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, 2020
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
Common Stock, $0.01 par value per share
Trading Symbol(s)
BLUE
Name of each exchange on which registered
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 has filed a report on and attested to its management's assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
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, 2020, the last business day of the registrant’s most recently completed second quarter, was $4,040,592,242.
As of February 18, 2021, there were 67,141,044 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 2021 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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Table of Contents
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, and to ensure adequate supply of our viral vectors and drug
products;
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;
our ability to obtain adequate 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;
the impact of the COVID-19 pandemic;
the timing and results of our investigation into the cause of recent safety events in our HGB-206 clinical study, and whether there is a relationship
with the use of our lentiviral vector in the manufacture of LentiGlobin for SCD;
the timing, effects, costs, and benefits, including the tax treatment of the planned separation of our portfolio of products and programs into two
independent, publicly-traded companies; 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
Summary of the Material and Other Risks Associated with Our Business
Below is a summary of the material risks to our business, operations and the investment in our common stock. This summary does not address all of
the risks that we face. Risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations.
Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk
Factors” and should be carefully considered, together with other information in this Annual Report on Form 10-K in its entirety before making investment
decisions regarding our common stock.
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The EMA has paused the renewal procedure for ZYNTEGLO's conditional marketing authorization while the EMA's pharmacovigilance risk
assessment committee reviews the risk-benefit assessment for ZYNTEGLO and determines whether any additional pharmacovigilance measures
are necessary, and we have no assurance as to what the EMA may require, or the timing, if ever, of when ZYNTEGLO may return to the market in
Europe.
The FDA has placed our HGB-206 and HGB-210 clinical studies of LentiGlobin for SCD on clinical hold, and we have no assurance as to what
the FDA may require, or the timing, if ever, of when the clinical hold may be lifted.
• 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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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. If we fail to obtain sufficient pricing or reimbursement approval for ZYNTEGLO or any
future products, our revenues may be adversely affected and our business may suffer.
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 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.
• 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.
• 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 may not be successful in our efforts to identify or discover additional product candidates.
• 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 have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.
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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.
• Our business may be materially and adversely affected by the ongoing COVID-19 pandemic. The COVID-19 pandemic has had, and will likely
continue to have, an impact on various aspects of our business and that of third parties on which we rely. The extent to which the COVID-19
pandemic impacts our business will depend in part on future developments, which are uncertain and unpredictable in nature.
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 programs in severe genetic disease include betibeglogene autotemcel (beti-cel; formerly
LentiGlobin gene therapy for β-thalassemia); LentiGlobin gene therapy for sickle cell disease, or SCD; and elivaldogene autotemcel (eli-cel; formerly
Lenti-D gene therapy 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. 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.
In January 2021, we announced our intent to separate our severe genetic disease and oncology programs into two separate, independent publicly traded
companies, bluebird bio, Inc. and a new company, which we refer to as Oncology NewCo in this annual report on Form 10-K. bluebird bio, Inc. intends to
retain focus on our severe genetic disease programs and Oncology NewCo is expected to focus on our oncology programs. The transaction is expected to
be completed in late 2021 and is anticipated to be tax-free, subject to receipt of a favorable Internal Revenue Service, or IRS, ruling.
In June 2019, we received conditional marketing approval from the European Commission for beti-cel as a treatment for patients 12 years and older
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with transfusion-dependent β-thalassemia, or TDT, who do not have a β /β 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 beti-cel as
ZYNTEGLO in the European Union, or EU, however in February 2021 we temporarily suspended marketing of ZYNTEGLO in light of a suspected
unexpected serious adverse reaction, or SUSAR, of acute myeloid leukemia, and a SUSAR of myelodysplastic syndrome in our HGB-206 study of
LentiGlobin gene therapy for SCD which is manufactured using the same vector as ZYNTEGLO. Additionally, the European Medicines Agency, or EMA,
has paused the renewal procedure for ZYNTEGLO's conditional marketing authorization while the EMA's pharmacovigilance risk assessment committee
reviews the risk-benefit assessment for ZYNTEGLO and determines whether any additional pharmacovigilance measures are necessary. We are engaged in
discussions with the U.S. Food and Drug Administration, or FDA, for regulatory approval of beti-cel in the United States regarding our proposed
development plans for beti-cel as a treatment for patients with TDT. Contingent upon successful resolution of the FDA's concerns arising out of the safety
events in our SCD program, we currently expect to complete our biologics license application, or BLA, submission for beti-cel in mid-2021 for the
treatment of all patients with TDT across all genotypes. We are engaged with the European Medicines Agency, or EMA, in discussions regarding our
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proposed development plans for ZYNTEGLO in patients with TDT and β /β genotypes and patients with TDT who are less than 12 years of age.
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Based on our prior discussions with the FDA, we believe that we may be able to seek accelerated approval for LentiGlobin for SCD in the United
States on the basis of clinical data from Group C of our HGB-206 clinical study, with our HGB-210 clinical study providing confirmatory data for full
approval. However, in light of a SUSAR of acute myeloid leukemia and a SUSAR of myelodysplastic syndrome in our HGB-206 clinical study reported to
us in February 2021, the FDA has placed our clinical studies of LentiGlobin for SCD on clinical hold. We are investigating these events and plan to
continue to work closely with the FDA in their review of these events. In addition, we are also engaged with the EMA in discussions regarding our
proposed development plans for LentiGlobin for SCD in Europe.
In October 2020, the EMA accepted our Marketing Authorization Application, or MAA, in the EU for eli-cel for the treatment of patients with CALD.
Based on our discussions with the FDA, we believe that we may be able to seek approval from the FDA for eli-cel for the treatment of patients with CALD
on the basis of our clinical data from our ongoing Starbeam study, safety data from our ongoing ALD-104 study, and the completed ALD-103 observational
study. We currently expect to submit the BLA for eli-cel for the treatment of patients with CALD to the FDA in mid-2021.
In collaboration with BMS, we are developing the 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. In September 2020, the FDA accepted for Priority Review the BLA submitted by BMS for 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. In addition, we are independently pursuing next-
generation BCMA-targeting CAR-T approaches for treating multiple myeloma.
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Table of Contents
Our other programs in oncology include programs to discover and develop T cell product candidates to treat other hematologic and solid tumor
malignancies, including: non-Hodgkin's lymphoma, acute myeloid leukemia, MAGE-A4 positive solid tumors, and Merkel cell carcinoma.
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.
Our Programs in Severe Genetic Disease
Betibeglogene autotemcel
We are developing and commercializing beti-cel as a one-time treatment for transfusion-dependent β-thalassemia, a rare genetic disease caused by a
mutation in the β-globin gene resulting in the production of defective red blood cells. The disease is characterized by severe anemia, and the ineffective
production of red blood cells 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 (as a result of blood transfusions needed to treat the disease). 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 normal red blood cells,
or RBCs, in patients. Beti-cel refers to the TDT patients' own cells that have undergone our ex vivo manufacturing process resulting in genetically modified
HSCs.
In June 2019, the European Commission granted conditional marketing authorization for beti-cel, marketed as ZYNTEGLO gene therapy, for the
treatment of patients 12 years and older with TDT who do not have a β /β genotype, for whom HSCT is appropriate but an HLA-matched related HSC
donor is not available. In February 2021, we temporarily suspended marketing of ZYNTEGLO and the EMA has paused the renewal procedure for
ZYNTEGLO's conditional marketing authorization while the EMA's pharmacovigilance risk assessment committee reviews the risk-benefit assessment for
ZYNTEGLO and determines whether any additional pharmacovigilance measures are necessary. In addition, the FDA has placed a clinical hold on our
HGB-207 and HGB-212 clinical studies. Patient dosing is complete in each of these two studies, and there is no plan to enroll or treat additional patients in
these studies. No cases of hematologic malignancy have been reported in any patient who has received treatment with beti-cel, however it is manufactured
using the same BB305 lentiviral vector used in LentiGlobin gene therapy for SCD.
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In the fourth quarter of 2019, we initiated a rolling submission of a BLA in the United States for beti-cel as a treatment of patients with TDT across all
ages and all genotypes, which will be based on data from the Northstar study, the Northstar-2 study, and the Northstar-3 study. Contingent upon successful
resolution of the FDA's concerns arising out of the safety events in our SCD program, we currently expect to complete our BLA submission for beti-cel in
mid-2021. In addition, 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 MAA variation submission in the EU, for the treatment of patients with TDT and β /β genotypes and
patients with TDT who are less than 12 years of age.
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Beti-cel 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 beti-cel for the treatment of transfusion-dependent patients
with β-thalassemia major, and rare pediatric disease designation for the treatment of TDT. We participated in the EMA’s Adaptive Pathways 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 beti-cel.
We are conducting the following clinical studies to evaluate the efficacy and safety of beti-cel in the treatment of patients with TDT:
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The Northstar-2 study (HGB-207) is an ongoing single-dose, open-label, non-randomized, international, multi-site phase 3 clinical study to
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evaluate the safety and efficacy of beti-cel to treat patients with TDT and non-β /β
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genotypes. Twenty-three patients have been 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. Age at enrollment ranged from four to 34 years old. To be enrolled,
patients with TDT and non-β /β genotypes must have received at least 100 mL/kg/year of RBCs 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 RBC
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 beti-cel on transfusion requirements and clinical
events. Safety evaluations to be performed during the study include success and kinetics of platelet and neutrophil 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 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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The 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 beti-cel to treat patients with TDT who have either a β /β , β /IVS-I-110, or IVS-I-110/IVS-I-110 genotypes. As
of March 3, 2020, 15 patients have been treated, and median age at enrollment was 15 years of age (ranging from four to 33 years). To be eligible,
patients must have received at least 100 mL/kg/year of RBCs 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 independence.” The secondary endpoints of this study are to measure the proportion of patients who meet the
definition of “transfusion reduction,” which is defined as demonstration of reduction in volume of RBC 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, to
quantify gene transfer efficiency and expression, and to measure the effects of treatment with beti-cel 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.
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In June 2020, we presented the following updated clinical data from our Northstar-2 and Northstar-3 studies at the 25th European Hematology
Association (EHA) Annual Congress. All data presented at the EHA Annual Congress and summarized below are as of the data cut-off date of March 3,
2020:
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Efficacy results from Northstar-2 study (HGB-207):
◦ All 23 patients enrolled in the study had been treated, with a median follow up period of 19.4 months.
◦ Of the 19 patients with sufficient follow-up duration to be evaluable for the primary endpoint of transfusion independence, 89 percent of
patients (17 out of 19) had achieved transfusion independence, with median weighted average total hemoglobin levels of 11.9 g/dL
(ranging from 9.4 to 12.9 g/dL) over a median of 19.4 months of follow-up to date (ranging from 12.3 to 31.4 months). The 17 patients
reaching transfusion independence previously required a median of 17.5 transfusions per year (ranging from 11.5 to 37 transfusions per
year).
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Improved iron levels, as measured by serum ferritin and hepcidin levels (proteins involved in iron storage and homeostasis), were
observed and trends toward improved iron management were seen. Over half of patients stopped iron chelation therapy, which is needed
to reduce excess iron caused by chronic blood transfusions. Seven out of 23 patients began using phlebotomy for iron reduction.
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Efficacy results from Northstar-3 study (HGB-212):
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Fifteen patients (nine β /β , three β /β
of 14.4 months (ranging from 1.1 to 24.0 months).
+IVS1-110
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, three homozygous IVS-I-110 mutation) had been treated, with a median follow up period
Six of eight evaluable patients achieved transfusion independence, with median weighted average total Hb levels of 11.5 g/dL (ranging
from 9.5 to 13.5 g/dL), and continued to maintain transfusion independence for a median duration of 13.6 months (ranging from 12.2 to
21.2 months) as of the data cutoff.
Eighty-five percent of patients (11 out of 13) with at least seven months of follow-up had not received a transfusion in more than seven
months at time of data cutoff. These eleven patients previously required a median of 18.5 transfusions per year (ranging from 11.0 to 39.5
T87Q
transfusions per year). In these patients, gene therapy-derived HbA
visit.
supported total Hb levels ranging from 8.8 to 14.0 g/dL at last
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Safety results from Northstar-2 (HGB-207) and Northstar-3 (HGB-212) studies: Non-serious adverse events (AEs) observed during the HGB-207
and HGB-212 trials that were considered related or possibly related to beti-cel were tachycardia, abdominal pain, pain in extremities, leukopenia,
neutropenia and thrombocytopenia. One serious adverse event of thrombocytopenia was considered possibly related to beti-cel. In HGB-207,
serious events post-infusion in more than two patients included three events of veno-occlusive liver disease and two events of thrombocytopenia.
In HGB-212, serious events post-infusion in more than two patients included two events of pyrexia. 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. In both Phase 3 studies, there have been no deaths, no graft failure, no cases of vector-mediated replication competent
lentivirus or clonal dominance, no leukemia and no lymphoma as of the data cut-off date.
In addition, we have conducted the following clinical studies of beti-cel:
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The 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 beti-cel in increasing hemoglobin production and eliminating or reducing transfusion
dependence following treatment. 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 treated 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 RBCs 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 β
month period between 18 and 24 months post-treatment. Exploratory efficacy endpoints included RBC 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 24 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.
-globin for the six-
A-T87Q
The HGB-205 study 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 beti-cel in four patients with TDT and of LentiGlobin for SCD in three patients with SCD. 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 RBCs 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 crises, or VOCs, or acute chest sydrome, 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 beti-cel/ LentiGlobin for SCD. The secondary objectives of
the study were to quantify gene transfer efficiency and expression, and to measure the effects of treatment with beti-cel/ LentiGlobin for SCD on
disease-specific biological parameters and clinical events. In the case of patients with TDT and SCD, this meant the volume of RBC transfusions,
and for patients with SCD, it also meant the number of VOCs 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 clonal
dominance or leukemia/ lymphoma.
As described above, patients participating in and completing the two years of follow up in either of the Phase 1/2 studies (HGB-204 and HGB-205) or
the Phase 3 studies (HGB-207 and HGB-212) were invited to enroll in the 13-year long-term follow-up study LTF-303. In December 2020, we presented
updated clinical data from LTF-303 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 as of March 3, 2020:
◦
Thirty-two patients were enrolled in LTF-303 (22 treated in Phase 1/2 studies, ten treated in Phase 3 studies) with a median post-infusion follow-
up of 49.1 months (ranging from 23.3 to 71.8 months). Of the 32 patients enrolled in LTF-303, transfusion independence was achieved in 64
percent of patients (14 out of 22) treated in Phase 1/2 and in 90 percent of patients (nine out of ten) treated in Phase 3. All patients who achieved
transfusion independence remained free from transfusions. The median duration of ongoing transfusion independence was 39.4 months (ranging
from 19.4 to 69.4 months). Weighted average Hb in patients who achieved transfusion independence in the Phase 1/2 studies was 10.4 g/dL
(ranging from 9.4 to 13.3 g/dL) and 12.5 g/dL (ranging from 11.9 to 13.5 g/dL) in patients who achieved transfusion independence in the Phase 3
studies.
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◦ Median gene therapy-derived hemoglobin (HbA
) in all patients treated in the Phase 1/2 studies was stable over time: with a median of 6.4 g/dL
T87Q
(ranging from 0.5 to 10.1 g/dL) in 22 patients at Month 24, a median of 6.7 g/dL (ranging from 0.4 to 10.1 g/dL) in 22 patients at Month 36, a
median of 6.6 g/dL (ranging from 0.5 to 10.7 g/dL) in 22 patients at Month 48, and a median of 7.1 g/dL (ranging from 2.8 to 11.2 g/dL) in ten
patients at Month 60. Median HbA
at Month 24 in all ten patients treated in the Phase 3 studies was 9.5 g/dL (ranging from 0.9 to 12.4 g/dL).
T87Q
◦
◦
Following an initial increase in liver iron concentration (LIC) after infusion, LIC in patients who achieved transfusion independence decreased,
particularly in patients with a high iron burden at baseline. Two patients with severe iron burden (LIC >15 mg/g) and the five patients with
significant iron burden (LIC ≥7 – 15 mg/g) at baseline had a median reduction of 59% and 38%, respectively, from baseline to Month 48.
Prior to beti-cel infusion, all patients were on iron chelation, which is needed to reduce excess iron caused by chronic blood transfusions. Fifteen
of the 23 patients (65%) who achieved transfusion independence following treatment with beti-cel discontinued iron chelation. Seven of the 23
(30%) were able to receive phlebotomy (blood removal), which is a preferred method for iron reduction.
◦ No cases of death, graft-versus-host disease, and replication-competent lentivirus, clonal dominance or leukemia/ lymphoma were observed as of
data cut-off. No drug-related adverse events were reported >2 years post-infusion. Serious adverse events during LTF-303 unrelated to beti-cel
included gonadotropic insufficiency, ectopic pregnancy, gall bladder wall thickening/polyp, bacteremia, neutropenia and major depression (with
one case of each).
LentiGlobin for Sickle Cell Disease
We are developing LentiGlobin for SCD as a one-time treatment for patients with SCD, 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 hemolytic
anemia, vaso-occlusive events (or VOEs, repeated acute painful episodes of vaso-occlusion due to sickle cell crises, acute chest syndrome, priapism, or
chronic organ damage), cumulative damage to multiple organs, infections, stroke, overall poor quality of life and early death in a large subset of patients.
As in our approach with beti-cel 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. We refer to the cells that have undergone our ex vivo manufacturing process resulting in genetically modified
HSCs as LentiGlobin for SCD.
Based on our prior discussions with the FDA, we believe that we may be able to seek accelerated approval for LentiGlobin for SCD in the United
States on the basis of clinical data from Group C of our HGB-206 clinical study, with our HGB-210 clinical study providing confirmatory data for full
approval. However, in light of a SUSAR of acute myeloid leukemia and a SUSAR of myelodysplastic syndrome in our HGB-206 clinical study reported to
us in February 2021, the FDA has placed our clinical studies of LentiGlobin for SCD on clinical hold. We are investigating these events and plan to
continue to work closely with the FDA in their review of these events. In addition, we are also engaged with the EMA in discussions regarding our
proposed development plans for LentiGlobin for SCD in Europe. 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, or
RMAT, designation to LentiGlobin for SCD.
We are conducting, or have conducted, the following clinical studies to evaluate the safety and efficacy of LentiGlobin for SCD in the treatment of
patients with SCD:
•
S
The HGB-206 study 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. Approximately fifty adult and adolescent patients are enrolled in the study. Patients must be at least twelve
S
years of age with a diagnosis of sickle cell disease, with β /β , β /β or β /β 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. We refer to the 32 patients
treated under the amended study protocol utilizing HSCs from peripheral blood after mobilization with plerixafor as patients in “Group C.” The
primary efficacy endpoint for this study is complete resolution of severe VOEs, between six and 18 months post-treatment, and the secondary
efficacy endpoint for this study is globin response based on β
expression and total hemoglobin. 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 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.
A-T87Q
+
S
S
0
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In December 2020, 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 are as of the data cut-off date as of August 20, 2020:
◦ A total of 32 patients were treated with LentiGlobin for SCD gene therapy in Group C of HGB-206 and had up to 30.9 months of follow-
up with a median of 13.0 months (ranging from 1.1 to 30.9 months).
◦
In the 22 patients with six or more months of follow-up whose hemoglobin fractions were available, median levels of gene therapy-
derived anti-sickling hemoglobin, HbA
Total hemoglobin and HbA
ranged from 9.6 to 15.1 g/dL and 2.7 to 8.9 g/dL, respectively.
contributing at least 40% of total hemoglobin at Month 6.
, were maintained with HbA
T87Q
T87Q
T87Q
◦ At Month 6, the production of HbA
was associated with a reduction in the proportion of HbS in total hemoglobin; median HbS was
T87Q
50% and remained less than 60% at all follow-up timepoints. All patients in Group C were able to stop regular blood transfusions by
three months post-treatment and remain off transfusions as of the data cut-off.
◦ Nineteen patients treated in Group C had a history of severe VOEs, defined as at least four severe VOEs in the 24 months prior to
informed consent (annualized rate of severe VOE ranging from 2.0 to10.5 events) and at least six months follow-up after treatment with
LentiGlobin for SCD. There have been no reports of severe VOEs in these Group C patients following treatment with LentiGlobin for
SCD. In addition, all 19 patients had a complete resolution of VOEs after Month 6.
◦
The safety data from Group C patients in HGB-206 remain generally consistent with the known side effects of HSC collection and
myeloablative single-agent busulfan conditioning, as well as underlying SCD. One non-serious, Grade 2 adverse event (AE) of febrile
neutropenia was considered related to LentiGlobin for SCD. There were no serious AEs related to LentiGlobin for SCD. One patient with
significant baseline SCD-related and cardiopulmonary disease died 20 months post-treatment; the treating physician and an independent
monitoring committee agreed his death was unlikely related to LentiGlobin for SCD and that SCD-related cardiac and pulmonary disease
contributed.
0
S
S
+
• 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, with a target enrollment of 35
S
pediatric, adolescent and adult patients. Patients must be at least two years of age at enrollment with a diagnosis of sickle cell disease, with β /β ,
β /β or β /β 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 β
annualized severe 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 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.
expression and total hemoglobin, and the secondary efficacy endpoint for this study is 75% reduction in
A-T87Q
S
• HGB-205 is a completed single-center phase 1/2 study in France of patients with SCD which also enrolled patients with TDT.
Elivaldogene autotemcel
We are developing eli-cel as a one-time treatment for CALD, the most severe form of adrenololeukodystrophy, a rare X-linked metabolic disorder
caused by mutations in the ABCD1 gene, which results in accumulation of very long-chain fatty acids in plasma and tissues, leading to a range of clinical
outcomes. 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. 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.
In October 2020, the EMA accepted our Marketing Authorization Application in the EU for eli-cel for the treatment of patients with CALD. Based on
our discussions with the FDA, we believe that we may be able to seek approval for eli-cel 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 completed 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
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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 designed to evaluate outcomes of allogeneic HSCT in
patients with CALD. We currently expect to submit the BLA for eli-cel for the treatment of patients with CALD in mid-2021. Eli-cel 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 eli-cel.
We are conducting the following studies to evaluate the safety and efficacy of eli-cel in the treatment of patients with CALD:
•
The Starbeam study (ALD-102) is a single-dose, open-label, non-randomized, international, multi-site phase 2/3 study to evaluate the safety and
efficacy of eli-cel in males with CALD ≤ 17 years of age. Thirty-two patients have been enrolled in this study. Key inclusion criteria included:
male and, at time of enrollment, ≤ 17 years of age and with a neurologic function score (NFS) of ≤ 1, with active CALD as defined by elevated
very long chain fatty acids (VLCFA) levels, and brain magnetic resonance imaging (MRI) demonstrating Loes score between 0.5 and ≤ 9
(inclusive) and evidence of gadolinium enhancement (GdE+). Patients with a willing, unaffected 10/10 HLA-matched sibling HSC donor were
excluded from the study. The primary efficacy endpoint of the study is the proportion of patients who are alive and free of six major functional
disabilities, or MFD, at 24 months post-treatment. MFDs were defined as loss of communication, complete loss of voluntary movement, cortical
blindness, tube feeding, wheelchair dependence, and total incontinence. These six MFDs were selected as they are considered to have the most
significant impact on the ability of patients with CALD to function independently, representing unambiguous and profound neurologic
degeneration. Secondary and exploratory endpoints included monitoring over time of the following: NFS, a 25-point scale used to evaluate the
severity of gross neurologic dysfunction by scoring 15 neurological abnormalities across multiple domains; Loes score, a 34-pont scale designed
to objectively measure the extent of demyelination and atrophy in CALD patients, based on brain magnetic resonance imagining, or MRI, studies;
and gadolinium enhancement status, associated with inflammation and disruption of the blood brain barrier on brain MRI.
The primary safety endpoint is the proportion of patients who experience either ≥ Grade 2 acute GVHD or chronic GVHD by 2 years post-
treatment. Some 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 ABCD1 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 (LTF-304) to
evaluate safety for up to 15 years, and will also monitor efficacy endpoints to demonstrate a sustained treatment effect.
In August 2020, we presented updated clinical data at the 46th Annual Meeting of the European Society for Blood and Marrow Transplantation
(EBMT). All data presented and summarized below are as of January 2020, except as otherwise indicated:
◦
The data reflect a total patient population of 32 patients in the study, with a median follow-up time of 30.0 months and a range of 9.1 to
70.7 months. Of the 32 patients who have received eli-cel, 20 had completed ALD-102 and were enrolled in LTF-304, while nine
continued to be followed in ALD-102 not having reached 24 months post-treatment, and three were 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 experienced rapid disease
progression early in the study, resulting in MFDs and death.
◦ Of the 23 patients who have or would have reached 24 months of follow-up and completed the study, 87 percent (20 out of 23) have met
the primary endpoint and continue to be alive and MFD-free in LTF-304. Fourteen patients have at least four years of follow-up,
including ten patients who have reached at least their Year 5 follow-up visit. The nine patients from ALD-102 that have not reached
Month 24 have shown no evidence of MFDs.
◦ Of the 32 patients who have received eli-cel, 31 had stable NFS (NFS ≤ 4, without a change of >3 from baseline) and 24 patients
maintained an NFS of 0 following treatment.
◦ As of the data cut-off date, no acute or chronic GvHD have been reported post- treatment and there have been no reports of graft failure
or graft rejection. The treatment regimen, comprising mobilization/apheresis, conditioning, and eli-cel infusion, had a safety and
tolerability profile primarily reflective of the known effects of mobilization/apheresis and conditioning. In ALD-102, as previously
reported, three adverse events were considered possibly related to eli-cel and include one serious adverse event (Grade 3 BK viral
cystitis),
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•
•
and two non-serious adverse events (Grade 1 vomiting). All three adverse events resolved using standard measures.
◦
There have been no cases of replication competent lentivirus or insertional oncogenesis as of the data-cutoff date. Integration site analysis
was conducted to determine the pattern of proviral integration post-eli-cel treatment and assess whether dominant or expanding clones
were present. In one patient, now enrolled in LTF-304 for long-term follow up, a case of benign clonal expansion was observed with
three separate integrations in the DNA of the cell at ACER3, RFX3, and MECOM. As of the patient’s Month 62 visit in March 2020, the
patient remained clinically stable. Bone marrow analyses showed no dysplasia (abnormal cell growth) or molecular abnormalities.
The ALD-104 study is an open-label, non-randomized, international, multi-site phase 3 study to evaluate the safety and efficacy of eli-cel in males
with CALD ≤ 17 years of age after myeloablative conditioning using busulfan and fludarabine, a different chemotherapy conditioning regimen
than what is used in ALD-102 (busulfan and cyclophosphamide). Target enrollment in ALD-104 is 35 patients. Key inclusion criteria included:
male and, at time of enrollment, ≤ 17 years of age and with a neurolgoci function score (NFS) of ≤ 1, with active CALD as defined by elevated
very long chain fatty acids (VLCFA) levels, and brain magnetic resonance imaging (MRI) demonstrating Loes score between 0.5 and ≤ 9
(inclusive) and evidence of gadolinium enhancement (GdE+). The primary efficacy endpoint of the study is the proportion of patients who are
alive and free of six MFDs at 24 months post-treatment. Secondary and exploratory endpoints included monitoring over time of the following:
NFS, Loes score, and gadolinium enhancement status, associated with inflammation and disruption of the blood brain barrier on brain MRIThe
primary safety endpoint is the proportion of patients with neutrophil engraftment after eli-cel infusion (time frame: 42 days post drug-product
infusion).
In August 2020, we presented updated clinical data at the 46th Annual Meeting of the European Society for Blood and Marrow Transplantation
(EBMT). All data presented and summarized below are as of February 2020:
◦
13 patients were on study with a median of 6.1 months of follow-up (ranging from 2.2 to 10.3 months). All 13 patients achieved
neutrophil engraftment and 12 out of 13 evaluable patients had platelet engraftment (platelet engraftment pending in one patient as of
data cut date).
◦ No events of acute or chronic GvHD had been reported and there have been no reports of graft failure, graft rejection, cases of insertional
oncogenesis, or replication competent lentivirus.
◦
The treatment regimen, comprising mobilization/apheresis, conditioning, and eli-cel infusion had a safety and tolerability profile
primarily reflective of the known effects of mobilization/apheresis and conditioning. Two adverse events of pancytopenia were
considered possibly related to eli-cel. These two ongoing adverse events were deemed as suspected unexpected serious adverse reactions
by the principal investigator and were diagnosed approximately two months post-eli-cel treatment in two patients (one Grade 2 and one
Grade 3). An additional serious adverse event was ongoing as of February 2020, a Grade 3 transverse myelitis that was diagnosed in the
presence of viral infection (adenovirus and rhinovirus/enterovirus positivity) approximately six months after eli-cel treatment and deemed
unrelated to eli-cel.
The ALD-103 study is a completed observational prospective/ partially retrospective data collection study of 59 patients with CALD ≤17 years of
age who received allogeneic HSCT. This study was designed to collect efficacy and safety outcomes data in patients who had undergone
allogeneic HSCT in a period that is contemporaneous with the Starbeam study. The study measured 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 were assessed by donor stem cell source, by donor
match, and by conditioning regimen. We anticipate that eli-cel 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.
Strategic collaborations in severe genetic disease
We have formed and intend to seek other opportunities to form strategic collaborations with third parties who can augment our industry-leading gene
therapy platform and expertise, and to access the substantial funding and other resources required to develop and commercialize gene therapy products. 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. Currently, our strategic
collaborations in severe genetic disease include those with:
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• Magenta Therapeutics, Inc., to evaluate the utility of MGTA-145 in combination with plerixafor for mobilization and collection of stem cells in
adults and adolescents with SCD, through a proof-of-concept clinical trial;
• Novo Nordisk A/S, to jointly develop next-generation in vivo genome editing treatments for genetic diseases, including hemophilia; and
•
Forty Seven, Inc., a subsidiary of Gilead Sciences, Inc., to pursue clinical proof-of-concept for an antibody-based conditioning regimen in
combination with our ex vivo lentiviral gene therapy platform.
Manufacturing in severe genetic disease
We have entered into multi-year agreements with external manufacturing partners in the United States and Europe to support our clinical and
commercial programs in severe genetic disease. We have multi-year agreements with SAFC Carlsbad, Inc., or SAFC (a subsidiary of MilliporeSigma), and
Thermo Fisher Scientific, Inc. (previously Novasep) in the production of lentiviral vector. In addition, we have entered into multi-year agreements with
Lonza Houston, Inc. and Minaris Regenerative Medicine, or Minaris, to produce drug product. Currently to support the commercialization of beti-cel in
Europe, SAFC is our sole manufacturer of lentiviral vector, and Minaris is our sole manufacturer of drug product. 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 Minaris, we reserve production capacity for the manufacture of our drug product. In
addition, we rely on specialized third-party testing organizations to confirm the quality of vector and drug product prior to their use in clinical trials and in
the commercial context.
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 activities, and to compile manufacturing and quality information for our regulatory
submissions and commercialization efforts. 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, to be centers for collection of HSCs from the patient and for infusion of
drug product to the patient.
Commercial operations
We are commercializing ZYNTEGLO in the European Union and the United Kingdom, following our receipt of conditional marketing approval by the
European Commission in June 2019. In February 2021, we temporarily suspended marketing of ZYNTEGLO and the EMA has paused the renewal
procedure for ZYNTEGLO's conditional marketing authorization while the EMA's pharmacovigilance risk assessment committee reviews the risk-benefit
assessment for ZYNTEGLO and determines whether any additional pharmacovigilance measures are necessary. 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, if and once approved, to patients through qualified treatment centers. In the course of preparing to treat our first commercial
patients, we have established commercial capabilities across the European Union, and in the United States and United Kingdom 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. Our commercialization activities include active engagement with stakeholders across the healthcare system, including those with
public and private payers, patient advocates and organizations, professional societies, and healthcare providers, to explore new payment models that we
hope will enable access for more patients. Ultimately, we intend to leverage our commercial infrastructure to support the potential for multiple product
launches sequentially across multiple geographies. For many territories and countries, we may also elect to utilize strategic collaborators, including
distributors, or contract field-based teams to assist in the commercialization of our product and potential future products.
While we have largely established the appropriate quality systems, compliance policies, systems and procedures, as well as internal systems and
infrastructure necessary for supporting our complex supply chain and commercialization activities, we expect that we may make additional targeted
investments as we continue our efforts in adding sites to our network of qualified treatment centers, establishing patient-focused programs, educating
healthcare professionals, and securing reimbursement.
The timing and conduct of our commercialization activities will be dependent upon regulatory interactions, marketing approvals received for our
product and potential future products, and on agreements we have made or may make in the future with strategic collaborators.
Our Programs in Oncology
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. Our oncology programs use a customized
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lentiviral vector to alter T cells, rather than HSCs, 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 ex vivo 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. 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. 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 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. 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 differ in specificity, size, ease of delivery and as naturally occurring versus engineered nucleases. Our gene editing
platform is based on homing endonucleases and megaTALs, 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.
Our programs in oncology include ide-cel and bb21217 in multiple myeloma, which we are developing in collaboration with BMS, and preclinical
programs to discover and develop T cell product candidates to treat other hematologic and solid tumor malignancies, including: non-Hodgkin's lymphoma,
acute myeloid leukemia (in collaboration with Seattle Children's Research Institute), MAGE-A4 positive solid tumors (in collaboration with Regeneron),
and Merkel cell carcinoma (in collaboration with Fred Hutchinson Cancer Research Center). We are also independently researching and developing other
CAR T cell product candidates against a variety of cancer targets, including next-generation anti-BCMA CAR-T cell products for the treatment of multiple
myeloma.
Ide-cel and bb21217
In collaboration with BMS, we are developing ide-cel and bb21217, with the goal of filing for regulatory approval for the treatment of multiple
myeloma on a global basis. Ide-cel and bb21217 both bind to BCMA, a cell surface protein expressed on normal plasma cells, some mature B cells, and on
malignant multiple myeloma cells, but not on other cells. Ide-cel and bb21217 arose from our multi-year collaboration with Celgene Corporation, or
Celgene, which was acquired by BMS in November 2019. We co-develop and co-commercialize ide-cel in the United States with BMS, in which we share
equally in costs and any profits. BMS has the exclusive license to develop and commercialize ide-cel outside of the United States. BMS has the exclusive
worldwide license to develop and commercialize bb21217, and we retain an option to co-develop and co-commercialize this product candidate in the
United States. The terms of our arrangements with BMS are described more fully below under “Strategic collaborations in oncology—Our strategic
alliance with BMS.”
In September 2020, the FDA accepted for Priority Review the BLA submitted by BMS for ide-cel as a treatment for relapsed and refractory multiple
myeloma. 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.
For the development of ide-cel, BMS is conducting, or is planning to conduct, the following clinical studies in multiple myeloma:
•
The KarMMa study, 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 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 (ORR) as assessed by an independent review committee (IRC) according to the
International Myeloma Working Group (IMWG) criteria. Complete response rate (CR) is the key secondary endpoint. Other efficacy endpoints
include time to response, duration of response (DoR), progression-free survival (PFS), overall survival and minimal residual disease (MRD)
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
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150-450 x 10 CAR+ T cells after receiving lymphodepleting chemotherapy. In May 2020, we and BMS presented the results at the American
Society of Clinical Oncology 2020 Virtual Scientific Program, as summarized below:
6
◦
◦
◦
◦
128 patients were treated with ide-cel across target dose levels of 150 to 450 x 10 CAR+ T cells. Patients had a median of six prior
regimens; 84% were refractory to all three classes of commonly used treatments including an IMiD, a PI and an anti-CD38 antibody,
and 94% were refractory to anti-CD38 antibodies. Median duration of follow-up was 13.3 months.
6
Results for the primary endpoint (ORR) and key secondary endpoint (CR), 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
6
150 x 10
4
6
300 x 10
70
6
450 x 10
54
6
150-450 x 10
128
Measures:
Overall response rate, n (%)
Complete response (CR)/ Stringent
CR, n (%)
Median DoR, months
Median DoR by best response
(CR/sCR), months
Median PFS, months
Median PFS by best response
(CR/sCR), months
†Not reported due to small n
††Data not reported
2 (50)
1 (25)
†
†
2.8
†
48 (69)
20 (29)
9.9
††
5.8
††
44 (82)
21 (39)
11.3
††
12.1
††
94 (73)
42 (33)
10.7
19.0
8.8
20.2
The overall response rate (ORR) was 73% across all dose levels, including 33% of patients who had a complete response (CR) or
stringent CR (sCR). Median duration of response (DoR) was 10.7 months, with 19.0 month median DoR for patients who had a CR or
sCR. Median progression-free survival (PFS) was 8.8 months, with 20.2 month median PFS for patients who had a CR or sCR. All
patients who had CR or sCR and were evaluable for minimal residual disease (MRD), were MRD-negative. Clinically meaningful benefit
was consistently observed across subgroups, and nearly all subgroups had an ORR of 50% or greater, including older and high-risk
patients. The overall survival (OS) data continue to mature, with an estimated median OS of 19.4 months across all dose levels and 78%
6
of patients alive at 12 months. Results support a favorable benefit-risk profile for ide-cel across the target dose levels of 150 to 450 × 10
CAR+ T cells.
The most frequently reported adverse events were cytopenia and cytokine release syndrome (CRS). Cytopenias were common and not
dose related. Overall, CRS of any grade was reported in 84% (107/128) of patients. Grade 3 or higher CRS occurred in <6% (7/128) of
patients, with one fatal CRS event. Investigator identified neurotoxicity events (iiNT) were reported in 18% (23/128) of patients,
including Grade 3 iiNT reported in 3% (4/128) of patients. There were no Grade 4 or Grade 5 iiNT events reported.
•
The CRB-401 study, 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.
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 December 2020, we presented updated results from the CRB-401 study at the ASH Annual Meeting as summarized below:
◦
◦
62 patients were treated with ide-cel across dose levels of 50, 150, 450, or 800 × 10 CAR positive T cells. Among the 62 patients treated
with ide-cel in this study, the overall response rate (ORR) was 76%, including 24 patients (39%) who achieved a complete response (CR).
The median duration of response (DoR) was 10.3 months. Median PFS was 8.8 months and median OS was 34.2 months, with a median
follow-up of 14.7 months.
6
Safety remained consistent with previously reported results from CRB-401. Among all infused patients , the most frequent adverse events
were neutropenia (92%), cytokine release syndrome (CRS; 76%), anemia (76%), and thrombocytopenia (74%). The most frequent Grade
3/4 adverse events were neutropenia (89%), leukopenia (61%), anemia (57%), and thrombocytopenia (57%). Most CRS events were
Grade 1 or 2. Four patients (7%) had Grade 3 CRS; there were no Grade 4 or 5 CRS events reported.
•
•
•
the KarMMa-2 study, an open-label, multi-cohort, multi-center phase 2 study of patients with relapsed and refractory multiple myeloma and in
high-risk multiple myeloma.
the KarMMa-3 study, an open-label, randomized, multi-center, phase 3 study comparing the efficacy and safety of ide-cel versus standard triplet
regimens in patients with relapsed and refractory multiple myeloma.
the KarMMa-4 study, an open label, single-arm, multi-center, 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, a single-dose, open label, single-arm, multi-center,
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 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.
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 2020, we presented updated clinical data from the CRB-402 study at the ASH Annual Meeting. All data presented at the ASH Annual
Meeting and summarized here are as of the data cut-off date of September 1, 2020. Sixty-nine patients received treatment as of the data cut-off. Patients
had a median of six prior lines of therapy and 78 percent of patients received at least one prior autologous stem cell transplant.
CAR+ T cell dose level
6
150 x 10 (n=12)
6
300 x 10 (n=14)
6
450 x 10 (n=43)
150-450 x 10 (n=69)
6
Median follow-up (min, max), months
Tumor repsonse, n/N(%)
ORR
sCR/CR
VGPR
PR
Median time to first response
(min,max), months
≥PR
≥CR
20 (4, 35)
11 (3, 21)
4 (<1, 17)
6 (<1, 35)
10/12 (83)
5 (42)
5 (42)
0
1 (1, 2)
6 (1, 24)
6/14 (43)
2 (14)
3 (21)
1 (7)
1 (1, 1)
12 (6, 18)
24/33 (73)
10 (30)
7 (21)
7 (21)
1 (1, 2)
1 (1, 13)
40/59 (68)
17 (29)
15 (25)
8 (14)
1 (1, 2)
2 (1, 24)
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CAR-T cell persistence was observed in 27 of 30 patients with ongoing response and evaluable at three months, 20 of 23 patients with ongoing
response and evaluable at six months, six of eleven patients with ongoing response and evaluable at twelve months, three of six patients with ongoing
response and evaluable at 18 months, and two of two patients with ongoing response and evaluable at 24 months.
The adverse events observed with bb21217 were consistent with known toxicities of BCMA CAR T-cell therapies, with low rates of Grade ≥3 CRS
and neurotoxicity. Of the 69 patients, 48 patients developed bb21217-related CRS: 45 with Grade 1/2, one with Grade 3, and two with Grade 5 (death).
Eleven of 69 (16%) patients developed neurotoxicity; eight Grade 1/2, two Grade 3 (one with vertigo/dizziness and one with encephalopathy), and one
Grade 4 (encephalopathy). One additional death occurred from infection within 6 months in the absence of MM progression. Cytopenias were common and
not dose related. Grade ≥3 infections were reported in 26 % of patients (18 of 69).
Strategic collaborations in oncology
We have formed and intend to seek other opportunities to form strategic collaborations with third parties who can augment our T cell immunotherapy,
lentiviral vector and gene-editing expertise, and to access the substantial funding and other resources required to develop and commercialize T cell
immunotherapy products. 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.
Currently, our strategic collaborations in oncology 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; and
• Gritstone Oncology, Inc., to validate targets and discover TCR product candidates in the field of cancer.
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.
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.
In September 2017, BMS exercised its option with respect to the bb21217 product candidate, and we 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 May 2020, we amended the co-development and co-promotion agreement with respect to ide-cel and the license agreement with respect to bb21217.
Under these amended agreements, BMS was relieved of its obligations to pay us future ex-U.S. milestones and royalties on ex-U.S. sales for each of ide-cel
and bb21217 in exchange for an up-front, non-refundable, non-creditable payment of $200.0 million. In connection with these amendments, BMS assumed
the contract manufacturing
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agreements relating to ide-cel adherent lentiviral vector. Over time, BMS is assuming responsibility for manufacturing ide-cel suspension lentiviral vector
outside of the U.S., with bluebird responsible for manufacturing ide-cel suspension lentiviral vector in the United States. In addition, under these amended
agreements, the parties are released from future exclusivity related to BCMA-directed T cell therapies. In addition, if we do not exercise our option to co-
develop and co-promote the bb21217 product candidate in the United States, we are also eligible to receive up to $10.0 million in clinical milestone
payments, up to $67.5 million in regulatory milestone payments and up to $45.0 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. 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.
Manufacturing in Oncology
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 in support of our oncology programs, including for ide-
cel commercialization, if and when approval is obtained. In addition, we have entered into multi-year agreements with external manufacturing partners in
the United States and Europe to support our various preclinical and clinical programs in oncology.
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, 2021, our patent portfolio includes the following:
•
•
approximately 182 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;
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•
•
•
•
•
approximately 97 patents or patent applications that we own or have exclusively in-licensed from third parties, including 13 that are co-owned
with MIT, related to vector manufacturing or production;
approximately 194 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 465 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;
approximately 201 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 43 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.
Beti-cel and LentiGlobin for SCD
The beti-cel and LentiGlobin for SCD programs include 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 beti-cel and LentiGlobin for SCD. As of January 31, 2021, we had an exclusive license to two issued U.S. patents. We expect the issued
composition of matter patents to expire in 2022 and 2023 in the United States (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 that may be utilized to produce beti-cel and LentiGlobin for SCD. As of January 31, 2021, we had an exclusive
license (from RDF) to eight issued U.S. patents and two pending U.S. patent applications 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, 2021, we co-owned four 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 and SCD. As of January 31, 2021, 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.
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Our β-thalassemia and SCD research programs also include 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, 2021, we had an exclusive license to two issued U.S. patents and
one pending U.S. patent application and as well as 25 corresponding foreign patents and 15 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, 2021, we had a non-exclusive license to five issued U.S. patents,
three pending corresponding foreign patent applications and 32 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.
Eli-cel
The eli-cel 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 eli-cel.
• 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 eli-cel.
•
bluebird bio. The bluebird bio patent portfolio contains patents and patent applications directed to compositions of matter for eli-cel vectors and
compositions and methods of using the vectors and compositions in cell-based gene therapy of adrenoleukodystrophy or
adrenomyeloneuropathy. As of January 31, 2021, we owned three U.S. patents and 26 issued foreign patents. We expect the issued composition
of matter patents for eli-cel 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).
Ide-cel, bb21217, and independent multiple myeloma program
The multiple myeloma programs include 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, 2021, we had an exclusive license (from RDF) to five issued patents 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, 2021, we had a co-exclusive license to
five issued U.S. patents and one pending U.S. patent application and one pending corresponding foreign application and 49 issued corresponding
foreign patents related to bb2121. We expect the issued patents to expire from 2024-2032 (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 2024-2030 (excluding
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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 2024-2030 (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, 2021, we had an exclusive license to 13 issued U.S. patents, 3 pending U.S. patent applications and 20
corresponding foreign patent applications and 19 issued corresponding foreign patents related to ide-cel. 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, 2021, we owned seven issued U.S. patents, ten pending U.S. patent applications, 104 corresponding
foreign patent applications, 181 foreign patents and one pending PCT application. 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 across our programs in severe genetic disease and oncology, 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, 2021, we had an exclusive license to two issued U.S.
patents, one pending U.S. patent application and two corresponding foreign patent applications and issued corresponding foreign patents in
Europe, Israel, and Japan. 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
across our severe genetic disease and oncology 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, 2021, we owned three issued U.S. patents, four pending
U.S. patent applications and 40 corresponding foreign patent applications and 55 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
2032-2038 (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 2032-2038 (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 programs 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,
2021, we had an exclusive license (from RDF) to five issued patents 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, 2021, we owned three issued
U.S. patents, 13 pending U.S. patent applications and 74 corresponding foreign patent applications and three foreign patents; six families of
pending U.S. provisional applications; and nine 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 2034-2041 (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 2034-2041 (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, 2021, 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, 2021, 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, 2021, we have an exclusive license to three families of U.S. non-
provisional applications and corresponding PCT applications directed to compositions and methods for treating cancers that express particular
target antigens. We expect any composition of matter or method of use 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 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 in 2039 (worldwide, excluding possible
patent term extensions). Also as of January 31, 2021, we co-own a PCT 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, 2021, we co-own three families of PCT 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
(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,
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or other governmental fees are paid, to expire from 2040 (worldwide, excluding possible patent term extensions). Also as of January 31, 2021, we
have an option to exclusively license two U.S. patent applications and 7 corresponding foreign patent applications 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, 2021, we had an exclusive/co-exclusive license to seven issued U.S. patents and one pending
U.S. patent application and 27 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, 2021, 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, 2021, we had an exclusive license to four
issued U.S. patents and three pending U.S. patent applications and 15 corresponding foreign patents and two 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, 2021,
we also had a non-exclusive license to one issued U.S. patent and one 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, 2021, we
had an exclusive license to one issued U.S. patent, and 20 corresponding issued foreign patents and 7 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 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). As of January 31, 2021, we also had a non-exclusive
license
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to two issued U.S. patents, one pending U.S. application, 25 corresponding foreign patent applications, and 13 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, 2021, we owned 11 patent families that include one issued U.S. patent, 14 pending U.S. patent applications and
58 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, 2021, we owned three 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, 2021, we also owned one provisional application 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 in 2041 (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 2041 (worldwide, excluding possible patent term extensions). As
of January 31, 2021, we co-owned (with Cellectis SA) two issued U.S. patents, two corresponding foreign patent applications, and 17
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
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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.
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 eli-cel, 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 two U.S. patents. The issued patents have statutory
expiration dates in 2022 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 β-thalassemia and SCD) or ALD (including CALD and adrenomyeloneuropathy), 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 β-thalassemia and SCD) or ALD (including CALD and adrenomyeloneuropathy ), 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 beti-cel, LentiGlobin for
SCD, eli-cel, ide-cel and bb21217, 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 beti-cel, LentiGlobin for
SCD, eli-cel, ide-cel and bb21217, 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 13
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 beti-cel and LentiGlobin for
SCD, we will be obligated to pay MIT a percentage of net sales by us or our sublicensees as a royalty. This royalty is in the low single digits and 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.
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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 beti-cel, LentiGlobin for
SCD, eli-cel, ide-cel and bb21217 , 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 2024 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 ide-cel and bb21217, 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 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
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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 2033-2034. 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 ide-cel
and bb21217, 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 2034.
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 beti-cel and LentiGlobin for SCD, 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 included 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. 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. 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
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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. Depending on how successful these competitive 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 Chiesi, who provide the leading iron chelation therapies, 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 small molecule that aims to improve red blood cell metabolism. Reblozyl (luspatercept), a
subcutaneously-delivered protein therapeutic marketed by Acceleron Pharma, Inc. and BMS that targets molecules in the TGF-β superfamily, has been
approved in the United States for the treatment of anemia in adult patients with beta thalassemia who require regular red blood cell (RBC) transfusions, and
was recently approved in the EU for the treatment of adult patients with transfusion-dependent anaemia associated with beta-thalassemia. Additionally,
Agios has announced that mitapivat, an oral pyruvate kinase receptor activator, will be entering phase 3 evaluations in 2H 2021. 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. There are also several different groups developing gene therapy options for β-
thalassemia. These include: 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; 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 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 transfusion dependent β-thalassemia (TDT), though Orchard Therapeutics has
announced that this program has been deprioritized as of May 2020.
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. 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. 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. Emmaus Life Sciences, Inc. received FDA approval for and have launched
Endari (L-glutamine) for the treatment of SCD. In addition to the FDA approved hemoglobin S (HbS) polymerization inhibitor (voxelotor, Global Blood
Therapeutics, Inc.) and the FDA / EMA approved antibody to p-selectin (crizanlizumab, Novartis), a number of different therapeutic approaches for the
chronic treatment of SCD are under investigation targeting the various aspects of SCD pathophysiology, including: Pyruvate Kinase-R (PKR) activator, FT-
4202, in a phase 1 study supported by Forma Therapeutics, a PDE9 inhibitor, IMR-687, in a phase 2 study supported by IMARA Inc., a pyruvate kinase
receptor activator, mitapivat, in a phase 1 study supported by Agios Pharmaceuticals, Inc.. There are also several different groups developing gene therapy
options for Sickle Cell Disease. These include: CRISPR Therapeutics AG’s (in collaboration with Vertex Pharmaceuticals Incorporated) ongoing phase 1/2
study for its CTX-001, which leverages the CRISPR/Cas9 gene editing platform to disrupt the BCL11A erythroid enhancer, Aruvant Sciences, Inc.’s
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ongoing phase 1/2 study for its ARU-1801, which leverages a lentiviral vector encoding γ-globin,, Editas Medicine, Inc.’s ongoing phase 1/2 study for its
EDIT-301, which leverages the CRISPR/Cas12a gene editing platform to target the HBG1/2 promoter to upregulate HbF, and Graphite Bio’s ongoing phase
1/2 study for its GPH101, which leverages a gene correction platform (CRISPR / homology directed repair (HDR)) to restore normal hemoglobin
production . There are several other groups developing gene therapy approaches for SCD in early phases of development, including Beam Therapeutics,
CSL Behring, Intellia Therapeutics, Inc. (in collaboration with Novartis), and Children’s Hospital of Philadelphia (CHOP).
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, Minoryx Therapeutics’ MIN-102 (leriglitazone), and Viking Therapeutics’ VK0214.
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.
T cell-based immunotherapies in oncology — Hundreds of academic laboratories, biotechnology and pharmaceutical companies are researching and
developing T cell-based immunotherapies in oncology, in addition to the multiple myeloma programs described above. These include and are not limited to
Novartis AG, Adaptimmune Inc., Bristol-Myers Squibb Inc., Gilead Sciences, Inc., Pfizer Inc., Amgen, Inc., Sanofi and Takeda among others. Many of the
T cell-based immunotherapy programs being developed by these companies are in phase 1/2 clinical trials for multiple indications. Cancer therapies in
other modalities, such as bispecific antibodies, antibody-drug conjugates, and dendritic cell vaccines, as well as combinatorial approaches are also in
development across a wide range of targets.
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 successfully
commercializing our product or any future 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.
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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 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
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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, 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
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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 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
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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 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 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
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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 future 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, 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
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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.
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.
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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.
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
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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 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.
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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.
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:
•
•
•
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.
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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.
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, including 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
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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 for ZYNTEGLO. While we 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.
COVID-19
Beginning in late 2019, the outbreak of a novel strain of coronavirus (COVID-19) has evolved into a global pandemic. As a result, we continue to
experience disruptions and increased risk in our operations and those of third parties upon whom we rely, which may materially and adversely affect our
business. These include disruptions and risks related to the conduct of our clinical trials, manufacturing, and commercialization efforts, as policies at
various clinical sites and federal, state, local and foreign laws, rules and regulations continue to evolve, including quarantines, travel restrictions, and
direction of healthcare resources toward pandemic response efforts. We continue to evaluate the impact of the COVID-19 global pandemic on patients,
healthcare providers and our employees, as well as our operations and the operations of our business partners and healthcare communities. In response to
the COVID-19 pandemic, we have implemented policies at our locations to mitigate the risk of exposure to COVID-19 by our personnel, including
restrictions on the number of staff in any given research and development laboratory or manufacturing facility, a work-from-home policy applicable to the
majority of our personnel, and a phased approach to bringing personnel back to our locations over time. Given the importance of supporting our patients,
we are diligently working with our suppliers, healthcare providers and partners to provide patients with access to ZYNTEGLO, while taking into account
regulatory, institutional, and government guidance, policies and protocols. Further, we are working with our clinical study sites to understand the duration
and scope of the impact on enrollment, develop protocols to help mitigate the impact of the COVID-19 pandemic, and other activities for our ongoing
clinical studies. Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations (Part II, Item 7 of this Form 10-K) for
further discussion regarding the impact of COVID-19 on our fiscal year 2020 financial results.
The extent to which the COVID-19 pandemic impacts our business going forward will depend on numerous evolving factors we cannot reliably
predict, including the duration and scope of the pandemic; governmental, business, and individuals' actions in response to the pandemic; and the impact on
economic activity including the possibility of recession or financial market instability. Refer to Risk Factors (Part I, Item 1A of this Form 10-K) for a
discussion of these factors and other risks.
Human capital
As of January 31, 2021, we had 1,213 full-time employees, 223 of whom have Ph.D., M.D. or Pharm.D. degrees. Of these full-time employees, 750
employees are engaged in research and development activities and 463 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.
Compensation and benefits programs
Our compensation programs are designed to align our employees' interests with the drivers of growth and stockholder returns by supporting the
Company's achievement of its primary business goals. The Company's goal is to attract and retain employees whose talents, expertise, leadership, and
contributions are expected to sustain growth and drive long-term stockholder value. Consequently, we provide employee wages that are competitive within
our industry, and we engage a nationally-recognized outside compensation and benefits consulting firm to independently evaluate the effectiveness of our
compensation and benefit programs and to provide benchmarking against our peers within the industry. We seek to align our
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employees' interests with those of stockholders by linking annual changes in compensation to overall Company performance, as well as each individual’s
contribution to the results achieved. The emphasis on overall Company performance is intended to align the employee’s financial interests with the interests
of shareholders. We are also committed to providing comprehensive benefit options and it is our intention to offer benefits that will allow our employees
and their families to live healthier and more secure lives. All employees are eligible for medical, dental, and vision insurance, paid and unpaid leaves,
employee stock purchase plan, 401(k) plan, and group life and disability coverage.
Employee development and training
The development, recruitment and retention of our employees is a critical success factor for our company. To ensure we provide a meaningful
experience for our employees, we regularly measure organizational culture and engagement to build on the competencies that are important for our future
success. We have a robust talent and succession planning process and have established programs to support the talent pipeline for critical roles throughout
our organization, to help us identify, foster, and retain high performing employees. To empower our employees to realize their potential at bluebird, we
provide a range of development programs, opportunities and resources they need to be successful, including leveraging formal leadership training and
coaching to improve performance and retention, increase our organizational learning and support the promotion of our current employees.
Diversity
We are committed to taking action to help address racial injustice and inequality. With significant input from employees and leaders at bluebird, our
senior leadership team and board of directors has developed a set of commitments to help improve representation and culture of inclusion by pledging to
accomplish the following by 2025:
• Double our Black, Indigenous, and Latino employee population;
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Balance our executive leadership and board of directors to ensure 50% representation of women and people of color; and
Sustain 100% pay equity and increase representation of women and people of color across all levels.
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.
Our business may be materially and adversely affected by the ongoing COVID-19 pandemic. The COVID-19 pandemic has had, and will likely
continue to have, an impact on various aspects of our business and that of third parties on which we rely. The extent to which the COVID-19 pandemic
impacts our business will depend in part on future developments, which are uncertain and unpredictable in nature.
In December 2019, a novel strain of coronavirus (COVID-19) was reported and in March 2020, the World Health Organization characterized COVID-
19 as a pandemic. The COVID-19 pandemic, which has continued to spread, and the related adverse public health developments, including orders to
shelter-in-place, travel restrictions, and the imposition of additional requirements on businesses, have adversely affected workforces, organizations,
healthcare communities, economies,
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and financial markets globally, leading to an economic downturn and increased market volatility. It has also disrupted the normal operations of businesses
across industries, including ours. As a result of the COVID-19 pandemic, we are experiencing disruptions in our operations and business, and those of third
parties upon whom we rely. For instance, we are experiencing disruptions in the conduct of our clinical trials, manufacturing and commercialization efforts,
including the treatment of patients in the commercial context. We cannot reasonably assess or predict at this time the full extent of the negative impact that
the COVID-19 pandemic and related effects may have on our business, financial condition, results of operations and cash flows. We expect to continue
experiencing these disruptions in our operations and those of our third parties for an unknown period of time, as the trajectory of the COVID-19 pandemic
remains uncertain and continues to evolve in the United States and globally. These impacts, which may materially and adversely affect our business,
include the following:
• We are conducting a number of clinical studies across our programs in geographies which are affected by the COVID-19 pandemic. The COVID-
19 pandemic has had, and will likely continue to have, an impact on various aspects of our clinical studies. Policies at various clinical sites and
federal, state, local and foreign laws, rules and regulations are continuing to evolve, including through the implementation of quarantines and
travel restrictions, and direction of healthcare resources toward pandemic response efforts. For instance, the availability of intensive care unit beds
and related healthcare resources available to support activities unrelated to COVID-19 response have fluctuated with the incidence of severe cases
of COVID-19 in the surrounding communities, and we anticipate that the availability of healthcare resources will continue to fluctuate and may
become significantly constrained, with variability across geographies. The COVID-19 pandemic has disrupted the conduct of our ongoing clinical
studies, with the result of slower patient enrollment and treatment as well as delays in post-treatment patient follow-up visits, the impact of which
has varied by clinical study, with the most significant impacts being on our ongoing HGB-210 study for LentiGlobin for SCD. It is possible that
these delays may impact the timing of our regulatory submissions. It is unknown how long these disruptions could continue. Moreover, we are
commercializing ZYNTEGLO in Europe, and our ability to generate meaningful product revenue may be delayed. In addition to the constraints on
healthcare systems and resources described above, which are also applicable in the commercial treatment context, we may experience decreased
patient demand for our approved product during this period of disruption and increased uncertainty because potential patients may choose not to
undergo treatment, or to delay treatment, with ZYNTEGLO.
• We currently rely on third parties to manufacture, perform quality testing, and ship our lentiviral vectors and drug products for our clinical studies
and support commercialization efforts. The third parties in our supply chain are subject to restrictions in operations arising from the COVID-19
pandemic, and in addition, a number of these third parties have experienced operational disruptions, which have affected activities necessary for
our research, development, and commercialization efforts. These restrictions and disruptions in operations have also given rise to staffing
shortages from time to time, which may result in production slowdowns and/or disruptions in delivery systems, potentially interrupting our supply
chain and limiting our ability to manufacture our lentiviral vectors and drug products for our clinical studies and for commercial use. At this time,
it is unknown how long these disruptions may continue, or the full extent of their impacts.
• Health regulatory agencies globally may experience disruptions in their operations as a result of the COVID-19 pandemic. The FDA and
comparable foreign regulatory agencies may have slower response times or lack resources to continue to monitor our clinical studies or to engage
in other activities related to review of regulatory submissions in drug development. As a result, review, inspection, and other timelines may be
materially delayed for an unknown period of time. Any de-prioritization of our clinical studies or delay in regulatory review resulting from such
disruptions could materially affect the development of our product candidates. In addition, we have been engaging in reimbursement discussions
with governmental health programs as part of our commercial preparation activities. It is not clear to what extent shifting priorities of the local
health authorities and healthcare systems due to the COVID-19 pandemic will impact our ability to achieve market access and reimbursement for
ZYNTEGLO across Europe.
• We have implemented policies at our locations to mitigate the risk of exposure to COVID-19 by our personnel, including restrictions on the
number of staff in any given research and development laboratory or manufacturing facility, a work-from-home policy applicable to the majority
of our personnel, and a phased approach to bringing personnel back to our locations over time. Our increased reliance on personnel working from
home may negatively impact productivity, or disrupt, delay, or otherwise adversely impact our business. In addition, this could increase our cyber
security risk, create data accessibility concerns, and make us more susceptible to communication disruptions, any of which could adversely impact
our business operations or delay necessary interactions with local and federal regulators, ethics committees, manufacturing sites, research or
clinical study sites and other important agencies and contractors. Furthermore, since the onset of the COVID-19 pandemic, our employees and
contractors conducting research and development activities have been limited in the activities that they may conduct, and will continue to be
subject to policies restricting access to our laboratories for an extended period of time. As a result, this could delay timely completion of
preclinical activities, including completing Investigational New Drug-enabling studies or our
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ability to select future development candidates, and initiation of additional clinical trials for our development programs.
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The trading prices for our shares of common stock and other biopharmaceutical companies have been highly volatile as a result of the economic
volatility and uncertainty caused by the COVID-19 pandemic. As a result, we may face difficulties raising capital through sales of shares of our
common stock or such sales may be on unfavorable terms. In addition, a recession, depression or other sustained adverse market event resulting
from the spread of the COVID-19 pandemic will materially and adversely affect our business, the value of our common stock, and our ability to
operate under our operating plan and execute our strategy. Our business and operating plan have already been impacted by the COVID-19
pandemic, the associated governmental restrictions, and the resulting economic conditions, leading us to reduce and defer costs, adjust our
priorities, timelines and expectations, and implement a revised operating plan in the first half of 2020 with the intention that it would enable us to
advance our corporate strategy and pipeline during this period of uncertainty.
The extent of the impacts described above will depend on numerous evolving factors that we may not be able to accurately predict, including:
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the duration, severity, and scope of the pandemic in the United States and globally;
the effectiveness of governmental, business and individuals’ protocols and actions that have been and continue to be taken in response to the
pandemic;
the impact of the pandemic on economic activity and actions taken in response;
the effect on patients, healthcare providers and business partners;
demand for our products, including as a result of reduced patient visits to healthcare providers, travel restrictions, social distancing, quarantines
and other containment measures;
uncertainty as to when we will be able to resume normal clinical study enrollment and patient treatment activities, particularly at clinical study
sites and qualified treatment centers located in highly impacted geographies as a result of disruptions at these sites;
the ability to obtain or deliver sufficient and timely supplies, given the disruptions to the production capabilities of our manufacturers and
suppliers, particularly with respect to the priority given to the development, regulatory approval, and manufacture of COVID-19 vaccines;
our access to the debt and equity markets on satisfactory terms, or at all;
disruptions in regulatory oversight and actions, as a result of significant and unexpected resources expended to address the COVID-19 by
regulators and industry professionals; and
any closures of our and our partners’ offices, operations and facilities.
The ultimate impact of the COVID-19 pandemic on our business operations is highly uncertain and subject to change and will depend on future
developments which are difficult to predict, including the duration of the pandemic, the ultimate geographic spread of the disease, additional or modified
government actions, new information that will emerge concerning the severity and impact of COVID-19 and other actions taken to contain or address its
impact in the short and long term, among others. We do not yet know the full extent of potential delays or impacts on our business, our commercialization
efforts, our clinical studies, our research programs, healthcare systems or the global economy, and if the ultimate impact of the COVID-19 pandemic and
the resulting uncertain economic and healthcare environment is more severe than we anticipated, we may not be able to execute on our current operating
plan or on our strategy. If the duration of the COVID-19 pandemic and the associated period of business and social restrictions and economic uncertainty is
longer than we anticipated, our cash, cash equivalents, and marketable securities may not be sufficient to fund the activities under our operating plan for the
time period that we anticipated, and we may be required to revise our operating plan further. To the extent the COVID-19 pandemic adversely affects our
business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
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.
We have limited experience as a commercial company. Consequently, there is limited information about our ability to overcome many of the risks and
uncertainties encountered by companies commercializing products in the biopharmaceutical
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industry. We also have several programs in late-stage clinical development. To execute our business plan, in addition to successfully marketing and selling
ZYNTEGLO and any future products, we will need to successfully:
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gain regulatory acceptance for the development and commercialization of the product candidates in our pipeline;
obtain adequate pricing and reimbursement for ZYNTEGLO and any future products in each of the jurisdictions in which we plan to
commercialize approved products;
establish and maintain, in the geographies where we hope to treat patients, relationships with qualified treatment centers who will be treating the
patients who receive ZYNTEGLO and any future products;
• manage our spending as costs and expenses increase due to clinical trials, marketing approvals, and commercialization, including for any
extension of marketing approval of ZYNTEGLO, and for any future products; and
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develop and maintain successful strategic alliances.
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 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
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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. 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, in our HGB-206 clinical study of LentiGlobin for SCD, we have received notice of
safety events of acute myeloid leukemia and of myelodysplastic syndrome. If these safety events are shown to be related to the use of our lentiviral vector
in the manufacture of the gene therapy or the use of myeloablative regimens prior to treatment, the market opportunity for our gene therapies may be
negatively impacted even if our gene therapies ultimately receive marketing approval.
Even if we obtain significant market share for a product within an approved indication, because the potential target populations for our product and for
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the product candidates in our pipeline are small, we may never achieve profitability without obtaining marketing approval for additional indications. 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 β /β genotype. We do not have any assurance of whether or when ZYNTEGLO may be commercially available to pediatric patients less than 12
years of age, or to patients with all genotypes of TDT, or in markets outside of Europe. 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. For example, BMS has submitted a BLA seeking approval
from the FDA for ide-cel as a treatment for relapsed and refractory multiple myeloma. BMS is conducting the KarMMa-2, KarMMa-3, and KarMMa-4
studies with the intention to generate data to support marketing approvals for earlier lines of therapy in multiple myeloma, but there is no assurance that
such studies will be successful or be sufficient.
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 our 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 Minaris Regenerative Medicine is the sole manufacturer of the
drug product to support commercialization of ZYNTEGLO in Europe. 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 our late-stage
product candidates, if they receive marketing approval. 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. If we fail to secure adequate capacity
to manufacture our drug products or lentiviral vectors used in the manufacture of our drug products, we may be unable to execute on our development and
commercialization plans on the timing that we expect.
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,
managing the transition from clinical manufacturing to manufacturing in the commercial setting, 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 in a timely manner or with available funds
problems that occur. 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
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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 our lentiviral
vectors or our drug product 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 product 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 strategy is to engage apheresis and transplant 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 train and conduct quality assessments of each
center as part of engagement. These qualified treatment centers are 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 are required 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.
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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 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 further develop these capabilities and 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 has required, and will continue to require, substantial investment in commercial capabilities. We are competing with companies that currently have
extensive and well-funded marketing and sales operations. Without significant commercial experience as a company 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 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. 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 payers. In addition,
because our therapies represent new treatment approaches, the estimation of potential revenues will be complex.
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
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commercial launch of the product, possibly for lengthy time periods, which could negatively impact the revenues we are able to generate or recognize from
the sale of the product in that particular country. For instance, although we have received conditional marketing approval for ZYNTEGLO in the European
Union and the United Kingdom, we are still in the process of negotiating pricing and reimbursement approval in the jurisdictions where we are
commercializing ZYNTEGLO, and there is no assurance that the approved prices or reimbursement levels that payers will be willing to pay will be
acceptable to us.
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.
In addition, the administration of autologous drug products requires procedures for the collection of HSCs or T cells 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 payers, there is no assurance that there
will be widespread adoption of these payment models by payers. 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, or our ability
to recognize revenue from product sales may be delayed. 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 or recognize
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. If our product candidates are not approved in a timely manner
or at all for any reason, our business prospects, results of operations, and financial condition would be adversely affected.
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, and 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.
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. 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. 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 β /β genotype experienced better outcomes from
treatment than patients with TDT who have a β /β genotype. Consequently, we received conditional approval in the European Union initially for the
treatment of patients with TDT who do not have a β /β genotype. In order to support an application for marketing approval of ZYNTEGLO in patients
with TDT who have a β /β genotype, we are conducting the HGB-212 study, but we do not know if or when ZYNTEGLO may be commercially available
to all genotypes of TDT or types of β-thalassemia in Europe.
0
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0
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0
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. The field of cell and gene therapy is evolving, and as more
products are reviewed by regulatory authorities, regulatory authorities may impose additional requirements that were not previously anticipated. 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 beti-cel has
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been granted the FDA’s Fast Track and Breakthrough Therapy designations, we are engaged in discussions with the FDA regarding the development plans
for beti-cel 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 and Northstar-3 clinical studies, together with data from our Northstar study, the LTF-303 long-term follow up protocol, and
completed HGB-205 study, could be sufficient to form the basis for a BLA submission for beti-cel to treat patients with TDT. 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 of a BLA for beti-cel for the treatment of patients with TDT. Furthermore, we are required to submit data relating to certain release
assays designed to confirm the quality, purity and strength (including potency) of beti-cel as a condition for completing the BLA submission, which has the
potential for further delaying the completion of our BLA submission, with the potential consequence of delaying any approval and commercial launch of
beti-cel in the United States. In addition, in February 2021 we temporarily suspended marketing of ZYNTEGLO and the EMA has paused the renewal
procedure for ZYNTEGLO's conditional marketing authorization while the EMA's pharmacovigilance risk assessment committee reviews the risk-benefit
assessment for ZYNTEGLO and determines whether any additional pharmacovigilance measures are necessary, in light of safety events arising from our
HGB-206 clinical study of LentiGlobin gene therapy for SCD. We cannot make any assurances as to what the EMA may require for ZYNTEGLO to return
to the market in Europe, or what the FDA may require for approval of beti-cel in the United States.
In September 2020, we submitted a MAA to the EMA to seek approval in Europe for eli-cel for the treatment of patients with CALD. Based on our
discussions with the FDA, we believe that we may be able to seek approval for eli-cel for the treatment of patients with CALD in the United States on the
basis of safety and efficacy data from our ongoing Starbeam study, safety data from our ongoing ALD-104 study, and the completed ALD-103
observational study. Whether eli-cel 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 eli-cel is eligible for approval.
Based on our discussions with the FDA, we believe that we may be able to seek accelerated approval for our LentiGlobin for SCD product candidate in
the United States on the basis of clinical data from Group C of our ongoing HGB-206 clinical study, with our ongoing HGB-210 clinical study providing
confirmatory data for full approval. We cannot be certain that data from our HGB-206 or HGB-210 clinical studies will be sufficiently robust from a safety
and/or efficacy perspective to support either conditional approval or full approval. We are also engaged with the EMA in discussions regarding our
proposed development plans for LentiGlobin for SCD in Europe. Our development plan in the United States is contingent upon LentiGlobin for SCD
demonstrating complete resolution of severe vaso-occlusive events, with globin response as a key secondary endpoint, and an acceptable safety profile in
the study participants. 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 our discussions with FDA regarding the
transition of manufacturing to the commercial setting from the clinical context, we are finalizing our plans for validating our commercial manufacturing
processes and for providing the FDA with the comparability data that it requires. The FDA may not agree with these plans, or may require additional
validation or comparability data as a condition for completing the BLA submission and filing. Any of these may result in delays in our ability to submit a
BLA for regulatory approval of LentiGlobin for SCD. Furthermore, in light of a SUSAR of acute myeloid leukemia and a SUSAR of myelodysplastic
syndrome in our HGB-206 clinical study reported to us in February 2021, the FDA has placed our clinical studies of LentiGlobin for SCD on clinical hold.
We are investigating these events and plan to continue to work closely with the FDA in their review of these events, and we cannot make any assurances as
to what the FDA may require to lift the clinical hold, if ever, or the timing for us to complete our investigation as to the relationship between the use of our
lentiviral vector in manufacturing and these safety events. Taken together, these factors are likely to result in delays in our ability to submit a BLA for
regulatory approval of LentiGlobin for 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.
In September 2020, the FDA accepted for Priority Review the BLA submitted by BMS for ide-cel as a treatment for relapsed and refractory multiple
myeloma. There is no guarantee that the FDA will conclude that the information in the BLA will be sufficient to support approval and we may fail to obtain
regulatory approval in the United States for ide-cel. Additionally, certain factors beyond our and BMS’ control may impact the timeliness of the regulatory
reviews of our submissions or any applications for approval.
If our product candidates are ultimately not approved for any reason, our business, prospects, results of operations and financial condition would be
adversely affected.
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Changes in our manufacturing processes may cause delays in our clinical development and commercialization plans.
The manufacturing processes for our lentiviral vectors and our drug products are complex. We explore improvements to our manufacturing processes
on a continual basis, as we evaluate clinical and manufacturing data and based on discussions with regulatory authorities. In some circumstances, changes
in the manufacturing process may require us to perform additional comparability studies, collect additional data from patients, submit additional regulatory
filings, or comply with additional requirements, which may lead to delays in our clinical development and commercialization plans. For instance, following
the conditional approval of ZYNTEGLO by the European Commission, we continued to refine our commercial drug product manufacturing process to
narrow some of the manufacturing process parameters and to tighten the range of commercial drug product release specifications, based on an ongoing
discussion with the EMA and evolving clinical data. Implementing these changes to the ZYNTEGLO commercial manufacturing process had the effect of
delaying our ability to treat the first patient in the commercial context in Europe. In LentiGlobin for SCD, we plan to seek regulatory approval for drug
product utilizing lentiviral vector manufactured using the scalable suspension manufacturing process, rather than the adherent manufacturing process. The
FDA and EMA may not agree with our proposed plans for demonstrating the comparability of the two processes, and may require us to conduct additional
studies, collect additional data, develop additional assays, or modify release specifications, which may delay our ability to submit a BLA or MAA for
regulatory approval of LentiGlobin for SCD. Over time, we also intend to transition the lentiviral vector manufacturing process for ZYNTEGLO in the
European Union, and beti-cel in the United States, to the suspension manufacturing process, and the timing in which we are able to make the transition will
be dependent upon reaching agreement with regulatory authorities, which may require us to conduct additional studies, collect additional data, develop
additional assays, or modify release specifications.
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, more experienced manufacturing capabilities, or more established commercial infrastructure. 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 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,
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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.
Insertional oncogenesis is a risk of gene therapies using viral vectors. If the vectors for our product or product candidates are shown to lead to
insertional oncogenesis, we may be required to halt or delay further clinical development of our product candidates, and cease the commercialization of
our approved product, which may materially and negatively impact the commercial potential of our product and any future products.
A significant risk in any gene therapy product using 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, known as insertional oncogenesis. In published studies, lentiviral vectors have
demonstrated an improved safety profile over gamma-retroviral vectors used in early gene therapy studies, which we believe is due to a number of factors
including the tendency of the lentiviral vectors to integrate within genes rather than in areas that control gene expression, as well as their lack of strong
viral enhancers. 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 make any assurances that it will not occur in any of our clinical studies or in the commercial
setting. Insertional oncogenesis leading to leukemia or lymphoma remains a risk. For instance, clonal predominance without a known clinical correlation
has been detected in some patients treated with eli-cel including vector insertions into or near genes previously associated with cancer in the general
population. In February 2021, a SUSAR of acute myeloid leukemia and a SUSAR of myelodysplastic syndrome in our HGB-206 clinical study resulted in
the FDA placing our clinical studies of LentiGlobin for SCD and beti-cel on clinical hold, and caused us to temporarily suspend marketing of ZYNTEGLO
in the European Union. An investigation into the causes of any safety events, including these safety events, may not be conclusive or may not be definitive
in eliminating the lentiviral vector as a cause. As a result, safety events such as leukemia, lymphoma, or myelodysplastic syndrome may result in delays or
halt further advancement of our clinical studies, and even if a product is approved, may result in the product being removed from the market or its market
opportunity being significantly reduced.
There is also the potential risk of delayed adverse events following exposure to gene 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, myelodysplastic syndrome is a known risk of certain myeloablative regimens, and we have previously reported that
in our ongoing HGB-206 study of LentiGlobin for SCD, a patient developed myelodysplastic syndrome several years after myeloablation and infusion with
drug
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product, which progressed to acute myeloid leukemia, leading to the patient’s death. Other patients receiving our product or product candidates may
develop myelodysplastic syndrome or acute myeloid leukemia 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 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
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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. 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.
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 decisions 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.
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
orvacabtagene autoleucel, 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.
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 re-
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prioritize 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.
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, whether due to the
impacts of COVID-19 or otherwise, 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 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
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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 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
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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 $618.7 million for the year ended December 31, 2020. As
of December 31, 2020, we had an accumulated deficit of $2.90 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 we recognize revenue from the sale of ZYNTEGLO in the European Union for the treatment of adult and
adolescent patients with TDT who do not have a β /β genotype, and we do not expect to generate meaningful product revenues until our conditional
marketing approval for ZYNTEGLO is renewed. 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.
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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.
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, 2020, our cash, cash equivalents and marketable securities were $1.27 billion. In response to the ongoing COVID-19 pandemic
and the associated economic conditions, we revised our operating plan to execute on our strategy during this period of uncertainty. Based on our current
business plan, we expect our cash, cash equivalents and marketable securities will be sufficient to fund planned operations for at least the next twelve
months from the date of issuance of these financial statements. Our current business plan assumes continued rigorous prioritization and focus on our
expenses, real estate optimization, and exploration of additional sources of funding to further strengthen our financial position. However, our operating plan
may change further as a result of the COVID-19 pandemic and the surrounding economic conditions, as well as many other factors currently unknown to
us. In addition, we may seek additional funds through public or private equity or debt
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financings, government or other third-party funding, marketing and distribution arrangements or other collaborations, strategic alliances and licensing
arrangements or a combination of these approaches, during this period. 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 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, or if revenues from collaboration arrangements or product sales are less than we have projected,
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, 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.
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. As we begin to generate product sales of
ZYNTEGLO in Europe, we expect that our product sales will be difficult to predict from period to period, given the absence of historical sales data. This
uncertainty is heightened by the unpredictable scope of the impact of the COVID-19 pandemic, which has adversely affected the operations of third parties
upon which we rely in our commercialization efforts, patient access to hospitals, physicians’ offices, clinics and other administration sites, and global
economic conditions, as well as caused a re-prioritization of healthcare services.
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
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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, further exacerbated by the impacts of the ongoing COVID-19 pandemic on healthcare systems and economic
conditions, will likely 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, including as a result of the COVID-19 pandemic;
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, 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. 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.
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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 have launched ZYNTEGLO in Europe, 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, 2020, we had 1,201 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. In February 2021, we temporarily suspended marketing of ZYNTEGLO and the EMA has paused the
renewal procedure for ZYNTEGLO's conditional marketing authorization while the EMA's pharmacovigilance risk assessment committee reviews the risk-
benefit assessment for ZYNTEGLO and determines whether any additional pharmacovigilance measures are necessary. 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;
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.
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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 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
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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.
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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. It is unclear whether the
Affordable Care Act will be overturned, repealed, replaced, or further amended. We cannot predict what effect 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
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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. 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 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.
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. In addition, we rely on third-party service
providers for management of the manufacture and delivery of drug product to patients in the commercial context, including for chain of identity and chain
of custody. 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.
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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.
Risks related to the proposed separation of our business
The proposed separation of our business into two independent, publicly traded companies is subject to various risks and uncertainties and may not be
completed on the terms or timeline currently contemplated, if at all, and will involve significant time, effort and expense, which could harm our
business, results of operations and financial condition.
In January 2021, we announced our intent to separate our oncology programs from our severe genetic disease programs, resulting in two independent,
publicly traded companies, bluebird bio and a new company, or Oncology NewCo. Following the separation, bluebird bio is expected to focus on the
development and commercialization of therapies in β-thalassemia, cerebral adrenoleukodystrophy and sickle cell disease in the United States and Europe.
Oncology NewCo is expected to focus on the investigational BCMA directed CAR T cell therapy, ide-cel, in multiple myeloma and continued development
of investigational bb21217 product candidate, as well as research and development efforts in our oncology pipeline.
The separation is expected to be completed by the end of 2021, subject to receipt of a favorable IRS ruling and the satisfaction of certain conditions.
Unexpected developments, including adverse market conditions or tax consequences or delays or difficulties effecting the proposed separation, could delay,
prevent or otherwise adversely impact the anticipated benefits from the proposed separation. Consummation of the separation also will require final
approval from our board of directors. We may not complete the separation on the terms or on the timeline that we announced, or may, for any or no reason
and at any time until the proposed separation is complete, abandon the separation or modify or change its terms. Any of the foregoing may result in our not
achieving the operational, financial, strategic and other benefits we anticipate realizing as a result of the separation, and in each case, our business, results
of operations and financial condition could be adversely affected.
We will incur significant expenses in connection with the proposed separation, and such costs and expenses may be greater than we anticipate. In
addition, completion of the separation will require a significant amount of management time and effort, which may disrupt our business or otherwise divert
management’s attention from other aspects of our business, including strategic initiatives, discovery, development and commercialization efforts and
relationships with our partners and other third parties. Any of the foregoing could adversely affect our business, results of operations and financial
condition.
We may fail to realize some or all of the anticipated benefits of the proposed separation.
Even if the separation is completed, the anticipated operational, financial, strategic and other benefits of the separation may not be achieved. The
combined value of the common stock of the two publicly-traded companies may not be equal to or greater than what the value of our common stock would
have been had the separation not occurred. The combined value of the common stock of the two companies could be lower than anticipated for a variety of
reasons, including the failure of either company to operate and compete effectively as an independent company. The common stock price of each company
may experience periods of extreme volatility. In addition, the two independent companies will be smaller and less diversified, with a narrower business
focus, and may be more vulnerable to changing market conditions. The separation also presents a number of significant risks to our internal processes,
including the failure to maintain an adequate control environment due to changes to our infrastructure technology systems and financial reporting
processes.
If the distribution of shares of the Oncology Newco, together with certain related transactions, does not qualify as a transaction that is generally tax-
free for U.S. federal income tax purposes, our stockholders and we could be subject to significant tax liabilities.
In connection with the distribution of shares in of Oncology Newco, we may seek a private letter ruling from the IRS (the "IRS Ruling") and an
opinion from our tax advisor (the "Tax Opinion") to the effect that, among other things, the distribution of shares in Oncology Newco, together with certain
related transactions, will generally qualify as tax-free for U.S. federal income tax purposes under Sections 368(a)(1)(D) and 355 of the U.S. Internal
Revenue Code of 1986, as amended (the “Code”). The IRS Ruling and the Tax Opinion will rely on certain facts, assumptions, representations, and
undertakings from us and Oncology Newco, including those regarding the past and future conduct of the companies' respective businesses and other
matters. Notwithstanding the IRS Ruling and the Tax Opinion, the IRS could determine that the distribution or any such related
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transaction is taxable if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated, or that the
distribution should be taxable for other reasons, including if the IRS were to disagree with the conclusions in the Tax Opinion. The Tax Opinion will not be
binding on the IRS or the courts. Accordingly, the IRS or the courts may challenge the conclusions stated in the Tax Opinion and such challenge could
prevail.
If the distribution were determined to be taxable for U.S. federal income tax purposes, our stockholders that receive shares of Oncology Newco in the
distribution would be treated as having received a distribution of property in an amount equal to the fair value of such Oncology Newco shares on the
distribution date and could incur significant income tax liabilities. Such distribution would be taxable to our stockholders as a dividend to the extent of our
current and accumulated earnings and profits. Any amount that exceeded our current and accumulated earnings and profits would be treated first as a non-
taxable return of capital to the extent of the relevant stockholder’s tax basis in its shares of stock, with any remaining amount being taxed as capital gain.
We would recognize a taxable gain in an amount equal to the excess, if any, of the fair market value of the shares of Oncology Newco common stock held
by us on the distribution date over our tax basis in such shares.
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
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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 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
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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.
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.
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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 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.
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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 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.
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The market price of our common stock has been volatile in the past, and may continue to be volatile for the foreseable future. Our stock price could be
subject to wide fluctuations in response to a variety of factors, including the following:
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adverse results or delays in preclinical or clinical studies;
reports of adverse events in our product, product candidates or other gene therapy products, or in clinical studies of such products;
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 regulatory authority'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;
developments concerning the proposed separation of our programs into two independent, publicly-traded companies;
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.
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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 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 are subject to securities class action litigation, which may result in substantial costs and a diversion of management's attention and resources,
which could harm our business.
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities, and on
February 12, 2021, a class action complaint was filed in the United States District Court for the Eastern District of New York, Leung v. bluebird bio, Inc.,
et. al., Case No. 1:21-cv-00777, by a purported stockholder against us and certain of our officers, and we may face additional securities class action
litigation in the future. This risk is especially relevant for us because biotechnology and pharmaceutical companies have experienced significant stock price
volatility in recent years, and we expect to experience continued stock price volatility. Defending against the current litigation and any future litigation
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 and prior to our initial public offering in 2013, which we believe have resulted in a change in control as
defined by IRC Section 382. We completed a study through September 2019 confirming no ownership changes have occurred since our initial public
offering in 2013. 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.
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We do not intend to pay cash 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:
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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;
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.
Changes in tax law could adversely affect our business and financial condition.
The rules dealing with U.S. federal, state, and local income taxation are constantly under review by persons involved in the legislative process and by
the Internal Revenue Service and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely
affect us or holders of our common stock. In recent years, many such changes have been made and changes are likely to continue to occur in the future. For
example, on March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security Act” or the CARES Act, which
included certain changes in tax law intended to stimulate the U.S. economy in light of the COVID-19 pandemic, including temporary beneficial changes to
the treatment of net operating losses, interest deductibility limitations and payroll tax matters. On December 27, 2020, President Trump signed into law the
“Consolidated Appropriations Act”, which included additional stimulus relief for the COVID-19 pandemic in the form of modifications to the refundable
employee retention credit under the CARES Act and credit extenders, and spending bill for the 2021 fiscal year. Future changes in tax laws could have a
material adverse effect on our
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business, cash flow, financial condition or results of operations. We urge investors to consult with their legal and tax advisers regarding the implications of
potential changes in tax laws on an investment in our common stock.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
Below is a summary of our material owned and leased properties as of December 31, 2020:
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 first half of 2022, 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.
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, 2020, 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.
On February 12, 2021, a class action complaint was filed in the United States District Court for the Eastern District of New York, Leung v. bluebird
bio, Inc., et. al., Case No. 1:21-cv-00777, by a purported stockholder against us and certain of our officers. The complaint alleges violations of Section
10(b) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder against all defendants and violations of Section 20(a) of the Exchange Act
against the officers and seeks unspecified damages. The allegations relate to our disclosure on November 4, 2020 that we were adjusting the expected
timing of submission of a BLA to the FDA for LentiGlobin for sickle cell disease to late 2022.
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 18, 2021, the last reported sale price
for our common stock on the Nasdaq Global Select Market was $26.95 per share.
Stock Performance Graph
The graph set forth below compares the cumulative total stockholder return on our common stock between December 31, 2015 and December 31,
2020, 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, 2015 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 18, 2021, 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.
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.
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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. Reserved
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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. Our severe genetic disease ("SGD") programs include beti-cel, LentiGlobin
for SCD gene therapy, and eli-cel. 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 BMS.
We are commercializing beti-cel as ZYNTEGLO in the EU and began to treat patients in the commercial context in the first quarter of 2021. However,
in February 2021 we temporarily suspended marketing of ZYNTEGLO in light of safety events in the HGB-206 clinical study of LentiGlobin for SCD,
which is manufactured using the same vector as ZYNTEGLO. Additionally, the EMA has paused the renewal procedure for ZYNTEGLO's conditional
marketing authorization while the EMA's pharmacovigilance risk assessment committee reviews the risk-benefit assessment for ZYNTEGLO and
determines whether any additional pharmacovigilance measures are necessary. We are engaged with the EMA in discussions regarding our proposed
development plans for beti-cel as a treatment for patients with TDT who are less than 12 years of age and for patients who have a β /β genotype. We are
engaged with the FDA in discussions regarding our proposed development plans for beti-cel as a treatment for patients with TDT. Contingent upon
successful resolution of the FDA's concerns arising out of the safety events in our SCD program, we currently expect to complete our BLA submission for
beti-cel in mid-2021 for the treatment of patients with TDT across all genotypes, including non-β /β and β /β genotypes, and patients with TDT who are
less than 12 years of age.
0
0
0
0
0
0
Based on our prior discussions with the FDA, we believe that we may be able to seek accelerated approval for LentiGlobin for SCD in the United
States on the basis of clinical data from Group C of our HGB-206 clinical study, with our HGB-210 clinical study providing confirmatory data for full
approval. However, in light of a SUSAR of acute myeloid leukemia and a SUSAR of myelodysplastic syndrome in our HGB-206 clinical study, the FDA
has placed our clinical studies of LentiGlobin for SCD on clinical hold. We are investigating these events and plan to continue to work closely with the
FDA in their review of these events. In addition, we are also engaged with the EMA in discussions regarding our proposed development plans for
LentiGlobin for SCD in Europe.
In October 2020, the EMA accepted our Marketing Authorization Application in the EU for eli-cel for the treatment of patients with CALD. Based on
our discussions with the FDA, we believe that we may be able to seek approval for eli-cel for the treatment of patients with CALD on the basis of our
clinical data from our ongoing Starbeam study, safety data from our ongoing ALD-104 study, and the completed ALD-103 observational study. We
currently expect to submit the BLA for eli-cel for the treatment of patients with CALD in mid-2021.
In collaboration with BMS, we are developing ide-cel and the 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. In September 2020, the FDA accepted for Priority Review the BLA submitted by BMS for 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. In addition, we are
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independently pursuing next-generation BCMA-targeting CAR-T approaches for treating multiple myeloma. Our other programs in oncology include
preclinical programs to discover and develop T cell product candidates to treat other hematologic and solid tumor malignancies, including: non-Hodgkin's
lymphoma, acute myeloid leukemia, MAGE-A4 positive solid tumors, and Merkel cell carcinoma.
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 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, 2020, we had cash, cash equivalents and marketable securities of approximately $1.27 billion. We have never been profitable and
have incurred net losses in each year since inception. Our net losses were $618.7 million for the year ended December 31, 2020 and our accumulated deficit
was $2.90 billion as of December 31, 2020. 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;
• manufacture clinical study materials and establish the infrastructure necessary to support and develop large-scale manufacturing capabilities to
support commercialization of our product and any future products;
seek regulatory approval for our product candidates;
add personnel to support our product development and commercialization efforts;
increase activities related to the commercialization of ZYNTEGLO in multiple markets in Europe, the potential commercial launch of beti-cel in
the United States, and the potential commercial launches of additional late-stage product candidates in the United States and Europe; and
incur costs related to the separation of our portfolio of programs and products in severe genetic disease and oncology into two separate,
independent publicly traded companies.
•
•
•
•
As we seek to obtain regulatory approval for our product candidates and begin to commercialize ZYNTEGLO, we expect to incur significant
commercialization expenses as we prepare for and begin product sales, marketing, commercial 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 and commercialization, 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.
Business update
Beginning in late 2019, the outbreak of a novel strain of coronavirus (COVID-19) has evolved into a global pandemic. As a result, we continue to
experience disruptions and increased risk in our operations and those of third parties upon whom we rely, which may materially and adversely affect our
business. These include disruptions and risks related to the conduct of our clinical trials, manufacturing, and commercialization efforts, as policies at
various clinical sites and federal, state, local and foreign laws, rules and regulations continue to evolve, including quarantines, travel restrictions, and
direction of healthcare resources toward pandemic response efforts. The COVID-19 pandemic has impacted the timing of patient treatment in the
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commercial context, and the timing of our ongoing clinical studies, with the result of slower patient enrollment and treatment in our clinical studies and
delays in post-treatment follow up visits, the impact of which has varied by clinical study and by program. It has also affected our activities with and
operations at our third-party manufacturers. It is unknown how long these disruptions could continue. In addition, we expect the COVID-19 pandemic to
delay our ability to achieve market access and reimbursement for ZYNTEGLO in Europe due to shifting priorities of the local authorities and healthcare
system. As a result of the demands upon healthcare regulatory authorities, review, inspection, and other activities related to review of regulatory
submissions in drug development may be impacted, and may result in delays for an unknown period of time.
We continue to evaluate the impact of the COVID-19 global pandemic on patients, healthcare providers and our employees, as well as our operations
and the operations of our business partners and healthcare communities. In response to the COVID-19 pandemic, we have implemented policies at our
locations to mitigate the risk of exposure to COVID-19 by our personnel, including restrictions on the number of staff in any given research and
development laboratory or manufacturing facility, a work-from-home policy applicable to the majority of our personnel, and a phased approach to bringing
personnel back to our locations over time. Given the importance of supporting our patients, we are diligently working with our suppliers, healthcare
providers and partners to provide patients with access to ZYNTEGLO, while taking into account regulatory, institutional, and government guidance,
policies and protocols. Further, we are working with our clinical study sites to understand the duration and scope of the impact on enrollment, develop
protocols to help mitigate the impact of the COVID-19 pandemic, and other activities for our ongoing clinical studies. However, the ultimate impact of the
COVID-19 pandemic on our business operations is highly uncertain and subject to change and will depend on future developments which are difficult to
predict.
We expect our cash, cash equivalents and marketable securities of $1.27 billion as of December 31, 2020, will be sufficient to fund planned operations
for at least the next twelve months from the date of issuance of these financial statements, though we may pursue additional cash resources through public
or private equity or debt financings or by establishing additional collaborations with other companies.
In January 2021, we announced our intent to separate our severe genetic disease and oncology programs into two separate, independent publicly traded
companies, bluebird bio, Inc. and a new company, which we refer to as Oncology NewCo in this annual report on Form 10-K. bluebird bio, Inc. intends to
retain focus on our severe genetic disease programs and Oncology NewCo is expected to focus on our oncology programs. The transaction is expected to
be completed in late 2021 and is anticipated to be tax-free, subject to receipt of a favorable IRS ruling.
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.
To date, revenue recognized under our collaborative arrangements 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. We entered into an agreement
with BMS to co-develop and co-promote ide-cel in March 2018, which was subsequently amended in May 2020, in which both parties will share equally in
U.S. costs and profits. Revenue from our collaborative arrangements is recognized as the underlying 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 ASC 606, Revenue from Contracts with Customers (“Topic 606” or "ASC 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 collaborative arrangement revenues as such amounts are incurred by the
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collaboration partner. Where amounts owed to a collaboration partner exceed our collaborative arrangement 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.
Effective January 1, 2020, we adopted Accounting Standards Update ("ASU") No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the
Interaction between Topic 808 and Topic 606 ("ASU 2018-18") on a retrospective basis. As a result, prior periods are presented in accordance with the new
standard. Prior to the adoption of ASU 2018-18, we presented all revenue recognized under our collaborative arrangements as collaboration revenue on our
consolidated statement of operations and comprehensive loss. However, as we recognize revenue under our collaborative arrangements both within and
outside the scope of Topic 606, we have revised our presentation of revenue on our consolidated statement of operations and comprehensive loss as
follows: service revenue includes revenue from collaborative partners recognized within the scope of Topic 606 and collaborative arrangement revenue
includes only revenue from collaborative partners recognized outside the scope of 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 out-license agreements, under which 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 clinical research organizations (“CROs”) and clinical sites that conduct our clinical studies;
costs of acquiring, developing, and manufacturing 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;
•
•
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 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;
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•
•
•
new manufacturing processes or protocols that we may choose to or be required to implement in the manufacture of our lentiviral vector or drug
product;
regulatory feedback on requirements for regulatory approval, as well as 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 advance the development of beti-cel, eli-cel,
and LentiGlobin for SCD, conduct research and development activities in severe genetic diseases and oncology, fund our share of the costs of development
of ide-cel and bb21217 (if we exercise our option to co-develop and co-commercialize this product candidate) in collaboration with BMS, and continue the
research and discovery of product candidates using our gene editing technology platform. 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 beti-cel in the treatment of patients
with TDT and a non-β /β genotype.
0
0
• Northstar-3 Study (HGB-212) – a multi-site, international phase 3 study to examine the safety and efficacy of beti-cel in the treatment of patients
with TDT and a β /β genotype or an IVS-I-110 mutation.
0
0
• HGB-206 study – a multi-site phase 1/2 study in the United States to study the safety and efficacy of LentiGlobin in the treatment of patients with
SCD.
• HGB-210 study – our multi-site, international phase 3 study of LentiGlobin in patients with SCD and a history of vaso-occlusive events.
•
Starbeam Study (ALD-102) – a multi-site, international phase 2/3 study to examine the safety and efficacy of eli-cel in the treatment of patients
with CALD.
• ALD-104 study – our multi-site, international phase 3 study to examine the safety and efficacy of eli-cel after myeloablative conditioning using
busulfan and fludarabine in the treatment of patients with CALD.
•
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.
• We will continue to incur costs related to the manufacture of clinical study materials in support of our clinical studies.
We expect that the timing of investment in our ongoing clinical studies will reflect COVID-19 related delays in these studies.
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, laboratory and
related expenses, certain license and other collaboration costs, 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:
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(1)
beti-cel
LentiGlobin for SCD
eli-cel
ide-cel
bb21217
Preclinical programs
Total direct research and development expense
Employee- and contractor-related expenses
Stock-based compensation expense
(2)
Laboratory and related expenses
License and other collaboration expenses
Facility expenses
Other expenses
(2)
Total other research and development expenses
Total research and development expense
2020
Year ended December 31,
2019
(in thousands)
2018
$
$
66,141 $
58,862
48,028
105,240
23,511
45,888
347,670
63,840
72,239
16,689
15,285
67,464
4,769
240,286
587,956 $
73,896 $
50,796
40,352
121,182
19,827
49,700
355,753
52,617
80,139
12,208
7,021
67,274
7,401
226,660
582,413 $
92,193
32,865
38,244
75,667
15,624
50,115
304,708
35,697
54,422
8,311
9,876
32,158
3,417
143,881
448,589
(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) Prior to 2020, costs within these categories were disclosed as "platform-related expenses."
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 continue to increase in the
future relative to current levels as we execute on our commercial launch plans in Europe for ZYNTEGLO, and perform commercial readiness activities in
the United States for our product candidates.
Cost of royalty and other revenue
Cost of royalty and other revenue represents expense associated with amounts owed to third-party licensors as a result of revenue recognized under our
out-license arrangements.
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.
As of December 31, 2020, 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 $1.5 million as of December 31, 2020, which
are classified within other non-current liabilities on our consolidated balance sheet.
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Interest income, net
For the years ended December 31, 2020 and 2019, interest income, net consists primarily of interest income earned on investments. For the year ended
December 31, 2018, interest income, 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.
Other (expense) income, net
Other (expense) income, net consists primarily of gains and losses on equity securities held by us, gains and losses on disposal of fixed assets, 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
Under Topic 606, Revenue from Contracts with Customers, 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 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
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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.
We recognize revenue within the following financial statement captions:
Service revenue
To date, our service revenue has primarily been generated from the elements of our collaboration arrangement with BMS that are accounted for
pursuant to Topic 606, using the five-step model described above. As discussed further below, we analyze our collaboration arrangement to assess whether
they are within the scope of ASC 808, Collaborative Arrangements (“ASC 808”) or Topic 606. For the elements of the arrangement which are more
reflective of a vendor-customer relationship and therefore within the scope of Topic 606, we record the related revenue as service revenue on the
consolidated statement of operations and comprehensive loss. Refer below for additional discussion around our policy for recognizing collaborative
arrangement revenue and the determination of whether elements of a collaboration arrangement are within the scope of ASC 808 or Topic 606.
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Collaborative arrangement revenue
To date, collaborative arrangement revenue has been primarily generated from our collaboration arrangements with BMS and Regeneron
Pharmaceuticals, Inc. ("Regeneron"), as further described in Note 11, Collaborative arrangements in the notes to consolidated financial statements.
We analyze our collaboration arrangements to assess whether they are within the scope of 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 (refer above for further discussion of the Company's policy for recognizing service revenue). 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 collaborative arrangement revenues as
such amounts are incurred by the collaboration partner. Where amounts owed to a collaboration partner exceed our collaborative arrangement revenues in
each quarterly period, such amounts are classified as research and development expense.
The recognition of service revenue and collaborative arrangement revenue (expense) require 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. Effective January 1, 2020, we eliminated the use of a representative peer group and use only our own historical
volatility data in our estimate of expected volatility given that there is now a sufficient amount of historical information regarding the volatility of our own
stock price. 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, 2020 and 2019:
Revenue:
Service revenue
Collaborative arrangement revenue
Royalty and other revenue
Total revenues
Operating expenses:
Research and development
Selling, general and administrative
Cost of royalty and other revenue
Change in fair value of contingent consideration
Total operating expenses
Loss from operations
Interest income, net
Other expense, net
Loss before income taxes
Income tax (expense) benefit
Net loss
Year ended December 31,
2020
2019
(in thousands)
Change
$
$
114,064 $
115,594
21,076
250,734
587,956
286,896
5,396
(6,468)
873,780
(623,046)
11,539
(6,502)
(618,009)
(686)
(618,695) $
30,729 $
5,740
8,205
44,674
582,413
271,362
2,978
2,747
859,500
(814,826)
34,761
(10,088)
(790,153)
545
(789,608) $
83,335
109,854
12,871
206,060
5,543
15,534
2,418
(9,215)
14,280
191,780
(23,222)
3,586
172,144
(1,231)
170,913
Revenue. Total revenue was $250.7 million for the year ended December 31, 2020, compared to $44.7 million for the year ended December 31, 2019.
The increase of $206.1 million was primarily attributable to a cumulative catch-up adjustment to revenue recorded in connection with the May 2020 BMS
contract modification, as well as an increase in royalty and other revenue primarily attributable to revenue recognized under an out-license agreement with
Juno Therapeutics, Inc.
Research and development expenses. Research and development expenses were $588.0 million for the year ended December 31, 2020, compared to
$582.4 million for the year ended December 31, 2019. The increase of $5.5 million was primarily attributable to the following:
•
•
•
•
$12.8 million of increased collaboration research funding costs, primarily due to an increase in collaboration costs incurred by BMS as a result of
BMS assuming the contract manufacturing agreements relating to ide-cel adherent lentiviral vector under the May 2020 contract modification;
$8.2 million of increased net employee compensation, benefit, and other headcount related expenses, which is primarily driven by an increase in
headcount in the quality and manufacturing organizations to support overall growth and includes a $7.9 million decrease in stock-based
compensation expense due to the recognition of expense on performance-based restricted stock units that vested in June 2019. 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;
$7.0 million of increased license and milestone fees primarily due to a sublicense fee upon execution of the May 2020 BMS contract modification;
and
$5.3 million of increased consulting fees primarily related to the quality and manufacturing organizations.
These increased costs were partially offset by:
•
•
•
$17.6 million of decreased material production and other platform costs, primarily due to BMS assuming the contract manufacturing agreements
relating to ide-cel adherent lentiviral vector under the May 2020 contract modification;
$7.0 million of decreased value-added taxes; and
$2.1 million of decreased medical research costs.
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Selling, general and administrative expenses. Selling, general and administrative expenses were $286.9 million for the year ended December 31, 2020,
compared to $271.4 million for the year ended December 31, 2019. The increase of $15.5 million was primarily due to the following:
•
•
$14.7 million of increased employee compensation, benefit, and other headcount related expenses, which is primarily driven by an increase in
headcount in the information technology and human resource organizations to support overall growth, including an increase of $3.9 million in
stock-based compensation expense; and
$10.6 million of increased information technology and facility-related costs primarily due to increased investment in software applications and
technology.
These increased costs were partially offset by:
•
•
$6.8 million of decreased costs related to commercial readiness activities due to delays in commercial launch activities during 2020 as a result of
the COVID-19 pandemic; and
$2.3 million of decreased consulting fees primarily related to commercial strategy and product marketing.
Cost of royalty and other revenue. Cost of royalty and other revenue was $5.4 million for the year ended December 31, 2020, compared to
$3.0 million for the year ended December 31, 2019. 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 was primarily due to the change in significant
unobservable inputs used in the fair value measurement of contingent consideration, including the probabilities of successful achievement of clinical and
commercial milestones and discount rates.
Interest income, net. The decrease in interest income, net was primarily related to decreased interest income earned on investments due to an overall
decrease in interest rates.
Other expense, net. The decrease in other expense, net was primarily related to changes in fair value on equity securities.
Comparison of the years ended December 31, 2019 and 2018:
Revenue:
Service revenue
Collaborative arrangement revenue
Royalty and other revenue
Total revenues
Operating expenses:
Research and development
Selling, general and administrative
Cost of royalty and other revenue
Change in fair value of contingent consideration
Total operating expenses
Loss from operations
Interest income, net
Other (expense) income, net
Loss before income taxes
Income tax benefit (expense)
Net loss
Year ended December 31,
2019
2018
(in thousands)
Change
$
$
30,729 $
5,740
8,205
44,674
582,413
271,362
2,978
2,747
859,500
(814,826)
34,761
(10,088)
(790,153)
545
(789,608) $
44,533 $
7,820
2,226
54,579
448,589
174,129
885
2,999
626,602
(572,023)
14,624
1,961
(555,438)
(187)
(555,625) $
(13,804)
(2,080)
5,979
(9,905)
133,824
97,233
2,093
(252)
232,898
(242,803)
20,137
(12,049)
(234,715)
732
(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 service revenue recognized for the ide-cel license and manufacturing services under
our agreement with BMS. This decrease was partially offset by an
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increase in royalty and other revenue and an increase in collaborative arrangement 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 approximately $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 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 royalty and other revenue. Cost of royalty and other 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 was primarily due to the change in significant
unobservable inputs used in the fair value measurement of contingent consideration, including the probabilities of successful achievement of clinical and
commercial milestones and discount rates.
Interest income, net. The change in interest income, 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.
Liquidity and Capital Resources
As of December 31, 2020, we had cash, cash equivalents and marketable securities of approximately $1.27 billion. We expect our cash, cash
equivalents and marketable securities will be sufficient to fund planned operations for at least the next twelve months from the date of issuance of these
financial statements, though we may pursue additional cash resources through public or private equity or debt financings or by establishing additional
collaborations with other companies. 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, 2020, our funds are primarily held in U.S. government agency securities and treasuries, equity
securities, corporate bonds, commercial paper, and money market accounts.
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We have incurred losses and cumulative negative cash flows from operations since our inception in April 1992, and as of December 31, 2020, we had
an accumulated deficit of $2.90 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:
•
•
•
•
•
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.
In May 2020, we entered into the First Amendment to the Amended and Restated Co-Development, Co-Promote and Profit Share Agreement (as
amended, the “Amended Ide-cel CCPS”) and the Second Amended and Restated bb21217 License Agreement (“Amended bb21217 License
Agreement”) with BMS pursuant to which BMS modified its obligations to pay us for future ex-U.S. milestones and royalties on commercial sales
by making a one-time up-front payment of $200.0 million. See Note 11, Collaborative arrangements, in the notes to consolidated financial
statements for more information.
In May 2020, we sold 10.5 million shares of common stock (inclusive of shares sold pursuant to an option granted to the underwriters in
connection with the offering) through an underwritten public offering at a price of $55.00 per share for aggregate net proceeds of $541.5 million.
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 in cash, cash equivalents and restricted cash
2020
Year ended December 31,
2019
(in thousands)
$
$
(470,351) $
(84,345)
546,715
(7,981) $
(564,384) $
507,807
21,187
(35,390) $
2018
(413,426)
(679,435)
737,692
(355,169)
Operating Activities. The net cash used in operating activities was $470.4 million for the year ended December 31, 2020 and primarily consisted of a
net loss of $618.7 million adjusted for non-cash items including stock-based compensation of $156.6 million and depreciation and amortization of $19.4
million, as well as the change in our net working capital.
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.
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Investing Activities. Net cash used in investing activities for the year ended December 31, 2020 was $84.3 million and was primarily due to the
purchase of $1.00 billion of marketable securities and the purchase of $29.0 million of property, plant and equipment offset by proceeds from the maturities
of available-for-sale marketable securities of $918.3 million.
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.
Financing Activities: Net cash provided by financing activities for the year ended December 31, 2020 was $546.7 million and was primarily due to net
cash proceeds from our May 2020 common stock offering, as well as employee option exercises and ESPP contributions.
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.
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 and employee option exercises and ESPP
contributions.
Contractual Obligations and Commitments
Lease commitments
60 Binney Street lease
In September 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 first half of 2022, which reflects the sublessor's exercise of its option to postpone the commencement date of the sublease, and end on December 31,
2030, unless other conditions specified in the 50 Binney Street Sublease occur. 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, 2020.
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Seattle, Washington leases
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, 2020.
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. In September 2020, the Company entered into a sublease agreement for the 22,188 square feet
added under the Second Amendment at a fixed monthly rent of $62.80 per square foot per year beginning in January 2021, subject to annual increases of
2.5%. The sublease term will continue through April 2028.
Embedded leases
In June 2016, we entered into a manufacturing agreement for the future commercial production of our beti-cel and eli-cel 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, we paid $12.0 million upon
the achievement of certain contractual milestones. 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.
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.
In November 2016, we entered into an agreement for clinical and commercial production of our ZYNTEGLO, LentiGlobin for SCD, and eli-cel drug
products with a contract manufacturing organization at an existing facility. We concluded that this agreement contains an embedded operating lease as the
clean rooms are designated for our exclusive use during the term of the agreement. The term of the agreement is five years with subsequent three-year
renewals at the mutual option of each party. As a result, we recorded a right-of-use asset and lease liability for this operating lease on the effective date of
ASC 842, and are recognizing rent expense on a straight-line basis throughout the estimated remaining term of the embedded lease. In March 2020, we
amended this agreement with the contract manufacturing organization, resulting in a lease modification. Under the terms of the amended arrangement, we
may be required to pay annual maintenance and production fees of up to €16.5 million, depending on its production needs, and may terminate this
agreement with twelve months’ notice and a one-time termination fee. The amendment also provides for an option to reserve an additional clean room for a
one-time option fee plus annual maintenance fees. As a result, we increased the right-of-use asset and lease liability related to this embedded operating
lease during the first quarter of 2020.
In July 2020, we entered into an agreement reserving manufacturing capacity with a contract manufacturing organization. We concluded that this
agreement contains an embedded lease as a controlled environment room at the facility is designated for our exclusive use during the term of the
agreement, with the option to sublease the space if we provide notice that we will not utilize it for a specified duration of time. Under the terms of the
agreement, we will be required to pay up to $5.4 million per year in maintenance fees in addition to the cost of any services provided and may terminate
this agreement with eighteen months' notice. The term of the agreement is five years, with the option to extend, and is expected to commence in the first
half of 2021.
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Contingent Consideration Related to Business Combinations
In connection with the Pregenen acquisition, we agreed to make contingent cash payments to the former equityholders 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. As of December 31, 2020, and 2019, $1.5 million and $8.0 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 do not recognize these
commitments in our financial statements until they become payable or have been paid.
Based on our development plans as of December 31, 2020, 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 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, 2020, 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, 2020 we paid Institut Pasteur €7.3 million in connection with amounts owed to us by sublicensees.
• 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
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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.
• 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.
• 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,
2020 we paid NIH $1.0 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.
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, now part of Thermo Fisher Scientific, Inc., 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. Our total non-cancelable contractual obligations arising from these manufacturing agreements is $96.5 million, with $83.9 million of these obligations
due within the next twelve months. 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 and infusion 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.
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Off-Balance Sheet Arrangements
As of December 31, 2020, 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, 2020 and 2019, we had cash, cash equivalents and marketable
securities of $1.27 billion and $1.24 billion, respectively, primarily invested in U.S. Treasury securities, U.S. government agency securities, equity
securities, 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, 2020, the net fair value of our interest-sensitive marketable securities would have
resulted in a hypothetical decline of $4.4 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, 2020, 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, 2020, based on
criteria established in the COSO 2013 framework.
The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by Ernst & Young LLP, an independent
registered public accounting firm, as stated in their report which is included herein.
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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 2020 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, 2020, 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,
2020, 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, 2020 and 2019, 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, 2020, and the related notes and our report dated
February 23, 2021 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 23, 2021
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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 certain of our
officers (including Jason Cole (Chief Operating and Legal Officer) and David Davidson (Chief Medical Officer)) have entered into trading plans 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 2021 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 2021 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 2021 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 2021 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 2021 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.
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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-6
F-7
F-8
F-9
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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, 2020 and 2019, 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, 2020, 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, 2020 and 2019, and the results of its operations
and its cash flows for each of the three years in the period ended December 31, 2020, 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, 2020, 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 23, 2021 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.
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.
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Description of the
Matter
Amendment to the Bristol-Myers Squibb Collaboration Agreement
As discussed in Note 11 to the consolidated financial statements, the Company and Bristol-Myers Squibb (BMS) entered into the
First Amendment to the Amended and Restated Co-Development, Co-Promote and Profit Share Agreement for Idecabtagene
vicleucel (ide-cel) and the Second Amended and Restated License Agreement for bb21217 (collectively with the First Amendment
to the Amended and Restated Co-Development, Co-Promote and Profit Share Agreement for Idecabtagene vicleucel, the
“Amendments”). The Amendments reduced the scope of the Company's ongoing performance obligations for vector
manufacturing services through development for both ide-cel and bb21217 and resolved the uncertainty associated with certain
previously constrained variable consideration included in the prior agreements. The Company allocated the $200.0 million up-
front payment received in connection with the Amendments to the remaining performance obligations pursuant to the variable
consideration allocation exception.
Auditing management’s application of the contract modification guidance under ASC 606, Revenue from contracts with customers
to the Amendments was especially challenging due to the complicated contractual terms of the prior agreements and the
Amendments and the information necessary to determine the nature and extent of changes to previously identified performance
obligations was obtained from multiple sources. In addition, auditing management’s evaluation that the up-front payment received
in connection with the Amendments (i) related specifically to the Company's satisfaction of each of its remaining performance
obligations and (ii) was representative of the amount of consideration the Company expected to be entitled to in exchange for
satisfying the respective performance obligations, and thus was subject to the variable consideration allocation exception, required
significant 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 accounting for amendments to its collaboration
agreements.
To test the Company’s application of the contract modification guidance under ASC 606 to the Amendments and assess the
application of the variable consideration allocation exception, our procedures included, among others, inspecting the
Amendments, obtaining information from the Company’s personnel that oversee the collaboration activities and participated in the
negotiations of the Amendments, understanding the nature of and basis for determining the up-front consideration received in
connection with the Amendments and inspecting the associated model used to determine the amount of consideration to be
received, and evaluating the application of the variable consideration allocation exception based on the nature of the previously
constrained variable consideration and the performance obligations remaining to be satisfied.
F-3
Table of Contents
Description of the
Matter
Bristol-Myers Squibb Ide-cel Co-Development, Co-Promote and Profit Share Agreement
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 collaborative arrangement revenue, with an offset for amounts
owed to the collaboration partner. Where amounts owed to a collaboration partner exceed the Company’s collaborative
arrangement revenue from the collaboration partner in a quarterly period, such amounts are classified as research and development
expense. The process of recognizing collaborative arrangement revenue (expense) for the BMS Ide-cel Co-Development, Co-
Promote and Profit Share Agreement includes the identification of costs incurred by the Company that relate to the collaboration
arrangement, evaluating the nature of such costs, and applying the terms of the collaborative arrangement to determine the portion
of such costs that are the responsibility of BMS. The process also includes an assessment of the costs incurred and reported by
BMS, as well as the determination of the appropriate financial statement presentation in each quarterly reporting period. The
Company recorded collaborative arrangement revenue for the BMS Ide-cel Co-Development, Co-Promote and Profit Share
Agreement of $108.2 million, net of collaborative partner amounts, and collaborative arrangement expense (included as a
component of research and development expense) of $41.6 million, net of collaborative arrangement revenue, for the year ended
December 31, 2020.
Auditing collaborative arrangement revenue (expense) for the BMS Ide-cel Co-Development, Co-Promote and Profit Share
Agreement is especially complex due to the fact that the contractual terms of the arrangement are complicated, the information
necessary to determine collaborative arrangement 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 collaborative
arrangement revenue (expense) or (ii) the portion of costs incurred that are the responsibility of BMS 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 collaborative arrangement revenue
(expense) for the BMS Ide-cel Co-Development, Co-Promote and Profit Share Agreement.
Description of the
Matter
To test the Company’s collaborative arrangement revenue (expense) for the BMS Ide-cel Co-Development, Co-Promote and Profit
Share Agreement, our procedures included, among others, inspecting the Company’s collaboration agreement, comparing the
Company’s computations of collaborative arrangement revenue (expense) to the contractual terms of its collaboration
arrangement, testing the accuracy and completeness of the underlying data used in the computation of collaborative arrangement
revenue (expense), and evaluating the costs included in the computation of collaborative arrangement revenue (expense) based on
the nature of the costs and the relevant contractual terms. We also obtained information directly from the Company’s collaboration
partner regarding the costs incurred by the collaboration partner during the period and agreed those amounts to the Company’s
computation of collaborative arrangement revenue (expense) for the BMS Ide-cel Co-Development, Co-Promote and Profit Share
Agreement.
Accrued Clinical and Contract Research Organization Costs and Manufacturing Costs
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 $46.3
million at December 31, 2020.
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-4
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 23, 2021
F-5
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
Operating lease liability, 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, 2020 and December 31, 2019
Common stock, $0.01 par value, 125,000 shares authorized; 66,432 and 55,368 shares
issued and outstanding at December 31, 2020 and December 31, 2019, 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-6
As of December 31,
2020
2019
317,705 $
833,546
37,472
26,814
1,215,537
122,891
162,831
10,041
13,128
184,019
72,805
1,781,252 $
21,602 $
145,406
25,024
2,320
9,236
203,588
25,762
21,581
167,997
7,268
426,196 $
327,214
779,246
32,888
12,826
1,152,174
131,506
151,176
14,326
13,128
185,885
79,229
1,727,424
42,995
141,556
20,175
8,474
10,380
223,580
9,791
27,834
170,812
10,414
442,431
— $
—
665
4,260,443
(5,505)
(2,900,547)
1,355,056
1,781,252 $
554
3,568,184
(1,893)
(2,281,852)
1,284,993
1,727,424
$
$
$
$
$
$
Table of Contents
bluebird bio, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share amounts)
Revenue:
Service revenue
Collaborative arrangement revenue
Royalty and other revenue
Total revenues
Operating expenses:
Research and development
Selling, general and administrative
Cost of royalty and other revenue
Change in fair value of contingent consideration
Total operating expenses
Loss from operations
Interest income, net
Other (expense) income, net
Loss before income taxes
Income tax (expense) benefit
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 (loss) income:
Other comprehensive (loss) income, net of tax benefit (expense) of
$0.0 million, $(1.2) million and $(0.4) million for the years ended
December 31, 2020, 2019 and 2018, respectively
Total other comprehensive (loss) income
Comprehensive loss
2020
Year ended December 31,
2019
2018
114,064 $
115,594
21,076
250,734
587,956
286,896
5,396
(6,468)
873,780
(623,046)
11,539
(6,502)
(618,009)
(686)
(618,695) $
30,729 $
5,740
8,205
44,674
582,413
271,362
2,978
2,747
859,500
(814,826)
34,761
(10,088)
(790,153)
545
(789,608) $
(9.95) $
(14.31) $
44,533
7,820
2,226
54,579
448,589
174,129
885
2,999
626,602
(572,023)
14,624
1,961
(555,438)
(187)
(555,625)
(10.68)
62,178
55,191
52,032
(3,612)
(3,612)
(622,307) $
1,734
1,734
(787,874) $
578
578
(555,047)
$
$
$
$
See accompanying notes to consolidated financial statements.
F-7
Table of Contents
Balances at December 31, 2017
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
Balances at December 31, 2018
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
Balances at December 31, 2019
Issuance of common stock upon
public offering, net of issuance
costs of $33,645
Vesting of restricted stock units
Exercise of stock options
Purchase of common stock under
ESPP
Stock-based compensation
Other comprehensive loss
Net loss
Balances at December 31, 2020
bluebird bio, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands)
Common stock
Shares
Amount
49,406 $
494 $
Additional
paid-in
capital
2,540,951 $
Accumulated
other
comprehensive
loss
(4,205) $
Accumulated
deficit
(913,808) $
Total
stockholders'
equity
1,623,432
—
152
4,169
420
575
16
—
—
—
54,738 $
—
251
354
25
—
—
—
55,368 $
10,455
434
95
80
—
—
—
66,432 $
—
2
42
4
5
—
—
—
—
547 $
—
3
4
—
—
—
—
554 $
105
4
1
1
—
—
—
665 $
—
(2)
649,326
54,480
29,763
1,604
110,836
—
—
3,386,958 $
—
(3)
17,834
2,766
160,629
—
—
3,568,184 $
541,431
(4)
1,846
3,774
145,212
—
—
4,260,443 $
—
—
—
—
—
(29,375)
—
—
—
—
—
—
578
—
(3,627) $
—
—
—
(555,625)
(1,498,808) $
—
—
—
6,564
—
—
—
—
1,734
—
(1,893) $
—
—
—
(789,608)
(2,281,852) $
—
—
—
—
—
—
—
—
(3,612)
—
(5,505) $
—
—
—
(618,695)
(2,900,547) $
(29,375)
—
649,368
54,484
29,768
1,604
110,836
578
(555,625)
1,885,070
6,564
—
17,838
2,766
160,629
1,734
(789,608)
1,284,993
541,536
—
1,847
3,775
145,212
(3,612)
(618,695)
1,355,056
See accompanying notes to consolidated financial statements.
F-8
Table of Contents
bluebird bio, Inc.
Consolidated Statements of Cash Flows
(in thousands)
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
Sales 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:
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 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:
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
2020
Year ended December 31,
2019
2018
$
(618,695)
$
(789,608)
$
(555,625)
(6,468)
19,356
156,631
7,217
458
(10,089)
21,281
(20,100)
(4,982)
(17,380)
9,817
(7,397)
(470,351)
(28,986)
(1,003,525)
29,878
918,288
—
(84,345)
—
—
541,536
5,179
—
546,715
(7,981)
381,709
373,728
317,705
1,500
54,523
373,728
2,854
19,414
—
361
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2,747
17,434
160,629
9,297
(11,000)
(13,913)
22,496
23,600
46,291
(9,944)
(16,674)
(5,739)
(564,384)
(71,028)
(756,570)
—
1,340,629
(5,224)
507,807
—
—
—
21,187
—
21,187
(35,390)
417,099
381,709
327,214
—
54,495
381,709
5,286
23,939
—
637
$
$
$
$
$
$
$
$
$
2,999
17,158
110,836
(2,154)
(5,880)
(24,288)
—
3,614
37,832
—
(41,872)
43,954
(413,426)
(55,737)
(1,517,982)
—
894,284
—
(679,435)
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
See accompanying notes to consolidated financial statements.
F-9
Table of Contents
bluebird bio, Inc.
Notes to Consolidated Financial Statements
For the Years Ended December 31, 2020, 2019 and 2018
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 betibeglogene autotemcel (beti-cel; formerly LentiGlobin for β-thalassemia gene therapy)
®
as a treatment for transfusion-dependent β-thalassemia, or TDT; its LentiGlobin product candidate as a treatment for sickle cell disease, or SCD; and
elivaldogene autotemcel (eli-cel; formerly Lenti-D gene therapy) as a treatment for cerebral adrenoleukodystrophy, or 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 are product candidates in oncology under the Company’s collaboration arrangement with Bristol-
Myers Squibb ("BMS"). ide-cel and bb21217 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 beti-cel as a treatment of patients 12
0
0
years and older with TDT who do not have a β /β genotype, for whom hematopoietic stem cell (HSC) transplantation is appropriate but a human
leukocyte-matched related HSC donor is not available. beti-cel is being marketed as ZYNTEGLO™ in the European Union. Since receiving conditional
marketing authorization for ZYNTEGLO, the Company has continued to advance its commercial readiness activities. Through December 31, 2020, the
Company had not generated any revenue from product sales. In February 2021 the Company temporarily suspended marketing of ZYNTEGLO in light of
safety events in the HGB-206 study of LentiGlobin gene therapy for SCD which is manufactured using the same vector as ZYNTEGLO. Additionally, the
European Medicines Agency, or EMA, has paused the renewal procedure for ZYNTEGLO's conditional marketing authorization while the EMA's
pharmacovigilance risk assessment committee reviews the risk-benefit assessment for ZYNTEGLO and determines whether any additional
pharmacovigilance measures are necessary.
In January 2021, the Company announced its intent to separate its severe genetic disease and oncology programs into two separate, independent
publicly traded companies, bluebird bio, Inc. and a new company, referred to as Oncology NewCo in these consolidated financial statements. bluebird bio,
Inc. intends to retain focus on its severe genetic disease programs and Oncology NewCo is expected to focus on the Company's oncology programs. The
transaction is expected to be completed in late 2021 and is anticipated to be tax-free, subject to receipt of a favorable Internal Revenue Service (“IRS”)
ruling.
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, 2020, the Company had an accumulated deficit of $2.90 billion. During the year ended December 31, 2020, the Company incurred a loss of
$618.7 million and used $470.4 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, 2020, the Company had cash, cash equivalents and marketable securities of $1.27 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
F-10
Table of Contents
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 and product candidates.
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, assessing the
period of performance over which revenue may be recognized, and accounting for modifications to revenue-generating arrangements.
F-11
Table of Contents
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.
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 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 assets. The Company’s marketable securities are maintained by
investment managers and consist of U.S. government agency securities and treasuries, equity securities, 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, net. 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 (expense) income, 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.
Effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Statements (“ASU 2016-13” or “ASC 326”), using the effective date method. As the Company had never recorded any other-than-temporary-
impairment adjustments to its available-for-sale debt securities prior to the effective date, no transition provisions are applicable to the Company.
The Company assesses its available-for-sale debt securities under the available-for-sale debt security impairment model in ASC 326 as of each
reporting date in order to determine if a portion of any decline in fair value below carrying value recognized on its available-for-sale debt securities is the
result of a credit loss. The Company records credit losses in the consolidated statements of operations and comprehensive loss as credit loss expense within
other (expense) income, net, which is limited to the difference between the fair value and the amortized cost of the security. To date, the Company has not
recorded any credit losses on its available-for-sale debt securities.
Accrued interest receivable related to the Company's available-for-sale debt securities is presented within receivables and other current assets on the
Company's consolidated balance sheets. The Company has elected the practical expedient available to exclude accrued interest receivable from both the fair
value and the amortized cost basis of available-for-sale debt securities for the purposes of identifying and measuring any impairment. The Company writes
off accrued interest receivable once it has determined that the asset is not realizable. Any write offs of accrued interest receivable are recorded by reversing
interest income, recognizing credit loss expense, or a combination of both. To date, the Company has not written off any accrued interest receivables
associated with its marketable securities.
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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 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 ASC 2017-04, Intangibles—Goodwill
and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), which removes the second step of the goodwill impairment test.
Under this ASU, the Company performs a one-step quantitative test and records 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.
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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. The Company
has not recognized any impairment charges related to intangible assets to date.
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:
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, amounts for the year ended December 31, 2018 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 current and non-current
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
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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 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.
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Revenue recognition
Under ASC Topic 606, Revenue from Contracts with Customers (“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 good or service
relative to the option exercise price. 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 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
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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.
The Company recognizes revenue within the following financial statement captions:
Service revenue
To date, the Company’s service revenue has primarily been generated from the elements of its collaboration arrangement with BMS that are accounted
for pursuant to Topic 606, using the five-step model described above. As discussed further below, the Company analyzes its collaboration arrangements to
assess whether they are within the scope of ASC 808, Collaborative Arrangements (“ASC 808”) or Topic 606. For the elements of a collaboration
arrangement which are more reflective of a vendor-customer relationship and therefore within the scope of Topic 606, the Company records the related
revenue as service revenue on the consolidated statement of operations and comprehensive loss. Refer below for additional discussion around the
Company’s policy for recognizing collaborative arrangement revenue and the determination of whether elements of a collaboration arrangement are within
the scope of ASC 808 or Topic 606.
Collaborative arrangement revenue
To date, the Company’s collaborative arrangement 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, which includes determining 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, 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 (refer above for further discussion of the Company's policy for
recognizing service revenue). 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
collaborative arrangement revenues as such amounts are incurred by the collaboration partner. Where amounts owed to a collaboration partner exceed the
Company’s collaborative arrangement revenues in each quarterly period, such amounts are classified as research and development expense.
Prior to the adoption of ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606
(“ASU 2018-18”) on January 1, 2020, the Company presented all revenue recognized under its collaborative arrangements as collaboration revenue on its
consolidated statements of operations and comprehensive loss. However, as the Company recognizes revenue under its collaborative arrangements both
within and outside the scope of Topic 606, the Company has revised its presentation of revenue on its consolidated statements of operations and
comprehensive loss as follows: service revenue includes revenue from collaborative partners recognized within the scope of Topic 606 and collaborative
arrangement revenue includes revenue from collaborative partners recognized outside the scope of Topic 606. The disaggregation of revenue recognized
under Topic 606 and outside of Topic 606 had previously otherwise been disclosed in the notes to consolidated financial statements.
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Royalty and other 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, Royalty and other 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. Where amounts owed
to a collaboration partner exceed the Company’s collaborative arrangement revenues in each quarterly period, such amounts are classified as research and
development expense.
Cost of royalty and other revenue
Cost of royalty and other 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.
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. Effective January 1, 2020, the Company eliminated the use of a representative peer group and uses only its own historical volatility
data in its estimate of expected volatility given that there is now a sufficient amount of historical information regarding the volatility of its own stock price.
The Company has estimated the expected term of its employee stock options using the “simplified” method, whereby, the expected term equals the
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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 on July 1, 2018, 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 on July 1, 2018, the measurement date for non-employee awards is the date of grant without changes in the fair value of the award.
Interest income, net
Interest income, net consists primarily of interest income earned on investments, net of amortization of premium and accretion of discount. Interest
income was approximately $11.5 million, $34.8 million, and $30.1 million for the years ended December 31, 2020, 2019, and 2018, respectively. Interest
expense was $0.0 million, $0.0 million, and $15.5 million for the years ended December 31, 2020, 2019, and 2018, 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 gains and losses on equity securities held by the Company, gains and losses on disposal of assets, and
gains and losses on foreign currency.
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 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
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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
ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements, ASU No. 2019-5
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 326): Measurement of Credit Losses on Financial
Statements. The new standard, as amended, 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 Company adopted this standard on January 1, 2020 on a
prospective basis and the adoption did not have a material impact on its financial position and results of operations.
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. The new standard removes certain disclosures, modifies certain disclosures, and adds additional disclosures
related to fair value measurement. The Company adopted this standard on January 1, 2020, and it did not have a material impact on its financial position
and 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. 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 Company adopted this standard on a
prospective basis as of January 1, 2020, and it did not have a material impact 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 under ASC 606, Revenue from Contracts with Customers (“Topic 606” or “ASC 606”) when the counter party is a customer in the context of
a unit of account. ASU 2018-18 also precludes companies from presenting transactions with collaborative partners that are outside the scope of Topic 606
together with revenue within the scope of Topic 606. The Company adopted this standard on a retrospective basis on January 1, 2020. As a result, revenue
for prior periods are presented in accordance with the new standard.
Prior to the adoption of ASU 2018-18, the Company presented all revenue recognized under its collaborative arrangements as collaboration revenue on
its consolidated statements of operations and comprehensive loss. However, as the Company recognizes revenue under its collaborative arrangements both
within and outside the scope of Topic 606, the Company has revised its presentation of revenue on its consolidated statements of operations and
comprehensive loss as follows: service revenue includes revenue from collaborative partners recognized within the scope of Topic 606 and collaborative
arrangement revenue includes revenue from collaborative partners recognized outside the scope of Topic 606. The disaggregation of revenue
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recognized under Topic 606 and outside of Topic 606 had previously otherwise been disclosed in the notes to consolidated financial statements.
ASU No. 2019-4, 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 2019-4, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives
and Hedging, and Topic 825, Financial Instruments. This update provides clarifications for three topics related to financial instruments accounting, some of
which apply to the Company. The Company adopted this standard on January 1, 2020 on a prospective basis, and it did not have a material impact on its
financial position and results of operations upon adoption.
Not yet adopted
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 adoption of ASU 2019-12
is not expected to have a material impact on the Company's financial position or results of operations upon adoption.
ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity
(Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—
Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”).
ASU 2020-06 simplifies the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity.
More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exception for contracts in an entity's own equity.
The Company will early adopt the new standard, effective January 1, 2021. The adoption of ASU 2020-06 is not expected to have an impact on the
Company's financial position or results of operations upon adoption.
ASU No. 2020-08, Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs
In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs
(“ASU 2020-08”) to provide further clarification and update the previously issued guidance in ASU 2017-08, Receivables - Nonrefundable Fees and Other
Costs (Subtopic 310-20: Premium Amortization on Purchased Callable Debt Securities) (“ASU 2017-08”). ASU 2017-08 shortened the amortization period
for certain callable debt securities purchased at a premium by requiring that the premium be amortized to the earliest call date. ASU 2020-08 requires that
at each reporting period, to the extent that the amortized cost of an individual callable debt security exceeds the amount repayable by the issuer at the next
call date, the excess premium shall be amortized to the next call date. The new standard will be effective beginning January 1, 2021. The adoption of ASU
2020-08 is not expected to have a material impact on the Company's financial position or results of operations upon adoption.
ASU No. 2020-10, Codification Improvements
In October 2020, the FASB issued ASU 2020-10, Codification Improvements ("ASU 2020-10"). The amendments in this ASU represent changes to
clarify the ASC, correct unintended application of the guidance, or make minor improvements to the ASC that are not expected to have a significant effect
on current accounting practice or create a significant administrative cost to most entities. This new standard will be effective beginning January 1, 2021.
The adoption of ASU 2020-10 is not expected to have a material impact on the Company's financial position or results of operations upon adoption.
3. Marketable securities
The following table summarizes the marketable securities held at December 31, 2020 and 2019 (in thousands):
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December 31, 2020
U.S. government agency securities and treasuries
Corporate bonds
Commercial paper
Equity securities
Total
December 31, 2019
U.S. government agency securities and treasuries
Certificates of deposit
Corporate bonds
Commercial paper
Equity securities
Total
Amortized cost /
cost
Unrealized gains
Unrealized losses
Fair value
$
$
$
$
675,043 $
197,171
77,949
20,017
970,180 $
633,970 $
960
185,827
74,378
20,017
915,152 $
302 $
432
1
—
735 $
2,014 $
—
824
—
—
2,838 $
(74) $
(40)
—
(14,364)
(14,478) $
(48) $
—
(43)
—
(7,147)
(7,238) $
675,271
197,563
77,950
5,653
956,437
635,936
960
186,608
74,378
12,870
910,752
No available-for-sale debt securities held as of December 31, 2020 or 2019 had remaining maturities greater than five years.
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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, 2020 and
2019 (in thousands):
December 31, 2020
Assets:
Cash and cash equivalents
Marketable securities:
U.S. government agency securities and treasuries
Corporate bonds
Commercial paper
Equity securities
Total assets
Liabilities:
Contingent consideration
Total liabilities
December 31, 2019
Assets:
Cash and cash equivalents
Marketable securities:
U.S. government agency securities and treasuries
Certificates of deposit
Corporate bonds
Commercial paper
Equity securities
Total assets
Liabilities:
Contingent consideration
Total liabilities
Cash and cash equivalents
Quoted
prices in
active
markets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Total
$
317,705 $
317,705 $
— $
675,271
197,563
77,950
5,653
1,274,142 $
—
—
—
5,653
323,358 $
675,271
197,563
77,950
—
950,784 $
—
—
—
—
—
—
1,509 $
1,509 $
— $
— $
— $
— $
1,509
1,509
327,214 $
311,245 $
15,969 $
635,936
960
186,608
74,378
12,870
1,237,966 $
—
—
—
—
12,870
324,115 $
635,936
960
186,608
74,378
—
913,851 $
—
—
—
—
—
—
7,977 $
7,977 $
— $
— $
— $
— $
7,977
7,977
$
$
$
$
$
$
$
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, 2020, cash and cash equivalents comprise funds in cash and money market accounts. As of December 31, 2019, cash and cash equivalents
comprise funds in cash, money market accounts, and commercial paper.
Marketable securities
Marketable securities classified as Level 2 within the valuation hierarchy generally consist of certificates of deposit, U.S. government agency securities
and treasuries, 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.
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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, 2020 and 2019, the balance in the Company’s accumulated other comprehensive loss was
composed primarily of activity related to the Company’s available-for-sale 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, 2020 or 2019.
Accrued interest receivable on the Company's available-for-sale debt securities totaled $3.1 million and $3.6 million as of December 31, 2020 and
2019, respectively. No accrued interest receivable was written off during the twelve months ended December 31, 2020 or 2019.
The following table summarizes available-for-sale debt securities in a continuous unrealized loss position for less than and greater than twelve months,
and for which an allowance for credit losses has not been recorded at December 31, 2020 and 2019 (in thousands):
Description
December 31, 2020
U.S. government agency securities
and treasuries
Corporate bonds
Total
December 31, 2019
U.S. government agency securities
and treasuries
Corporate bonds
Total
$
$
$
$
Less than 12 months
12 months or greater
Total
Fair value
Unrealized losses
Fair value
Unrealized losses
Fair value
Unrealized losses
211,384 $
76,598
287,982 $
(74) $
(40)
(114) $
— $
1,205
1,205 $
— $
—
— $
211,384 $
77,803
289,187 $
13,234 $
53,983
67,217 $
(3) $
(43)
(46) $
79,618 $
—
79,618 $
(45) $
—
(45) $
92,852 $
53,983
146,835 $
(74)
(40)
(114)
(48)
(43)
(91)
The Company determined that there was no material change in the credit risk of the above investments during the twelve months ended December 31,
2020. As such, an allowance for credit losses was not recognized. As of December 31, 2020, the Company does not intend to sell such securities and it is
not more likely than not that the Company will be required to sell the securities before recovery of their amortized cost bases.
The Company holds equity securities with an aggregate fair value of $5.7 million and $12.9 million at December 31, 2020 and 2019, respectively
within current marketable securities on its consolidated balance sheet. The Company recorded unrealized losses of $7.2 million and $9.3 million and an
unrealized gain of $2.2 million during the years ended December 31, 2020, 2019, and 2018 respectively, related to its equity securities, which are included
in other (expense) income, net on the consolidated statements of operations and comprehensive loss. In January 2021, the Company sold a portion of its
equity securities for proceeds of $31.3 million. The fair value of the remaining equity securities held as of the trade date is $7.3 million.
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. In the
absence of new information related to the probability of milestone achievement, changes in fair value will reflect changing discount rates and the passage
of time. Contingent consideration is included in accrued expenses and other current liabilities and other non-current liabilities on the consolidated balance
sheets.
Please refer to Note 9, Commitments and contingencies, for further information.
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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
As of December 31,
2020
2019
$
$
1,210 $
15,745
6,950
7,665
55,521
34,286
92,514
213,891
(51,060)
162,831 $
1,210
15,664
6,947
7,599
44,560
33,788
77,981
187,749
(36,573)
151,176
Depreciation and amortization expense related to property, plant and equipment was $15.1 million, $13.4 million, and $13.4 million for the years
ended December 31, 2020, 2019, and 2018, 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, 2020, a portion of the facility has been placed into service and the remainder of the facility is still in
process of construction and qualification, which is required for the facility to be ready for its intended use. Construction-in-progress as of December 31,
2020, and 2019, includes $91.1 million and $74.2 million, respectively, related to the North Carolina manufacturing facility.
6. Restricted cash
As of both December 31, 2020 and 2019, the Company maintained letters of credit of $54.5 million, which are collateralized with bank accounts at
financial institutions in accordance with the agreements. Total restricted cash as of December 31, 2020 and 2019 consisted of the following (in thousands):
60 Binney Street lease
50 Binney Street sublease
Other
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):
F-25
As of December 31,
2020
2019
$
$
13,763 $
40,072
2,188
56,023 $
13,763
40,072
660
54,495
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Employee compensation
Manufacturing costs
Clinical and contract research organization costs
Collaboration research costs
Property, plant, and equipment
License and milestone fees
Professional fees
Other
Total accrued expenses and other current liabilities
8. Leases
As of December 31,
2020
2019
55,802 $
22,571
23,766
20,004
789
278
1,541
20,655
145,406 $
44,679
23,126
16,799
27,142
2,354
300
1,827
25,329
141,556
$
$
The Company leases certain office and laboratory space. Additionally, the Company has embedded leases at contract manufacturing organizations.
60 Binney Street lease
In September, 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. The $13.8 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. 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. In applying the ASC 842 transition guidance, the Company
classified this lease as an operating lease and recorded a right-of-use asset and lease liability 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 first half of 2022, which reflects the sublessor's exercise of its option to postpone the commencement
date of the sublease, and end on December 31, 2030, unless other conditions specified in the 50 Binney Street Sublease occur. 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
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of December 31, 2020. 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 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.
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 extend the term.
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. In September 2020, the Company entered into a sublease agreement for the 22,188 square feet added under the
Second Amendment at a fixed monthly rent of $62.80 per square foot per year beginning in January 2021, subject to annual increases of 2.5%. The
sublease term will continue through April 2028. The Company is recognizing rent expense on a straight-line basis through the remaining extended term of
the respective leases. The head lease and the sublease will be accounted for as two separate contracts with the income from the sublease presented
separately from the lease expense on the head lease.
Embedded leases
In June 2016, the Company entered into a manufacturing agreement for the future commercial production of the Company’s beti-cel and eli-cel 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. Construction was completed in March 2018 and beginning in
April 2018, the Company pays $5.1 million per year, subject to annual inflationary adjustments, in fixed suite fees, as well as certain fixed labor, raw
materials, testing and shipping costs for manufacturing services. 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 as the suites are designated for the Company’s exclusive use during the term of the agreement. The Company recorded a right-of-use asset and lease
liability for this operating lease on the effective date of ASC 842 and is recognizing rent expense on a straight-line basis throughout the remaining term of
the embedded lease.
In November 2016, the Company entered into an agreement for clinical and commercial production of the Company’s ZYNTEGLO, LentiGlobin for
SCD, and eli-cel drug products with a contract manufacturing organization at an existing facility. The Company concluded that this agreement contains an
embedded operating lease as the clean rooms are designated for the Company’s exclusive use during the term of the agreement. The term of the agreement
is five years with subsequent three-year renewals at the mutual option of each party. As a result, the Company recorded a right-of-use asset and lease
liability for this operating lease on the effective date of ASC 842, and is recognizing rent expense on a straight-line basis throughout the estimated
remaining term of the embedded lease. In March 2020, the Company amended its agreement with the contract manufacturing organization, resulting in a
lease modification. Under the terms of the amended arrangement, the Company may be required to pay annual maintenance and production fees of up to
€16.5 million, depending on its production needs, and may terminate this agreement with twelve months’ notice and a one-time termination fee. The
amendment also provides for an option to reserve an additional clean room for a one-time option fee plus annual maintenance fees. As a result, the
Company increased the right-of-use asset and lease liability related to this embedded operating lease during the first quarter of 2020.
In July 2020, the Company entered into an agreement reserving manufacturing capacity with a contract manufacturing organization. The Company
concluded that this agreement contains an embedded lease as a controlled environment room at the
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facility is designated for the Company's exclusive use during the term of the agreement, with the option to sublease the space if the Company provides
notice that it will not utilize it for a specified duration of time. Under the terms of the agreement, the Company will be required to pay up to $5.4 million
per year in maintenance fees in addition to the cost of any services provided and may terminate this agreement with eighteen months' notice. The term of
the agreement is five years, with the option to extend, and is expected to commence in the first half of 2021. The Company intends to assess the lease
classification of the embedded lease and commence recognition of the associated rent expense upon lease commencement.
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 years ended December 31, 2020 and 2019 (in thousands):
(1)
Lease cost
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,
2020
2019
$
$
$
$
$
$
35,049
35,049
32,097
6.4 years
6.35 %
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, 2020 and 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 $47.7 million, $45.3 million, and $9.8 million for the years ended December 31, 2020, 2019 and
2018, respectively. Note that the Company adopted ASC 842 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 year ended December 31, 2018 are presented under previous
accounting guidance and are therefore not comparable to the amounts recorded during the years ended December 31, 2020 and 2019 under ASC 842.
As of December 31, 2020, future minimum commitments under ASC 842 under the Company’s operating leases were as follows (in thousands):
Maturity of lease liabilities
2021
2022
2023
2024
2025
2026 and thereafter
Total lease payments
Less: imputed interest
Total operating lease liabilities
As of
December 31, 2020
$
$
36,430
36,899
37,387
37,398
32,082
56,095
236,291
(43,270)
193,021
The above table excludes legally binding minimum lease payments for leases executed but not yet commenced as of December 31, 2020.
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Table of Contents
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.
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. Please refer to Note 11, Collaborative arrangements, for further information on the collaboration agreement with Regeneron.
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.
Based on our development plans as of December 31, 2020, the Company 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. As further discussed in Note 11,
Collaborative arrangements, BMS assumed responsibility for amounts due to licensors as a result of any future ex-U.S. sales of ide-cel and bb21217.
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,
2021
2022
2023
2024
2025
2026 and thereafter
Total purchase commitments
Litigation
Purchase
commitment
83,885
12,611
—
—
—
—
96,496
$
$
From time to time, the Company is party to various claims and complaints arising in the ordinary course of business, including securities class action
litigation. The Company enters into standard indemnification agreements in the ordinary course of business. Pursuant to the agreements, the Company
indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally the
Company’s 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. Management
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does not believe that any ultimate liability resulting from any of these claims will have a material adverse effect on its results of operations, financial
position, or liquidity. However, management cannot give any assurance regarding the ultimate outcome of any claims, and their resolution could be
material to operating results for any particular period.
The Company also indemnifies each of its directors and officers for certain events or occurrences, subject to certain limits, while the officer or director
is or was serving at the Company's request in such capacity, as permitted under Delaware law and in accordance with its certificate of incorporation and by-
laws. The term of the indemnification period lasts as long as a director may be subject to any proceeding arising out of acts or omissions of such director or
officer in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company currently holds director and officer
liability insurance. This insurance allows the transfer of risk associated with the Company's exposure and may enable it to recover a portion of any future
amounts paid. The Company believes that the fair value of these indemnification obligations is minimal. Accordingly, it has not recognized any liabilities
relating to these obligations.
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, 2020, and 2019, the Company had 66.4 million and 55.4 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.
In May 2020, the Company sold 10.5 million shares of common stock (inclusive of shares sold pursuant to an option granted to the underwriters in
connection with the offering) through an underwritten public offering at a price of $55.00 per share for aggregate net proceeds of $541.5 million.
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, 2020 and 2019,
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):
Options to purchase common stock
Restricted stock units
2013 Stock Option and Incentive Plan
2013 Employee Stock Purchase Plan
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As of December 31,
2020
2019
6,262
1,495
2,545
67
10,369
5,483
1,127
2,007
147
8,764
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11. Collaborative arrangements
To date, the Company’s service and collaborative arrangement revenue has been primarily generated from its collaboration arrangements with 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
In March 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, in March 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 an up-front, non-refundable, non-creditable payment of $75.0 million.
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.
BMS Amended Collaboration Agreement
In June 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. 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 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.
BMS Ide-cel License Agreement
In February 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 in
February 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. Under the Ide-cel License Agreement, the
Company was eligible to receive U.S. milestones of up to $85.0 million for the first indication to be addressed by ide-cel and royalties for U.S. sales of ide-
cel. Additionally, the Company was eligible to receive ex-U.S. milestones of up to $55.0 million and royalties for ex-U.S. sales of ide-cel.
BMS Ide-cel Co-Development, Co-Promote and Profit Share Agreement
In March 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. As a result of executing the Ide-
cel CCPS, the responsibilities of the parties remain unchanged from
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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. As a result of electing to co-develop and co-
promote ide-cel within the U.S., the milestones and royalties payable under the Ide-cel License Agreement were adjusted. Under the Ide-cel CCPS, the
Company was eligible to receive a $10.0 million milestone related to the development of ide-cel in the U.S. and, for the first indication to be addressed by
ide-cel, ex-U.S. regulatory and commercial milestones of up to $60.0 million. Under the Ide-cel CCPS, the $10.0 million development milestone was
achieved in the second quarter of 2019 and subsequently paid by BMS.
In May 2020, the First Amendment to the Amended and Restated Co-Development, Co-Promote and Profit Share Agreement (as amended, the
"Amended Ide-cel CCPS") was executed, which amended the Ide-cel CCPS. Under the Amended Ide-cel CCPS, the parties will continue to share equally
in all profits and losses related to developing, commercializing and manufacturing ide-cel within the U.S. Under the Amended Ide-cel CCPS and the
Amended bb21217 License Agreement, described further below, BMS was relieved of its obligations to pay the Company for future ex-U.S. milestones and
royalties on ex-U.S. sales for each of ide-cel and bb21217 in exchange for an up-front, non-refundable, non-creditable payment of $200.0 million, which
represents the aggregate of the probability-weighted, net present value of the future ex-U.S. milestones and royalties on ex-U.S. sales for each of ide-cel
and bb21217. In connection with these amendments, BMS assumed the contract manufacturing agreements related to ide-cel adherent lentiviral vector.
Over time, BMS is assuming responsibility for manufacturing ide-cel suspension lentivrial vector outside of the U.S., with bluebird responsible for
manufacturing ide-cel suspension lentiviral vector in the U.S. In addition, under the Amended Ide-cel CCPS and the Amended bb21217 License
Agreement, described further below, the parties are released from future exclusivity related to BCMA-directed T cell therapies. There are no remaining
milestones or royalties under the Amended Ide-cel CCPS.
BMS bb21217 License Agreement
In September 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 in September 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 for which the Company will be reimbursed based upon an agreed-upon amount per
patient. Under the bb21217 License Agreement, the Company is eligible to receive U.S. milestones of up to $85.0 million for the first indication to be
addressed by bb21217 and royalties for U.S. sales of bb21217. Additionally, the Company was eligible to receive ex-U.S. milestones of up to $55.0 million
and royalties for ex-U.S. sales of bb21217.
In May 2020, the Second Amended and Restated License Agreement ("Amended bb21217 License Agreement") was executed, which replaced the
bb21217 License Agreement. Under the Amended bb21217 License Agreement, over time, BMS is assuming responsibility for manufacturing suspension
lentiviral vector outside of the U.S., with bluebird responsible for manufacturing suspension lentiviral vector in the U.S. Under the Amended bb21217
License Agreement, 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. There are no remaining milestones and royalties related
to the ex-U.S. development or commercialization of bb21217 following execution of the Amended bb21217 License Agreement.
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. Under this scenario, the U.S. milestones and royalties payable under the Amended bb21217 License Agreement would be adjusted
and the Company would be eligible to receive a $10.0 million development milestone payment related to the development of bb21217 within the U.S. The
Company would not be eligible for royalties on U.S. sales of bb21217 under this scenario.
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, there would be no change to the U.S. milestones and royalties for U.S. sales of bb21217, as previously
described above, for which the Company would be eligible to receive.
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Accounting Analysis – Amended Ide-cel CCPS and Amended bb21217 License Agreement
In accordance with the Company’s accounting policies related to variable consideration, as further described in Note 2, Summary of Significant
Accounting Policies and Basis of Presentation, if an arrangement includes variable consideration, including milestone payments, the Company evaluates
whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price of an arrangement. 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, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are
received. 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.
Prior to the May 2020 amendments, the Company had constrained all variable consideration related to the remaining ex-U.S. milestones and royalties
for ex-U.S. sales under the Ide-cel CCPS and bb21217 License Agreement. As a result of the May 2020 amendments, the uncertainty associated with the
previously constrained variable consideration for future ex-U.S. milestones and royalties on ex-U.S. sales for each of ide-cel and bb21217 was resolved in
exchange for an up-front, non-refundable, non-creditable payment of $200.0 million.
While the Ide-cel CCPS and bb21217 License Agreement were historically accounted for as separate contracts, the May 2020 amendments to each
agreement were negotiated as a package with a single commercial objective and, as such, the Amended Ide-cel CCPS and Amended bb21217 License
Agreement were combined for accounting purposes and treated as a single arrangement.
At the time of the May 2020 amendments, there was one remaining performance obligation under each of the Ide-cel CCPS and bb21217 License
Agreement, neither of which were fully satisfied: a combined performance obligation of the ide-cel license and ide-cel vector manufacturing through
development; and a combined performance obligation of the bb21217 license and bb21217 vector manufacturing through development. Subsequent to the
May 2020 amendments, the Company concluded the two performance obligations are distinct from each other as BMS can benefit from each license and
associated manufacturing services separately and the respective licenses and manufacturing services do not modify one another and are not interdependent.
Accordingly, the Company will continue to account for each performance obligation separately.
The Company allocated the $200.0 million up-front payment received in connection with the May 2020 amendments to the remaining performance
obligations described above based on the general allocation principles of Topic 606. In applying these principles, the Company considered the $200.0
million up-front payment is representative of previously constrained variable consideration that has been changed and the related uncertainties resolved by
the May 2020 amendments. Moreover, the Company considered that a portion of the $200.0 million was specifically attributable to each remaining
performance obligation as the amount represents the aggregate of the probability-weighted, net present value of the future ex-U.S. milestones and royalties
on ex-U.S. sales for each of ide-cel and bb21217 and that each respective portion therefore (i) relates specifically to the Company's satisfaction of each of
its remaining performance obligations and (ii) is representative of the amount of consideration the Company expects to be entitled to in exchange for
satisfying the respective performance obligations. As such, the Company concluded that the portion of the $200.0 million up-front payment specifically
attributable to each of ide-cel and bb21217 should be allocated to each respective performance obligation pursuant to the variable consideration allocation
exception.
The Amended Ide-cel CCPS and Amended bb21217 License Agreement represent a contract modification to an existing contract under Topic 606
given the May 2020 amendments resulted in a reduction in scope of the Company's responsibilities under each performance obligation described above.
Specifically, the May 2020 amendments reduced the scope of the Company's obligation to provide ex-U.S. vector manufacturing services through
development for both ide-cel and bb21217 as those activities will transition to BMS over time. In addition, the May 2020 amendments resulted in a change
in the overall transaction price under the arrangement. The May 2020 amendments did not include any additional promised goods and services.
The remaining goods and services to be provided in order to fully satisfy each performance obligation described above are not distinct from those
previously provided with respect to each performance obligation. Therefore, for each performance obligation, the remaining goods and services are part of
a single performance obligation that is partially satisfied at the date of the contract modification. Accordingly, the effect that the contract modification had
on the transaction price and the measure of progress toward complete satisfaction of each respective performance obligation has been recognized on a
cumulative catch-up basis. The accounting for any previously satisfied performance obligations as of the contract modification date are not affected by the
modification.
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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 (including those performance obligations that were completed as of the May 2020 contract modification date), and the amount of the
transaction price unsatisfied as of December 31, 2020 (in thousands):
Upfront non-refundable payments received prior to May 2020 contract modification (1)
Allocated portion of the upfront non-refundable payment received in connection with the Amended Ide-cel CCPS and
bb21217 License Agreement (2)
Estimated variable consideration (3)
Ide-cel transaction price
as of December 31, 2020
120,000
$
184,029
83,900
387,929
$
(1) Composed of all up-front payments and option fee and milestone payments received under the BMS Collaboration Agreement, Amended BMS
Collaboration Agreement, Ide-cel License Agreement, and Ide-cel CCPS. This consideration was allocated to the performance obligations under the
Ide-cel CCPS based on a relative standalone selling price (“SSP”) basis. The Company estimated the SSP of the ide-cel 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 ide-cel research and development services and ide-cel 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.
(2) This represents the portion of the $200.0 million up-front payment received under the Amended Ide-cel CCPS and Amended bb21217 License
Agreement which was allocated to ide-cel.
(3) Estimated variable consideration represents the estimated reimbursement from BMS for the manufacture of vectors and associated payload through
development.
Ide-cel research and development services
Ide-cel license and manufacturing services
Ide-cel research and development services
Allocation of
transaction
price to
performance
obligations
Transaction price
unsatisfied as of
December 31, 2020
$
$
40,912 $
347,017
387,929 $
—
1,082
1,082
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 through projected initial phase 1 clinical study substantial completion, or through May 2018. The research and development
performance obligation was satisfied prior to the May 2020 amendments and, as a result, the accounting for this previously satisfied performance obligation
was not affected by the modification. The Company recognized no revenue related to ide-cel research and development services for the year ended
December 31, 2020. The Company recognized $2.3 million and $5.8 million related to ide-cel research and development services for the year ended
December 31, 2019 and 2018, respectively.
Ide-cel license and manufacturing services
The Company allocated $347.0 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.
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The Company recognizes revenue associated with the combined performance obligation 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 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, 2020, 2019, and 2018 (in thousands):
ASC 808 ide-cel license and manufacturing revenue - U.S.
ASC 808 ide-cel research and development expense - U.S.
(1)
(1)
2020
For the years ended December 31,
2019
2018
$
$
108,196 $
41,599 $
— $
32,415 $
6,255
8,689
(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.
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 ex-U.S. license and vector
manufacturing services for the years ended December 31, 2020, 2019, and 2018 (in thousands):
2020
For the years ended December 31
2019
2018
ASC 606 ide-cel license and manufacturing revenue - ex-U.S.
$
99,053 $
25,522 $
35,900
As of December 31, 2020, 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 $1.1 million, which the Company expects to recognize as revenue as
manufacturing services are provided through the remaining development period. As of December 31, 2020 and 2019, the Company had $0.8 million and
$8.5 million, respectively, of deferred revenue associated with the combined performance obligation consisting of the ide-cel license and manufacturing
services.
bb21217 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 (including those performance obligations that were completed as of the May 2020 contract modification date), and the amount of the
transaction price unsatisfied as of December 31, 2020 (in thousands):
(in thousands)
Upfront non-refundable payments received prior to May 2020 contract modification (1)
Allocated portion of the up-front non-refundable payment received in connection with the Amended Ide-cel CCPS and bb21217
License Agreement (2)
Estimated variable consideration (3)
bb21217 transaction price
as of December 31, 2020
15,000
$
15,971
1,803
32,774
$
(1) Composed of the up-front non-refundable payment received under the bb21217 License Agreement. This consideration was allocated to the
performance obligations under the bb21217 License Agreement based on a relative SSP basis. The Company estimated the SSP of the bb21217
license after considering potential future cash flows under the license. The
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Company then discounted these probability-weighted cash flows to their present value. The Company estimated the SSP of each of the bb21217
research and development services and bb21217 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.
(2) This represents the portion of the $200.0 million up-front payment received under the Amended Ide-cel CCPS and Amended bb21217 License
Agreement which was allocated to bb21217.
(3) Estimated variable consideration represents the estimated reimbursement from BMS for the manufacture of vectors and associated payload through
development.
bb21217 research and development services
bb21217 license and manufacturing services
Allocation of transaction
price to performance
obligations
Transaction price
unsatisfied as of
December 31, 2020
$
$
5,444 $
27,330
32,774 $
—
27,330
27,330
All of the remaining development, regulatory, and commercial milestones under the Amended bb21217 License Agreement are related to U.S.
development, regulatory and commercialization activities and are fully constrained and are therefore 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 U.S. 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 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 substantial completion of the initial phase 1 clinical study,
or through September 2019. The research and development performance obligation was satisfied prior to the May 2020 amendments, and as a result, the
accounting for this previously satisfied performance obligation was not affected by the modification. As part of performing its initial obligation to complete
a phase 1 trial as originally contemplated, the Company recognized no revenue for the year ended December 31, 2020 and revenue of $2.2 million and
$2.9 million for the years ended December 31, 2019 and 2018, respectively.
The agreement to expand the bb21217 phase 1 trial that occurred in 2019 was previously treated as a separate contract for accounting purposes,
because the trial expansion was for the addition of a promised good or service that is distinct and the associated consideration reflected the standalone
selling price of the additional promised good or service. This contract was not affected by the May 2020 amendments and, accordingly, the accounting for
this agreement was not impacted by the May 2020 amendments. 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 Company began
fulfilling the performance obligation in the fourth quarter of 2019 and it was satisfied in the fourth quarter of 2020. In connection with treating additional
patients in the phase 1 trial, the Company recognized revenue of $12.4 million, $0.4 million, and $0.0 million for the years ended December 31, 2020,
2019, and 2018, respectively.
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, 2020, 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 and
comprehensive loss for the years ended December 31, 2020, 2019, and 2018.
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The aggregate amount of the transaction price allocated to the combined performance obligation, which consists of the bb21217 license and
manufacturing services, is $27.3 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 $25.8 million and $9.8 million of remaining deferred revenue as of December 31, 2020 and 2019, respectively, 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, 2020 (in thousands):
Receivables
Contract liabilities:
Deferred revenue
Balance at
December 31, 2019
Additions
Deductions
Balance at
December 31, 2020
400 $
12,400 $
(12,400) $
400
18,265 $
200,000 $
(191,683) $
26,582
$
$
The change in the receivables balance for the year ended December 31, 2020 is primarily driven by amounts owed to the Company for bb21217
research and development services provided during the period (expanded phase 1 clinical trial), offset by amounts collected from BMS in the period.
The increase in deferred revenue during the year ended December 31, 2020 is primarily driven by the $200.0 million consideration received in
connection with the May 2020 amendments, offset by revenue recognized in the year-to-date period related to the combined unit of accounting for ide-cel
license and vector manufacturing services. A total of $191.7 million was released from deferred revenue during the year-to-date period, of which
$169.2 million is related to a cumulative catch-up adjustment to revenue recorded in connection with the May 2020 contract modification described further
above. As of December 31, 2019, the Company had $8.5 million of deferred revenue associated with the combined performance obligation consisting of
the ide-cel license and manufacturing services, of which $8.2 million was released during the year ended December 31, 2020.
Regeneron
Regeneron Collaboration Agreement
In August 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. In August 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
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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 in August 2018. In August 2018, on 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 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, 2020 and 2019, the Company
has $30.8 million and $38.2 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.
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The Company recognized $7.4 million and $5.7 million of collaboration revenue from the Regeneron Collaboration Agreement during the years ended
December 31, 2020 and 2019, respectively.
12. Royalty and other revenue
Novartis Pharma AG
In April 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 years
ended December 31, 2020, 2019, and 2018, the Company recognized royalty and other revenue of $21.1 million, $8.2 million, and $2.2 million,
respectively. For the years ended December 31, 2020, 2019, and 2018, the Company recognized cost of royalty and other revenue of $5.4 million, $3.0
million, and $0.9 million, respectively.
In December 2020, the Company received notice of termination from Novartis for the license agreement described above. This termination will be
effective in March 2021, at which point in time Novartis will no longer be required to pay the Company royalty or other payments on net sales of Kymriah
or any future products.
Orchard Therapeutics Limited (assigned by GlaxoSmithKline Intellectual Property Development Limited)
In April 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 million as well as $1.3 million of potential milestone payments related to 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 in April 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 after regulatory approvals are received. There was no revenue recognized under this arrangement in the years ended December 31, 2020, 2019, or
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, 2020, 2019, or 2018, there was no associated cost of
royalty and other revenue.
13. Intangible assets
Intangible assets, net of accumulated amortization, are summarized as follows (in thousands):
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As of December 31,
2020
Accumulated
amortization
Cost
Net
Cost
As of December 31,
2019
Accumulated
amortization
Developed technology
In-licensed rights
Total
$
$
30,100 $
5,224
35,324 $
(24,456) $
(827)
(25,283) $
5,644 $
4,397
10,041 $
30,100 $
5,224
35,324 $
(20,694) $
(304)
(20,998) $
Net
9,406
4,920
14,326
Amortization expense for intangible assets was $4.3 million, $4.1 million, and $3.8 million for each of the years ended December 31, 2020, 2019 and
2018, respectively.
Developed technology
The Company's developed technology was obtained through its acquisition of Pregenen, a privately-held biotechnology company in 2014. 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 and thereafter (in thousands):
2021
2022
2023
2024
2025
2026 and thereafter
Total
14. Stock-based compensation
As of December 31,
2020
$
$
4,285
2,404
522
522
522
1,786
10,041
In June 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. 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
2020 and January 2021, the number of common stock available for issuance under the 2013 Plan was increased by approximately 2.2 million and 2.7
million shares, respectively, as a result of this automatic increase provision.
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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, 2020, the total
number of common stock that may be issued under all plans is 2.6 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 $156.6 million, $160.6 million, and $110.8 million during the years ended
December 31, 2020, 2019 and 2018, respectively. Stock-based compensation expense recognized by award type is as follows (in thousands):
Stock options
Restricted stock units
Employee stock purchase plan and other
2020
Year Ended December 31,
2019
2018
$
$
93,977 $
49,326
13,328
156,631 $
95,668 $
63,580
1,381
160,629 $
83,449
26,628
759
110,836
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
2020
Year Ended December 31,
2019
72,239 $
84,392
156,631 $
80,139 $
80,490
160,629 $
$
$
2018
54,422
56,414
110,836
In February 2018, the Company issued restricted stock units with service and performance conditions to employees, less than 0.1 million of which are
outstanding as of December 31, 2020. 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, 2020, the Company had $146.0 million, $89.3 million and $0.4 million of unrecognized compensation expense related to unvested
stock options, restricted stock units (exclusive of those with service and performance conditions that have not yet been achieved) and the employee stock
purchase plan, respectively, that is expected to be recognized over a weighted-average period of 2.1 years, 2.4 years, and 0.3 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
2020
Year Ended December 31,
2019
2018
69.5 %
6.0
1.4 %
0.0 %
70.7 %
6.0
2.3 %
0.0 %
75.5 %
6.0
2.7 %
0.0 %
The following table summarizes the stock option activity under the Company’s equity awards plans:
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Outstanding at December 31, 2019
Granted
Exercised
Canceled or forfeited
Outstanding at December 31, 2020
Exercisable at December 31, 2020
Vested and expected to vest at December 31, 2020
Shares
(in thousands)
Weighted-
average
exercise price
per share
Weighted-
average
contractual
life
(in years)
Aggregate
intrinsic
value (a)
(in thousands)
5,483 $
1,585 $
(95) $
(711) $
6,262 $
3,669 $
6,262 $
116.30
69.40
19.43
124.00
105.02
107.11
105.02
7.0 $
5.8 $
7.0 $
15,716
15,659
15,716
(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, 2020.
The weighted-average fair values of options granted during 2020, 2019 and 2018 was $43.24, $83.44, and $125.12, respectively. The intrinsic value of
options exercised during the years ended December 31, 2020, 2019, and 2018, was $4.0 million, $29.0 million and $73.1 million, respectively.
Restricted stock units
The following table summarizes the restricted stock unit activity under the Company’s equity award plans:
Unvested balance at December 31, 2019
Granted
Vested
Forfeited
Unvested balance at December 31, 2020
Shares
(in thousands)
Weighted-average
grant date
fair value
1,127 $
1,018
(433)
(217)
1,495 $
146.10
70.18
130.10
123.32
102.34
The intrinsic value of restricted stock units vested during the years ended December 31, 2020, 2019, and 2018 was $30.9 million, $28.4 million and
$25.5 million, respectively.
Employee Stock Purchase Plan
In June 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. 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, 2020 and 2019, 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 2021, the Company expects to make matching contributions of approximately $5.2 million related to employee
contributions made during 2020. In March 2020, the Company made $4.6 million of matching contributions related to employee contributions made during
2019. The match contribution is included in accrued expenses and other current liabilities as of December 31, 2020 and 2019. Expense related to the
401(k) Plan totaled $5.2 million, $4.6 million, $2.4 million for the years ended December 31, 2020, 2019, and 2018, respectively.
16. Income taxes
The components of loss before income taxes were as follows (in thousands):
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U.S.
Foreign
Total
The provision for (benefit from) income taxes were as follows (in thousands):
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Total income tax expense (benefit)
2020
Year ended December 31,
2019
$
$
(489,091) $
(128,918)
(618,009) $
(649,172) $
(140,981)
(790,153) $
2018
(440,473)
(114,965)
(555,438)
2020
Year ended December 31,
2019
2018
$
$
— $
2
684
—
—
—
686 $
— $
7
612
(966)
(198)
—
(545) $
—
324
222
(307)
(52)
—
187
A reconciliation of income tax expense (benefit) computed at the statutory federal income tax rate to the Company’s effective income tax rate 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
Stock-based compensation
Research and development credit
Foreign differential
Federal tax rate change
Other
Change in valuation allowance
Effective income tax rate (expense) benefit
2020
Year ended December 31,
2019
2018
21.0 %
3.1 %
(0.6)%
(2.4)%
6.0 %
(4.6)%
— %
(0.3)%
(22.3)%
(0.1)%
21.0 %
3.7 %
(0.8)%
(0.7)%
5.4 %
(3.7)%
— %
0.8 %
(25.6)%
0.1 %
21.0 %
5.1 %
(0.7)%
1.6 %
6.5 %
(4.4)%
0.1 %
(0.1)%
(29.1)%
— %
For the years ended December 31, 2020, 2019 and 2018, the Company recognized an income tax expense (benefit) of $0.7 million or (0.1)%, $(0.5)
million or 0.1%, and $0.2 million or 0.0%, respectively. The Company did not recognize any significant tax expense for the years ended December 31,
2020, 2019, or 2018 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):
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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
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,
2020
2019
$
$
546,098 $
246,742
14,402
15,644
51,828
48,680
14,536
937,930
(1,499)
(45,976)
(7,576)
(882,879)
— $
439,839
213,810
16,295
15,119
46,111
52,631
15,432
799,237
(2,518)
(49,480)
(2,670)
(744,569)
—
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 $138.3 million
during the year ended December 31, 2020 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.
As of December 31, 2020, 2019 and 2018, the Company had U.S. federal net operating loss carryforwards of approximately $2.03 billion, $1.62
billion, and $1.10 billion, respectively, which may be available to offset future income tax liabilities. Of the amount as of December 31, 2020, $1.32 billion
will carryforward indefinitely while $711.0 million will expire at various dates through 2037. As of December 31, 2020, 2019 and 2018, the Company also
had U.S. state net operating loss carryforwards of approximately $1.89 billion, $1.56 billion, and $1.08 billion, respectively, which may be available to
offset future income tax liabilities and expire at various dates through 2039.
As of December 31, 2020, 2019 and 2018, the Company had federal research and development and orphan drug tax credit carryforwards of
approximately $235.3 million, $203.1 million, and $156.2 million, respectively, available to reduce future tax liabilities which expire at various dates
through 2039. As of December 31, 2020, 2019 and 2018, the Company had state credit carryforwards of approximately $14.5 million, $13.6 million, and
$14.3 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 yet been completed for 2018, 2019, or 2020.
In March 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted. This law temporarily suspends and adjusts
certain law changes enacted in the Tax Cuts and Jobs Act in 2017. In December 2020, the Consolidated Appropriations Act was enacted. This law modified
the employee retention credit under the CARES Act and created credit extenders for certain credits. The Company has concluded that the provisions in the
CARES Act and Consolidated Appropriations Act have an immaterial impact on the Company’s income tax expense due to its cumulative losses and full
valuation allowance position.
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
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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 and prior to its initial public offering in 2013, which it believes has resulted in a change in control as defined by
Sections 382 and 383 of the Internal Revenue Code. The Company completed a study through September 2019 confirming no ownership changes have
occurred since the Company's initial public offering in 2013; any ownership shifts occurring after September 2019 could result in an ownership change
under Section 382.
The Company files Federal 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, 2017 through December 31, 2019. 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, 2018
Increases (decreases) for tax positions related to current period
Increases (decreases) for tax positions related to prior periods
Balance as of December 31, 2019
Increases (decreases) for tax positions related to current period
Increases (decreases) for tax positions related to prior periods
Balance as of December 31, 2020
$
Unrecognized tax
benefits
12,095
3,554
296
15,945
3,149
(100)
18,994
The unrecognized tax benefits at December 31, 2020, 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, 2020, 2019 and 2018, 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):
Outstanding stock options
Restricted stock units
ESPP shares and other
2020
Year ended December 31, 2020,
2019
2018
6,262
1,495
326
8,083
5,483
1,127
19
6,629
4,643
931
10
5,584
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18. Selected quarterly financial data (unaudited)
The following table contains quarterly financial information for 2020 and 2019. 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
19. Subsequent events
First
quarter
Second
quarter
2020
Third
quarter
(in thousands, except per share data)
Fourth
quarter
21,863 $
225,288
(203,425)
(202,611)
198,890 $
224,835
(25,945)
(21,465)
19,273 $
208,967
(189,694)
(194,745)
10,708 $
214,690
(203,982)
(199,874)
Total
250,734
873,780
(623,046)
(618,695)
(3.64) $
(0.36) $
(2.94) $
(3.01) $
(9.95)
First
quarter
Second
quarter
2019
Third
quarter
(in thousands, except per share data)
Fourth
quarter
12,471 $
183,645
(171,174)
(164,446)
13,296 $
215,998
(202,702)
(195,782)
8,910 $
9,997 $
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)
$
$
$
$
In January 2021, the Company announced its intent to separate its severe genetic disease and oncology programs into two separate, independent
publicly traded companies, bluebird bio, Inc. and a new company, referred to as Oncology NewCo in these consolidated financial statements. bluebird bio,
Inc. intends to retain focus on its severe genetic disease programs and Oncology NewCo is expected to focus on the Company's oncology programs. The
transaction is expected to be completed in late 2021 and is anticipated to be tax-free, subject to receipt of a favorable IRS ruling.
F-46
Table of Contents
Exhibit Index
Exhibit
Number
2.1
3.1
3.2
4.1
4.2
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
Specimen Common Stock Certificate
Description of the Registrant's Securities
10.4
10.5†
10.3#
10.2#
10.6†
10.1#
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
10.13† Master Collaboration Agreement by and between the Registrant and
10.10†
10.12†
10.11†
10.8†
10.7†
10.9†
10.14†
10.15
10.16
10.17†
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
Amended and Restated License Agreement by and between the Registrant
and Celgene Corporation, dated February 16, 2016
Form
8-K
8-K
—
—
S-1
S-1
Incorporated by Reference
File no.
001-35966
Exhibit
2.1
Filing Date
June 30, 2014
001-35966
—
S-1/A
333-188605
3.1
—
4.1
—
—
333-188605
10.1
June 24, 2013
Filed herewith
June 4, 2013
Filed herewith
May 14, 2013
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
10-Q/A
001-35966
10.16
November 2, 2016
Table of Contents
Exhibit
Number
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#
Exhibit Title
Second Amended and Restated License Agreement by and between the
Registrant and Celgene Corporation and Celgene European Investment
Company LLC, dated May 8, 2020
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
First Amendment to 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 May
8, 2020
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.
Amendment No. 3 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
Incorporated by Reference
Form
10-Q
File no.
001-35966
Exhibit
10.18
Filing Date
August 5, 2020
10-Q
001-35966
10.20
May 2, 2018
10-Q
001-35966
10.20
August 5, 2020
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
—
—
—
Filed herewith
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
Table of Contents
Exhibit
Number
10.40#
10.41#
10.42†
10.43
10.44
10.45††
10.46
21.1
23.1
31.1
31.2
32.1
101.INS
Executive Cash Incentive Bonus Plan
Exhibit Title
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
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
S-1
8-K
File no.
333-188605
001-35966
Exhibit
10.18
10.1
Filing Date
May 14, 2013
February 11, 2019
10-Q
001-35966
10.3
November 5, 2015
10-Q
001-35966
10.37
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)
—
—
—
—
—
—
—
—
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
104
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
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
/s/ Nick Leschly
Nick Leschly
/s/ Chip Baird
Chip Baird
/s/ Daniel S. Lynch
Daniel S. Lynch
/s/ John O. Agwunobi, M.D.
John O. Agwunobi, M.D.
/s/ Wendy L. Dixon, Ph.D.
Wendy L. Dixon, Ph.D.
/s/ Ramy Ibrahim, M.D.
Ramy Ibrahim, M.D.
/s/ William R. Sellers, M.D.
William R. Sellers, M.D.
/s/ Denice Torres
Denice Torres
/s/ Mark Vachon
Mark Vachon
Title
President, Chief Executive Officer and Director
(Principal Executive Officer and Duly Authorized Officer)
Chief Financial Officer
(Principal Financial Officer, Principal Accounting Officer, and
Duly Authorized Officer)
Director
Director
Director
Director
Director
Director
Director
Date
February 23, 2021
February 23, 2021
February 23, 2021
February 23, 2021
February 23, 2021
February 23, 2021
February 23, 2021
February 23, 2021
February 23, 2021
Exhibit 3.2
AMENDED AND RESTATED
BY-LAWS
OF
BLUEBIRD BIO, INC.
(the “Corporation”)
ARTICLE I
Stockholders
SECTION 1. Annual Meeting. The annual meeting of stockholders of the Corporation (any such meeting being referred to
in these By-laws as an “Annual Meeting”) shall be held at the hour, date and place within or without the United States which is
fixed by the Board of Directors, which time, date and place may subsequently be changed at any time by vote of the Board of
Directors. If no Annual Meeting has been held for a period of thirteen (13) months after the Corporation’s last Annual Meeting, a
special meeting in lieu thereof may be held, and such special meeting shall have, for the purposes of these By-laws or otherwise,
all the force and effect of an Annual Meeting. Any and all references hereafter in these By-laws to an Annual Meeting or Annual
Meetings shall be deemed to also refer to any special meeting(s) in lieu thereof.
SECTION 2. Notice of Stockholder Business and Nominations.
(a) Annual Meetings of Stockholders.
(1) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of other
business to be considered by the stockholders may be brought before an Annual Meeting (i) by or at the direction of the
Board of Directors or (ii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of
notice provided for in this By-law, who is entitled to vote at the meeting, who is present (in person or by proxy) at the
meeting and who complies with the notice procedures set forth in this By-law as to such nomination or business. For the
avoidance of doubt, the foregoing clause (ii) shall be the exclusive means for a stockholder to bring nominations or
business properly before an Annual Meeting (other than matters properly brought under Rule 14a-8 or Rule 14a-11 (or
any successor rules) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), and such stockholder
must comply with the notice and other procedures set forth in Article I, Section 2(a)(2) and (3) of this By-law to bring
such nominations or business properly before an Annual Meeting. In addition to the other requirements set forth in this
By-law, for any proposal of business to be considered at an Annual Meeting, it must be a proper subject for action by
stockholders of the Corporation under Delaware law.
(2) For nominations or other business to be properly brought before an Annual Meeting by a stockholder
pursuant to clause (ii) of Article I, Section 2(a)(1) of this By-law, the stockholder must (i) have given Timely Notice (as
defined below) thereof in writing to the
1
Secretary of the Corporation, (ii) have provided any updates or supplements to such notice at the times and in the forms
required by this By-law and (iii) together with the beneficial owner(s), if any, on whose behalf the nomination or business
proposal is made, have acted in accordance with the representations set forth in the Solicitation Statement (as defined
below) required by this By-law. To be timely, a stockholder’s written notice shall be received by the Secretary at the
principal executive offices of the Corporation not later than the close of business on the ninetieth (90th) day nor earlier
than the close of business on the one hundred twentieth (120th) day prior to the one-year anniversary of the preceding
year’s Annual Meeting; provided, however, that in the event the Annual Meeting is first convened more than thirty (30)
days before or more than sixty (60) days after such anniversary date, or if no Annual Meeting were held in the preceding
year, notice by the stockholder to be timely must be received by the Secretary of the Corporation not later than the close
of business on the later of the ninetieth (90th) day prior to the scheduled date of such Annual Meeting or the tenth (10th)
day following the day on which public announcement of the date of such meeting is first made (such notice within such
time periods shall be referred to as “Timely Notice”). Notwithstanding anything to the contrary provided herein, for the
first Annual Meeting following the initial public offering of common stock of the Corporation, a stockholder’s notice
shall be timely if received by the Secretary at the principal executive offices of the Corporation not later than the close of
business on the later of the ninetieth (90th) day prior to the scheduled date of such Annual Meeting or the tenth (10th) day
following the day on which public announcement of the date of such Annual Meeting is first made or sent by the
Corporation. Such stockholder’s Timely Notice shall set forth:
(A) as to each person whom the stockholder proposes to nominate for election or reelection as a director,
all information relating to such person that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the
Exchange Act (including such person’s written consent to being named in the proxy statement as a nominee and to
serving as a director if elected);
(B) as to any other business that the stockholder proposes to bring before the meeting, a brief description
of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting,
and any material interest in such business of each Proposing Person (as defined below);
(C) (i) the name and address of the stockholder giving the notice, as they appear on the Corporation’s
books, and the names and addresses of the other Proposing Persons (if any) and (ii) as to each Proposing Person,
the following information: (a) the class or series and number of all shares of capital stock of the Corporation
which are, directly or indirectly, owned beneficially or of record by such Proposing Person or any of its affiliates
or associates (as such terms are defined in Rule 12b-2 promulgated under the Exchange Act), including any shares
of any class or series of capital stock of the Corporation as to which such Proposing Person or any of its affiliates
or associates has a right to acquire beneficial ownership at any time in the future; (b) all Synthetic Equity Interests
(as defined below) in which such Proposing Person or any of its affiliates or associates, directly or indirectly, holds
an interest including a description of the material terms of each such Synthetic Equity Interest,
2
including without limitation, identification of the counterparty to each such Synthetic Equity Interest and
disclosure, for each such Synthetic Equity Interest, as to (x) whether or not such Synthetic Equity Interest conveys
any voting rights, directly or indirectly, in such shares to such Proposing Person, (y) whether or not such Synthetic
Equity Interest is required to be, or is capable of being, settled through delivery of such shares and (z) whether or
not such Proposing Person and/or, to the extent known, the counterparty to such Synthetic Equity Interest has
entered into other transactions that hedge or mitigate the economic effect of such Synthetic Equity Interest; (c) any
proxy (other than a revocable proxy given in response to a public proxy solicitation made pursuant to, and in
accordance with, the Exchange Act), agreement, arrangement, understanding or relationship pursuant to which
such Proposing Person has or shares a right to, directly or indirectly, vote any shares of any class or series of
capital stock of the Corporation; (d) any rights to dividends or other distributions on the shares of any class or
series of capital stock of the Corporation, directly or indirectly, owned beneficially by such Proposing Person that
are separated or separable from the underlying shares of the Corporation; and (e) any performance-related fees
(other than an asset based fee) that such Proposing Person, directly or indirectly, is entitled to based on any
increase or decrease in the value of shares of any class or series of capital stock of the Corporation or any
Synthetic Equity Interests (the disclosures to be made pursuant to the foregoing clauses (a) through (e) are referred
to, collectively, as “Material Ownership Interests”) and (iii) a description of the material terms of all agreements,
arrangements or understandings (whether or not in writing) entered into by any Proposing Person or any of its
affiliates or associates with any other person for the purpose of acquiring, holding, disposing or voting of any
shares of any class or series of capital stock of the Corporation;
(D) (i) a description of all agreements, arrangements or understandings by and among any of the
Proposing Persons, or by and among any Proposing Persons and any other person (including with any proposed
nominee(s)), pertaining to the nomination(s) or other business proposed to be brought before the meeting of
stockholders (which description shall identify the name of each other person who is party to such an agreement,
arrangement or understanding), and (ii) identification of the names and addresses of other stockholders (including
beneficial owners) known by any of the Proposing Persons to support such nominations or other business
proposal(s), and to the extent known the class and number of all shares of the Corporation’s capital stock owned
beneficially or of record by such other stockholder(s) or other beneficial owner(s); and
(E) a statement whether or not the stockholder giving the notice and/or the other Proposing Person(s), if
any, will deliver a proxy statement and form of proxy to holders of, in the case of a business proposal, at least the
percentage of voting power of all of the shares of capital stock of the Corporation required under applicable law to
approve the proposal or, in the case of a nomination or nominations, at least the percentage of voting power of all
of the shares of capital stock of the Corporation reasonably believed by such Proposing Person to be sufficient to
elect the nominee or nominees proposed to be nominated by such stockholder (such statement, the “Solicitation
Statement”).
3
For purposes of this Article I of these By-laws, the term “Proposing Person” shall mean the following persons: (i)
the stockholder of record providing the notice of nominations or business proposed to be brought before a stockholders’
meeting, and (ii) the beneficial owner(s), if different, on whose behalf the nominations or business proposed to be brought
before a stockholders’ meeting is made. For purposes of this Section 2 of Article I of these By-laws, the term “Synthetic
Equity Interest” shall mean any transaction, agreement or arrangement (or series of transactions, agreements or
arrangements), including, without limitation, any derivative, swap, hedge, repurchase or so-called “stock borrowing”
agreement or arrangement, the purpose or effect of which is to, directly or indirectly: (a) give a person or entity economic
benefit and/or risk similar to ownership of shares of any class or series of capital stock of the Corporation, in whole or in
part, including due to the fact that such transaction, agreement or arrangement provides, directly or indirectly, the
opportunity to profit or avoid a loss from any increase or decrease in the value of any shares of any class or series of
capital stock of the Corporation, (b) mitigate loss to, reduce the economic risk of or manage the risk of share price
changes for, any person or entity with respect to any shares of any class or series of capital stock of the Corporation, (c)
otherwise provide in any manner the opportunity to profit or avoid a loss from any decrease in the value of any shares of
any class or series of capital stock of the Corporation, or (d) increase or decrease the voting power of any person or entity
with respect to any shares of any class or series of capital stock of the Corporation.
(3) A stockholder providing Timely Notice of nominations or business proposed to be brought before an Annual
Meeting shall further update and supplement such notice, if necessary, so that the information (including, without
limitation, the Material Ownership Interests information) provided or required to be provided in such notice pursuant to
this By-law shall be true and correct as of the record date for the meeting and as of the date that is ten (10) business days
prior to such Annual Meeting, and such update and supplement shall be received by the Secretary at the principal
executive offices of the Corporation not later than the close of business on the fifth (5th) business day after the record date
for the Annual Meeting (in the case of the update and supplement required to be made as of the record date), and not later
than the close of business on the eighth (8th) business day prior to the date of the Annual Meeting (in the case of the
update and supplement required to be made as of ten (10) business days prior to the meeting).
(4) Notwithstanding anything in the second sentence of Article I, Section 2(a)(2) of this By-law to the contrary,
in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there
is no public announcement naming all of the nominees for director or specifying the size of the increased Board of
Directors made by the Corporation at least ten (10) days before the last day a stockholder may deliver a notice of
nomination in accordance with the second sentence of Article I, Section 2(a)(2), a stockholder’s notice required by this
By-law shall also be considered timely, but only with respect to nominees for any new positions created by such increase,
if it shall be received by the Secretary of the Corporation not later than the close of business on the tenth (10th) day
following the day on which such public announcement is first made by the Corporation.
4
(b) General.
(1) Only such persons who are nominated in accordance with the provisions of this By-law or in accordance
with Rule 14a-11 under the Exchange Act shall be eligible for election and to serve as directors and only such business
shall be conducted at an Annual Meeting as shall have been brought before the meeting in accordance with the provisions
of this By-law or in accordance with Rule 14a-8 under the Exchange Act. The Board of Directors or a designated
committee thereof shall have the power to determine whether a nomination or any business proposed to be brought before
the meeting was made in accordance with the provisions of this By-law. If neither the Board of Directors nor such
designated committee makes a determination as to whether any stockholder proposal or nomination was made in
accordance with the provisions of this By-law, the presiding officer of the Annual Meeting shall have the power and duty
to determine whether the stockholder proposal or nomination was made in accordance with the provisions of this By-law.
If the Board of Directors or a designated committee thereof or the presiding officer, as applicable, determines that any
stockholder proposal or nomination was not made in accordance with the provisions of this By-law, such proposal or
nomination shall be disregarded and shall not be presented for action at the Annual Meeting.
(2) Except as otherwise required by law, nothing in this Article I, Section 2 shall obligate the Corporation or the
Board of Directors to include in any proxy statement or other stockholder communication distributed on behalf of the
Corporation or the Board of Directors information with respect to any nominee for director or any other matter of
business submitted by a stockholder.
(3) Notwithstanding the foregoing provisions of this Article I, Section 2, if the nominating or proposing
stockholder (or a qualified representative of the stockholder) does not appear at the Annual Meeting to present a
nomination or any business, such nomination or business shall be disregarded, notwithstanding that proxies in respect of
such vote may have been received by the Corporation. For purposes of this Article I, Section 2, to be considered a
qualified representative of the proposing stockholder, a person must be authorized by a written instrument executed by
such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the
meeting of stockholders and such person must produce such written instrument or electronic transmission, or a reliable
reproduction of the written instrument or electronic transmission, to the presiding officer at the meeting of stockholders.
(4) For purposes of this By-law, “public announcement” shall mean disclosure in a press release reported by the
Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(5) Notwithstanding the foregoing provisions of this By-law, a stockholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this By-
law. Nothing in this By-law shall be deemed to affect any rights of (i) stockholders to have nominations or proposals
included in the Corporation’s proxy statement pursuant to Rule 14a-8 or Rule 14a-11 (or any
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successor rules), as applicable, under the Exchange Act and, to the extent required by such rule, have such nominations or
proposals considered and voted on at an Annual Meeting or (ii) the holders of any series of Undesignated Preferred Stock
to elect directors under specified circumstances.
SECTION 3. Special Meetings. Except as otherwise required by statute and subject to the rights, if any, of the holders of
any series of Undesignated Preferred Stock, special meetings of the stockholders of the Corporation may be called only by the
Board of Directors acting pursuant to a resolution approved by the affirmative vote of a majority of the Directors then in office.
The Board of Directors may postpone or reschedule any previously scheduled special meeting of stockholders. Only those
matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders of the
Corporation. Nominations of persons for election to the Board of Directors of the Corporation and stockholder proposals of other
business shall not be brought before a special meeting of stockholders to be considered by the stockholders unless such special
meeting is held in lieu of an annual meeting of stockholders in accordance with Article I, Section 1 of these By-laws, in which
case such special meeting in lieu thereof shall be deemed an Annual Meeting for purposes of these By-laws and the provisions of
Article I, Section 2 of these By-laws shall govern such special meeting.
SECTION 4. Notice of Meetings; Adjournments.
(a) A notice of each Annual Meeting stating the hour, date and place, if any, of such Annual Meeting and the means of
remote communication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such
meeting, shall be given not less than ten (10) days nor more than sixty (60) days before the Annual Meeting, to each stockholder
entitled to vote thereat by delivering such notice to such stockholder or by mailing it, postage prepaid, addressed to such
stockholder at the address of such stockholder as it appears on the Corporation’s stock transfer books. Without limiting the
manner by which notice may otherwise be given to stockholders, any notice to stockholders may be given by electronic
transmission in the manner provided in Section 232 of the Delaware General Corporation Law (“DGCL”).
(b) Notice of all special meetings of stockholders shall be given in the same manner as provided for Annual Meetings,
except that the notice of all special meetings shall state the purpose or purposes for which the meeting has been called.
(c) Notice of an Annual Meeting or special meeting of stockholders need not be given to a stockholder if a waiver of
notice is executed, or waiver of notice by electronic transmission is provided, before or after such meeting by such stockholder or
if such stockholder attends such meeting, unless such attendance is for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting was not lawfully called or convened.
(d) The Board of Directors may postpone and reschedule any previously scheduled Annual Meeting or special meeting
of stockholders and any record date with respect thereto, regardless of whether any notice or public disclosure with respect to any
such meeting has been sent or made pursuant to Section 2 of this Article I of these By-laws or otherwise. In no event shall the
public announcement of an adjournment, postponement or rescheduling of any previously scheduled
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meeting of stockholders commence a new time period for the giving of a stockholder’s notice under this Article I of these By-
laws.
(e) When any meeting is convened, the presiding officer may adjourn the meeting if (i) no quorum is present for the
transaction of business, (ii) the Board of Directors determines that adjournment is necessary or appropriate to enable the
stockholders to consider fully information which the Board of Directors determines has not been made sufficiently or timely
available to stockholders, or (iii) the Board of Directors determines that adjournment is otherwise in the best interests of the
Corporation. When any Annual Meeting or special meeting of stockholders is adjourned to another hour, date or place, notice
need not be given of the adjourned meeting other than an announcement at the meeting at which the adjournment is taken of the
hour, date and place, if any, to which the meeting is adjourned and the means of remote communications, if any, by which
stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting; provided, however,
that if the adjournment is for more than thirty (30) days from the meeting date, or if after the adjournment a new record date is
fixed for the adjourned meeting, notice of the adjourned meeting and the means of remote communications, if any, by which
stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting shall be given to each
stockholder of record entitled to vote thereat and each stockholder who, by law or under the Certificate of Incorporation of the
Corporation (as the same may hereafter be amended and/or restated, the “Certificate”) or these By-laws, is entitled to such notice.
SECTION 5. Quorum. A majority of the shares entitled to vote, present in person or represented by proxy, shall constitute
a quorum at any meeting of stockholders. If less than a quorum is present at a meeting, the holders of voting stock representing a
majority of the voting power present at the meeting or the presiding officer may adjourn the meeting from time to time, and the
meeting may be held as adjourned without further notice, except as provided in Section 4 of this Article I. At such adjourned
meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as
originally noticed. The stockholders present at a duly constituted meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a quorum.
SECTION 6. Voting and Proxies. Stockholders shall have one vote for each share of stock entitled to vote owned by them
of record according to the stock ledger of the Corporation as of the record date, unless otherwise provided by law or by the
Certificate. Stockholders may vote either (i) in person, (ii) by written proxy or (iii) by a transmission permitted by Section 212(c)
of the DGCL. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission permitted by
Section 212(c) of the DGCL may be substituted for or used in lieu of the original writing or transmission for any and all purposes
for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other
reproduction shall be a complete reproduction of the entire original writing or transmission. Proxies shall be filed in accordance
with the procedures established for the meeting of stockholders. Except as otherwise limited therein or as otherwise provided by
law, proxies authorizing a person to vote at a specific meeting shall entitle the persons authorized thereby to vote at any
adjournment of such meeting, but they shall not be valid after final adjournment of such meeting. A proxy with respect to stock
held in the name of two or more persons shall be valid if executed by or on behalf of any one of them unless at or prior to the
exercise of the proxy the Corporation receives a specific written notice to the contrary from any one of them.
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SECTION 7. Action at Meeting. When a quorum is present at any meeting of stockholders, any matter before any such
meeting (other than an election of a director or directors) shall be decided by a majority of the votes properly cast for and against
such matter, except where a larger vote is required by law, by the Certificate or by these By-laws. When a quorum is present at
any meeting of stockholders, a nominee for director shall be elected to the Board of Directors if the votes properly cast for such
nominee’s election exceed the votes properly cast against such nominee’s election; provided, however, that directors shall be
elected by a plurality of the votes properly cast at any meeting of stockholders at which there is a contested election of directors.
An election shall be considered contested if as of the record date of any meeting of stockholders there are more nominees for
election than positions on the Board of Directors to be filled by election at that meeting.
SECTION 8. Stockholder Lists. The Secretary or an Assistant Secretary, if any (or the Corporation’s transfer agent or
other person authorized by these By-laws or by law) shall prepare and make, at least ten (10) days before every Annual Meeting
or special meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for a period of at least ten (10) days prior to the meeting in the manner
provided by law. The list shall also be open to the examination of any stockholder during the whole time of the meeting as
provided by law.
SECTION 9. Presiding Officer. The Board of Directors shall designate a representative to preside over all Annual
Meetings or special meetings of stockholders, provide that if the Board of Directors does not so designate such a presiding
officer, then the Chairman of the Board, if one is elected, shall preside over such meetings. If the Board of Directors does not so
designate such a presiding officer and there is no Chairman of the Board or the Chairman of the Board is unable to so preside or
is absent, then the Chief Executive Officer, if one is elected, shall preside over such meetings, provided further that if there is no
Chief Executive Officer or the Chief Executive Officer is unable to so preside or is absent, then the President shall preside over
such meetings. The presiding officer at any Annual Meeting or special meeting of stockholders shall have the power, among
other things, to adjourn such meeting at any time and from time to time, subject to Sections 4 and 5 of this Article I. The order of
business and all other matters of procedure at any meeting of the stockholders shall be determined by the presiding officer.
SECTION 10. Inspectors of Elections. The Corporation shall, in advance of any meeting of stockholders, appoint one or
more inspectors to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as
alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of
stockholders, the presiding officer shall appoint one or more inspectors to act at the meeting. Any inspector may, but need not, be
an officer, employee or agent of the Corporation. Each inspector, before entering upon the discharge of his or her duties, shall
take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her
ability. The inspectors shall perform such duties as are required by the DGCL, including the counting of all votes and ballots. The
inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the
inspectors. The presiding officer may review all determinations made by the inspectors, and in so doing the presiding officer shall
be entitled to exercise his or her sole judgment and discretion and he or she shall not be bound by any determinations made by the
inspectors. All determinations by the
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inspectors and, if applicable, the presiding officer, shall be subject to further review by any court of competent jurisdiction.
ARTICLE II
Directors
SECTION 1. Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board
of Directors except as otherwise provided by the Certificate or required by law.
SECTION 2. Number and Terms. The number of directors of the Corporation shall be fixed solely and exclusively by
resolution duly adopted from time to time by the Board of Directors. The directors shall hold office in the manner provided in the
Certificate.
SECTION 3. Qualification. No director need be a stockholder of the Corporation.
SECTION 4. Vacancies. Vacancies in the Board of Directors shall be filled in the manner provided in the Certificate.
SECTION 5. Removal. Directors may be removed from office only in the manner provided in the Certificate.
SECTION 6. Resignation. A director may resign at any time by giving written notice to the Chairman of the Board, if one
is elected, the President or the Secretary. A resignation shall be effective upon receipt, unless the resignation otherwise provides.
SECTION 7. Regular Meetings. The regular annual meeting of the Board of Directors shall be held, without notice other
than this Section 7, on the same date and at the same place as the Annual Meeting following the close of such meeting of
stockholders. Other regular meetings of the Board of Directors may be held at such hour, date and place as the Board of Directors
may by resolution from time to time determine and publicize by means of reasonable notice given to any director who is not
present at the meeting at which such resolution is adopted.
SECTION 8. Special Meetings. Special meetings of the Board of Directors may be called, orally or in writing, by or at the
request of a majority of the directors, the Chairman of the Board, if one is elected, or the President. The person calling any such
special meeting of the Board of Directors may fix the hour, date and place thereof.
SECTION 9. Notice of Special Meetings. Notice of the hour, date and place of all special meetings of the Board of
Directors shall be given to each director by the Secretary or an Assistant Secretary, or in case of the death, absence, incapacity or
refusal of such persons, by the Chairman of the Board, if one is elected, or the President or such other officer designated by the
Chairman of the Board, if one is elected, or the President. Notice of any special meeting of the Board of Directors shall be given
to each director in person, by telephone, or by facsimile, electronic mail or other form of electronic communication, sent to his or
her business or home address, at least twenty-four (24) hours in advance of the meeting, or by written notice mailed to his or her
business or home address, at
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least forty-eight (48) hours in advance of the meeting. Such notice shall be deemed to be delivered when hand-delivered to such
address, read to such director by telephone, deposited in the mail so addressed, with postage thereon prepaid if mailed, dispatched
or transmitted if sent by facsimile transmission or by electronic mail or other form of electronic communications. A written
waiver of notice signed before or after a meeting by a director and filed with the records of the meeting shall be deemed to be
equivalent to notice of the meeting. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction
of any business because such meeting is not lawfully called or convened. Except as otherwise required by law, by the Certificate
or by these By-laws, neither the business to be transacted at, nor the purpose of, any meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
SECTION 10. Quorum. At any meeting of the Board of Directors, a majority of the total number of directors shall
constitute a quorum for the transaction of business, but if less than a quorum is present at a meeting, a majority of the directors
present may adjourn the meeting from time to time, and the meeting may be held as adjourned without further notice. Any
business that might have been transacted at the meeting as originally noticed may be transacted at such adjourned meeting at
which a quorum is present. For purposes of this section, the total number of directors includes any unfilled vacancies on the
Board of Directors.
SECTION 11. Action at Meeting. At any meeting of the Board of Directors at which a quorum is present, the vote of a
majority of the directors present shall constitute action by the Board of Directors, unless otherwise required by law, by the
Certificate or by these By-laws.
SECTION 12. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors
may be taken without a meeting if all members of the Board of Directors consent thereto in writing or by electronic transmission
and the writing or writings or electronic transmission or transmissions are filed with the records of the meetings of the Board of
Directors. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the
minutes are maintained in electronic form. Such consent shall be treated as a resolution of the Board of Directors for all purposes.
SECTION 13. Manner of Participation. Directors may participate in meetings of the Board of Directors by means of
conference telephone or other communications equipment by means of which all directors participating in the meeting can hear
each other, and participation in a meeting in accordance herewith shall constitute presence in person at such meeting for purposes
of these By-laws.
SECTION 14. Presiding Director. The Board of Directors shall designate a representative to preside over all meetings of
the Board of Directors, provided that if the Board of Directors does not so designate such a presiding director or such designated
presiding director is unable to so preside or is absent, then the Chairman of the Board, if one is elected, shall preside over all
meetings of the Board of Directors. If both the designated presiding director, if one is so designated, and the Chairman of the
Board, if one is elected, are unable to preside or are absent, the Board of Directors shall designate an alternate representative to
preside over a meeting of the Board of Directors.
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SECTION 15. Committees. The Board of Directors, by vote of a majority of the directors then in office, may elect one or
more committees, including, without limitation, a Compensation Committee, a Nominating & Corporate Governance Committee
and an Audit Committee, and may delegate thereto some or all of its powers except those which by law, by the Certificate or by
these By-laws may not be delegated. Except as the Board of Directors may otherwise determine, any such committee may make
rules for the conduct of its business, but unless otherwise provided by the Board of Directors or in such rules, its business shall be
conducted so far as possible in the same manner as is provided by these By-laws for the Board of Directors. All members of such
committees shall hold such offices at the pleasure of the Board of Directors. The Board of Directors may abolish any such
committee at any time. Any committee to which the Board of Directors delegates any of its powers or duties shall keep records of
its meetings and shall report its action to the Board of Directors.
SECTION 16. Compensation of Directors. Directors shall receive such compensation for their services as shall be
determined by a majority of the Board of Directors, or a designated committee thereof, provided that directors who are serving
the Corporation as employees and who receive compensation for their services as such, shall not receive any salary or other
compensation for their services as directors of the Corporation.
ARTICLE III
Officers
SECTION 1. Enumeration. The officers of the Corporation shall consist of a President, a Treasurer, a Secretary and such
other officers, including, without limitation, a Chairman of the Board of Directors, a Chief Executive Officer and one or more
Vice Presidents (including Executive Vice Presidents or Senior Vice Presidents), Assistant Vice Presidents, Assistant Treasurers
and Assistant Secretaries, as the Board of Directors may determine.
SECTION 2. Election. At the regular annual meeting of the Board of Directors following the Annual Meeting, the Board
of Directors shall elect the President, the Treasurer and the Secretary. Other officers may be elected by the Board of Directors at
such regular annual meeting of the Board of Directors or at any other regular or special meeting.
SECTION 3. Qualification. No officer need be a stockholder or a director. Any person may occupy more than one office
of the Corporation at any time.
SECTION 4. Tenure. Except as otherwise provided by the Certificate or by these By- laws, each of the officers of the
Corporation shall hold office until the regular annual meeting of the Board of Directors following the next Annual Meeting and
until his or her successor is elected and qualified or until his or her earlier resignation or removal.
SECTION 5. Resignation. Any officer may resign by delivering his or her written resignation to the Corporation
addressed to the President or the Secretary, and such resignation shall be effective upon receipt, unless the resignation otherwise
provides.
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SECTION 6. Removal. Except as otherwise provided by law, the Board of Directors may remove any officer with or
without cause by the affirmative vote of a majority of the directors then in office.
SECTION 7. Absence or Disability. In the event of the absence or disability of any officer, the Board of Directors may
designate another officer to act temporarily in place of such absent or disabled officer.
SECTION 8. Vacancies. Any vacancy in any office may be filled for the unexpired portion of the term by the Board of
Directors.
SECTION 9. President. The President shall, subject to the direction of the Board of Directors, have such powers and shall
perform such duties as the Board of Directors may from time to time designate.
SECTION 10. Chairman of the Board. The Chairman of the Board, if one is elected, shall have such powers and shall
perform such duties as the Board of Directors may from time to time designate.
SECTION 11. Chief Executive Officer. The Chief Executive Officer, if one is elected, shall have such powers and shall
perform such duties as the Board of Directors may from time to time designate.
SECTION 12. Vice Presidents and Assistant Vice Presidents. Any Vice President (including any Executive Vice President
or Senior Vice President) and any Assistant Vice President shall have such powers and shall perform such duties as the Board of
Directors or the Chief Executive Officer may from time to time designate.
SECTION 13. Treasurer and Assistant Treasurers. The Treasurer shall, subject to the direction of the Board of Directors
and except as the Board of Directors or the Chief Executive Officer may otherwise provide, have general charge of the financial
affairs of the Corporation and shall cause to be kept accurate books of account. The Treasurer shall have custody of all funds,
securities, and valuable documents of the Corporation. He or she shall have such other duties and powers as may be designated
from time to time by the Board of Directors or the Chief Executive Officer. Any Assistant Treasurer shall have such powers and
perform such duties as the Board of Directors or the Chief Executive Officer may from time to time designate.
SECTION 14. Secretary and Assistant Secretaries. The Secretary shall record all the proceedings of the meetings of the
stockholders and the Board of Directors (including committees of the Board of Directors) in books kept for that purpose. In his or
her absence from any such meeting, a temporary secretary chosen at the meeting shall record the proceedings thereof. The
Secretary shall have charge of the stock ledger (which may, however, be kept by any transfer or other agent of the Corporation).
The Secretary shall have custody of the seal of the Corporation, and the Secretary, or an Assistant Secretary shall have authority
to affix it to any instrument requiring it, and, when so affixed, the seal may be attested by his or her signature or that of an
Assistant Secretary. The Secretary shall have such other duties and powers as may be designated from time to time by the Board
of Directors or the Chief Executive Officer. In the absence of the Secretary, any Assistant Secretary may perform
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his or her duties and responsibilities. Any Assistant Secretary shall have such powers and perform such duties as the Board of
Directors or the Chief Executive Officer may from time to time designate.
SECTION 15. Other Powers and Duties. Subject to these By-laws and to such limitations as the Board of Directors may
from time to time prescribe, the officers of the Corporation shall each have such powers and duties as generally pertain to their
respective offices, as well as such powers and duties as from time to time may be conferred by the Board of Directors or the
Chief Executive Officer.
ARTICLE IV
Capital Stock
SECTION 1. Certificates of Stock. Each stockholder shall be entitled to a certificate of the capital stock of the
Corporation in such form as may from time to time be prescribed by the Board of Directors. Such certificate shall be signed by
the Chairman of the Board, the President or a Vice President and by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary. The Corporation seal and the signatures by the Corporation’s officers, the transfer agent or the registrar may
be facsimiles. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on such
certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the time of its issue. Every
certificate for shares of stock which are subject to any restriction on transfer and every certificate issued when the Corporation is
authorized to issue more than one class or series of stock shall contain such legend with respect thereto as is required by law.
Notwithstanding anything to the contrary provided in these Bylaws, the Board of Directors of the Corporation may provide by
resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares (except that the
foregoing shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation), and by the
approval and adoption of these Bylaws the Board of Directors has determined that all classes or series of the Corporation’s stock
may be uncertificated, whether upon original issuance, re-issuance, or subsequent transfer.
SECTION 2. Transfers. Subject to any restrictions on transfer and unless otherwise provided by the Board of Directors,
shares of stock that are represented by a certificate may be transferred on the books of the Corporation by the surrender to the
Corporation or its transfer agent of the certificate theretofore properly endorsed or accompanied by a written assignment or power
of attorney properly executed, with transfer stamps (if necessary) affixed, and with such proof of the authenticity of signature as
the Corporation or its transfer agent may reasonably require. Shares of stock that are not represented by a certificate may be
transferred on the books of the Corporation by submitting to the Corporation or its transfer agent such evidence of transfer and
following such other procedures as the Corporation or its transfer agent may require.
SECTION 3. Record Holders. Except as may otherwise be required by law, by the Certificate or by these By-laws, the
Corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes,
including the payment of dividends and the right to vote with respect thereto, regardless of any transfer, pledge or other
disposition of such stock, until
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the shares have been transferred on the books of the Corporation in accordance with the requirements of these By-laws.
SECTION 4. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date: (a) in the case of
determination of stockholders entitled to vote at any meeting of stockholders, shall, unless otherwise required by law, not be more
than sixty (60) nor less than ten (10) days before the date of such meeting and (b) in the case of any other action, shall not be
more than sixty (60) days prior to such other action. If no record date is fixed: (i) the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on
which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is
held; and (ii) the record date for determining stockholders for any other purpose shall be at the close of business on the day on
which the Board of Directors adopts the resolution relating thereto.
SECTION 5. Replacement of Certificates. In case of the alleged loss, destruction or mutilation of a certificate of stock of
the Corporation, a duplicate certificate may be issued in place thereof, upon such terms as the Board of Directors may prescribe.
ARTICLE V
Indemnification
SECTION 1. Definitions. For purposes of this Article:
(a) “Corporate Status” describes the status of a person who is serving or has served (i) as a Director of the Corporation,
(ii) as an Officer of the Corporation, (iii) as a Non-Officer Employee of the Corporation, or (iv) as a director, partner, trustee,
officer, employee or agent of any other corporation, partnership, limited liability company, joint venture, trust, employee benefit
plan, foundation, association, organization or other legal entity which such person is or was serving at the request of the
Corporation. For purposes of this Section 1(a), a Director, Officer or Non-Officer Employee of the Corporation who is serving or
has served as a director, partner, trustee, officer, employee or agent of a Subsidiary shall be deemed to be serving at the request of
the Corporation. Notwithstanding the foregoing, “Corporate Status” shall not include the status of a person who is serving or has
served as a director, officer, employee or agent of a constituent corporation absorbed in a merger or consolidation transaction
with the Corporation with respect to such person’s activities prior to said transaction, unless specifically authorized by the Board
of Directors or the stockholders of the Corporation;
(b) “Director” means any person who serves or has served the Corporation as a director on the Board of Directors of the
Corporation;
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(c) “Disinterested Director” means, with respect to each Proceeding in respect of which indemnification is sought
hereunder, a Director of the Corporation who is not and was not a party to such Proceeding;
(d) “Expenses” means all attorneys’ fees, retainers, court costs, transcript costs, fees of expert witnesses, private
investigators and professional advisors (including, without limitation, accountants and investment bankers), travel expenses,
duplicating costs, printing and binding costs, costs of preparation of demonstrative evidence and other courtroom presentation
aids and devices, costs incurred in connection with document review, organization, imaging and computerization, telephone
charges, postage, delivery service fees, and all other disbursements, costs or expenses of the type customarily incurred in
connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in,
settling or otherwise participating in, a Proceeding;
(e) “Liabilities” means judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in
settlement;
(f) “Non-Officer Employee” means any person who serves or has served as an employee or agent of the Corporation,
but who is not or was not a Director or Officer;
(g) “Officer” means any person who serves or has served the Corporation as an officer of the Corporation appointed by
the Board of Directors of the Corporation;
(h) “Proceeding” means any threatened, pending or completed action, suit, arbitration, alternate dispute resolution
mechanism, inquiry, investigation, administrative hearing or other proceeding, whether civil, criminal, administrative, arbitrative
or investigative; and
(i) “Subsidiary” shall mean any corporation, partnership, limited liability company, joint venture, trust or other entity of
which the Corporation owns (either directly or through or together with another Subsidiary of the Corporation) either (i) a general
partner, managing member or other similar interest or (ii) (A) fifty percent (50%) or more of the voting power of the voting
capital equity interests of such corporation, partnership, limited liability company, joint venture or other entity, or (B) fifty
percent (50%) or more of the outstanding voting capital stock or other voting equity interests of such corporation, partnership,
limited liability company, joint venture or other entity.
SECTION 2. Indemnification of Directors and Officers.
(a) Subject to the operation of Section 4 of this Article V of these By-laws, each Director and Officer shall be
indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), and to
the extent authorized in this Section 2.
(1) Actions, Suits and Proceedings Other than By or In the Right of the Corporation. Each Director and Officer
shall be indemnified and held harmless by the Corporation against any and all Expenses and Liabilities that are incurred
or paid by such
15
Director or Officer or on such Director’s or Officer’s behalf in connection with any Proceeding or any claim, issue or
matter therein (other than an action by or in the right of the Corporation), which such Director or Officer is, or is
threatened to be made, a party to or participant in by reason of such Director’s or Officer’s Corporate Status, if such
Director or Officer acted in good faith and in a manner such Director or Officer reasonably believed to be in or not
opposed to the best interests of the Corporation and, with respect to any criminal proceeding, had no reasonable cause to
believe his or her conduct was unlawful.
(2) Actions, Suits and Proceedings By or In the Right of the Corporation. Each Director and Officer shall be
indemnified and held harmless by the Corporation against any and all Expenses that are incurred by such Director or
Officer or on such Director’s or Officer’s behalf in connection with any Proceeding or any claim, issue or matter therein
by or in the right of the Corporation, which such Director or Officer is, or is threatened to be made, a party to or
participant in by reason of such Director’s or Officer’s Corporate Status, if such Director or Officer acted in good faith
and in a manner such Director or Officer reasonably believed to be in or not opposed to the best interests of the
Corporation; provided, however, that no indemnification shall be made under this Section 2(a)(2) in respect of any claim,
issue or matter as to which such Director or Officer shall have been finally adjudged by a court of competent jurisdiction
to be liable to the Corporation, unless, and only to the extent that, the Court of Chancery or another court in which such
Proceeding was brought shall determine upon application that, despite adjudication of liability, but in view of all the
circumstances of the case, such Director or Officer is fairly and reasonably entitled to indemnification for such Expenses
that such court deems proper.
(3) Survival of Rights. The rights of indemnification provided by this Section 2 shall continue as to a Director or
Officer after he or she has ceased to be a Director or Officer and shall inure to the benefit of his or her heirs, executors,
administrators and personal representatives.
(4) Actions by Directors or Officers. Notwithstanding the foregoing, the Corporation shall indemnify any
Director or Officer seeking indemnification in connection with a Proceeding initiated by such Director or Officer only if
such Proceeding (including any parts of such Proceeding not initiated by such Director or Officer) was authorized in
advance by the Board of Directors of the Corporation, unless such Proceeding was brought to enforce such Officer’s or
Director’s rights to indemnification or, in the case of Directors, advancement of Expenses under these By- laws in
accordance with the provisions set forth herein.
SECTION 3. Indemnification of Non-Officer Employees. Subject to the operation of Section 4 of this Article V of these
By-laws, each Non-Officer Employee may, in the discretion of the Board of Directors of the Corporation, be indemnified by the
Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended, against any or all
Expenses and Liabilities that are incurred by such Non-Officer Employee or on such Non- Officer Employee’s behalf in
connection with any threatened, pending or completed Proceeding, or any claim, issue or matter therein, which such Non-Officer
Employee is, or is threatened to be made, a party to or participant in by reason of such Non-Officer Employee’s Corporate Status,
if such Non-Officer Employee acted in good faith and in a manner such Non-Officer Employee reasonably believed to be in or
not opposed to the best interests of the Corporation and, with respect to any criminal proceeding,
16
had no reasonable cause to believe his or her conduct was unlawful. The rights of indemnification provided by this Section 3
shall exist as to a Non-Officer Employee after he or she has ceased to be a Non-Officer Employee and shall inure to the benefit of
his or her heirs, personal representatives, executors and administrators. Notwithstanding the foregoing, the Corporation may
indemnify any Non-Officer Employee seeking indemnification in connection with a Proceeding initiated by such Non-Officer
Employee only if such Proceeding was authorized in advance by the Board of Directors of the Corporation.
SECTION 4. Determination. Unless otherwise ordered by a court, no indemnification shall be provided pursuant to this
Article V to a Director, to an Officer or to a Non-Officer Employee unless a determination shall have been made that such person
acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal Proceeding, such person had no reasonable cause to believe his or her conduct was
unlawful. Such determination shall be made by (a) a majority vote of the Disinterested Directors, even though less than a quorum
of the Board of Directors, (b) a committee comprised of Disinterested Directors, such committee having been designated by a
majority vote of the Disinterested Directors (even though less than a quorum), (c) if there are no such Disinterested Directors, or
if a majority of Disinterested Directors so directs, by independent legal counsel in a written opinion, or (d) by the stockholders of
the Corporation.
SECTION 5. Advancement of Expenses to Directors Prior to Final Disposition.
(a) The Corporation shall advance all Expenses incurred by or on behalf of any Director in connection with any
Proceeding in which such Director is involved by reason of such Director’s Corporate Status within thirty (30) days after the
receipt by the Corporation of a written statement from such Director requesting such advance or advances from time to time,
whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the
Expenses incurred by such Director and shall be preceded or accompanied by an undertaking by or on behalf of such Director to
repay any Expenses so advanced if it shall ultimately be determined that such Director is not entitled to be indemnified against
such Expenses. Notwithstanding the foregoing, the Corporation shall advance all Expenses incurred by or on behalf of any
Director seeking advancement of expenses hereunder in connection with a Proceeding initiated by such Director only if such
Proceeding (including any parts of such Proceeding not initiated by such Director) was (i) authorized by the Board of Directors of
the Corporation, or (ii) brought to enforce such Director’s rights to indemnification or advancement of Expenses under these By-
laws.
(b) If a claim for advancement of Expenses hereunder by a Director is not paid in full by the Corporation within thirty
(30) days after receipt by the Corporation of documentation of Expenses and the required undertaking, such Director may at any
time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and if successful in whole or in part,
such Director shall also be entitled to be paid the expenses of prosecuting such claim. The failure of the Corporation (including
its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning
the permissibility of such advancement of Expenses under this Article V shall not be a defense to an action brought by a Director
for recovery of the unpaid amount of an advancement claim and shall not create a presumption that such advancement is not
permissible. The burden of proving that a Director is not entitled to an advancement of expenses shall be on the Corporation.
17
(c) In any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that the Director has not met any
applicable standard for indemnification set forth in the DGCL.
SECTION 6. Advancement of Expenses to Officers and Non-Officer Employees Prior to Final Disposition.
(a) The Corporation may, at the discretion of the Board of Directors of the Corporation, advance any or all Expenses
incurred by or on behalf of any Officer or any Non- Officer Employee in connection with any Proceeding in which such person is
involved by reason of his or her Corporate Status as an Officer or Non-Officer Employee upon the receipt by the Corporation of a
statement or statements from such Officer or Non-Officer Employee requesting such advance or advances from time to time,
whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the
Expenses incurred by such Officer or Non-Officer Employee and shall be preceded or accompanied by an undertaking by or on
behalf of such person to repay any Expenses so advanced if it shall ultimately be determined that such Officer or Non-Officer
Employee is not entitled to be indemnified against such Expenses.
(b) In any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that the Officer or Non-Officer
Employee has not met any applicable standard for indemnification set forth in the DGCL.
SECTION 7. Contractual Nature of Rights.
(a) The provisions of this Article V shall be deemed to be a contract between the Corporation and each Director and
Officer entitled to the benefits hereof at any time while this Article V is in effect, in consideration of such person’s past or current
and any future performance of services for the Corporation. Neither amendment, repeal or modification of any provision of this
Article V nor the adoption of any provision of the Certificate of Incorporation inconsistent with this Article V shall eliminate or
reduce any right conferred by this Article V in respect of any act or omission occurring, or any cause of action or claim that
accrues or arises or any state of facts existing, at the time of or before such amendment, repeal, modification or adoption of an
inconsistent provision (even in the case of a proceeding based on such a state of facts that is commenced after such time), and all
rights to indemnification and advancement of Expenses granted herein or arising out of any act or omission shall vest at the time
of the act or omission in question, regardless of when or if any proceeding with respect to such act or omission is commenced.
The rights to indemnification and to advancement of expenses provided by, or granted pursuant to, this Article V shall continue
notwithstanding that the person has ceased to be a director or officer of the Corporation and shall inure to the benefit of the estate,
heirs, executors, administrators, legatees and distributes of such person.
(b) If a claim for indemnification hereunder by a Director or Officer is not paid in full by the Corporation within sixty
(60) days after receipt by the Corporation of a written claim for indemnification, such Director or Officer may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of the claim, and if successful in whole or in part, such
Director or
18
Officer shall also be entitled to be paid the expenses of prosecuting such claim. The failure of the Corporation (including its
Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the
permissibility of such indemnification under this Article V shall not be a defense to an action brought by a Director or Officer for
recovery of the unpaid amount of an indemnification claim and shall not create a presumption that such indemnification is not
permissible. The burden of proving that a Director or Officer is not entitled to indemnification shall be on the Corporation.
(c) In any suit brought by a Director or Officer to enforce a right to indemnification hereunder, it shall be a defense that
such Director or Officer has not met any applicable standard for indemnification set forth in the DGCL.
SECTION 8. Non-Exclusivity of Rights. The rights to indemnification and to advancement of Expenses set forth in this
Article V shall not be exclusive of any other right which any Director, Officer, or Non-Officer Employee may have or hereafter
acquire under any statute, provision of the Certificate or these By-laws, agreement, vote of stockholders or Disinterested
Directors or otherwise.
SECTION 9. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any Director,
Officer or Non-Officer Employee against any liability of any character asserted against or incurred by the Corporation or any
such Director, Officer or Non- Officer Employee, or arising out of any such person’s Corporate Status, whether or not the
Corporation would have the power to indemnify such person against such liability under the DGCL or the provisions of this
Article V.
SECTION 10. Other Indemnification. The Corporation’s obligation, if any, to indemnify or provide advancement of
Expenses to any person under this Article V as a result of such person serving, at the request of the Corporation, as a director,
partner, trustee, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise shall be reduced by any amount such person may collect as indemnification or advancement of Expenses from such
other corporation, partnership, joint venture, trust, employee benefit plan or enterprise (the “Primary Indemnitor”). Any
indemnification or advancement of Expenses under this Article V owed by the Corporation as a result of a person serving, at the
request of the Corporation, as a director, partner, trustee, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise shall only be in excess of, and shall be secondary to, the indemnification
or advancement of Expenses available from the applicable Primary Indemnitor(s) and any applicable insurance policies.
SECTION 11. Exclusive Forum. Unless the Corporation consents in writing to the selection of an alternative forum, the
Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any state law claims for (i) any derivative
action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by
any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action
asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or the Corporation’s Certificate of
Incorporation or By-laws, or (iv) any action asserting a claim governed by the internal affairs doctrine. Unless the Corporation
consents in writing to the selection of an alternative forum, the United States District Court for the District of Massachusetts shall
be the sole and exclusive forum for resolving any complaint asserting a cause of
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action arising under the Securities Act of 1933, as amended. Any person or entity purchasing or otherwise acquiring any interest
in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 11.
ARTICLE VI
Miscellaneous Provisions
SECTION 1. Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors.
SECTION 2. Seal. The Board of Directors shall have power to adopt and alter the seal of the Corporation.
SECTION 3. Execution of Instruments. All deeds, leases, transfers, contracts, bonds, notes and other obligations to be
entered into by the Corporation in the ordinary course of its business without director action may be executed on behalf of the
Corporation by the Chairman of the Board, if one is elected, the President or the Treasurer or any other officer, employee or agent
of the Corporation as the Board of Directors or the executive committee of the Board may authorize.
SECTION 4. Voting of Securities. Unless the Board of Directors otherwise provides, the Chairman of the Board, if one is
elected, the President or the Treasurer may waive notice of and act on behalf of the Corporation, or appoint another person or
persons to act as proxy or attorney in fact for the Corporation with or without discretionary power and/or power of substitution, at
any meeting of stockholders or shareholders of any other corporation or organization, any of whose securities are held by the
Corporation.
SECTION 5. Resident Agent. The Board of Directors may appoint a resident agent upon whom legal process may be
served in any action or proceeding against the Corporation.
SECTION 6. Corporate Records. The original or attested copies of the Certificate, By- laws and records of all meetings of
the incorporators, stockholders and the Board of Directors and the stock transfer books, which shall contain the names of all
stockholders, their record addresses and the amount of stock held by each, may be kept outside the State of Delaware and shall be
kept at the principal office of the Corporation, at an office of its counsel, at an office of its transfer agent or at such other place or
places as may be designated from time to time by the Board of Directors.
SECTION 7. Certificate. All references in these By-laws to the Certificate shall be deemed to refer to the Amended and
Restated Certificate of Incorporation of the Corporation, as amended and/or restated and in effect from time to time.
SECTION 8. Amendment of By-laws.
(a) Amendment by Directors. Except as provided otherwise by law, these By-laws may be amended or repealed by the
Board of Directors by the affirmative vote of a majority of the directors then in office.
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(b) Amendment by Stockholders. These By-laws may be amended or repealed at any Annual Meeting, or special
meeting of stockholders called for such purpose in accordance with these By-Laws, by the affirmative vote of at least seventy-
five percent (75%) of the outstanding shares entitled to vote on such amendment or repeal, voting together as a single class;
provided, however, that if the Board of Directors recommends that stockholders approve such amendment or repeal at such
meeting of stockholders, such amendment or repeal shall only require the affirmative vote of the majority of the outstanding
shares entitled to vote on such amendment or repeal, voting together as a single class. Notwithstanding the foregoing, stockholder
approval shall not be required unless mandated by the Certificate, these By-laws, or other applicable law.
SECTION 9. Notices. If mailed, notice to stockholders shall be deemed given when deposited in the mail, postage
prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation. Without limiting
the manner by which notice otherwise may be given to stockholders, any notice to stockholders may be given by electronic
transmission in the manner provided in Section 232 of the DGCL.
SECTION 10. Waivers. A written waiver of any notice, signed by a stockholder or director, or waiver by electronic
transmission by such person, whether given before or after the time of the event for which notice is to be given, shall be deemed
equivalent to the notice required to be given to such person. Neither the business to be transacted at, nor the purpose of, any
meeting need be specified in such a waiver.
ADOPTED: May 5, 2013
EFFECTIVE: June 18, 2013
AMENDED: February 11, 2016
AMENDED: December 15, 2020
21
Description of the Company’s Capital Stock
Exhibit 4.2
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
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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
Amendment No. 3
to
Clinical and Commercial Supply Agreement
Viral Vector Product
Exhibit 10.28
This Amendment No. 3 to the Clinical and Commercial Supply Agreement-Viral Vector Product (the “Amendment”) is made
effective January 1, 2021, (“Amendment Effective Date”) by and between bluebird bio (Switzerland) GmbH (“Company”), and
SAFC Carlsbad, Inc., a California corporation (“SAFC”). Company and SAFC may hereinafter be referred to as a Party or as the
Parties. Capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in the Agreement.
WHEREAS, Company and SAFC are parties to that certain Clinical and Commercial Supply Agreement, as amended, dated as
of November 27, 2017, and having an Effective Date of January 1, 2018 (the “Agreement”);
WHEREAS, Company and SAFC wish to document their mutual agreement to remove Company’s contractual obligation to
arrange for Testing Services by way of charging of fees and invoicing for such fees with SAFC’s affiliates BioReliance
Corporation and BioReliance Limited effective from January 1, 2021 through the end of the Term; and
WHEREAS, the Parties agree that the Minimum Purchase Commitment (“MPC”) for the year 2020 is satisfied in full, with no
shortfall payment due SAFC.
WHEREAS, the Parties desire to mutually amend, modify and clarify their respective obligations under the Agreement as stated
hereinafter.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration,
the amount and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
1. SAFC shall not be obligated to quote nor charge fees and invoice for such fees regarding third party Testing as required
in the Agreement. Company shall be solely responsible to arrange all Testing on its behalf in order to comply with the
Agreement Testing requirements. Such actions shall be in effect from January 1, 2021 through the end of the Term.
2. This Amendment, together with the Agreement, constitutes the final, complete and exclusive statement of the agreement
between the parties pertaining to its subject matter and supersedes any and all prior and contemporaneous
understandings or agreements of the parties with respect thereto.
3. This Amendment may be executed in counterparts, each of which shall constitute an original, but all of which when taken
together shall constitute a single instrument. Delivery of an executed counterpart of a signature page to this Amendment
by telecopier or other electronic means (e.g., via PDF) shall be effective delivery of a manually executed counterpart of
this Amendment.
Except as provided herein, all terms and conditions of the Agreement shall remain the same and are in full force and effect.
IN WITNESS WHEREOF, the Parties hereto have each caused this Amendment to be executed by their duly authorized
representatives as of the Amendment Effective Date above.
SAFC CARLSBAD, INC.
bluebird bio (Switzerland) GmbH
By:
Name:
Title:
/s/ Angela Myers
Angela Myers
Head of Gene Editing & Novel Modalities
By:
Name:
Title:
/s/ David Seeberger
David Seeberger
Head of Finance, Europe
The following is a list of subsidiaries of the Company as of January 31, 2021:
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 Greece Single Member, L.L.C.
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
Greece
Netherlands
Washington
Exhibit 23.1
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. 333-236489) 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, 333-229768, and 333-236490)
pertaining to the 2013 Stock Option and Incentive Plan of bluebird bio, Inc.;
of our reports dated February 23, 2021, 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, 2020.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 23, 2021
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 23, 2021
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 23, 2021
By:
/s/ Chip Baird
Chip Baird
Chief Financial Officer
(Principal Financial Officer, Principal Accounting 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, 2020 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 23, 2021
Date: February 23, 2021
By:
By:
/s/ Nick Leschly
Nick Leschly
President and Chief Executive Officer
(Principal Executive Officer and Duly
Authorized Officer)
/s/ Chip Baird
Chip Baird
Chief Financial Officer
(Principal Financial Officer, Principal
Accounting Officer, and Duly Authorized
Officer)