
The Common Stock is listed on The Nasdaq Global Market under the symbol “BLUE”.
Holders of our Common Stock are entitled to one vote for each share of Common Stock held of record for the election of directors and
on all matters submitted to a vote of stockholders. Holders of our Common Stock are entitled to receive dividends ratably, if any, as may be
declared by our board of directors out of legally available funds, subject to any preferential dividend rights of any preferred stock then
outstanding. Upon our dissolution, liquidation or winding up, holders of our common stock are entitled to share ratably in our net assets legally
available after the payment of all our debts and other liabilities, subject to the preferential rights of any preferred stock then outstanding.
Holders of our common stock have no preemptive, subscription, redemption or conversion rights and there are no sinking fund provisions
applicable to our common stock. The rights, preferences and privileges of holders of common stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future. Except as described
below in “Anti-takeover Effects of Delaware Law, our Charter and our By-laws,” a majority vote of common stockholders is generally required
to take action under our Charter and By-laws.
Preferred Stock
Pursuant to the Company’s Charter, our board of directors has the authority, without further action by the stockholders (unless such
stockholder action is required by applicable law or Nasdaq rules), to designate and issue up to 5,000,000 shares of preferred stock in one or
more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences and privileges
of the shares of each wholly unissued series, and any qualifications, limitations or restrictions thereon, and to increase or decrease the number
of shares of any such series, but not below the number of shares of such series then outstanding. Currently, there are no shares of preferred
stock outstanding.
Though the actual effect of any such issuance on the rights of the holders of common stock will not be known until such time as our
board of directors determines the specific rights of the holders of preferred stock, the potential effects of such an issuance include:
•
•
•
diluting the voting power of the holders of common stock;
reducing the likelihood that holders of common stock will receive dividend payments;
reducing the likelihood that holders of common stock will receive payments in the event of our liquidation, dissolution, or winding up;
and
1
•
delaying, deterring or preventing a change in control or other corporate takeover.
We will fix the rights, preferences and privileges of each series of preferred stock, as well as any qualifications, limitations or restrictions
thereon, in the certificate of designation relating to that series.
Anti-takeover Effects of Delaware Law, our Charter and our By-laws
The Company’s Charter and By-laws include a number of provisions that may have the effect of encouraging persons considering
unsolicited tender offers or other unilateral takeover proposals to negotiate with our board of directors rather than pursue non-negotiated
takeover attempts. These provisions include the items described below.
Board Composition and Filling Vacancies
In accordance with our Charter, our board is divided into three classes serving three-year terms, with one class being elected each year.
Our Charter also provides that directors may be removed only for cause and then only by the affirmative vote of the holders of 75% or more of
the shares then entitled to vote at an election of directors. Furthermore, any vacancy on our board of directors, however occurring, including a
vacancy resulting from an increase in the size of our board, may only be filled by the affirmative vote of a majority of our directors then in
office, even if less than a quorum.
No Written Consent of Stockholders
Our Charter provides that all stockholder actions are required to be taken by a vote of the stockholders at an annual or special meeting,
and that stockholders may not take any action by written consent in lieu of a meeting.
Meetings of Stockholders
Our By-laws provide that only a majority of the members of our board of directors then in office may call special meetings of
stockholders and only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of
stockholders. Our By-laws limit the business that may be conducted at an annual meeting of stockholders to those matters properly brought
before the meeting.
Advance Notice Requirements
Our By-laws establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for
election as directors or new business to be brought before meetings of our stockholders. These procedures provide that notice of stockholder
proposals must be timely given in writing to our corporate secretary prior to the meeting at which the action is to be taken. Generally, to be
timely, notice must be received at our principal executive offices not less than 90 days or more than 120 days prior to the first anniversary date
of the annual meeting for the preceding year. The notice must contain certain information specified in the By-laws. These provisions may have
the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed. These provisions may also
discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise
attempting to obtain control of our company.
Amendment to By-Laws and Charter
As required by the Delaware General Corporation Law, any amendment of our Charter must first be approved by a majority of our
board of directors and, if required by law or our Charter, thereafter be approved by a majority of the outstanding shares entitled to vote on the
amendment, and a majority of the outstanding shares of each class entitled to vote thereon as a class, except that the amendment of the
2
provisions relating to stockholder action, directors, limitation of liability, exclusive jurisdiction of Delaware Courts and the amendment of our
by-laws and certificate of incorporation must be approved by not less than 75% of the outstanding shares entitled to vote on the amendment,
and not less than 75% of the outstanding shares of each class entitled to vote thereon as a class. Our By-laws may be amended by the
affirmative vote of a majority of the directors then in office, subject to any limitations set forth in the by-laws; and may also be amended by the
affirmative vote of at least 75% of the outstanding shares entitled to vote on the amendment, or, if the board of directors recommends that the
stockholders approve the amendment, by the affirmative vote of the majority of the outstanding shares entitled to vote on the amendment, in
each case voting together as a single class.
Blank Check Preferred Stock
Our Charter provides for 5,000,000 authorized shares of preferred stock. The existence of authorized but unissued shares of preferred
stock may enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender
offer, proxy contest or otherwise. For example, if in the due exercise of its fiduciary obligations, our board of directors were to determine that a
takeover proposal is not in the best interests of us or our stockholders, our board of directors could cause shares of preferred stock to be issued
without stockholder approval in one or more private offerings or other transactions that might dilute the voting or other rights of the proposed
acquirer or insurgent stockholder or stockholder group. In this regard, our certificate of incorporation grants our board of directors broad power
to establish the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could
decrease the amount of earnings and assets available for distribution to holders of shares of common stock. The issuance may also adversely
affect the rights and powers, including voting rights, of these holders and may have the effect of delaying, deterring or preventing a change in
control of us.
Section 203 of the Delaware General Corporation Law
We are subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly-
held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following the
time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner. A “business
combination” includes, among other things, a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested
stockholder. An “interested stockholder” is a person who, together with affiliates and associates, owns, or did own within three years prior to
the determination of interested stockholder status, 15% or more of the corporation’s voting stock.
Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of
the following conditions:
• before the stockholder became interested, the board of directors approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder;
• upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the voting stock outstanding, shares owned by persons who are directors and also
officers, and employee stock plans, in some instances; or
• at or after the time the stockholder became interested, the business combination was approved by the board of directors of the
corporation and authorized at an annual or
3
special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not
owned by the interested stockholder.
A Delaware corporation may “opt out” of these provisions with an express provision in its original certificate of incorporation or an
express provision in its certificate of incorporation or by-laws resulting from a stockholders’ amendment approved by at least a majority of the
outstanding voting shares. We have not opted out of these provisions. As a result, mergers or other takeover or change in control attempts of us
may be discouraged or prevented.
Exclusive Jurisdiction of Certain Actions
Our Charter requires that, to the fullest extent permitted by law, derivative actions brought in our name, actions against our directors,
officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of
Delaware, unless we otherwise consent. Although we believe this provision benefits us by providing increased consistency in the application of
Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our directors and
officers.
4
The following is a list of subsidiaries of the Company as of January 31, 2020:
BLUEBIRD BIO, INC.
Exhibit 21.1
Name
bluebird bio, Inc.
bluebird bio Securities Corporation
bluebird bio France, SARL
bluebird bio (FR) SAS
bluebird bio Australia Pty Ltd
bluebird bio (Bermuda) Ltd
bluebird bio (UK) Ltd
bluebird bio (Italy) Srl
bluebird bio (Switzerland) GmbH
bluebird bio (Germany) GmbH
bluebird bio (Netherlands) B.V.
Precision Genome Engineering, Inc.
Jurisdiction of Incorporation
Delaware
Massachusetts
France
France
Australia
Bermuda
United Kingdom
Italy
canton of Zug, Switzerland
Germany
Netherlands
Washington
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
1. Registration Statement (Form S-3 No. 333-216178) of bluebird bio, Inc.,
2. Registration Statement (Form S-8 No. 333-189560) pertaining to the Second Amended and Restated 2002 Employee, Director and Consultant Plan,
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, 333-202283, 333-209715, 333-216179, 333-223132 and 333-229768) pertaining to the 2013
Stock Option and Incentive Plan of bluebird bio, Inc.;
of our reports dated February 18, 2020, with respect to the consolidated financial statements of bluebird bio, Inc. and the effectiveness of internal control over
financial reporting of bluebird bio, Inc., included in this Annual Report (Form 10-K) of bluebird bio, Inc. for the year ended December 31, 2019.
Exhibit 23.1
/s/ Ernst & Young LLP
Boston, Massachusetts
February 18, 2020
CERTIFICATIONS
Exhibit 31.1
I, 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 the
statements 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 the
financial 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 in
Exchange 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
the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure 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 our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes 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 the
effectiveness 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
recent fiscal 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; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’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
reasonably likely 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
control over financial reporting.
Date: February 18, 2020
By:
/s/ Nick Leschly
Nick Leschly
President and Chief Executive Officer
(Principal Executive Officer and Duly Authorized Officer)
CERTIFICATIONS
Exhibit 31.2
I, Chip Baird, 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 the
statements 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 the
financial 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 in
Exchange 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
the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure 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 our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes 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 the
effectiveness 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
recent fiscal 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; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’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
reasonably likely 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
control over financial reporting.
Date: February 18, 2020
By:
/s/ Chip Baird
Chip Baird
Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report on Form 10-K of bluebird bio, Inc. (the “Company”) for the year ended December 31, 2019 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company hereby certifies, pursuant to 18
U.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 18, 2020
By:
/s/ Nick Leschly
Nick Leschly
President and Chief Executive Officer
(Principal Executive Officer and Duly Authorized
Officer)
Date: February 18, 2020
By:
/s/ Chip Baird
Chip Baird
Chief Financial Officer
(Principal Financial Officer and Duly Authorized
Officer)