Transformative Gene-Based Medicines
For Serious Human Diseases
2 02 3 AN N UA L R E P O RT
We are rapidly translating the
revolutionary CRISPR technology
into therapies to treat a broad range
of serious human diseases.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
TO
Commission File Number 001-37923
FOR THE TRANSITION PERIOD FROM
CRISPR THERAPEUTICS AG
(Exact name of registrant as specified in its charter)
Switzerland
(State or other jurisdiction of
incorporation or organization)
Baarerstrasse 14
6300 Zug, Switzerland
(Address of principal executive offices)
Not Applicable
(Zip Code)
Registrant’s telephone number, including area code: +41 (0)41 561 32 77
Not Applicable
(I.R.S. Employer
Identification No.)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Shares, nominal value CHF 0.03
Securities registered pursuant to Section 12(g) of the Act: None
Trading
Symbol(s)
CRSP
Name of each exchange on which registered
The Nasdaq Global Market
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 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
☒
Accelerated filer
☐
Non-accelerated filer
☐
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 attestation 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. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previously issued financial statements. ☐
☐
Smaller reporting company
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
The aggregate market value of the common shares held by non-affiliates of the Registrant was approximately $4.1 billion, based on the closing price
on the Nasdaq Global Market of the Registrant’s common shares on June 30, 2023 (the last trading day of the Registrant’s second fiscal quarter of
2023).
The number of the Registrant’s common shares outstanding as of February 16, 2024 was 80,275,950.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Definitive Proxy Statement relating to the 2024 Annual General Meeting of Shareholders, which the Registrant intends to
file with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the Registrant’s fiscal year ended
December 31, 2023, are incorporated by reference into Part III of this Report.
Table of Contents
Business
Risk Factors
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Reserved
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
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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PART I
Item 1.
Item 1A.
Item 1B.
Item 1C.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
i
Risk Factor Summary
Our business is subject to a number of risks and uncertainties of which you should be aware before making an investment
decision in our business. These risks are discussed more fully in the “Risk Factors” section of this Annual Report on Form 10-K.
These risks include, but are not limited to, the following:
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We have incurred significant operating losses since our inception and anticipate that we will incur continued losses for the
foreseeable future.
We will need to raise substantial additional funding, which will dilute our shareholders. If we are unable to raise capital
when needed, we would be forced to delay, reduce or eliminate some of our product development programs or
commercialization efforts.
If we are unable to advance our product candidates to clinical development, obtain regulatory approval and ultimately
commercialize our product candidates, or experience significant delays in doing so, our business will be materially
harmed.
Our CRISPR/Cas9 gene editing product candidates are based on a relatively new gene editing technology, which makes it
difficult to predict the time and cost of development and of subsequently obtaining regulatory approval, if at all. There
have only been a limited number of clinical trials of product candidates based on gene editing technology.
The U.S. Food and Drug Administration, or FDA, the National Institutes of Health, or NIH, and the European Medicines
Agency, or EMA, have demonstrated caution in their regulation of gene therapy treatments, and ethical and legal concerns
about gene therapy and genetic testing may result in additional regulations or restrictions on the development and
commercialization of our product candidates, which may be difficult to predict.
If any of the product candidates we may develop or administration processes we rely on cause undesirable side effects, it
could delay or prevent their regulatory approval, limit the commercial potential or result in significant negative
consequences following any potential marketing approval.
If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory
approvals could be delayed or prevented.
Positive results from early preclinical studies or preliminary results from clinical trials of our product candidates are not
necessarily predictive of the results of later preclinical studies and any future clinical trials of our product candidates. If
we cannot replicate the positive results from our earlier preclinical studies of our product candidates in our later
preclinical studies, clinical trials and future clinical trials, we may be unable to successfully develop, obtain regulatory
approval for and commercialize our product candidates.
Adverse public perception of gene editing and cellular therapy products may negatively impact demand for, or regulatory
approval of, our product candidates.
The commercial success of any of our products or product candidates will depend upon its degree of market acceptance by
physicians, patients, third-party payors and others in the medical community.
We face significant competition in the biotechnology and pharmaceutical industries.
We have partnered with Vertex Pharmaceuticals Incorporated, or Vertex, on our lead program CASGEVY; Vertex has
significant control over the CASGEVY program.
Gene editing products are novel and may be complex and difficult to manufacture. We could experience manufacturing
problems that result in delays in the development or commercialization of our product candidates or otherwise harm our
business.
Our status as a Swiss corporation may limit our flexibility with respect to certain aspects of capital management and may
cause us to be unable to make distributions without subjecting our shareholders to Swiss withholding tax.
If we are unable to obtain or protect intellectual property rights related to our proprietary gene editing technology and
product candidates, we may not be able to compete effectively in our markets.
The intellectual property landscape around gene editing technology, including CRISPR/Cas9, is highly dynamic, and third
parties may initiate and prevail in legal proceedings alleging that the patents that we in-license or own are invalid or that
we are infringing, misappropriating, or otherwise violating their intellectual property rights, the outcome of which would
be uncertain and could have a material adverse effect on the success of our business.
ii
Throughout this Annual Report on Form 10-K, the “Company,” “CRISPR,” “CRISPR Therapeutics,” “we,” “us,” and “our,”
except where the context requires otherwise, refer to CRISPR Therapeutics AG and its consolidated subsidiaries; “our board of
directors” refers to the board of directors of CRISPR Therapeutics AG; and we generally refer to CASGEVY (exagamglogene
autotemcel [exa-cel]), formerly CTX001, as "CASGEVY".
“CRISPR Therapeutics®” standard character mark and design logo, “CRISPRXTM,” “CRISPR TXTM,” “CTX112TM,”
“CTX131TM,” “CTX310TM,” “CTX320TM,” “CTX330TM,” and “CTX211TM” are trademarks and registered trademarks of CRISPR
Therapeutics AG. The CASGEVY™ word mark and design are trademarks of Vertex Pharmaceuticals Incorporated. All other
trademarks and registered trademarks contained in this Annual Report on Form 10-K are the property of their respective owners.
Solely for convenience, trademarks, service marks and trade names referred to in this Annual Report on Form 10-K may appear
without the ® or ™ symbols and any such omission is not intended to indicate waiver of any such rights.
Special Note Regarding Forward-Looking Statements and Industry Data
This Annual Report on Form 10-K contains “forward-looking statements” that involve substantial risks and uncertainties. All
statements, other than statements of historical facts, contained in this Annual Report on Form 10-K are forward-looking statements.
These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,”
“intend,” “may,” “plan,” “predict,” “project,” “potential,” “will,” “would” or the negative or plural of these words or similar
expressions or variations, although not all forward-looking statements contain these identifying words. Forward-looking statements in
this Annual Report on Form 10-K include, but are not limited to, statements about:
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the safety, efficacy and clinical progress of various clinical programs, including those for CASGEVY, CTX112, CTX131,
CTX211, CTX310 and CTX320;
plans and expectations for the commercialization of, and anticipated benefits of, CASGEVY, including the anticipated
patient population eligible for CASGEVY in the United States and plans for patient access to CASGEVY, as well as
timelines for and expectations regarding additional regulatory agency decisions regarding CASGEVY;
the status of clinical trials, including development timelines and discussions with regulatory authorities related to product
candidates under development by us and our collaborators;
the initiation, timing, progress and results of our preclinical studies and clinical trials, including our ongoing clinical trials
and any planned clinical trials, and our research and development programs, including delays or disruptions in clinical
trials, non-clinical experiments and Investigational New Drug application-enabling studies;
the actual or potential benefits of regulatory designations, such as orphan drug, fast track and regenerative medicine
advanced therapy in the United States or such European equivalents, including the PRIority MEdicines, or PRIME,
designation;
our ability to advance product candidates into, and successfully complete, clinical trials;
the size and growth potential of the markets for our product candidates and our ability to serve those markets;
the rate and degree of market acceptance of our product candidates and the success of competing therapies that are or
become available;
our efforts to establish internal manufacturing capabilities and operation of our cell therapy manufacturing facility;
our intellectual property coverage and positions, including those of our licensors and third parties as well as the status and
potential outcome of proceedings involving any such intellectual property;
our anticipated expenses, ability to obtain funding for our operations and the sufficiency of our cash resources; and
the therapeutic value, development, and commercial potential of CRISPR/Cas9 gene editing technologies and therapies.
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 assumptions that could cause our actual
results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in
the section titled “Risk Factors,” set forth in Part I, Item 1A of this Annual Report on Form 10-K. You should not rely upon forward-
looking statements as predictions of future events. Such forward-looking statements speak only as of the date of this report. Our
forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or
investments we may make or enter into.
You should read this Annual Report on Form 10-K and the documents that we have filed as exhibits to this Annual Report on
Form 10-K completely and with the understanding that our actual future results, performance or achievements may be materially
different from what we expect. Except as required by law, we undertake no obligation to update any forward-looking statements to
reflect events or circumstances after the date of such statements.
iii
This Annual Report on Form 10-K includes statistical and other industry and market data, which we obtained from our own
internal estimates and research, as well as from industry and general publications and research, surveys, and studies conducted by third
parties. Industry publications, studies, and surveys generally state that they have been obtained from sources believed to be reliable,
although they do not guarantee the accuracy or completeness of such information. While we believe that each of these studies and
publications is reliable, we have not independently verified market and industry data from third-party sources. While we believe our
internal company research is reliable and the market definitions are appropriate, neither such research nor these definitions have been
verified by any independent source.
iv
Item 1. Business.
Overview
PART I
BUSINESS
We are a leading gene editing company focused on the development of CRISPR/Cas9-based therapeutics. CRISPR/Cas9 is a
revolutionary technology for gene editing, the process of precisely altering specific sequences of genomic DNA. We aim to apply this
technology to disrupt, delete, correct and insert genes to treat genetic diseases and to engineer advanced cellular therapies. We have
advanced this technology from discovery to an approved medicine with unparalleled speed, culminating in the landmark first approval
of a CRISPR-based therapy, CASGEVY (exagamglogene autotemcel [exa-cel]), in 2023 with our collaborators at Vertex
Pharmaceuticals Incorporated, or Vertex. We believe that the combination of our technology, research and development capabilities,
and proven ability to execute may enable us to create an entirely new class of highly effective and potentially curative therapies for
patients with both rare and common diseases for whom current biopharmaceutical approaches have had limited success.
The use of CRISPR/Cas9 for gene editing was co-invented by one of our scientific founders, Dr. Emmanuelle Charpentier, the
Acting and Founding Director of the Max Planck Unit for the Science of Pathogens in Berlin, Germany. Dr. Charpentier and her
collaborators published work elucidating the mechanism by which the Cas9 endonuclease, a key component of CRISPR/Cas9, can be
programmed to cut double-stranded DNA at specific locations. Dr. Charpentier and her collaborator, Dr. Jennifer Doudna of the
University of California, Berkeley, shared the 2020 Nobel Prize in Chemistry for their groundbreaking work. We acquired exclusive
rights to intellectual property encompassing CRISPR/Cas9 and related technologies from Dr. Charpentier and continue to strengthen
our intellectual property estate through our own research and additional in-licensing efforts, furthering our leadership in gene editing
therapeutics.
We have established a portfolio of therapeutic programs spanning four core franchises:
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Hemoglobinopathies: Our most advanced program, CASGEVY, has received approval in the United States and other
countries for the treatment of eligible patients with severe sickle cell disease, or SCD, or transfusion-dependent beta
thalassemia, or TDT, two genetic disorders of hemoglobin, or hemoglobinopathies, with high unmet medical need. In
addition, we have further research efforts on targeted conditioning and in vivo editing of hematopoietic stem cells that
have the potential to expand the number of patients that could benefit significantly.
Immuno-oncology and autoimmune: We are progressing multiple next-generation gene-edited cell therapy programs,
including allogeneic chimeric antigen receptor T cell, or CAR T, candidates for the treatment of hematological and solid
tumor cancers and autoimmune diseases.
In vivo approaches: We are advancing a portfolio of programs leveraging in vivo editing for both common and rare
diseases, starting with the treatment and prevention of cardiovascular disease.
Type 1 diabetes: We have multiple parallel efforts using allogeneic, gene-edited, hypoimmune, stem cell-derived beta
cells to address type 1 diabetes, or T1D, without the need for chronic immunosuppression.
Depending on the program, we take either an ex vivo approach, in which we edit cells outside of the human body before
administering them to the patient, or an in vivo editing approach, where we deliver the CRISPR-based therapeutic directly to target
cells within the human body. In addition, we continue to innovate on our platform to develop next-generation technologies that can
enable new therapies. Through these efforts, we aim to unlock the full potential of CRISPR/Cas9 to create medicines that can
transform the lives of patients.
Our mission is to create transformative gene-based medicines for serious human diseases. We believe that our innovative
research, translational expertise, and clinical development experience, position us as a leader in the development of CRISPR-based
therapeutics.
Hemoglobinopathies
CASGEVY is a non-viral, ex vivo CRISPR/Cas9 gene-edited cell therapy, in which a patient’s own hematopoietic stem and
progenitor cells are edited at the erythroid specific enhancer region of the BCL11A gene through a precise double-strand break. This
edit results in the production of high levels of fetal hemoglobin in red blood cells, which can compensate for the defective adult
hemoglobin in patients with SCD and TDT. CASGEVY is the first therapy to emerge from our strategic partnership with Vertex and is
being advanced under a joint development and commercialization agreement between us and Vertex and certain of its affiliates.
1
In 2023, CASGEVY became the first-ever approved CRISPR-based gene-editing therapy in the world. To date, CASGEVY has
been approved in the United States, Europe, Great Britain, Saudi Arabia, and Bahrain for the treatment of eligible patients 12 years
and older with SCD or TDT. Efficacy data presented to date support the profile of this therapy as a potential one-time functional cure
for people with severe SCD and TDT.
Immuno-Oncology and Autoimmune
We believe CRISPR/Cas9 has the potential to create the next generation of CAR T cell therapies that may have a superior
product profile and allow broader patient access compared to current autologous therapies. We are advancing several cell therapy
programs for oncology and/or autoimmune indications, including two next-generation allogeneic CAR T programs, CTX112 targeting
CD19 and CTX131 targeting CD70. These product candidates incorporate two novel gene edits—knock-out of Regnase-1 and knock-
out of transforming growth factor-beta receptor type 2, or TGFBR2—designed to enhance CAR T potency and reduce CAR T
exhaustion. Emerging pharmacology data, including pharmacokinetics, from ongoing clinical trials of CTX112 and CTX131, indicate
that the novel potency gene edits lead to significantly higher CAR T cell expansion and functional persistence in patients compared to
our first-generation candidates that did not incorporate these edits. In addition, the next-generation candidates exhibit increased
manufacturing robustness, with a higher and more consistent number of CAR T cells produced per batch. We are producing CTX112
and CTX131 for clinical trials at our internal GMP manufacturing facility.
CTX112 is being investigated in an ongoing clinical trial designed to assess the safety and efficacy of the candidate in adult
patients with relapsed or refractory CD19-positive B-cell malignancies who have received at least two prior lines of therapy. In
addition, we plan to initiate a clinical trial of CTX112 in systemic lupus erythematosus in the first half of 2024, with the potential to
expand into additional autoimmune indications in the future. CTX131 is being investigated in an ongoing clinical trial designed to
assess the safety and efficacy of the candidate in adult patients with relapsed or refractory solid tumors. In addition, we plan to expand
trials of CTX131 into hematologic malignancies, including T- and B-cell malignancies.
In Vivo
Our in vivo gene editing strategy focuses on gene disruption and whole gene correction – the two technologies required to
address the vast majority of the most prevalent severe monogenic diseases as well as many common diseases. We have established a
leading platform for in vivo gene editing and are rapidly advancing a broad portfolio of in vivo programs. Our first in vivo programs
target the liver, taking advantage of validated lipid nanoparticle, or LNP, delivery technologies, and aim to treat diseases where we can
produce a strong therapeutic effect by safely disrupting a gene with well-understood genetic association. For example, our first two in
vivo programs, CTX310 and CTX320, aim to address cardiovascular disease by disrupting the validated targets angiopoietin-like
protein 3, or ANGPTL3, and lipoprotein (a), or Lp(a), respectively. We have initiated Phase 1 clinical trials for both CTX310 and
CTX320. Building upon CTX310 and CTX320, we have a number of earlier stage investigational in vivo programs leveraging gene
disruption in the liver for both rare and common diseases. In addition, we have programs focused on gene correction in the liver,
including programs leveraging technologies developed by our CRISPR-X research team. Finally, we are pursuing additional delivery
technologies, including further advancements to nanoparticle technology and adeno-associated virus, or AAV, vectors, for delivery to
tissues beyond the liver, including hematopoietic stem cells.
Type 1 Diabetes
We are advancing a series of programs focused on the development of gene-edited stem cell-derived therapies for the treatment
of T1D. We believe our gene editing capabilities have the potential to enable a beta-cell replacement product candidate that may
deliver durable benefit to patients without the need for long-term immunosuppression. We have three parallel efforts to achieve this
goal. First, our most advanced product candidate, CTX211, is an allogeneic, gene-edited, hypoimmune, stem cell derived product
candidate in a device that is implanted into patients and intended to produce insulin in a glucose-dependent manner. This program,
formerly known as VCTX211, originated from our collaboration with ViaCyte, Inc., a subsidiary of Vertex, and was developed by
applying our gene editing technology to ViaCyte’s proprietary stem cell capabilities. CTX211 is being investigated in an ongoing
Phase 1/2 clinical trial designed to assess the safety, tolerability and efficacy of CTX211 in adult patients with T1D. Second, we have
research efforts focused on a deviceless beta cell replacement approach consisting of unencapsulated beta cells derived from edited
stem cells. Third, we have granted a non-exclusive license to certain of our CRISPR/Cas9 intellectual property to Vertex to accelerate
Vertex’s development of hypoimmune cell therapies for T1D, for which we received $170 million in upfront and milestone payments
in 2023 and remain eligible to receive additional research and development milestones and royalties on future products.
2
CRISPR-X
While we have made significant progress with our current portfolio of programs, we recognize that we need to continue to
innovate to unlock the full power of gene editing and bring potentially transformative therapies to even more patients. We have a
dedicated early-stage research team called CRISPR-X that focuses on innovating next-generation editing modalities. CRISPR-X is
developing technologies to enable whole gene correction and insertion without requiring homology-directed repair or viral delivery of
DNA, such as all-RNA gene correction, non-viral delivery of DNA and novel gene insertion techniques.
Partnerships
Given the numerous potential therapeutic applications for CRISPR/Cas9, we have partnered strategically to broaden the
indications we can pursue and to accelerate programs by accessing specific technologies and/or disease-area expertise. For additional
information regarding certain of these partnerships, please see “Business—Strategic Partnerships and Collaborations.”
Vertex. We established our initial collaboration agreement in 2015 with Vertex, which focused on TDT, SCD, cystic fibrosis and
select additional indications. In December 2017, we entered into a joint development and commercialization agreement with Vertex
pursuant to which, among other things, we are co-developing and co-commercializing CASGEVY for TDT and SCD. In April 2021,
we and Vertex amended and restated our existing joint development and commercialization agreement, pursuant to which, among
other things, we will continue to develop and commercialize CASGEVY for TDT and SCD in partnership with Vertex. We also
entered into a strategic collaboration and license agreement with Vertex in June 2019 for the development and commercialization of
products for the treatment of Duchenne muscular dystrophy, or DMD, and myotonic dystrophy type 1, or DM1 and, in March 2023,
we entered into a non-exclusive license agreement with Vertex for Vertex to utilize our gene editing technology in diabetes.
ViaCyte. We entered into a research and collaboration agreement in September 2018 with ViaCyte to pursue the discovery,
development and commercialization of gene-edited allogeneic stem cell therapies for the treatment of diabetes, and in July 2021, we
entered into a joint development and commercialization agreement with ViaCyte, or the ViaCyte JDCA. In connection with entering
into the ViaCyte JDCA, our existing research collaboration agreement with ViaCyte expired in accordance with its terms. In the third
quarter of 2022, Vertex announced it had acquired ViaCyte and the rights to the ViaCyte Collaboration Field, and in March 2023, we
entered into an amendment to the ViaCyte JDCA pursuant to which, among other things, we adjusted certain rights and obligations of
the parties thereunder. In December 2023, ViaCyte elected to opt-out of the collaboration with us for the co-development and co-
commercialization of gene-edited stem cell therapies for the treatment of diabetes. Per the opt-out terms, once the opt-out is complete,
the on-going collaboration assets will be wholly owned by us, subject to a royalty on future sales owed to ViaCyte. The opt-out
became effective in early February 2024. The ViaCyte collaboration assets include CTX211 (formerly VCTX211), an allogeneic,
gene-edited, hypoimmune, stem cell derived product candidate in a device that is implanted into patients and intended to produce
insulin in a glucose-dependent manner. We are continuing to advance a Phase 1 clinical trial for CTX211 for the treatment of T1D.
Other Partnerships. We have entered into a number of additional collaborations and license agreements to support and
complement our hematopoietic stem cell, immuno-oncology and autoimmune, in vivo and T1D programs and platform, including
agreements with: Nkarta, Inc., or Nkarta, to develop and commercialize products leveraging donor-derived, gene-edited CAR-NK
cells; Capsida Biotherapeutics, Inc. to develop in vivo gene editing therapies delivered with engineered AAV, vectors; Roswell Park
Comprehensive Cancer Center to advance a gene-edited autologous CAR T program against a new target; MaxCyte, Inc. on ex vivo
delivery for our hemoglobinopathy and immuno-oncology programs; CureVac AG on optimized mRNA constructs and manufacturing
for certain in vivo programs; and KSQ Therapeutics, Inc. on intellectual property for our allogeneic immuno-oncology programs.
Gene Editing Background
There are thousands of diseases caused by aberrant DNA sequences. Traditional small molecule and biologic therapies have had
limited success in treating many of these diseases because they fail to address the underlying genetic causes. Newer approaches, such
as RNA therapeutics and viral gene therapy, more directly target the genes related to disease, but each has clear limitations. RNA-
based therapies, such as mRNA and siRNA, face challenges with repeat dosing and related toxicities. Non-integrating viral gene
therapy platforms, such as AAV, may have limited durability because they do not permanently change the genome and have limited
efficacy upon re-administration due to resulting immune responses. Integrating viral gene therapy platforms, such as lentivirus,
permanently alter the genome but do so randomly, which leads to the potential for undesirable mutations. Additionally, cells may
recognize the transduced genes as foreign and respond by reducing their expression, limiting their efficacy. Thus, while our
understanding of genetic diseases has increased since the mapping of the human genome, our ability to treat them effectively has been
limited.
3
We believe gene editing has the potential to enable a next generation of therapeutics and provide potentially curative therapies
to many genetic diseases through precise gene modification. Furthermore, the ability to alter DNA sequences precisely has
applications beyond the treatment of genetic diseases. CRISPR/Cas9 gene editing could also enable the engineering of cell-based
therapies to make them more efficacious, safer and available to a broader group of patients. Cell therapies have already begun to make
a meaningful impact in certain diseases and gene editing could help accelerate that progress across diverse disease areas, including
oncology, autoimmune diseases and diabetes.
The process of gene editing involves precisely altering DNA sequences within the genomes of cells using enzymes to cut the
DNA at specific locations. After a cut is made, natural cellular processes repair the DNA to either silence or correct undesirable
sequences, potentially reversing their negative effects. Importantly, because the genome itself is modified in this process, the change is
permanent in the patient. Earlier generations of gene editing technologies, such as zinc finger nucleases, or ZFNs, transcription-
activator like effector nucleases, or TALENs, and meganucleases, rely on engineered protein-DNA interactions to govern the location
of editing. While these systems were an important first step to demonstrate the potential of gene editing, their development has been
challenging in practice due to the complexity of engineering protein-DNA interactions. In contrast, CRISPR/Cas9 is guided by RNA-
DNA interactions, which are more predictable and straightforward to engineer and apply.
The CRISPR/Cas9 Technology
CRISPR/Cas9 stands for Clustered Regularly Interspaced Short Palindromic Repeats (CRISPR)/CRISPR-associated protein 9
(Cas9) and evolved as a naturally occurring defense mechanism that protects bacteria against viral infections. Dr. Charpentier and her
collaborators elucidated this mechanism and developed ways to adapt and simplify it for use in gene editing. In recognition of this
groundbreaking work, Dr. Charpentier was awarded the 2020 Nobel Prize in Chemistry along with her collaborator, Dr. Jennifer
Doudna of the University of California, Berkeley. The CRISPR/Cas9 technology they described consists of three basic components:
Cas9, CRISPR RNA, or crRNA, and trans-activating CRISPR RNA, or tracrRNA. Cas9, in combination with these two RNA
molecules, is described as “molecular scissors” that can make specific cuts and edits in selected double-stranded DNA.
Dr. Charpentier and her collaborators further simplified the system for use in gene editing by combining the crRNA and
tracrRNA into a single RNA molecule called a guide RNA, or gRNA. The gRNA binds to Cas9 and can be programmed to direct the
Cas9 enzyme to a specific DNA sequence based on Watson-Crick base pairing rules. The CRISPR/Cas9 technology can be used to
make cuts in DNA at specific sites of targeted genes, providing a powerful tool for developing gene editing-based therapeutics.
Once the DNA is cut, the cell uses naturally occurring DNA repair mechanisms to rejoin the cut ends. If a single cut is made, a
process called non-homologous end joining can result in the addition or deletion of base pairs, disrupting the original DNA sequence
and causing gene inactivation. A larger fragment of DNA can also be deleted by using two gRNAs that target separate sites. After
cleavage at each site, non-homologous end joining unites the separate ends, deleting the intervening sequence. Alternatively, if a DNA
template is added alongside the CRISPR/Cas9 machinery, the cell can correct a gene or even insert a new gene through a process
called homology-directed repair.
CRISPR/Cas9 gene editing
4
Given the versatility of CRISPR/Cas systems, multiple groups have developed new technologies based on CRISPR/Cas9, such
as base editing and prime editing. While still nascent, such new CRISPR-based technologies could have advantages in select disease
applications. As a result, we have continued to invest in broadening our CRISPR platform so we can employ a variety of technologies
as appropriate. We believe that CRISPR/Cas9 will form the basis of an entirely new class of therapeutics with the potential to treat
both rare and common diseases. To turn this promise into reality, we have built a broad and diversified pipeline of product candidates
leveraging CRISPR/Cas9 gene editing.
Our Pipeline
The following table summarizes the status of our product development pipeline:
Hemoglobinopathies
Hemoglobinopathies are a diverse group of inherited blood disorders that result from variations in the synthesis or structure of
hemoglobin. Our lead program in hemoglobinopathies, CASGEVY, is the first-ever approved CRISPR-based gene-editing therapy in
the world. It is the first therapy to emerge from our strategic partnership with Vertex and is being advanced under a joint development
and commercialization agreement, with Vertex leading commercialization. CASGEVY has received approvals in the United States
and multiple other countries worldwide for the treatment of eligible patients with SCD or TDT. SCD and TDT are caused by
mutations in the gene encoding the beta globin protein. Beta globin is an essential component of hemoglobin, a protein in red blood
cells that delivers oxygen and removes carbon dioxide throughout the body.
CASGEVY (exagamglogene autotemcel [exa-cel])
CASGEVY is a non-viral, ex vivo CRISPR/Cas9 gene-edited cell therapy, in which a patient’s own hematopoietic stem and
progenitor cells, or HSPCs, are edited at the erythroid specific enhancer region of the BCL11A gene through a precise double-strand
break. This edit results in the production of high levels of fetal hemoglobin, or HbF; hemoglobin F, in red blood cells. HbF is the form
of the oxygen-carrying hemoglobin that is naturally present during fetal development, which then switches to the adult form of
hemoglobin after birth.
5
This HbF upregulation approach mimics a phenomenon observed in natural human genetics. In most patients with SCD or TDT,
HbF disappears in infancy, at which point the symptoms of the disease begin to manifest. However, some patients have elevated levels
of HbF that persist into adulthood, a condition known as hereditary persistence of fetal hemoglobin, or HPFH. These patients are often
asymptomatic or experience much milder forms of disease because elevated HbF compensates for the defective adult hemoglobin.
This protective HPFH condition has been shown to result from specific changes to these individuals’ genomic DNA, including in
regions associated with genetic regulatory elements that control the expression levels of the globin genes, such as BCL11A. We chose
to pursue this HbF upregulation strategy—rather than directly correcting the mutated beta globin gene—given the efficiency and
consistency of the editing approach involved, the ability of this approach to counteract a wide variety of different beta globin
mutations, including patients with TDT, and the natural history data supporting absence of symptoms in patients with HPFH.
Relationship between level of HbF and morbidity in sickle cell disease and beta thalassemia
Patients treated with CASGEVY first undergo a treatment that mobilizes a population of HSPCs, from the bone marrow into the
bloodstream. Blood cells are collected from the patient’s bloodstream and transferred to a manufacturing facility where the HSPCs are
sorted and CRISPR/Cas9 gene-editing is performed. Following manufacturing, the edited cells, now called CASGEVY, are
transferred back to the clinical site. Patients are preconditioned with a treatment that ablates their bone marrow prior to infusion of
CASGEVY.
On December 8, 2023, the FDA approved CASGEVY for the treatment of SCD in patients 12 years and older with recurrent
vaso-occlusive crises, or VOCs, and on January 16, 2024, the FDA approved CASGEVY for the treatment of patients 12 years and
older with TDT. Also , CASGEVY has been granted conditional approval by the European Commission for patients 12 years of age
and older with SCD characterized by recurrent VOCs for whom hematopoietic stem cell (HSC) transplantation is appropriate and a
human leukocyte antigen (HLA)-matched related HSC donor is not available and for patients 12 years of age and older with TDT for
whom hematopoietic stem cell transplantation is appropriate and an HLA-matched related HSC donor is not available. CASGEVY has
also been granted conditional marketing authorization in Great Britain by the U.K. Medicines and Healthcare products Regulatory
Agency, in the Kingdom of Saudi Arabia by the Saudi Food and Drug Agency and in Bahrain by the National Health Regulatory
Authority for patients 12 years of age and older with SCD characterized by recurrent VOCs or TDT, for whom HSC transplantation is
appropriate and an HLA-matched related HSC donor is not available.
We and Vertex continue to investigate CASGEVY, including (1) three clinical trials designed to assess the safety and efficacy
of a single dose of CASGEVY in patients ages 12 to 35 with severe SCD and TDT, respectively, (2) two clinical trials in patients 5 to
11 years of age, one in severe SCD and a second in TDT, and (3) long-term follow-up clinical trials designed to follow participants for
up to 15 years after CASGEVY infusion. CASGEVY safety data presented to date is generally consistent with an autologous stem cell
transplant and myeloablative conditioning. Efficacy data presented to date support the profile of CASGEVY as a potential one-time
functional cure for people with severe SCD and TDT.
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SCD: VOC-free and No In-patient Hospitalizations for VOCs Achieved Out to 45.5 Months
TDT: Transfusion Independence Achieved Out to 45 Months
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Beta Thalassemia
Beta thalassemia is a blood disorder that is associated with a reduction in the production of hemoglobin. This disease is caused
by mutations that give rise to the insufficient expression of the beta globin protein, which can lead to symptoms related not only to the
lack of hemoglobin, but also to the buildup of unpaired alpha globin proteins in red blood cells. The severity of symptoms associated
with beta thalassemia varies depending on the levels of functional beta globin present in the blood cells. The unpaired alpha globin
chains are toxic to red blood cells and reduce red blood cell lifespan. In the most severe cases, described as beta thalassemia major,
functional beta globin is either completely absent or reduced, resulting in severe anemia. In these patients, the bone marrow cannot
keep pace with the destruction of red blood cells, and thus these patients require regular blood transfusions. While chronic blood
transfusions can be effective at addressing symptoms, they often lead to iron overload, progressive heart and liver failure, and
eventually early death. Patients with mild forms of beta thalassemia may experience some mild anemia or even be asymptomatic. The
total worldwide incidence of beta thalassemia is estimated to be 60,000 births annually, the total prevalence in the United States and
the European Union, or EU, is estimated to be approximately 16,000 and there are over 200,000 people worldwide who are alive and
registered as receiving treatment for the disease.
The most common treatment for beta thalassemia is chronic blood transfusions. Transfusion-dependent patients typically receive
transfusions every two to four weeks and chronic administration of blood often leads to elevated levels of iron in the body, which can
cause organ damage over a relatively short period of time. Patients often undergo phlebotomy or are given iron chelators, or medicines
to reduce iron levels in the blood, which are associated with their own significant toxicities. In developing countries, where chronic
transfusions are not available, most patients die in early childhood. Also, a disease-modifying therapy for beta thalassemia, Reblozyl
(luspatercept-aamt), received FDA approval in 2019.
A potentially curative therapy for beta thalassemia is allogeneic hematopoietic stem cell transplant, or allo-HSCT, but few
patients elect to have this procedure given its associated morbidity and mortality and the lack of matched and willing donors. Another
option is Zynteglo (betibeglogene autotemcel), an ex vivo autologous lentiviral gene therapy developed by bluebird bio, which the
FDA approved for the treatment of certain patients with TDT in August 2022.
Sickle Cell Disease
SCD is an inherited disorder of red blood cells resulting from a specific mutation in the beta globin gene that causes abnormal
red blood cell function. Under conditions of low oxygen concentration, the abnormal hemoglobin proteins aggregate within the red
blood cells causing them to become sickled in shape and inflexible. These sickled cells obstruct blood vessels, restricting blood flow
to organs, ultimately resulting in severe pain, infections, stroke, overall poor quality of life and early death. Patients also experience
increased hemolysis, leading to anemia. The worldwide incidence of SCD is estimated to be 300,000 births annually and there are 20-
25 million people worldwide with the disease. In the United States and the European Union, the total prevalence is estimated to be
150,000 individuals.
As with beta thalassemia, in regions where medical infrastructure can support it, standard treatment for patients with SCD who
have high levels of hemolysis involves chronic blood transfusions, which has the same associated risks of iron overload and toxicities
associated with chelation therapy. The FDA and/or EMA have approved several disease-modifying therapies for SCD as well,
including hydroxyurea, Adakveo (crizanlizumab-tmca) and Oxbryta (voxelotor).Prior to December 2023, the only curative option was
Allo-HSCT which is often avoided given the significant risk of transplant-related morbidity and mortality in these patients and the
lack of matched and willing donors. In December 2023, the FDA approved Lyfgenia (lovotibeglogene autotemcel), an ex vivo
autologous lentiviral gene therapy developed by bluebird bio, which carries a boxed warning for hematologic malignancy.
Next-generation Efforts
Building upon CASGEVY, we are pursuing next-generation efforts in targeted conditioning regimens, which could offer
benefits over the myeloablative busulfan conditioning regimen currently used with CASGEVY, and for in vivo editing of
hematopoietic stem cells. Either of these efforts could broaden the number of patients that can benefit from our therapies.
Immuno-Oncology and Autoimmune
Interest in the oncology community has grown rapidly in the field of immuno-oncology, or treatments that harness the immune
system to attack cancer cells. Engineered immune cell therapy is one such approach, in which immune system cells such as T cells are
genetically modified to enable them to recognize and attack cancerous cells.
8
Engineered cell therapy has demonstrated encouraging results leading to multiple approvals for autologous, or patient-derived,
CAR T products. These cell therapies require unique products to be created for each patient treated, an approach that has in the past
proven challenging and cost prohibitive in the field of oncology. This bespoke manufacturing process takes time during which a
patient’s disease can progress and sometimes fails to produce a viable product at all. Additionally, these versions of engineered cell
therapies appear limited in their ability to treat solid tumors and have demonstrated a high rate of toxicities that require complicated
management protocols. In contrast, allogeneic, or donor-derived, engineered T-cell therapies can be manufactured ahead of time and
administered “off-the-shelf,” enabling immediate availability, improved access, simpler logistics, greater consistency since each batch
yields many doses, and re-dosing.
We expect that the cellular engineering strategies that are ultimately successful in immuno-oncology will involve multiple
genetic modifications, an application for which we believe CRISPR/Cas9 will play a central role. While other gene editing platforms
could potentially be used for these purposes, CRISPR/Cas9 is particularly well-suited for multiplexed editing, which is the
modification and/or insertion of multiple genes within a single cell. Gene editing techniques that require different protein enzymes for
each genetic modification may be limited in the number of edits they can make concurrently due to efficiency, cytotoxicity and/or
manufacturing challenges. In contrast, CRISPR/Cas9 has the potential to efficiently make multiple edits using a single Cas9 protein
and multiple small gRNA molecules.
In our immuno-oncology cell therapies, we are using the multiplexing ability of CRISPR/Cas9 both to enable allogeneic
administration and to introduce additional genetic edits that aim to improve the efficacy profile of these product candidates.
Furthermore, we are leveraging our CRISPR platform to enable a process of continuous innovation in which we incorporate
incremental edits into next-generation products to try to increase treatment benefit further. We continue to expand our multiplexing
capabilities to help us realize the full potential of engineered cell therapy in immuno-oncology across all tumor types, including solid
tumors.
In addition, multiple groups have begun to demonstrate the utility of CAR T therapy for the treatment of various autoimmune
diseases, including systemic lupus erythematosus, or SLE. Specifically, CD19-directed autologous CAR T cells have produced
durable remissions in early clinical studies. Allogeneic CAR T therapy has the potential to provide similar results with several
potential advantages, including increased scalability, dramatically decreased cost of goods, reduced risk of toxicities and an improved
patient experience with no need for apheresis. Autoimmune disease could represent a large additional opportunity for our allogeneic
CAR T cell programs.
Next-generation Allogeneic CAR T Candidates
We are advancing two next-generation, investigational, gene-edited, healthy donor-derived allogeneic CAR T product
candidates in clinical trials: CTX112 targeting CD19 and CTX131 targeting CD70. These next-generation candidates build upon our
first-generation programs and reflect our mission of innovating continuously to bring potentially transformative medicines to patients
as quickly as possible. Those first-generation allogeneic CAR T candidates, CTX110 and CTX130, provided important proof of
concept that allogeneic CAR T cells can produce durable remissions following a standard lymphodepletion regimen. In addition, the
first-generation programs demonstrated a well-tolerated safety profile. Preliminary data from ongoing clinical trials of CTX112 and
CTX131, suggest that these candidates may improve upon the clinical profile of CTX110 and CTX130. Emerging pharmacology data,
including pharmacokinetics, indicate that the novel potency gene edits in CTX112 and CTX131 lead to significantly higher CAR T
cell expansion and functional persistence in patients compared to the first-generation candidates. In addition, the next-generation
candidates exhibit increased manufacturing robustness, with a higher and more consistent number of CAR T cells produced per batch.
We are producing CTX112 and CTX131 for clinical trials at our internal GMP manufacturing facility.
CTX112 and CTX131 each incorporate two novel gene edits, leveraging the fact that our CRISPR/Cas9 platform enables us to
innovate continuously by incorporating additional edits into next-generation products. These edits—knock-out of Regnase-1 and
knock-out of transforming growth factor-beta receptor type 2, or TGFBR2—have the potential to enhance CAR T potency and reduce
CAR T exhaustion. Editing Regnase-1 removes an intrinsic “brake” on T cell function while editing TGFBR2 removes a key extrinsic
“brake” on T cell anti-tumor activity. We identified this combination of edits through systematic screening of dozens of new and
previously described genes. In preclinical studies, these edits synergistically improved potency approximately 10-fold compared to the
first-generation candidates, as shown below for CTX131 versus CTX130 in a renal cell carcinoma xenograft model.
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Regnase-1 and TGFBR2 Edits Increase Potency Approximately 10-fold
In total, to generate CTX112 and CTX131 we make five and six modifications, respectively, to T cells taken from healthy
donors using our gene editing technology:
1.
2.
3.
4.
5.
6.
Elimination of the T-cell receptor, or TCR, to reduce the risk of Graft versus Host Disease, or GvHD.
Site-specific insertion of a CD19-directed CAR (for CTX112) or CD70-directed CAR (for CTX131) into the TRAC locus.
Removal of the class I major histocompatibility complex, MHC I, from the cell surface to improve the persistence of the
CAR T cells in an “off-the-shelf” setting.
Disruption of Regnase-1 to increase functional persistence, cytokine secretion and sensitivity, and effector function.
Disruption of TGFBR2 to reduce tumor microenvironment inhibition of multiple CAR T cell functions.
For CTX131 only, knock-out of CD70 to prevent CAR T cell fratricide and further increase potency.
Our Next-Generation CRISPR Gene-edited Allogeneic CAR T Chassis
We believe this approach will have advantages over other allogeneic CAR T products in development that semi-randomly insert
the CAR using an integrating virus and do not include edits to increase potency.
CTX112
We are investigating CTX112 in an ongoing clinical trial designed to assess the safety and efficacy of CTX112 in adult patients
with relapsed or refractory CD19-positive B-cell malignancies who have received at least two prior lines of therapy. In this trial, we
use a standard lymphodepletion regimen consisting of cyclophosphamide (500 mg/m2) and fludarabine (30 mg/m2) for three days.
In preclinical studies, CTX112 significantly extended survival in a mouse model when compared to either untreated mice, mice
treated with CTX110, or mice treated with CAR T cells bearing the Regnase-1 or TGFBR2 edits individually, as shown in the figure
below.
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Treatment with CTX112 Leads to Extended Survival in Nalm6-Luc Mice
In addition, we plan to initiate a clinical trial of CTX112 in SLE, with the potential to expand into additional autoimmune
indications in the future. The autologous CAR T cells used successfully in SLE to this point appear to cause a B cell “reset” following
deep B cell depletion whereby reconstituted B cells do not express high levels of autoantibodies. We believe that CTX112 has the
potential to produce a similar B cell “reset” based on clinical data from our first-generation program, CTX110, showing deep B cell
depletion in patients with B cell malignancies, as shown in the figure below.
B cell Depletion Following CTX110 Infusion Among Patients with Detectable B cells at Baseline
CTX131
We are advancing CTX131 for the potential treatment of both solid tumors and certain hematologic malignancies. Several
cancers express CD70, including renal cell carcinoma, glioblastoma, pancreatic, lung and ovarian cancers, non-Hodgkin’s lymphoma
and certain T-cell lymphomas, while normal tissues do not express or show extremely limited expression of CD70.
We are investigating CTX131 in an ongoing clinical trial designed to assess the safety and efficacy of CTX131 in adult patients
with relapsed or refractory solid tumors. In this trial, we use a standard lymphodepletion regimen consisting of cyclophosphamide
(500 mg/m2) and fludarabine (30 mg/m2) for three days. In addition, we plan to expand trials of CTX131 into hematologic
malignancies, including T- and B-cell malignancies.
In preclinical studies, CTX131 showed robust activity, eliminating xenograft models of lung and renal cell carcinoma in all mice
treated, both initially and upon multiple re-challenges, as shown in the figure below.
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CTX131 Eliminates Three Different Xenograft Tumor Models in Succession without Exhaustion
Additional candidates
We are advancing several additional CAR T product candidates against new targets. For one such candidate, we have developed
an innovative partnership model with a leading cancer center, Roswell Park Comprehensive Cancer Center, or Roswell Park, to
validate the novel target glypican-3, or GPC3, in the clinic. With Roswell Park, we are advancing a gene-edited, autologous CAR T
candidate targeting GPC3, expressed in hepatocellular carcinoma. Roswell Park will conduct manufacturing and a first-in-human
clinical trial, while we retain commercial rights. This structure will enable us to assess the safety and activity of this gene-edited
product candidate rapidly. Based on the clinical results, we can choose to continue advancing the autologous program internally or
develop an allogeneic version to expand the opportunity further.
In addition, multiple groups have begun to explore the use of other immune cells, such as natural killer, or NK, cells, in
immuno-oncology therapy. To expand our efforts in gene-edited immune cell therapy beyond T cells, we formed a collaboration with
Nkarta that brings together our gene editing technology and cell therapy expertise with Nkarta’s leading NK cell discovery,
development and manufacturing capabilities. We and Nkarta are co-developing and co-commercializing product candidates
incorporating donor-derived, gene-edited CAR-NK cell product candidates, one of which targets CD70.
In Vivo Approaches
We have established a leading platform for in vivo gene editing and are rapidly advancing a broad portfolio of in vivo programs.
In vivo gene editing, or delivery of a CRISPR/Cas9-based therapeutic directly to tissues within the human body, could enable the
treatment of many rare and common diseases, including those difficult to address with ex vivo approaches.
Our lead in vivo programs target the liver and take advantage of the clinically established and validated lipid nanoparticle, or
LNP, delivery technologies now available. LNPs have several advantages that make them well-suited for delivering CRISPR/Cas9 in
vivo, including efficient and safe delivery to the liver, large cargo size and transient cargo expression. Our first programs in the liver
aim to treat diseases where we can produce a strong therapeutic effect by safely disrupting a gene with well-understood genetic
association. For example, our two clinical programs, CTX310 and CTX320, aim to address cardiovascular disease by disrupting the
validated targets ANGPTL3 and lipoprotein (a), or Lp(a), respectively.
Beyond the liver, for delivery to hematopoietic stem cells and other extrahepatic tissues, we are pursuing multiple delivery
technologies, including LNPs, further advancements to nanoparticle technology and AAV vectors. Through internal efforts and
external collaborations, we are developing new delivery modalities to support future in vivo therapeutics.
Cardiovascular and Dyslipidemia Programs
Cardiovascular disease, or CVD, is the leading cause of death globally, accounting for close to one third of all deaths, or nearly
20.5 million people, in 2021. CVD includes heart failure, stroke, atherosclerotic cardiovascular disease, or ASCVD, aortic valve
calcification and more. Dyslipidemias are a leading cause of CVD. Dyslipidemias are characterized by abnormally high levels of
lipids, including cholesterol, lipoproteins and triglycerides, in the bloodstream. Three of the most common dyslipidemias are
hypercholesterolemia, hypertriglyceridemia and elevated Lp(a). Today’s chronic care treatment model of CVD involves daily
medication, weekly injection, multiple infusions annually and/or surgical interventions. This model places a heavy burden on patients
and the healthcare system. Adherence to lipid-lowering therapy remains a major challenge, and over 80% of people with very high
cardiovascular risk do not reach low density lipoprotein, cholesterol, or LDL-C target goal.
We aim to transform the treatment paradigm for CVD by developing one-time in vivo editing therapies that can durably lower
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levels of atherogenic lipoproteins for a patient’s lifetime. To do so, we aim to disrupt genes like ANGPTL3 that when dysfunctional or
inhibited result in lower levels of key lipoproteins and improved cardiovascular outcomes based on studies of natural human genetics
and other therapeutic modalities. By recapitulating this benefit, we believe that our therapies have the potential to minimize or
eliminate the need for additional treatments and improve long-term cardiovascular outcomes for both patients with severe genetic
dyslipidemias and much larger ASCVD patient populations.
CTX310
Our lead in vivo product candidate, CTX310, targets the gene encoding angiopoietin-related protein 3, or ANGPTL3, for the
treatment and prevention of CVD. ANGPTL3 plays an important role in lipid metabolism by inhibiting an enzyme called lipoprotein
lipase, or LPL. LPL is the main enzyme that breaks down triglyceride-enriched lipoproteins like chylomicrons, very low density
lipoprotein, or VLDL, and LDL. By preventing LPL from hydrolyzing these lipoproteins, ANGPTL3 activity increases the level of
circulating triglycerides. Reducing ANGPTL3 expression by disrupting the ANGPTL3 gene increases LPL expression and thereby
reduces triglyceride-rich lipoproteins, as well as LDL-C. This mechanism has been validated through natural history studies, as
individuals with natural loss-of-function variants of ANGPTL3 have lower triglyceride levels, lower LDL-C levels, and a lower risk of
coronary artery disease. CTX310, which consists of messenger RNA encoding Cas9 and a gRNA targeting ANGPTL3 delivered via
LNP, aims to recapitulate this effect by disrupting the ANGPTL3 gene. CTX310 has been shown to decrease ANGPTL3 protein levels
by nearly 90% in non-human primates, or NHPs, leading to a greater than 50% reduction in serum triglycerides. We have initiated a
Phase 1 clinical trial for CTX310 in mixed dyslipidemia, homozygous familial hypercholesterolemia, or HoFH, heterozygous familial
hypercholesterolemia, or HeFH, and severe hypertriglyceridemia, or SHTG.
A single dose of CTX310 durably reduced ANGPTL3 and triglycerides in NHPs out to 1 year
CTX320
Our second in vivo product candidate, CTX320, targets another protein associated with CVD: Lp(a). Lp(a) is a lipoprotein
consisting of an LDL-like particle covalently bound to a protein called apolipoprotein(a), or apo(a). Lp(a) transports cholesterol in the
blood and is highly atherogenic. It can infiltrate and bind to components of the extracellular matrix in the inner layers of the aortic
valve and other areas of the circulatory system, resulting in increases in inflammation and fatty deposits that over time lead to a
weakened aortic valve and other serious symptoms contributing to CVD. Lp(a) is its own independent risk factor for CVD. High
concentrations of Lp(a), as well as genetic variants associated with high Lp(a) concentrations, are both associated with CVD. Elevated
levels of Lp(a) above 50 mg/dL are directly associated with aortic valve calcification disease, or AVCD. Up to 20% of adults in the
United States have Lp(a) levels above 50 mg/dL and over 1 million adults in the United States have AVCD. Additionally, 30% of
patients with familial hypercholesterolemia have elevated Lp(a) levels. To date, there are no Lp(a) lowering therapies approved by the
FDA. CTX320 consists of a gRNA targeting LPA, the gene encoding apo(a), and messenger RNA encoding Cas9 delivered via LNP.
By reducing levels of apo(a), CTX320 should reduce plasma levels of Lp(a) substantially, as supported by preclinical data showing
that treatment with CTX320 decreases Lp(a) levels by over 90% in NHPs. We have initiated a Phase 1 clinical trial for CTX320 in
ASCVD with elevated Lp(a).
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A single dose of CTX320 durably reduced Lp(a) in NHPs out to 1 year
Hypercholesterolemia
Hypercholesterolemia is defined by levels of LDL-C above 130 mg/dL and is associated with increased risk of heart disease and
stroke. In hypercholesterolemia, high levels of LDL-C accumulate in blood vessels, leading to atherosclerosis. Treatment aims to
reduce LDL-C levels to below 100 mg/dL with 70 mg/dL as the ultimate goal, but some patients cannot achieve this level of reduction
through existing means. Patients with LDL-C levels above 200 mg/dL are considered to have familial hypercholesterolemia (FH).
Patients with FH have one or more genetic mutations that contribute to the disease in addition to diet and lifestyle. Patients with FH
cannot metabolize LDL-C effectively, leading to high levels of circulating LDL-C, in some cases exceeding 1000 mg/dL. FH can be
subcategorized by mutation status into HeFH, and HoFH. HoFH patients have the most severe phenotype, with LDL-C levels usually
exceeding 400 mg/dL. HoFH patients often suffer from CVD early in life and have an average life expectancy of 33 years if untreated.
HoFH has a prevalence of 1 in 200,000 to 1,000,000 adults.
Hypertriglyceridemia
Hypertriglyceridemia is clinically defined as having triglyceride levels above l50 mg/dL. The most severe patients can have
levels exceeding 2000 mg/dl. Hypertriglyceridemia is associated with CVD and acute pancreatitis. Like LDL-C, triglyceride levels
can be affected by diet and lifestyle choices and treated with common therapies. However, over three million adults in the United
States still have SHTG. Known genetic conditions can cause SHTG, including familial chylomicronemia syndrome, or FCS, and
multifactorial chylomicronemia syndrome, or MCS. There are parallels between FCS/MCS and HoFH/HeFH. FCS is the only true
monogenic form of hypertriglyceridemia and is associated with extreme levels of triglycerides exceeding 885 mg/dL. The prevalence
of FCS is 1 in 200,000 to 300,000 individuals in the United States and EU. MCS is polygenic in nature, meaning that the genetic
underpinnings causing the disease to vary among individuals, and is clinically defined as having triglyceride levels between 150 and
885 mg/dL. MCS has a prevalence of 1 in 600 to 1,000 individuals.
Additional In Vivo Programs
Building upon CTX310 and CTX320, we have a number of earlier stage investigational in vivo programs leveraging gene
disruption in the liver for both rare and common diseases. These include CTX330, which targets PCSK9, a well understood target for
CVD with robust data from natural human genetics and antibody and RNAi therapies. In addition, we have programs focused on gene
correction in the liver, including the first programs leveraging technologies developed by our CRISPR-X group. We are also
investigating programs for the diagnosis, treatment, or prevention of certain hemophilia A, autoimmune and eye disorders, on which
Bayer has options to co-develop and co-commercialize two products with us or, under certain circumstances, exclusively license such
optioned products.
Type 1 Diabetes
We are advancing a series of programs focused on the development of gene-edited stem cell-derived therapies for the treatment
of type 1 diabetes, or T1D. We believe our gene editing capabilities have the potential to enable a beta-cell replacement product
candidate that may deliver durable benefit to patients without the need for long-term immunosuppression.
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Clinical data with allogeneic islet transplants indicate that beta-cell replacement approaches may offer benefit to patients with
insulin-requiring diabetes. However, this approach requires collecting islets from cadavers, which is not a scalable process. In
addition, because a patient’s immune system will identify these cadaveric cells as foreign, patients require long-term
immunosuppression to avoid rejection. The first challenge can be solved by using beta cells derived from stem cells. Multiple groups
have advanced stem cell-derived beta-cell replacement product candidates into clinical studies, but these product candidates still
require chronic immunosuppression.
Our gene editing technology offers the potential to protect the transplanted cells from the patient’s immune system by ex vivo
editing of immuno-modulatory genes within the stem cell line used to produce the pancreatic-lineage cells. We believe that the speed,
specificity and multiplexing efficiency of CRISPR/Cas9 make our technology well suited to this task. Furthermore, our CRISPR
platform enables a process of continuous innovation, with additional edits incorporated into next-generation product candidates with
the aim of increasing treatment benefit further. This feature of the CRISPR/Cas9 platform has led us to pursue a multi-pronged
product strategy:
1.
Our most advanced product candidate, CTX211, consists of encapsulated pancreatic progenitor cells derived from stem
cells with gene edits for immune evasion and cell survival. This program, formerly known as VCTX211, originated from
our collaboration with ViaCyte, Inc., a subsidiary of Vertex. We now have full rights to this product candidate and others
following ViaCyte’s election to opt-out of the collaboration.
2. We have research efforts focused on a deviceless approach consisting of unencapsulated beta cells derived from edited
stem cells.
3. We granted a non-exclusive license to certain of our CRISPR-Cas9 gene editing intellectual property to Vertex in March
2023 to accelerate Vertex’s development of hypoimmune cell therapies for T1D. We received $170 million in upfront and
milestone payments in 2023 and remain eligible to receive additional research and development milestones and royalties
on future products under the license.
CTX211
CTX211 is an investigational, allogeneic, gene-edited, hypoimmune, stem cell-derived beta cell replacement therapy developed
by applying our gene editing technology to ViaCyte’s proprietary stem cell capabilities. CTX211 incorporates six gene edits designed
to promote immune evasion and cell fitness: knock-out of B2M and TXNIP and knock-in of PD-L1, HLA-E, MANF and A20.
CTX211 benefits from work on a precursor product candidate, VCTX210, which only had four of these edits. Collectively, the edits in
CTX211 improve the ability of beta cells to evade the immune system in vitro and in vivo in preclinical models, as shown below. In
addition, CTX211 has been shown to reverse hyperglycemia in a diabetic rat model. CTX211 is being investigated in an ongoing
Phase 1/2 clinical trial designed to assess the safety, tolerability and efficacy of CTX211 in adult patients with T1D.
CTX211 Cells Evade Immunity In Vitro and In Vivo
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CTX211 Reverses Hyperglycemia in a Diabetic Rat Model
CRISPR-X: Further Unlocking the Potential of Our Gene Editing Platform
While we have made significant progress with our current portfolio of programs, we recognize that we can bring transformative
therapies to even more patients by continuing to innovate to unlock the full potential of CRISPR gene editing. In late 2022, we
launched a new early-stage research team known as CRISPR-X that focuses on innovative research to develop next-generation gene
editing modalities. CRISPR-X is developing technologies to enable whole gene correction and insertion without requiring homology-
directed repair, which occurs at low efficiency in many cells, or viral delivery of a DNA template, which creates toxicity risks and
technical challenges. These technologies include all-RNA gene correction, non-viral delivery of DNA and novel editing and insertion
techniques. These efforts complement other core platform capabilities, such as gRNA selection, on- and off-target assessment,
multiplexing and lipid nanoparticle discovery.
Other Vertex Partnered Programs
We have partnered with Vertex, a global leader in rare diseases, in several other disease areas beyond SCD and TDT. We have
entered into license agreements with Vertex with respect to cystic fibrosis, or CF, where Vertex has extensive expertise, and Duchenne
muscular dystrophy, or DMD. In addition, we have entered into a collaboration agreement on myotonic dystrophy type 1, or DM1, in
which we retain the option to co-develop and co-commercialize products. We believe that our CRISPR/Cas9 gene editing technology
is well suited to address CF, DMD and DM1, all of which have significant patient populations with high unmet medical need.
Duchenne Muscular Dystrophy
DMD is an X-linked recessive genetic disease caused by mutations in the dystrophin gene, which results in a lack of the
dystrophin protein. Because dystrophin plays a key structural role in muscle fiber function, the absence of this protein in muscle cells
leads to significant cell damage and ultimately causes muscle cell death and fibrosis. Patients with the disease experience muscle
degeneration, loss of mobility and premature death. DMD is among the most prevalent severe genetic diseases, occurring in one in
3,300 male births worldwide. There are currently several approved disease-modifying therapies in the United States for the treatment
of DMD, including one for patients who have confirmed mutations of the dystrophin gene amenable to exon 51 skipping, two for
patients who have confirmed mutations of the dystrophin gene amenable to exon 53 skipping, and one for patients who have
confirmed mutations of the dystrophin gene amenable to exon 45 skipping. These mutations affect about 13%, 8% and 8% of the
DMD population, respectively. In addition, in June 2023, the FDA granted accelerated approval for Elevidys (delandistrogene
moxeparvovec), an AAV gene therapy carrying a micro-dystrophin gene for the treatment of ambulatory pediatric patients aged 4
through 5 years with DMD with a confirmed mutation in the DMD gene.
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Myotonic Dystrophy Type 1
DM1 is an autosomal genetic disease caused by the expansion of a CTG trinucleotide repeat in the noncoding region of the
DMPK gene. The disease affects the skeletal and smooth muscle, as well as other organ systems, such as the eye, heart, endocrine
system, and central nervous system. The clinical manifestations of DM1 span a continuum from mild to severe. Based on these
phenotypes, DM1 is classified into three somewhat overlapping forms: mild, classic, and congenital. Patients with mild DM1 have
normal lifespans and typically develop cataracts, and experience mild sustained muscle contractions, or myotonia. Those with classic
DM1 tend to have muscle weakness and wasting, myotonia, cataracts and often abnormalities in cardiac conduction, and may become
physically disabled and have shortened lifespans. Patients with congenital DM1 commonly have intellectual disability and typically
have hypotonia and severe generalized weakness at birth, often with respiratory insufficiency and early death. DM1 affects around 1
in 8,000 people worldwide. No approved therapies exist to treat the underlying disease; instead, most interventions to date aim to
address specific symptoms of the disease.
Cystic Fibrosis
CF is a progressive disease caused by mutations in the cystic fibrosis transmembrane regulator, or CFTR, gene resulting in the
loss or reduced function of the CFTR protein. Patients with CF develop thick mucus in vital organs, particularly in the lungs, pancreas
and gastrointestinal tract. As a result, CF patients experience chronic severe respiratory infections, chronic lung inflammation, poor
absorption of nutrients, progressive respiratory failure and early mortality. The median age of death from CF in the United States was
31 years in 2017, with most deaths resulting from respiratory failure. CF is an orphan disease that is estimated to affect more than
70,000 patients in the United States and Europe. CF patients require lifelong treatment with multiple daily medications and hours of
self-care. They often require frequent hospitalizations and sometimes even lung transplantation, which can prolong survival but is not
curative.
Strategic Partnerships and Collaborations
We view strategic partnerships as a core component of our strategy, allowing us to access capabilities and resources in support
of our therapeutic programs. We maintain broad strategic partnerships to develop gene editing-based therapeutics in specific disease
areas.
Vertex
We, and certain of our affiliates, have entered into a series of agreements with Vertex, and or affiliates of Vertex, that
contemplate certain research, development, manufacturing and commercialization activities involving various targets. Since October
2015, we have entered into a Strategic Collaboration, Option and License Agreement, as amended in 2017 and 2019, or the 2015
Collaboration Agreement; a Joint Development and Commercialization Agreement, or the Vertex JDA, which was amended and
restated in April 2021, or the A&R Vertex JDCA, as amended in December 2023, or the Amended A&R Vertex JDCA; and a
Strategic Collaboration and License Agreement, as amended in April 2021, or the 2019 Collaboration Agreement. In addition, we and
Vertex entered into a non-exclusive license agreement, dated March 23, 2023, or the Non-Ex License Agreement, pursuant to which
we agreed to license to Vertex, on a non-exclusive basis, certain of our gene editing intellectual property.
2015 Collaboration Agreement
Pursuant to the 2015 Collaboration Agreement, we agreed to provide technology and options to obtain licenses relating to our
CRISPR/Cas technology to Vertex in exchange for a $75.0 million upfront payment. In 2015, in connection with the initial entry into
the 2015 Collaboration Agreement, Vertex also made a $30.0 million equity investment in us.
The initial focus of the 2015 Vertex collaboration was to use CRISPR/Cas9 technology to discover and develop gene-based
treatments for hemoglobinopathies and cystic fibrosis. In 2017, Vertex exercised its option to co-develop and co-commercialize the
hemoglobinopathies program. Matters relating to hemoglobinopathies targets are governed by the Amended A&R Vertex JDCA, as
summarized below. Further discovery efforts focused on a specified number of other genetic targets. Under the 2015 Collaboration
Agreement, Vertex had the option to exclusively license treatments for a specified number of collaboration targets that emerged from
the four-year research collaboration under certain of our platform and background intellectual property to develop, manufacture,
commercialize, sell and use therapeutics directed to each such collaboration target. We were responsible for discovery activities, and
the related expenses were fully funded by Vertex.
In October 2019, Vertex exercised the remaining options granted to it under the 2015 Collaboration Agreement to exclusively
in-license three additional targets for the development of gene-based treatments using CRISPR-based gene editing. The targets include
the cystic fibrosis transmembrane conductance regulator gene and two undisclosed targets. Under the terms of the 2015 Collaboration
Agreement, we received an upfront payment of $30.0 million in connection with the option exercise and have the potential to receive
up to $410.0 million in development, regulatory and commercial milestones, as well as royalty payments in the single digits to low
teens on net product sales for each of the three targets. The milestone and royalty payments are each subject to reduction under certain
specified conditions set forth in the 2015 Collaboration Agreement. For these targets, Vertex is solely responsible for all research,
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development, manufacturing and global commercialization activities and Vertex received exclusive rights to develop and
commercialize products related to these targets globally. The research term of the 2015 Collaboration Agreement has expired, and
Vertex no longer holds rights to in-license additional targets under the 2015 Collaboration Agreement.
Either party can terminate the 2015 Collaboration Agreement upon the other party’s material breach, subject to specified notice
and cure provisions. Vertex also has the right to terminate the 2015 Collaboration Agreement for convenience at any time upon 90
days’ written notice prior to any product receiving marketing approval and upon 270 days’ notice after a product has received
marketing approval. We may also terminate the 2015 Collaboration Agreement in the event Vertex challenges any of our patent rights.
Absent early termination, the 2015 Collaboration Agreement will continue until the expiration of Vertex’s payment obligations
under the 2015 Collaboration Agreement.
Joint Development Agreement
In December 2017, we entered into the Vertex JDA with Vertex pursuant to which the parties agreed to, among other things, co-
develop and co-commercialize CASGEVY and other product candidates specified in the Vertex JDA. In April 2021, we and Vertex
agreed to amend and restate the Vertex JDA and entered into the A&R Vertex JDCA, pursuant to which the parties agreed to, among
other things, (a) adjust the governance structure for the collaboration and adjust the responsibilities of each party thereunder; (b) adjust
the allocation of net profits and net losses between the parties with respect to CASGEVY only; and (c) exclusively license (subject to
our reserved rights to conduct certain activities) certain intellectual property rights to Vertex relating to the specified product
candidates and products (including CASGEVY) that may be researched, developed, manufactured and commercialized under such
agreement. We and Vertex amended the A&R Vertex JDCA in December 2023.
The A&R Vertex JDCA, as amended, includes, among other things, provisions relating to the following:
Governance; Activities. We and Vertex disbanded the previously established collaboration strategy team and all working groups
established by such team and established the following committees: (i) a joint oversight committee to provide high-level oversight and
(ii) a transition committee to provide for forum planning, discussing and sharing information regarding certain transition activities
until completion of such activities. Each of the new committees contain an equal number of representatives from each of CRISPR and
Vertex. The agreement provides that, subject to the terms and conditions of such agreement, Vertex has the right to conduct all
research, development, manufacturing and commercialization activities relating to the specified product candidates and products
(including CASGEVY) throughout the world subject to our reserved right to conduct certain activities. We will continue to participate
in certain aspects of such activities in an observer capacity unless and to the extent otherwise agreed to by the parties.
Financial Terms. In the second quarter of 2021, in connection with the closing of the transaction contemplated by the
amendment and restatement of the Vertex JDA, we received a $900 million up-front payment from Vertex. Additionally, in
connection with the FDA’s approval of CASGEVY on December 8, 2023 for the treatment of sickle cell disease in patients 12 years
and older with recurrent vaso-occlusive crises, we received a $200.0 million milestone payment from Vertex in the first quarter of
2024. The net profits and net losses, as applicable, incurred under the Amended A&R Vertex JDCA with respect to all product
candidates and products specified in such agreement, other than CASGEVY, shall be shared equally between us and Vertex. With
respect to CASGEVY only, the net profits and net losses, as applicable, incurred under the agreement through July 1, 2021 in
connection with the initial shared product (i.e., CASGEVY) were shared equally between us and Vertex, and beginning July 1, 2021,
the net profits and net losses, as applicable, incurred under the agreement are allocated 40% to CRISPR and 60% to Vertex. In
addition, the agreement allows us to defer a portion of our share of costs under the arrangement if spending on the CASGEVY
program exceeds specified amounts. In December 2023, pursuant to the amendment, the parties agreed to (a) allocate certain costs
arising from a license agreement with a third party, resulting in a current payment due to Vertex by CRISPR of $20 million upon an
event specified in such amendment; and (b) adjust, under certain specified circumstances, the timing of and portion of CRISPR’s share
of costs it is permitted to defer under the agreement. Any deferred amounts under the Amended A&R Vertex JDCA are payable to
Vertex only as an offset against future profitability of the CASGEVY program and the amounts payable are capped at a specified
maximum amount per year.
Termination. Either party can terminate the agreement upon the other party’s material breach, subject to specified notice and
cure provisions, or, in the case of Vertex, in the event that we become subject to specified bankruptcy, winding up or similar
circumstances. Either party may terminate the agreement in the event the other party commences or participates in any action or
proceeding challenging the validity or enforceability of any patent that is licensed to such challenging party pursuant to the agreement.
Vertex also has the right to terminate the agreement for convenience at any time after giving prior written notice.
If circumstances arise pursuant to which a party would have the right to terminate the agreement on account of an uncured
material breach, such party may elect to keep the agreement in effect and cause such breaching party to be treated as if it had exercised
its opt-out rights with respect to the products associated with such uncured material breach (described below) and the royalties payable
to the breaching party would be reduced by a specified percentage.
Opt-Out Rights. Either party may opt out of the development of a product candidate under the agreement after predetermined
points in the development of the product candidate, on a candidate-by-candidate basis. In the event of such opt-out, the party opting
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out will no longer share in the net profits and net losses associated with such product candidate and, instead, the opting-out party will
be entitled to high single to mid-teen percentage royalties on the net sales of such product, if commercialized.
2019 Collaboration Agreement
In June 2019, we and Vertex entered the 2019 Collaboration Agreement, pursuant to which we and Vertex agreed to collaborate
to develop and commercialize products for the treatment of DMD and DM1. We and Vertex amended the 2019 Collaboration
Agreement in April 2021.
The 2019 Collaboration Agreement includes, among other things, provisions relating to the following:
Governance. We and Vertex will form a joint advisory committee to provide high-level oversight and coordination of the
activities covered by the 2019 Collaboration Agreement.
Development and Commercialization. The 2019 Collaboration Agreement provides that Vertex will be responsible for
development and commercialization activities, subject to our option, exercisable during a specified exercise period, to co-develop and
co-commercialize products for the treatment of DM1.
Financial Terms. In connection with entering into the 2019 Collaboration Agreement, we received a $175.0 million up-front
payment from Vertex. We are eligible to receive milestone payments from Vertex of up to $775.0 million in the aggregate, depending
on the numbers and types of products that achieve pre-determined development and commercial milestones. We are also eligible to
receive royalties on the sales of products ranging from the low single digits to the low double digits.
Co-Development and Co-Commercialization Option. If we elect to co-develop and co-commercialize products for the treatment
of DM1, we would reimburse Vertex for fifty percent (50%) of the DM1 research and development costs incurred by Vertex and
would be responsible for fifty percent (50%) of such costs going forward. We would receive, in lieu of further milestone or royalty
payments associated with DM1 development and commercialization activities, fifty percent (50%) of all profits from sales of such
products and would be responsible for fifty percent (50%) of all losses.
Termination. Either party may terminate the 2019 Collaboration Agreement upon the other party’s material breach, subject to
specified notice and cure provisions. We may also terminate the 2019 Collaboration Agreement in the event Vertex commences or
participates in any action or proceeding challenging the validity or enforceability of any patent that is licensed to Vertex pursuant to
the 2019 Collaboration Agreement. Vertex may also terminate the 2019 Collaboration Agreement upon our bankruptcy or insolvency,
or for convenience at any time, after giving written notice.
If circumstances arise pursuant to which Vertex would have the right to terminate the 2019 Collaboration Agreement on account
of an uncured material breach, Vertex may elect to keep the 2019 Collaboration Agreement in effect and reduce by a specified
percentage the applicable royalties payable in respect of the product(s) that are the subject of the breach.
Non-Exclusive License Agreement
In March 2023, we and Vertex entered the Non-Ex License Agreement, pursuant to which we agreed to license to Vertex, on a
non-exclusive basis, certain of our gene editing intellectual property to exploit certain products for the diagnosis, treatment or
prevention of diabetes type 1, diabetes type 2 or insulin dependent/requiring diabetes throughout the world.
The Non-Ex License Agreement includes, among other things, provisions relating to the following:
Financial Terms. In connection with entering into the Non-Ex License, we received a $100.0 million up-front payment from
Vertex. We are eligible to receive milestone payments from Vertex of up to $230.0 million in the aggregate and inclusive of a $70.0
million research milestone achieved in the second quarter of 2023. The milestones are dependent on the achievement of pre-
determined research, development and commercial milestones for certain products utilizing the licensed intellectual property. We are
also eligible to receive tiered royalties on the sales of certain products in the low to mid-single digits. In the event of any termination
or expiration of the Non-Ex License Agreement, tiered royalties on the sales of certain products will continue in the low to mid-single
digits.
Termination. Either party may terminate the Non-Ex License Agreement upon the other party’s material breach, subject to
specified notice and cure provisions. We may also terminate the Non-Ex License Agreement in the event Vertex commences or
participates in any action or proceeding challenging the validity or enforceability of any patent that is licensed to Vertex pursuant to
the Non-Ex License Agreement. Vertex may also terminate the Non-Ex License Agreement upon our bankruptcy or insolvency, or for
convenience upon the earlier of the achievement of certain milestone events or a specified period of time, after giving written notice.
Bayer
In December 2019, we and Bayer entered into an option agreement, or the 2019 Option Agreement, in connection with the
termination of our joint venture with Bayer established to discover, develop and commercialize CRISPR/Cas9 gene editing
therapeutics to treat the genetic causes of certain diseases. Under the 2019 Option Agreement, Bayer obtained an option (exercisable
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during a specified exercise period defined by future events, but in no event longer than five years after the effective date of the 2019
Option Agreement) to co-develop and co-commercialize two products for the diagnosis, treatment, or prevention of certain
autoimmune disorders, eye disorders, or hemophilia A disorders. In the event Bayer elects to co-develop and co-commercialize a
product, the parties will negotiate and enter into a co-development and co-commercialization agreement, or a Co-Commercialization
Agreement, for such product, and Bayer would be responsible for 50% of the research and development costs incurred by us for such
product going forward. Bayer would receive 50% of all profits from sales of such product and would be responsible for 50% of all
losses.
If Bayer elects to exercise its option to co-develop and co-commercialize a product, Bayer will make a one-time $20.0 million
payment, or the Option Payment, to us that will become non-refundable once the parties execute a Co-Commercialization Agreement
with respect to such optioned product. The Option Payment is payable only once with respect to the first time Bayer exercises an
option under the 2019 Option Agreement.
In addition, following Bayer’s exercise of its option and/or the execution of a co-commercialization agreement for an optioned
product, for a period beginning on the effective date of such co-commercialization agreement and ending on the earlier of the three-
month anniversary of such effective date or during the 90-day negotiation process of such co-commercialization agreement, Bayer has
a right to negotiate an exclusive license to develop and commercialize such optioned product. If Bayer exercises such right, the parties
will enter into an exclusive license agreement for such optioned product on terms mutually agreeable to the parties. Further, the
Option Payment paid for such optioned product would become credited against payments due under such exclusive license or any
other exclusive license entered into in connection with the 2019 Option Agreement.
Either party may terminate the 2019 Option Agreement upon the other party’s material breach, subject to specified notice and
cure provisions. We may also terminate the 2019 Option Agreement in the event Bayer commences or participates in any action or
proceeding challenging the validity or enforceability of any CRISPR patent necessary or useful for the research, development,
manufacture or commercialization of a product that is the subject of the 2019 Option Agreement. Bayer may also terminate the 2019
Option Agreement upon our bankruptcy or insolvency, or for convenience at any time, after giving written notice.
The foregoing descriptions of our strategic agreements are qualified in their entirety by reference to the full text of such
agreements, copies of which are filed as exhibits to this Annual Report on Form 10-K.
Intellectual Property
We strive to protect and enhance the proprietary technology, inventions, know-how and improvements that we believe are
commercially important to our business by seeking, maintaining, and defending patent rights, whether developed internally or licensed
from third parties, that cover our gene editing technology, and existing and planned therapeutic programs. We also rely on trade secret
protection and confidentiality agreements to protect our proprietary technologies and know-how to protect aspects of our business that
are not amenable to, or that we do not consider appropriate for, patent protection, as well as continuing technological innovation and
seeking in-licensing opportunities to develop, strengthen and maintain our proprietary position in the field of gene editing. We
additionally rely on trademark protection, copyright protection and regulatory protection available via orphan drug designations, data
exclusivity, market exclusivity, and, if relevant, patent term extensions. Our success will depend significantly on our ability to obtain
and maintain patent and other proprietary protection for our technology, our ability to defend and enforce our intellectual property
rights and our ability to operate without infringing any valid and enforceable patents and proprietary rights of third parties. We also
protect the integrity and confidentiality of our data, know-how and trade secrets by maintaining physical security of our premises and
physical and electronic security of our information systems.
In-Licensed Intellectual Property from Dr. Charpentier
In April 2014, pursuant to an exclusive license with Dr. Charpentier, we licensed certain rights to a worldwide patent portfolio
which covers various aspects of our gene editing platform technology including, for example, compositions of matter (e.g.,
CRISPR/Cas9 systems) and methods of use, including the use of CRISPR/Cas9 systems for gene editing. We refer to this worldwide
patent portfolio as the “Patent Portfolio”. This Patent Portfolio to-date includes, for example, more than one hundred (100) granted or
allowed patents in the United States, United Kingdom, or the UK, Canada, Europe (including Germany, France, Italy), Japan, China,
India, Ukraine, New Zealand, Singapore, Australia, Mexico, Hong Kong, Israel, the Philippines, and South Africa and pending patent
applications in the United States, Europe, Canada, Mexico, Australia and other selected countries in Central America, South America,
Asia and Africa. This license is limited to therapeutic products such as pharmaceuticals and biologics and any associated companion
diagnostics, for the treatment or prevention of human diseases, disorders, or conditions. For further information about this license,
please see “Business— License Agreements—CRISPR License with Dr. Charpentier.”
In addition to Dr. Charpentier, the Patent Portfolio has named inventors who assigned their rights either to the Regents of the
University of California, or California, or the University of Vienna, or Vienna. California’s rights are subject to certain overriding
obligations to the sponsors of its research, including the Howard Hughes Medical Institute and the U.S. Government. Caribou
Biosciences, or Caribou, had reported that it had an exclusive license to patent rights from California and Vienna, subject to a retained
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right to allow non-profit entities to use the inventions for research and educational purposes. Intellia Therapeutics, Inc., or Intellia
Therapeutics, had reported that it had an exclusive license to such rights from Caribou in certain fields. We refer collectively to Dr.
Charpentier, California, and Vienna as the “CVC Group”. We are or have been subject to quasi-litigation, inter partes administrative
proceedings in the U.S. Patent and Trademark Office, or USPTO, the European Patent Office and patent offices in Australia, Japan,
China and India involving the Patent Portfolio. For further information regarding risks regarding these proceedings, please see “Risk
Factors—Risks Related to Intellectual Property.”
On December 15, 2016, we entered into a Consent to Assignments, Licensing and Common Ownership and Invention
Management Agreement, or the IMA, with California, Vienna, Dr. Charpentier, Intellia Therapeutics, Caribou, ERS Genomics Ltd., or
ERS, and our wholly-owned subsidiary TRACR Hematology Ltd., or TRACR. Under the IMA, California and Vienna retroactively
consent to Dr. Charpentier’s licensing of her rights to the CRISPR/Cas9 intellectual property, pursuant to our license with Dr.
Charpentier, to us, TRACR, and ERS, in the United States and globally. The IMA also provides retroactive consent of co-owners to
sublicenses granted by us, TRACR and other licensees, prospective consent to sublicenses they may grant in future, retroactive
approval of prior assignments by certain parties, and provides for, among other things, (i) good faith cooperation among the parties
regarding patent maintenance, defense and prosecution, (ii) cost-sharing arrangements, and (iii) notice of and coordination in the event
of third-party infringement of the subject patents and with respect to certain adverse claimants of the CRISPR/Cas9 intellectual
property. Unless earlier terminated by the parties, the IMA will continue in effect until the later of the last expiration date of the
patents underlying the gene editing technology, or the date on which the last underlying patent application is abandoned. For further
information regarding the effects of joint ownership in the United States and in other jurisdictions worldwide, please see “Risk
Factors—The Intellectual Property That Protects Our Core Gene Editing Technology Is Jointly Owned, And Our License Is From
Only One Of The Joint Owners, Materially Limiting Our Rights In The United States And In Other Jurisdictions.”
CRISPR-Owned Intellectual Property
In addition to the Patent Portfolio, we have a broad intellectual property estate that includes numerous patent families covering
key aspects of our CRISPR/Cas9 technologies and development programs which is intended to provide multiple layers of protection.
These patent families encompass filings covering our development programs (such as composition of matter, method of use,
manufacturing processes, dosing and formulations), the use and improvement modifications of CRISPR/Cas9 systems for gene editing
(such as improvements to component systems including nucleases and single or modified gRNAs), technologies for delivering
protein/nucleic acid complexes and RNA into cells (such as improved viral vector systems and self-inactivating systems), and
technology relevant to stem cell-based therapies.
Overall, our intellectual property estate includes over one hundred (100) active patent families and over sixty (60) granted or
allowed patents in the United States, China, Europe, and South Africa, and pending patent applications in the United States, Europe,
Australia, Canada, China, Japan, Mexico and other selected countries in Central America, South America, the Middle East, Asia and
Africa. The granted patents and any other patents that may ultimately issue from these patent families are expected to expire starting in
2033, not including any applicable patent term extensions.
Our U.S. trademark estate consists of twenty (20) pending applications, including, for example, for CRISPRX, CRISPR
THERAPEUTICS, CTX112, CTX131, CTX211, CTX310, CTX320 and CTX330, as well as seven U.S. registrations, including for
CRISPR THERAPEUTICS and the CRISPR THERAPEUTICS logo. Our international trademark estate consists of multiple pending
applications and registrations, including pending applications for CRISPR THERAPEUTICS standard character mark in Germany and
Switzerland, and registrations in Benelux, Italy, Spain, and UK. For the CRISPR THERAPEUTICS logo, we have pending
applications in Canada, Germany, Korea and Switzerland, and registrations in Benelux, Brazil, Hong Kong, Italy, Japan, Mexico,
Singapore, South Africa, Spain, and the UK. We have registrations for CTX112 in the EU, Switzerland, and the UK. We have
registrations for CTX131 in the EU, Switzerland, and the UK. We have a registration for CTX310 in Switzerland. We have pending
applications for CTX320 in Australia and New Zealand, and a registration for CTX320 in Switzerland. We have a registration for
CTX330 in Switzerland.
Patent Assignment Agreement
In November 2014, we entered into a patent assignment agreement with Dr. Charpentier, Dr. Ines Fonfara and Vienna, or the
Patent Assignment Agreement. Under the Patent Assignment Agreement, Dr. Charpentier, Dr. Fonfara and Vienna assigned to us all
rights to a family of patent applications relating to certain compositions of matter, including additional CRISPR/TRACR/Cas9
complexes, and methods of use, including their use in targeting or cutting DNA.
As consideration for the patent rights assigned to us, we agreed to pay an upfront payment, milestone payments beginning with
the filing of a U.S. Investigational New Drug application or its equivalent in another country, a minimum annual royalty, a low single-
digit royalty on net sales of products whose manufacture, use, sale, or importation is covered by the assigned patent rights, and a low
single-digit percentage of licensing revenues.
We are obligated to use commercially reasonable efforts to obtain regulatory approval to market a product whose manufacture,
use, sale, or importation is covered by the assigned patent rights.
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License Agreements
CRISPR License With Dr. Charpentier
In April 2014, we entered into a license agreement, or the Charpentier License Agreement, with Dr. Charpentier, one of our co-
founders, pursuant to which we received an exclusive license under Dr. Charpentier’s joint ownership interest in the Patent Portfolio,
to research, develop and commercialize therapeutic products such as pharmaceuticals or biological preparations, and any associated
companion diagnostics, for the treatment or prevention of human diseases, disorders, or conditions, other than hemoglobinopathies,
which we refer to as the CRISPR Field. The license is exclusive, even as to Dr. Charpentier, except that she retains a non-transferable
right to use the technology for her own research purposes and in research collaborations with academic and non-profit partners. The
exclusive license is granted only under Dr. Charpentier’s interest in the patent applications and the exclusivity is not granted under any
other joint owner’s interest. Additionally, the Charpentier License Agreement granted us an exclusive, worldwide, royalty-free
sublicense, including the right to sublicense, to research, develop, produce, commercialize and sell therapeutic products relating to the
CRISPR Field which incorporate any intellectual property that TRACR develops under its license with Dr. Charpentier. In turn, we
granted to Dr. Charpentier an exclusive license with the obligation to sublicense to TRACR any intellectual property we develop
under the license with Dr. Charpentier for treatment and prevention of hemoglobinopathies in humans, including, without limitation,
sickle cell disease and thalassemia.
Under the terms of the Charpentier License Agreement, as consideration for the license, Dr. Charpentier received a technology
transfer fee, an immaterial annual maintenance fee, immaterial milestone payments that will be due after the initiation of clinical trials,
a low single digit percentage royalty on net sales of licensed products, and a low single digit percentage royalties of sublicensing
revenue. We are obligated to use commercially reasonable efforts to obtain regulatory approval to market a licensed therapeutic
product. We must use commercially reasonable efforts to file a U.S. Investigational New Drug application (or its equivalent in a major
market country) for a therapeutic product in the CRISPR field by April 2024.
Unless terminated earlier, the term of the Charpentier License Agreement will expire on a country-by-country basis, upon the
expiration of the last to expire valid claim of the Patent Portfolio in such country. We have the right to terminate the agreement at will
upon 60 days’ written notice to Dr. Charpentier. We and Dr. Charpentier may terminate the agreement upon 90 days’ notice in the
event of a material breach by the other party, which is not cured during the 90-day notice period. Dr. Charpentier may terminate the
license agreement immediately if we challenge the enforceability, validity, or scope of any Patent Portfolio.
TRACR License With Dr. Charpentier
In April 2014, concurrently with our license agreement with Dr. Charpentier, TRACR entered into a license agreement, or the
TRACR License Agreement, with Dr. Charpentier, a minority shareholder of TRACR, under the Patent Portfolio. Pursuant to the
TRACR License Agreement, TRACR was granted an exclusive, worldwide, royalty-bearing license, including the right to sublicense,
to research, develop, produce, commercialize and sell therapeutic and diagnostic products for the treatment and prevention of
hemoglobinopathies in humans, including sickle cell disease and thalassemia, or the TRACR Field. TRACR also received a non-
exclusive, worldwide, royalty-free license, including the right to sublicense, to carry out internal pharmaceutical research for
therapeutic products outside of the TRACR Field and an exclusive, worldwide, royalty-free sublicense, including the right to
sublicense, to research, develop, produce, commercialize and sell therapeutic products relating to the TRACR Field which incorporate
any intellectual property that CRISPR develops under its license with Dr. Charpentier. In turn, TRACR granted to Dr. Charpentier an
exclusive license to sublicense to CRISPR any intellectual property that TRACR develops under the license with Dr. Charpentier for
use in the CRISPR Field.
TRACR is obligated to use commercially reasonable efforts to research, develop, and commercialize at least one therapeutic
product for the prevention or treatment of human disease under the license agreement. TRACR must use commercially reasonable
efforts to file a U.S. Investigational New Drug application (or its equivalent in a major market country) for a therapeutic product in the
TRACR field by April 2024. TRACR is solely responsible for all clinical, regulatory and development costs.
Under the TRACR License Agreement, Dr. Charpentier is entitled to receive immaterial clinical and regulatory milestone
payments per product that TRACR commercializes. TRACR is also required to pay Dr. Charpentier low single digit percentage
royalties on the net sales of any approved therapeutic or diagnostic products, made by it, its affiliates, or its sublicensees and low
single-digit percentage royalties on sublicensing revenue.
Unless terminated earlier, the term of the license agreement will expire on a country-by-country basis, upon the expiration of the
last to expire valid claim of the Patent Portfolio in such country. TRACR has the right to terminate the agreement at will upon 60
days’ written notice to Dr. Charpentier. TRACR and Dr. Charpentier may terminate the agreement upon 90 days’ notice in the event
of a material breach by the other party, which is not cured during the 90-day notice period. Dr. Charpentier may terminate the license
agreement immediately if TRACR challenges the enforceability, validity, or scope of any Patent Right.
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Enabling Technologies
We have entered into a number of additional collaborations and license agreements to support and complement our ex vivo and
in vivo programs, including agreements related to: technologies to deliver CRISPR/Cas9 ex vivo and in vivo; additions to our
hematopoietic stem cell and in vivo programs, including two grants to advance gene editing therapies for HIV; and enhancements to
our immuno-oncology and regenerative medicine cell therapy programs and platform. For example, we have entered into agreements
with Nkarta to develop and commercialize products leveraging donor-derived, gene-edited CAR-NK cells; Capsida Biotherapeutics,
Inc. to develop in vivo gene editing therapies delivered with engineered AAV vectors; Roswell Park Comprehensive Cancer Center to
advance a gene-edited autologous CAR T programs against new target; MaxCyte, Inc. on ex vivo delivery for our hemoglobinopathy
and immuno-oncology programs; CureVac AG on optimized mRNA constructs and manufacturing for certain in vivo programs; and
KSQ Therapeutics Incorporated on intellectual property for our allogeneic immuno-oncology programs.
Manufacturing
The manufacturing processes for cell and genetic therapies are complex and require customized systems, equipment, facilities
and expertise for each program and therapy. Due to the critical importance of high-quality manufacturing and control of production
timing and know-how, we are establishing internal manufacturing capabilities and have established our own cell therapy
manufacturing facility to support our multifaceted strategy to develop treatments and therapies for people suffering from serious
diseases through transformative gene-based medicines.
We have an approximately 50,000 square foot manufacturing facility in Framingham, Massachusetts intended for clinical and
commercial production of our product candidates and certain components thereof for certain of our programs. The facility was
designed with flexibility and scalability in mind in order to accommodate manufacturing and supply for our product pipeline. We
believe it has the capacity to support, in whole or in part, the manufacture and supply of product for certain of our current clinical
programs with the capability to scale-up to support potential commercial supply. In addition, we believe our facility has the capacity
and necessary technology to support additional programs we may advance in the future (including some of our in vivo programs as
well as our T1D program) as well as the production of various delivery modalities, such as mRNA, we may utilize in the future. Our
operations at this facility are compliant with current Good Manufacturing Practice, or cGMP, and in 2023 we began manufacturing
CTX112 and CTX131 at this facility for our clinical trials of these product candidates.
In addition to utilizing our internal manufacturing facility, we expect we will continue to rely on external manufacturing
capabilities realized via contract manufacturing organization relationships in the United States and abroad. We have entered into
certain manufacturing and supply arrangements with third-party suppliers to support production of our product candidates and their
components. We plan to continue to rely on qualified third-party organizations to produce or process bulk compounds, formulated
compounds, viral vectors or engineered cells for IND-supporting activities and early stage clinical trials. We expect that commercial
quantities of any compound, vector, or engineered cells that we may seek to develop will be manufactured in facilities and by
processes that comply with FDA and other regulations. At the appropriate time in the product development process, we will determine
whether to utilize our own manufacturing facility or continue to rely on third parties to manufacture commercial quantities of any
products that we may successfully develop.
We continue to expect to make significant investment in our manufacturing capabilities in Framingham, Massachusetts and in
partnerships with third-party organizations for our gene editing programs in order to continue to advance and, in the future,
commercialize these programs.
In addition, as product candidates advance through our pipeline, our commercial plans may change. In particular, some of our
research programs target potentially larger indications. Data, the size of the development programs, the size of the target market, the
size of a commercial infrastructure and manufacturing needs may all influence our strategies in the United States, Europe and the rest
of the world. Outside of the United States and Europe, where appropriate, we may elect in the future to utilize strategic partners,
distributors or contract sales forces to assist in the commercialization of our products. In certain instances, we may consider building
our own commercial infrastructure.
Competition
The biotechnology and pharmaceutical industries, including in the gene editing, gene therapy and cell therapy fields, are
characterized by rapidly advancing technologies, intense competition and a strong emphasis on intellectual property and proprietary
products. While we believe that our technology, development experience and scientific knowledge provide us with competitive
advantages, we currently face, and will continue to face, substantial competition from many different sources, including large
pharmaceutical, specialty pharmaceutical and biotechnology companies; academic institutions and governmental agencies; and public
and private research institutions, some or all of which may have greater access to capital or resources than we do. For any products
that we may ultimately commercialize, not only will we compete with any existing therapies and those therapies currently in
development, but we will also have to compete with new therapies that may become available in the future.
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We compete in the segments of the pharmaceutical, biotechnology and other related markets that utilize technologies
encompassing genomic medicines to create therapies, including gene editing, gene therapy and cell therapy. In addition, we compete
with companies working to develop therapies in areas related to our specific research and development programs.
Our platform and product focus is on the development of therapies using CRISPR/Cas9 gene editing technology. We are aware
of several companies focused on developing therapies in various indications using CRISPR/Cas9 gene editing technology, including
Intellia Therapeutics and Editas Medicine. In addition, several academic groups have developed new gene editing technologies based
on CRISPR/Cas9, such as base editing and prime editing, that may have utility in therapeutic development. Companies seeking to
develop therapies based on these technologies include Beam Therapeutics and Prime Medicine.
There are also companies developing therapies using additional gene editing technologies, such as TALENs, meganucleases and
ZFNs. These companies include 2seventy bio, Allogene Therapeutics, Cellectis, Precision BioSciences and Sangamo Therapeutics.
We are also aware of companies developing therapies in various areas related to our specific research and development
programs. In hemoglobinopathies, these companies include Beam Therapeutics, bluebird bio, Editas Medicine, Merck, Novartis
Pharmaceuticals and Pfizer. In immuno-oncology, these companies include 2seventy bio, Adicet Bio, Allogene Therapeutics, Bristol
Myers Squibb, Caribou Biosciences, Cellectis, Century Therapeutics, Fate Therapeutics, Gilead Sciences, Legend Biotech, Novartis
Pharmaceuticals and Poseida Therapeutics. In regenerative medicine, these companies include BlueRock Therapeutics (acquired by
Bayer in 2019), Sana Biotechnology and Semma Therapeutics (acquired by Vertex in 2019). In in vivo, these companies include
Alnylam Pharmaceuticals, Arrowhead Pharmaceuticals, BioMarin Pharmaceutical, Intellia Therapeutics, Ionis Pharmaceuticals,
Regeneron Pharmaceuticals and Verve Therapeutics. Gene editing is a highly active field of research and new technologies, related or
unrelated to CRISPR, may be discovered and create new competition. These new technologies could have advantages over
CRISPR/Cas9 gene editing in some applications and there can be no certainty that other gene editing technologies will not be
considered better or more attractive than our technology for the development of products. For example, Cas9 may be determined to be
less attractive than other CRISPR proteins, such as Cas12a or novel Cas enzymes that have yet to be discovered, or other CRISPR-
associated nuclease variants that can edit human DNA, such as base editors and prime editors.
Gene editing is a highly active field of research and new technologies, related or unrelated to CRISPR, may be discovered and
create new competition. These new technologies could have advantages over CRISPR/Cas9 gene editing in some applications and
there can be no certainty that other gene editing technologies will not be considered better or more attractive than our technology for
the development of products. For example, Cas9 may be determined to be less attractive than other CRISPR proteins, such as Cas12a
or novel Cas enzymes that have yet to be discovered, or other CRISPR-associated nuclease variants that can edit human DNA, such as
base editors and prime editors.
In addition to competition from other gene editing therapies or gene or cell therapies, any product we may develop may also
face competition from other types of therapies, such as small molecule, antibody or protein therapies. In addition, new scientific
discoveries may cause CRISPR/Cas9 technology, or gene editing as a whole, to be considered an inferior form of therapy.
In addition, many of our current or potential competitors, either alone or with their collaboration partners, have significantly
greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials,
obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical,
biotechnology, and gene and cell therapy industries may result in even more resources being concentrated among a smaller number of
our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative
arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified
scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in
acquiring technologies complementary to, or necessary for, our programs. 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, have broader acceptance and higher rates of reimbursement by third-party payors 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. Additionally, technologies developed by our competitors may render our potential product candidates uneconomical or
obsolete, and we may not be successful in marketing any product candidates we may develop against competitors. The key
competitive factors affecting the success of all of our programs are likely to be their efficacy, safety, convenience, and availability of
reimbursement.
If our current programs are approved for the indications for which we are currently planning clinical trials, they may compete
with other products currently under development, including gene editing, gene therapy, and cell therapy products. Competition with
other related products currently under development may include competition for clinical trial sites, patient recruitment, and product
sales. In addition, due to the intense research and development taking place in the gene editing field, including by us and our
competitors, the intellectual property landscape is in flux and highly competitive. There may be significant intellectual property
related litigation and proceedings relating to our owned and in-licensed, and other third-party, intellectual property and proprietary
rights in the future. For example, see our discussion of the ‘048 interference, the ‘115 interference and European opposition
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proceedings in “Risk Factors—Risks Related to Intellectual Property—Third-party Claims Of Intellectual Property Infringement
Against Us, Our Licensors Or Our Collaborators May Prevent Or Delay Our Product Discovery and Development Efforts.”
Moreover, 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 and our patents may not be sufficient to prevent our
competitors from commercializing competing 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.
Government Regulation
Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions,
including the EU, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval,
packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting,
and import and export of pharmaceutical products, including biological products. Some jurisdictions outside of the United States also
regulate the pricing of such products. The processes for obtaining marketing approvals in the United States and in other countries and
jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the
expenditure of substantial time and financial resources.
Licensure and Regulation of Biologics in the United States
In the United States, our product candidates are regulated as biological products, or biologics, under the Public Health Service
Act, or PHSA, and the Federal Food, Drug, and Cosmetic Act, or FDCA, and their implementing regulations. The failure to comply
with the applicable U.S. requirements at any time during the product development process, including nonclinical testing, clinical
testing, the approval process or post-approval process, may subject an applicant to delays in the conduct of a study, regulatory review
and approval, and/or administrative or judicial sanctions. These sanctions may include, but are not limited to, the FDA’s refusal to
allow an applicant to proceed with clinical testing, refusal to approve pending applications, license suspension or revocation,
withdrawal of an approval, untitled or warning letters, adverse publicity, product recalls, product seizures, total or partial suspension
of production or distribution, injunctions, fines, and civil or criminal investigations and penalties brought by the FDA or the
Department of Justice or other governmental entities.
An applicant seeking approval to market and distribute a new biologic in the United States generally must satisfactorily
complete each of the following steps:
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preclinical laboratory tests, animal studies and formulation studies all performed in accordance with the FDA’s Good
Laboratory Practice, or GLP, regulations;
submission to the FDA of an Investigational New Drug, or IND, application for human clinical testing, which must
become effective before human clinical trials may begin;
approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial
may be initiated, or by a central IRB if appropriate;
performance of adequate and well-controlled human clinical trials to establish the safety, potency, and purity of the
product candidate for each proposed indication, in accordance with the FDA’s Good Clinical Practice, or GCP,
regulations;
preparation and submission to the FDA of a Biologics License Application, or BLA, for a biologic product requesting
marketing for one or more proposed indications, including submission of detailed information on the manufacture and
composition of the product and proposed labeling;
review of the product by an FDA advisory committee, where appropriate or if applicable;
satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities, including those of third
parties, at which the product, or components thereof, are produced to assess compliance with cGMP requirements and to
assure that the facilities, methods, and controls are adequate to preserve the product’s identity, strength, quality, and
purity, and, if applicable, the FDA’s current good tissue practice, or CGTP, for the use of human cellular and tissue
products;
satisfactory completion of any FDA audits of the nonclinical study and clinical trial sites to assure compliance with GLPs
and GCPs, respectively, and the integrity of clinical data in support of the BLA;
payment of user fees and securing FDA approval of the BLA; and
compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and
Mitigation Strategy, or REMS, adverse event reporting, and compliance with any post-approval studies required by the
FDA.
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Preclinical Studies and Investigational New Drug Application
Before testing any biologic product candidate in humans, including a gene therapy product candidate, the product candidate
must undergo preclinical testing. Preclinical tests include laboratory evaluations of product chemistry, formulation and stability, as
well as studies to evaluate the potential for efficacy and toxicity in animals. The conduct of the preclinical tests and formulation of the
compounds for testing must comply with federal regulations and requirements. The results of the preclinical tests, together with
manufacturing information and analytical data, are submitted to the FDA as part of an IND application. The IND automatically
becomes effective 30 days after receipt by the FDA, unless before that time the FDA imposes a clinical hold based on concerns or
questions about the product or conduct of the proposed clinical trial, including concerns that human research subjects would be
exposed to unreasonable and significant health risks. In that case, the IND sponsor and the FDA must resolve any outstanding FDA
concerns before the clinical trials can begin.
As a result, submission of the IND may result in the FDA not allowing the trials to commence or not allowing the trial to
commence on the terms originally specified by the sponsor in the IND. If the FDA raises concerns or questions either during this
initial 30-day period, or at any time during the conduct of the IND study, including safety concerns or concerns due to non-
compliance, it may impose a partial or complete clinical hold. This order issued by the FDA would either delay a proposed clinical
study or cause suspension of an ongoing study, or in the case of a partial clinical hold limit a study, until all outstanding concerns have
been adequately addressed and the FDA has notified the company that investigations may proceed or recommence but only under
terms authorized by the FDA. This could cause significant delays or difficulties in completing planned clinical studies in a timely
manner.
Human Clinical Trials in Support of a BLA
Clinical trials involve the administration of the investigational product candidate to healthy volunteers or patients with the
disease to be treated under the supervision of a qualified principal investigator in accordance with GCP requirements. Clinical trials
are conducted under study protocols detailing, among other things, the objectives of the study, inclusion and exclusion criteria, the
parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. A protocol for each clinical trial and
subsequent protocol amendments must be submitted to the FDA as part of the IND.
A sponsor who wishes to conduct a clinical trial outside the United States may, but need not, obtain FDA authorization to
conduct the clinical trial under an IND. If a non-U.S. clinical trial is not conducted under an IND, the sponsor may submit data from a
well-designed and well-conducted clinical trial to the FDA in support of the BLA so long as the clinical trial is conducted in
compliance with GCP and the FDA is able to validate the data from the study through an onsite inspection if the FDA deems it
necessary.
Further, each clinical trial must be reviewed and approved by an IRB either centrally or individually at each institution at which
the clinical trial will be conducted. The IRB will consider, among other things, clinical trial design, subject informed consent, ethical
factors, and the safety of human subjects. An IRB must operate in compliance with FDA regulations. The FDA or the clinical trial
sponsor may suspend or terminate a clinical trial at any time for various reasons, including a finding that the clinical trial is not being
conducted in accordance with FDA requirements or the subjects or patients are being exposed to an unacceptable health risk.
Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in
accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. Clinical testing
also must satisfy extensive GCP rules and the requirements for informed consent. Additionally, some clinical trials are overseen by an
independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee.
This group may recommend continuation of the study as planned, changes in study conduct, or cessation of the study at designated
check points based on access to certain data from the study.
In addition to the submission of an IND to the FDA before initiation of a clinical trial in the United States, certain human
clinical trials involving recombinant or synthetic nucleic acid molecules are subject to oversight of institutional biosafety committees,
or IBCs, as set forth in the NIH Guidelines for Research Involving Recombinant or Synthetic Nucleic Acid Molecules, or NIH
Guidelines. Under the NIH Guidelines, recombinant and synthetic nucleic acids are defined as: (i) molecules that are constructed by
joining nucleic acid molecules and that can replicate in a living cell (i.e., recombinant nucleic acids); (ii) nucleic acid molecules that
are chemically or by other means synthesized or amplified, including those that are chemically or otherwise modified but can base pair
with naturally occurring nucleic acid molecules (i.e., synthetic nucleic acids); or (iii) molecules that result from the replication of those
described in (i) or (ii). Specifically, under the NIH Guidelines, supervision of human gene transfer trials includes evaluation and
assessment by an IBC, a local institutional committee that reviews and oversees research utilizing recombinant or synthetic nucleic
acid molecules at that institution. The IBC assesses the safety of the research and identifies any potential risk to public health or the
environment, and such review may result in some delay before initiation of a clinical trial. While the NIH Guidelines are not
mandatory unless the research in question is being conducted at or sponsored by institutions receiving NIH funding of recombinant or
synthetic nucleic acid molecule research, many companies and other institutions not otherwise subject to the NIH Guidelines
voluntarily follow them.
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Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined. Additional studies
may be required after approval.
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Phase 1 clinical trials are initially conducted in a limited population to test the product candidate for safety, including
adverse effects, dose tolerance, absorption, metabolism, distribution, excretion, and pharmacodynamics in healthy humans
or, on occasion, in patients, such as cancer patients.
Phase 2 clinical trials are generally conducted in a limited patient population to identify possible adverse effects and
safety risks, evaluate the efficacy of the product candidate for specific targeted indications and determine dose tolerance
and optimal dosage. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to
beginning larger and costlier Phase 3 clinical trials.
Phase 3 clinical trials are undertaken within an expanded patient population to further evaluate dosage and gather the
additional information about effectiveness and safety that is needed to evaluate the overall benefit-risk relationship of the
drug and to provide an adequate basis for physician labeling.
Progress reports detailing the results, if known, of the clinical trials must be submitted at least annually to the FDA. Written IND
safety reports must be submitted to the FDA and the investigators within 15 calendar days of receipt by the sponsor or its agents after
determining that the information qualifies for such expedited reporting. IND safety reports are required for serious and unexpected
suspected adverse events, findings from other studies or animal or in vitro testing that suggest a significant risk to humans exposed to
the drug, and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or
investigator brochure. Additionally, a sponsor must notify FDA within 7 calendar days after receiving information concerning any
unexpected fatal or life-threatening suspected adverse reaction.
In some cases, the FDA may approve a BLA for a product candidate but require the sponsor to conduct additional clinical trials
to further assess the product candidate’s safety and effectiveness after approval. Such post-approval trials are typically referred to as
Phase 4 clinical trials. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic
indication and to document a clinical benefit in the case of biologics approved under accelerated approval regulations. Failure to
exhibit due diligence with regard to conducting Phase 4 clinical trials could result in withdrawal of approval for products.
Guidance Governing Gene Therapy Products
The FDA has defined a gene therapy product as one that mediates its effects by transcription and/or translation of transferred
genetic material or by specifically altering host (human) genetic sequences. Examples of gene therapy products include nucleic acids
(e.g., plasmids, in vitro transcribed ribonucleic acid), genetically modified microorganisms (e.g., viruses, bacteria, fungi), engineered
site specific nucleases used for human genome editing and ex vivo genetically modified human cells. The products may be used to
modify cells in vivo or transferred to cells ex vivo prior to administration to the recipient. Within the FDA, the Center for Biologics
Evaluation and Research, or CBER, regulates gene therapy products. Within the CBER, the review of gene therapy and related
products is consolidated in the Office of Therapeutic Products, and the FDA has established the Cellular, Tissue and Gene Therapies
Advisory Committee to advise CBER on its reviews. The FDA and the NIH have published guidance documents with respect to the
development and submission of gene therapy protocols.
Although the FDA has indicated that its guidance documents regarding gene therapies are not legally binding, we believe that
our compliance with them is likely necessary to gain approval for any product candidate we may develop. The guidance documents
provide additional factors that the FDA will consider at each of the above stages of development and relate to, among other things, the
proper preclinical assessment of gene therapies; the chemistry, manufacturing, and control information that should be included in an
IND application; the proper design of tests to measure product potency in support of an IND or BLA application; and measures to
observe delayed adverse effects in subjects who have been exposed to investigational gene therapies when the risk of such effects is
high. Further, the FDA usually recommends that sponsors observe subjects for potential gene therapy-related delayed adverse events.
Depending on the product type, long term follow up can be up to 15 years or as little as five years.
Compliance with cGMP and CGTP Requirements
Before approving a BLA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA
will not approve an application unless it determines that the manufacturing processes and facilities are in full compliance with cGMP
requirements and adequate to assure consistent production of the product within required specifications. The PHSA emphasizes the
importance of manufacturing control for products like biologics whose attributes cannot be precisely defined.
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For a gene therapy product, the FDA also will not approve the product if the manufacturer is not in compliance with CGTP.
These requirements are found in 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 CGTP 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.
Manufacturers and others involved in the manufacture and distribution of products, and those supplying products, ingredients,
and components of them, must also register their establishments with the FDA and certain state agencies for products intended for the
U.S. market, and with analogous health regulatory agencies for products intended for other markets globally. Both U.S. and non-U.S.
manufacturing establishments must register and provide additional information to the FDA and/or other health regulatory agencies
upon their initial participation in the manufacturing process. Any product manufactured by or imported from a facility that has not
registered, whether U.S. or non-U.S., is deemed misbranded under the FDCA, and could be affected by similar as well as additional
compliance issues in other jurisdictions. Establishments may be subject to periodic unannounced inspections by government
authorities to ensure compliance with cGMPs and other laws. Manufacturers may also have to provide, on request, electronic or
physical records regarding their establishments. Delaying, denying, limiting, or refusing inspection by the FDA or other governing
health regulatory agency may lead to a product being deemed to be adulterated.
Review and Approval of a BLA
The results of product candidate development, preclinical testing, and clinical trials, including negative or ambiguous results as
well as positive findings, are submitted to the FDA as part of a BLA requesting a license to market the product. The BLA must contain
extensive manufacturing information and detailed information on the composition of the product and proposed labeling as well as
payment of a user fee.
The FDA has 60 days after submission of the application to conduct an initial review to determine whether it is sufficient to
accept for filing based on the agency’s threshold determination that it is sufficiently complete to permit substantive review. Once the
submission has been accepted for filing, the FDA begins an in-depth review of the application. Under the goals and policies agreed to
by the FDA under the Prescription Drug User Fee Act, or the PDUFA, the FDA has ten months in which to complete its initial review
of a standard application and respond to the applicant, and six months for a priority review of the application. The FDA does not
always meet its PDUFA goal dates for standard and priority BLAs. The review process may often be significantly extended by FDA
requests for additional information or clarification. The review process and the PDUFA goal date may be extended by three months if
the FDA requests or if the applicant otherwise provides through the submission of a major amendment additional information or
clarification regarding information already provided in the submission within the last three months before the PDUFA goal date.
Under the PHSA, the FDA may approve a BLA if it determines that the product is safe, pure, and potent and the facility where
the product will be manufactured meets standards designed to ensure that it continues to be safe, pure, and potent.
On the basis of the FDA’s evaluation of the application and accompanying information, including the results of the inspection of
the manufacturing facilities and any FDA audits of nonclinical study and clinical trial sites to assure compliance with GLPs and GCPs,
respectively, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing
of the product with specific prescribing information for specific indications. If the application is not approved, the FDA will issue a
complete response letter, which will contain the conditions that must be met in order to secure final approval of the application, and
when possible will outline recommended actions the sponsor might take to obtain approval of the application. Sponsors that receive a
complete response letter may submit to the FDA information that represents a complete response to the issues identified by the FDA.
Such resubmissions are classified under PDUFA as either Class 1 or Class 2. The classification of a resubmission is based on the
information submitted by an applicant in response to an action letter. Under the goals and policies agreed to by the FDA under
PDUFA, the FDA has two months to review a Class 1 resubmission and six months to review a Class 2 resubmission. The FDA will
not approve an application until issues identified in the complete response letter have been addressed. Alternatively, sponsors that
receive a complete response letter may either withdraw the application or request a hearing.
The FDA may also refer the application to an advisory committee for review, evaluation, and recommendation as to whether the
application should be approved. In particular, the FDA may refer applications for novel biologic products or biologic products that
present difficult questions of safety or efficacy to an advisory committee. Typically, an advisory committee is a panel of independent
experts, including clinicians and other scientific experts, that reviews, evaluates, and provides 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.
If the FDA approves a new product, it may limit the approved indications for use of the product. It may also require that
contraindications, warnings or precautions be included in the product labeling. In addition, the FDA may call for post-approval
studies, including Phase 4 clinical trials, to further assess the product’s safety after approval. The agency may also require testing and
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surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or
other risk management mechanisms, including REMS, to help ensure that the benefits of the product outweigh the potential risks.
REMS can include medication guides, communication plans for healthcare professionals, and elements to assure safe use, or ETASU.
ETASU can include, but are not limited to, specific or special training or certification for prescribing or dispensing, dispensing only
under certain circumstances, special monitoring, and the use of patent registries. The FDA may prevent or limit further marketing of a
product based on the results of post-market studies or surveillance programs. After approval, many types of changes to the approved
product, such as adding new indications, certain manufacturing changes and additional labeling claims, are subject to further testing
requirements and FDA review and approval.
Expedited Programs
The FDA is authorized to designate certain products for expedited review if they are intended to address an unmet medical need
in the treatment of a serious or life-threatening disease or condition. These programs are referred to as fast track designation,
breakthrough therapy designation, priority review, and regenerative medicine advanced therapy designation.
Specifically, the FDA may designate a product for fast track review if it is intended, whether alone or in combination with one
or more other products, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to
address unmet medical needs for such a disease or condition. For fast track products, sponsors may have greater interactions with the
FDA and the FDA may initiate review of sections of a fast track product’s application before the application is complete. This rolling
review may be available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a fast track
product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining
information and the sponsor must pay applicable user fees. However, the FDA’s time period goal for reviewing a fast track application
does not begin until the last section of the application is submitted. In addition, the fast track designation may be withdrawn by the
FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process, or if the designated
drug development program is no longer being pursued.
Second, FDA has a regulatory scheme allowing for expedited review of products designated as “breakthrough therapies.” A
product may be designated as a breakthrough therapy if it is intended, either alone or in combination with one or more other products,
to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate
substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects
observed early in clinical development. The FDA may take certain actions with respect to breakthrough therapies, including holding
meetings with the sponsor throughout the development process; providing timely advice to the product sponsor regarding development
and approval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and
taking other steps to design the clinical trials in an efficient manner.
Third, the FDA may designate a product for priority review if it is a product that treats a serious condition and, if approved,
would provide a significant improvement in safety or effectiveness. The FDA determines, on a case-by-case basis, whether the
proposed product represents a significant improvement when compared with other available therapies. Significant improvement may
be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-
limiting adverse reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, and
evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to direct overall attention and resources
to the evaluation of such applications, and to shorten the FDA’s goal for taking action on a marketing application from ten months to
six months.
Finally, the FDA can accelerate review and approval of products designated as regenerative medicine advanced therapies. A
product is eligible for this designation if it is a regenerative medicine therapy that is intended to treat, modify, reverse or cure a serious
or life-threatening disease or condition and preliminary clinical evidence indicates that the product has the potential to address unmet
medical needs for such disease or condition. The benefits of a regenerative medicine advanced therapy designation include early
interactions with FDA to expedite development and review, benefits available to breakthrough therapies, potential eligibility for
priority review and accelerated approval based on surrogate or intermediate endpoints.
In addition, under the Food and Drug Omnibus Reform Act of 2022, or FDORA, a platform technology incorporated within or
utilized by a drug or biological product is eligible for designation as a designated platform technology if (1) the platform technology is
incorporated in, or utilized by, a drug approved under a BLA; (2) preliminary evidence submitted by the sponsor of the approved or
licensed drug, or a sponsor that has been granted a right of reference to data submitted in the application for such drug, demonstrates
that the platform technology has the potential to be incorporated in, or utilized by, more than one drug without an adverse effect on
quality, manufacturing, or safety; and (3) data or information submitted by the applicable person indicates that incorporation or
utilization of the platform technology has a reasonable likelihood to bring significant efficiencies to the drug development or
manufacturing process and to the review process. A sponsor may request the FDA to designate a platform technology as a designated
platform technology concurrently with, or at any time after, submission of an IND application for a drug that incorporates or utilizes
the platform technology that is the subject of the request. If so designated, the FDA may expedite the development and review of any
subsequent original BLA for a drug that uses or incorporates the platform technology. Designated platform technology status does not
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ensure that a drug will be developed more quickly or receive FDA approval. In addition, the FDA may revoke a designation if the
FDA determines that a designated platform technology no longer meets the criteria for such designation.
Accelerated Approval Pathway
The FDA may grant accelerated approval to a product for a serious or life-threatening condition that provides meaningful
therapeutic advantage to patients over existing treatments based upon a determination that the product has an effect on a surrogate
endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval for such a condition when
the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or
mortality, or IMM, and that is reasonably likely to predict an effect on IMM or other clinical benefit, taking into account the severity,
rarity, or prevalence of the condition and the availability or lack of alternative treatments. Products granted accelerated approval must
meet the same statutory standards for safety and effectiveness as those granted traditional approval.
For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic
image, physical sign, or other measure that is thought to predict clinical benefit but is not itself a measure of clinical benefit. Surrogate
endpoints can often be measured more easily or more rapidly than clinical endpoints. An intermediate clinical endpoint is a
measurement of a therapeutic effect that is considered reasonably likely to predict the clinical benefit of a product, such as an effect on
IMM. The FDA has limited experience with accelerated approvals based on intermediate clinical endpoints but has indicated that such
endpoints generally could support accelerated approval where a study demonstrates a relatively short-term clinical benefit in a chronic
disease setting in which assessing durability of the clinical benefit is essential for traditional approval, but the short-term benefit is
considered reasonably likely to predict long-term benefit.
The accelerated approval pathway is most often used in settings in which the course of a disease is long and an extended period
of time is required to measure the intended clinical benefit of a product, even if the effect on the surrogate or intermediate clinical
endpoint occurs rapidly. Thus, accelerated approval has been used extensively in the development and approval of products for
treatment of a variety of cancers in which the goal of therapy is generally to improve survival or decrease morbidity and the duration
of the typical disease course requires lengthy and sometimes large trials to demonstrate a clinical or survival benefit.
The accelerated approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional
post-approval confirmatory studies to verify and describe the product’s clinical benefit, and the FDA is now permitted to require, as
appropriate, that such trials be underway prior to approval or within a specific time period after the date of approval for a product
granted accelerated approval. As a result, a product candidate approved on this basis is subject to rigorous post-marketing compliance
requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure
to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, would allow the FDA to
withdraw the product from the market on an expedited basis. All promotional materials for product candidates approved under
accelerated regulations are subject to prior review by the FDA.
Post-Approval Regulation
If regulatory approval for marketing of a product or new indication for an existing product is obtained, the sponsor will be
required to comply with all regular post-approval regulatory requirements as well as any post-approval requirements that the FDA has
imposed as part of the approval process. The sponsor will be required to report certain adverse reactions and production problems to
the FDA, provide updated safety and efficacy information and comply with requirements concerning advertising and promotional
labeling requirements. Manufacturers are required to comply with applicable product tracking and tracing requirements.
Manufacturers and certain of their subcontractors 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 ongoing regulatory
requirements, including cGMP regulations, which impose certain procedural and documentation requirements upon manufacturers.
Accordingly, the sponsor and its third-party manufacturers must continue to expend time, money, and effort in the areas of production
and quality control to maintain compliance with cGMP regulations and other regulatory requirements.
A product may also be subject to official lot release, meaning that 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 lot release, the manufacturer must submit
samples of each lot, 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, to the FDA. The FDA may in addition perform certain confirmatory tests on lots of
some products before releasing the lots for distribution. Finally, the FDA will conduct laboratory research related to the safety, purity,
potency, and effectiveness of pharmaceutical products.
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements is not maintained
or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including
adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory
requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or
clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential
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consequences of a failure to comply with regulatory requirements include, among other things:
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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or
product recalls;
fines, untitled or warning letters or holds on post-approval clinical trials;
refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation
of product license approvals;
product seizure or detention, or refusal to permit the import or export of products; or
injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates marketing, labeling, advertising and promotion of licensed and approved products that are placed on
the market. Pharmaceutical products may be promoted only for the approved indications and in accordance with the provisions of the
approved label. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and
a company that is found to have improperly promoted off-label uses may be subject to significant liability.
Orphan Drug Designation
Orphan drug designation in the United States is designed to encourage sponsors to develop products intended for rare diseases
or conditions. In the United States, a rare disease or condition is statutorily defined as a condition that affects fewer than 200,000
individuals in the United States or that affects more than 200,000 individuals in the United States and for which there is no reasonable
expectation that the cost of developing and making available the biologic for the disease or condition will be recovered from sales of
the product in the United States.
Orphan drug designation qualifies a company for tax credits and market exclusivity for seven years following the date of the
product’s marketing approval if granted by the FDA. An application for designation as an orphan product can be made any time prior
to the filing of an application for approval to market the product. A product becomes an orphan when it receives orphan drug
designation from the Office of Orphan Products Development, or OOPD, at the FDA based on acceptable confidential requests made
under the regulatory provisions. The product must then go through the review and approval process for commercial distribution like
any other product.
A sponsor may request orphan drug designation of a previously unapproved product or new orphan indication for an already
marketed product. In addition, a sponsor of a product that is otherwise the same product as an already approved orphan drug may seek
and obtain orphan drug designation for the subsequent product for the same rare disease or condition if it can present a plausible
hypothesis that its product may be clinically superior to the first drug. More than one sponsor may receive orphan drug designation for
the same product for the same rare disease or condition, but each sponsor seeking orphan drug designation must file a complete
request for designation.
The period of exclusivity begins on the date that the marketing application is approved by the FDA and applies only to the
indication for which the product has been designated. The FDA may approve a second application for the same product for a different
use or a second application for a clinically superior version of the product for the same use. The FDA cannot, however, approve the
same product made by another manufacturer for the same indication during the market exclusivity period unless it has the consent of
the sponsor or the sponsor is unable to provide sufficient quantities.
Pediatric Studies and Exclusivity
Under the Pediatric Research Equity Act of 2003 (PREA), as amended, a BLA or supplement thereto must contain data that are
adequate to assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations, and
to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. Sponsors must also
submit pediatric study plans prior to the assessment data. Those plans must contain an outline of the proposed pediatric study or
studies the applicant plans to conduct, including study objectives and design, any deferral or waiver requests, and other information
required by regulation. The applicant, the FDA, and the FDA’s internal review committee must then review the information submitted,
consult with each other, and agree upon a final plan. The FDA or the applicant may request an amendment to the plan at any time.
The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data
until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Unless otherwise
required by regulation, the pediatric data requirements do not apply to products with orphan designation; however, they will apply to a
BLA for a new active ingredient that is orphan-designated if the biologic is a molecularly targeted cancer product intended for the
treatment of an adult cancer and is directed at a molecular target that the FDA determines to be substantially relevant to the growth or
progression of a pediatric cancer.
Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the
attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity. This six-month
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exclusivity may be granted if a BLA sponsor submits pediatric data that fairly respond to a written request from the FDA for such
data. The data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed
to fairly respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to
and accepted by the FDA within the statutory time limits, whatever existing periods of regulatory exclusivity of each drug product
containing the studied active moiety are extended by six months. This is not a patent term extension, but it effectively extends the
regulatory period during which the FDA cannot approve another application.
Biosimilars and Exclusivity
The Patient Protection and Affordable Care Act, or ACA, which was signed into law in March 2010, included a subtitle called
the Biologics Price Competition and Innovation Act of 2009 or BPCIA. The BPCIA established a regulatory scheme authorizing the
FDA to approve biosimilars and interchangeable biosimilars. The FDA has issued several guidance documents outlining an approach
to review and approval of biosimilars.
Under the BPCIA, a manufacturer may submit an application for licensure of a biologic product that is “biosimilar to” or
“interchangeable with” a previously approved biological product or “reference product.” In order for the FDA to approve a biosimilar
product, it must find that there are no clinically meaningful differences between the reference product and proposed biosimilar product
in terms of safety, purity, and potency. For the FDA to approve a biosimilar product as interchangeable with a reference product, the
agency must find that the biosimilar product can be expected to produce the same clinical results as the reference product, and (for
products administered multiple times) that 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.
Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date
of approval of the reference product. The FDA may not approve a biosimilar product until 12 years from the date on which the
reference product was approved. Even if a product is considered to be a reference product eligible for exclusivity, another company
could market a competing version of that product if the FDA approves a full BLA for such product containing the sponsor’s own
preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity, and potency of their
product. The BPCIA also created certain exclusivity periods for biosimilars approved as interchangeable products, and FDA may
approve multiple “first” interchangeable products so long as they are all approved on the same first day of marketing. This exclusivity
period, which may be shared amongst multiple first interchangeable products, lasts until the earlier of: (1) one year after the first
commercial marketing of the first interchangeable product; (2) 18 months after resolution of a patent infringement suit instituted under
42 U.S.C. § 262(l)(6) against the applicant that submitted the application for the first interchangeable product, based on a final court
decision regarding all of the patents in the litigation or dismissal of the litigation with or without prejudice; (3) 42 months after
approval of the first interchangeable product, if a patent infringement suit instituted under 42 U.S.C. § 262(l)(6) against the applicant
that submitted the application for the first interchangeable product is still ongoing; or (4) 18 months after approval of the first
interchangeable product if the applicant that submitted the application for the first interchangeable product has not been sued under 42
U.S.C. § 262(l)(6). At this juncture, it is unclear whether products deemed “interchangeable” by the FDA will, in fact, be readily
substituted by pharmacies, which are governed by state pharmacy law.
Patent Term Restoration and Extension
A patent claiming a new biologic product may be eligible for a limited patent term extension under the Drug Price Competition
and Patent Term Restoration Act of 1984, or Hatch-Waxman Amendments, which permits a patent restoration of up to five years for
patent term lost during product development and FDA regulatory review. The restoration period granted on a patent covering a
product is typically one-half the time between the effective date of an IND and the submission date of a marketing application, plus
the time between the submission date of the marketing application and the ultimate approval date, less any time the applicant failed to
act with due diligence. Patent term restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the
product’s approval date. Only one patent applicable to an approved product is eligible for the extension, and the application for the
extension must be submitted prior to the expiration of the patent in question. A patent that covers multiple products for which approval
is sought can only be extended in connection with one of the approvals. The USPTO reviews and approves the application for any
patent term extension or restoration in consultation with the FDA.
Regulation And Procedures Governing Approval Of Medicinal Products In Europe
In order to market any product outside of the United States, a company must also comply with numerous and varying regulatory
requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical
trials, marketing authorization, commercial sales and distribution of products. Whether or not it obtains FDA approval for a product,
an applicant will need to obtain the necessary approvals by the comparable health regulatory authorities before it can commence
clinical trials or marketing of the product in those countries or jurisdictions. Specifically, the process governing approval of medicinal
products in Europe generally follows the same lines as in the United States, although the approval of a medicinal product in the United
States is no guarantee of approval of the same product in Europe, either at all or within the same timescale as approval may be granted
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in the United States. The process entails satisfactory completion of preclinical studies and adequate and well-controlled clinical trials
to establish the safety and efficacy of the product for each proposed indication. It also requires the submission to the EMA, or the
relevant competent authorities of a marketing authorization application, or MAA, and granting of a marketing authorization by the
EMA or these authorities before the product can be marketed and sold in Europe.
Clinical Trial Approval
An applicant for a clinical trial authorization in the EU must obtain approval from the national competent authority, or NCA, of
an EU Member State in which the clinical trial is to be conducted, or in multiple Member States if the clinical trial is to be conducted
in a number of Member States. Furthermore, the applicant may only start a clinical trial at a specific study site after the applicable
ethics committee, or EC, has issued a favorable opinion in relation to the clinical trial.
In April 2014, the EU adopted a new Clinical Trials Regulation (EU) No 536/2014, which replaced the Clinical Trials Directive
2001/20/EC on 31 January 2022. It overhauls the current system of approvals for clinical trials in the EU. Specifically, the new
legislation, which is directly applicable in all EU Member States (meaning that no national implementing legislation in each EU
Member State is required), aims at simplifying and streamlining the approval of clinical trials in the EU. For instance, the Clinical
Trials Regulation provides for a streamlined application procedure via a single-entry point and strictly defined deadlines for the
assessment of clinical trial applications.
Marketing Authorization
To obtain a marketing authorization for a product in the EU, an applicant must submit an MAA, either under a centralized
procedure administered by the EU or one of the procedures administered by competent authorities in the EU Member States
(decentralized procedure, national procedure, or mutual recognition procedure). A marketing authorization may be granted only to an
applicant established in the EEA (comprising the EU Member States plus Iceland, Norway and Liechtenstein). Regulation (EC) No
1901/2006 provides that prior to obtaining a marketing authorization in the EU, an applicant must demonstrate compliance with all
measures included in an EMA-approved pediatric investigation plan, or PIP, covering all subsets of the pediatric population, unless
the EMA has granted a product-specific waiver, class waiver, or a deferral for one or more of the measures included in the PIP.
The centralized procedure provides for the grant of a single marketing authorization by the European Commission that is valid
throughout the EEA. Pursuant to Regulation (EC) No. 726/2004, the centralized procedure is compulsory for specific products,
including for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, advanced
therapy medicinal products, or ATMPs, and products with a new active substance indicated for the treatment of certain diseases,
including products for the treatment of cancer, HIV or AIDS, diabetes, neurodegenerative disorders, auto-immune and other immune
dysfunctions and viral diseases. For those products for which the use of the centralized procedure is not mandatory, applicants may
elect to use the centralized procedure where either the product contains a new active substance indicated for the treatment of other
diseases, or where the applicant can show that the product constitutes a significant therapeutic, scientific or technical innovation or for
which a centralized process is in the interest of patients at an EU level.
Specifically, the grant of a marketing authorization in the EU for products containing viable human tissues or cells such as gene
therapy medicinal products is governed by Regulation (EC) No 1394/2007 on ATMPs, read in combination with Directive
2001/83/EC of the European Parliament and of the European Council, which is the EU Directive governing medicinal products for
human use. Regulation (EC) No 1394/2007 lays down specific rules concerning the authorization, supervision, and pharmacovigilance
of gene therapy medicinal products, somatic cell therapy medicinal products, and tissue engineered products. Manufacturers of
advanced therapy medicinal products must demonstrate the quality, safety, and efficacy of their products to the Committee for
Advanced Therapies, or CAT, at the EMA, which conducts a scientific assessment of the MAA and provides an opinion regarding the
MAA for an ATMP. The European Commission grants or refuses marketing authorization in light of the opinion delivered by the
EMA.
The Committee for Medicinal Products for Human Use, or the CHMP, established at the EMA is responsible for issuing a final
opinion on whether an ATMP meets the required quality, safety and efficacy requirements, and whether a product has a positive
benefit/risk profile. Under the centralized procedure in the EU, the maximum timeframe for the evaluation of an MAA by the EMA is
210 days from receipt of a valid MAA, excluding clock stops when additional information or written or oral explanation is to be
provided by the applicant in response to questions of the CHMP. Clock stops may extend the timeframe of evaluation of an MAA
considerably beyond 210 days. Where the CHMP gives a positive opinion, it provides the opinion, together with supporting
documentation, to the European Commission, who make the final decision to grant a marketing authorization, which is issued within
67 days of receipt of the EMA's recommendation. Accelerated evaluation may be granted by the CHMP in exceptional cases, when a
medicinal product is expected to be of major interest from the point of view of public health and, in particular, from the viewpoint of
therapeutic innovation. If the CHMP accepts such a request, the time frame of 210 days for assessment will be reduced to 150 days
(excluding clock stops), but it is possible that the CHMP may revert to the standard time limit for the centralized procedure if it
determines that the application is no longer appropriate to conduct an accelerated assessment.
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Now that the UK (which comprises Great Britain and Northern Ireland) has left the EU, Great Britain will no longer be covered
by centralized marketing authorizations (under the Northern Ireland Protocol, centralized marketing authorizations will continue to be
recognized in Northern Ireland).However, on January 1, 2024, a new international recognition framework was put in place by the
Medicines and Healthcare products Regulatory Agency, or MHRA under which the MHRA may have regard to decisions on the
approval of marketing authorizations made by the EMA and certain other regulators.
PRIME scheme
In March 2016, the EMA launched an initiative to facilitate development of product candidates in indications, often rare, for
which few or no therapies currently exist, by, amongst other things, offering early dialogue with, and regulatory support from, the
EMA. The scheme is intended to stimulate innovation, optimize development and enable accelerated assessment of PRIority
Medicines, or PRIME, by building upon the scientific advice scheme and accelerated assessment procedure offered by EMA. The
scheme is voluntary and eligibility criteria must be met for a medicine to qualify for PRIME.
The PRIME scheme is open to medicines under development and for which the applicant intends to submit an initial marketing
authorization application through the centralized procedure. Eligible products must target conditions for which there is an unmet
medical need (meaning there is no satisfactory method of diagnosis, prevention or treatment in the EU or, if there is, the new medicine
will bring a major therapeutic advantage) and they must demonstrate the potential to address the unmet medical need by introducing
new methods or therapy or improving existing ones. Applicants will typically be at the exploratory clinical trial phase of development,
and will have preliminary clinical evidence in patients to demonstrate the promising activity of the medicine and its potential to
address, to a significant extent, an unmet medical need. In exceptional cases, applicants from the academic sector or SMEs (small and
medium sized enterprises) may submit an eligibility request at an earlier stage of development if compelling non-clinical data in a
relevant model provide early evidence of promising activity, and first in man studies indicate adequate exposure for the desired
pharmacotherapeutic effects and tolerability.
If a medicine is selected for the PRIME scheme, the EMA:
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appoints a rapporteur from the CHMP or from the CAT to provide continuous support and to build up knowledge of the
medicine in advance of the filing of a marketing authorization application;
issues guidance on the applicant’s overall development plan and regulatory strategy;
organizes a kick-off meeting with the rapporteur and experts from relevant EMA committees and working groups;
provides a dedicated EMA contact person; and
provides scientific advice at key development milestones, involving additional stakeholders, such as health technology
assessment bodies and patients, as needed.
Medicines that are selected for the PRIME scheme are also expected to benefit from the EMA’s accelerated assessment
procedure at the time of application for marketing authorization. Where, during the course of development, a medicine no longer
meets the eligibility criteria, support under the PRIME scheme may be withdrawn.
Data and Market Exclusivity
In the EU, innovate medicinal products approved on the basis of a complete independent data package qualify for eight years of
data exclusivity upon grant of a marketing authorization and an additional two years of market exclusivity pursuant to Regulation
(EC) No 726/2004, as amended, and Directive 2001/83/EC, as amended. Data exclusivity prevents applicants for authorizations of
generics or biosimilars from referencing the innovator’s preclinical and clinical data contained in the dossier of the reference product
when applying for a generic or biosimilar marketing authorization in the EU, during a period of eight years from the date on which the
reference product was first authorized in the EU. During the additional two-year period of market exclusivity, a generic or biosimilar
MAA can be submitted and the innovator’s data may be referenced, but no generic or biosimilar medicinal product can be marketed in
the EU until the expiration of the market exclusivity period. The overall ten-year period will be extended to a maximum of eleven
years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new
therapeutic indications which, during the scientific evaluation prior to authorization, are held to bring a significant clinical benefit in
comparison with existing therapies. There is no guarantee that a product will be considered by the EMA to be an innovative medicinal
product, and products may qualify for data exclusivity. Even if a product is considered to be an innovative medicinal product so that
the innovator gains the prescribed period of data exclusivity, another company nevertheless could also market another version of the
product if such company obtained a marketing authorization based on an MAA with a complete independent data package of
pharmaceutical tests, preclinical tests and clinical trials.
Periods of Authorization and Renewals
A centralized marketing authorization is valid for five years, in principle, and it may be renewed after five years on the basis of
a reevaluation of the risk-benefit balance by the EMA or by the competent authority of the authorizing EU Member State for a
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nationally authorized product. Once renewed, the marketing authorization is valid for an unlimited period, unless the European
Commission or the competent authority decides, on justified grounds relating to pharmacovigilance, to proceed with one additional
five-year renewal period. Any authorization that is not followed by the actual placement of the drug on the EU market (in the case of
the centralized procedure), or on the market of the authorizing EU Member State, within three years after authorization ceases, to be
valid (the so-called sunset clause).
Orphan Drug Designation and Exclusivity
Regulation (EC) No 141/2000 and Regulation (EC) No 847/2000 provide that a product can be designated as an orphan
medicinal product by the European Commission if its sponsor can establish that: (1) the product 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 (5) in ten thousand (10,000) persons in the EU when the application is made; or (b) it is unlikely that the product, without benefits
derived from orphan status, would generate sufficient return in the EU to justify the necessary investment in its development; (3) there
exists no satisfactory method of diagnosis, prevention, or treatment of such condition authorized for marketing in the EU or, if such
method exists, the product will be of significant benefit to those affected by that condition.
An orphan designation provides a number of benefits, including fee reductions, regulatory assistance, and the ability to apply for
a centralized marketing authorization. The grant of a marketing authorization for an orphan medicinal product leads to a ten-year
period of market exclusivity. During this market exclusivity period, neither the European Commission nor the EU Member States can
accept an application or grant a marketing authorization in respect of a “similar medicinal product.” A “similar medicinal product” is
defined as a medicinal product containing a similar active substance or substances as contained in an authorized orphan medicinal
product, and which is intended for the same therapeutic indication. The market exclusivity period for the authorized therapeutic
indication may, however, 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 because, for example, the product is sufficiently profitable not to justify market exclusivity. There are a
few limited of derogations from the ten-year period of market exclusivity pursuant to which the European Commission may grant a
marketing authorization for a similar medicinal product in the same therapeutic indication, which are:
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where the second applicant can establish that although their product is similar to the orphan medicinal product already
authorized, the second product is safer, more effective or otherwise clinically superior;
where the marketing authorization holder for the authorized orphan product consents to the second orphan medicinal
product application; or
where the marketing authorization holder for the authorized orphan product cannot supply enough orphan medicinal
product.
Regulatory Requirements after Marketing Authorization has been obtained
If an authorization for a medicinal product in the EU is obtained, the holder of the marketing authorization is required to comply
with a range of requirements applicable to the manufacturing, marketing, promotion and sale of the medicinal product. These include
compliance with the EU’s stringent pharmacovigilance or safety reporting rules, pursuant to which post-authorization studies and
additional monitoring obligations can be imposed. In addition, the manufacturing of authorized products, for which a separate
manufacturer’s license is mandatory, must also be conducted in strict compliance with the applicable EU laws, regulations and
guidance, including Directive 2001/83/EC, Directive (EU) 2017/1572, Regulation (EC) No 726/2004 and the European Commission
Guidelines for Good Manufacturing Practice. These requirements include compliance with EU cGMP standards when manufacturing
medicinal products and active pharmaceutical ingredients, including the manufacture of active pharmaceutical ingredients outside of
the EU with the intention to import the active pharmaceutical ingredients into the EU. Finally, the marketing and promotion of
authorized products, including industry-sponsored continuing medical education and advertising directed toward the prescribers of
drugs and/or the general public, are strictly regulated in the EU. The advertising of prescription-only medicines to the general public is
not permitted in the EU.
The aforementioned EU rules are generally applicable in the EEA. For other markets in which we might in the future seek to
obtain marketing approval for the commercialization of products, there are other health regulatory regimes for seeking approval, and
we would need to ensure ongoing compliance with applicable health regulatory procedures and standards, as well as other governing
laws and regulations for each applicable jurisdiction.
Reform of the Regulatory Framework in the European Union
The European Commission introduced legislative proposals in April 2023 that, if implemented, will replace the current
regulatory framework in the EU for all medicines (including those for rare diseases and for children). The European Commission has
provided the legislative proposals to the European Parliament and the European Council for their review and approval. In October
2023, the European Parliament published draft reports proposing amendments to the legislative proposals, which will be debated by
the European Parliament. Once the European Commission’s legislative proposals are approved (with or without amendment), they will
be adopted into EU law.
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European Data Protection Regulation
The collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the European Economic
Area or EEA and the UK, including personal health data, is subject to the EU General Data Protection Regulation, or EU GDPR, with
respect to the EEA, and the UK General Data Protection Regulation, or UK GDPR, with respect to the UK, and collectively with the
EU GDPR referred to as the “GDPR” in this report unless specified otherwise. The GDPR applies to companies established in the
EEA/UK, as well as to any company established outside the EEA/UK, if they collect and use personal data in connection with the
offering of goods or services to individuals in the EEA/UK or the monitoring of their behavior in the EEA/ Switzerland/UK. The
GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements
relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, having
legal bases for processing personal data relating to identifiable individuals, providing details to those individuals regarding the
processing of their personal data, implementing safeguards to protect the security and confidentiality of personal data, having data
processing agreements with third parties who process personal data, responding to individuals’ requests to exercise their rights in
respect of their personal data, reporting security breaches involving personal data to the competent national data protection authority
and affected individuals, appointing data protection officers, conducting data protection impact assessments, ensuring certain
accountability measures are in place and record keeping. The GDPR also imposes strict rules on the transfer of personal data to
countries outside the EEA, 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 (£17.5 million under the UK GDPR) 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.
Switzerland has adopted a data protection regime similar to the GDPR. Compliance with the GDPR and the Swiss data -
protection regime remains a rigorous and time-intensive process that may increase the cost of doing business or require companies to
change their business practices to ensure full compliance.
Brexit and the Regulatory Framework in the United Kingdom
On June 23, 2016, the electorate in the UK voted in favor of leaving the EU (commonly referred to as “Brexit”), and the UK
formally left the EU on January 31, 2020. There was a transition period during which EU pharmaceutical laws continued to apply to
the UK, which expired on December 31, 2020. However, the EU and the UK have concluded a trade and cooperation agreement, or
TCA, which was provisionally applicable since January 1, 2021 and has been formally applicable since May 1, 2021. The TCA
includes specific provisions concerning pharmaceuticals, which include the mutual recognition of GMP, inspections of manufacturing
facilities for medicinal products and GMP documents issued, but does not provide for wholesale mutual recognition of UK and EU
pharmaceutical regulations. At present, Great Britain has implemented EU legislation on the marketing, promotion and sale of
medicinal products through the Human Medicines Regulations 2012 (as amended) (under the Northern Ireland Protocol, the EU
regulatory framework currently continues to apply in Northern Ireland). The regulatory regime in Great Britain therefore aligns in
many ways with EU regulations, however it is possible that these regimes will more significantly diverge in future now that Great
Britain’s regulatory system is independent from the EU and the TCA does not provide for mutual recognition of UK and EU
pharmaceutical legislation. However, notwithstanding that there is no wholesale recognition of EU pharmaceutical legislation under
the TCA, under a new international recognition framework mentioned above which was put in place by the MHRA on January 1,
2024, the MHRA may take into account decisions on the approval of a marketing authorization from the EMA (and certain other
regulators) when considering an application for a Great Britain marketing authorization.
On February 27, 2023, the UK government and the European Commission announced a political agreement in principle to
replace the Northern Ireland Protocol with a new set of arrangements, known as the “Windsor Framework”. This new framework
fundamentally changes the existing system under the Northern Ireland Protocol, including with respect to the regulation of medicinal
products in the UK. In particular, the MHRA will be responsible for approving all medicinal products destined for the UK market (i.e.,
Great Britain and Northern Ireland), and the EMA will no longer have any role in approving medicinal products destined for Northern
Ireland. A single UK-wide marketing authorization will be granted by the MHRA for all medicinal products to be sold in the UK,
enabling products to be sold in a single pack and under a single authorization throughout the UK. The Windsor Framework was
approved by the EU-UK Joint Committee on March 24, 2023, so the UK government and the EU will enact legislative measures to
bring it into law. On June 9, 2023, the MHRA announced that the medicines aspects of the Windsor Framework will apply from
January 1, 2025.
Coverage, Pricing and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any products or product candidates for which we
have received or may seek regulatory approval by the FDA or other government authorities. In the United States and markets in other
countries, patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely
on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use any products or product
candidates we may develop unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of
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such product candidates. Even if approved, sales of any product or product candidates will depend, in part, on the extent to which
third-party payors, including government health programs in the United States such as Medicare and Medicaid, commercial health
insurers, and managed care organizations, provide coverage, and establish adequate reimbursement levels for, such product
candidates. Factors a payor considers in determining reimbursement are based on whether the product is:
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a covered benefit under its health plan;
safe, effective and medically necessary;
appropriate for the specific patient;
cost-effective; and
neither experimental nor investigational.
The process for determining whether a payor will provide coverage for a product may be separate from the process for setting
the price or reimbursement rate that the payor will pay for the product once coverage is approved. Third-party payors are increasingly
challenging the prices charged, examining the medical necessity, and reviewing the cost-effectiveness of medical products and
services and imposing controls to manage costs. Third-party payors may limit coverage to specific products on an approved list, also
known as a formulary, which might not include all of the approved products for a particular indication.
In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct
expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition
to the costs required to obtain FDA or other comparable marketing approvals. Nonetheless, products or product candidates may not be
considered medically necessary or cost effective. A decision by a third-party payor not to cover any product candidates we may
develop could reduce physician utilization of such product candidates once approved and have a material adverse effect on our sales,
results of operations and financial condition. Additionally, a payor’s decision to provide coverage for a product does not imply that an
adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure
that other payors will also provide coverage and reimbursement for the product, and the level of coverage and reimbursement can
differ significantly from payor to payor. Third-party reimbursement and coverage may not be available to enable us to maintain price
levels sufficient to realize an appropriate return on our investment in product development.
The containment of healthcare costs also has become a priority of various federal, state and/or local governments, as well as
other payors, within the United States and in other countries globally, and the prices of pharmaceuticals have been a focus in these
efforts. Governments and other payors have shown significant interest in implementing cost-containment programs, including price
controls, restrictions on reimbursement, and requirements for substitution of generic products. Adoption of price controls and cost-
containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further
limit a company’s revenue generated from the sale of any approved products. Coverage policies and third-party reimbursement rates
may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which a
company or its collaborators receive marketing approval, less favorable coverage policies and reimbursement rates may be
implemented in the future.
Outside the United States, ensuring adequate coverage and payment for any products or product candidates we may develop will
face challenges. Pricing of prescription pharmaceuticals is subject to governmental control in many countries. Pricing negotiations
with governmental authorities can extend well beyond the receipt of regulatory marketing approval for a product and may require us to
conduct a clinical trial that compares the cost effectiveness of any product candidates we may develop to other available therapies.
The conduct of such a clinical trial could be expensive and result in delays in our commercialization efforts.
In the EU, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may
be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that
compare the cost-effectiveness of a particular product candidate to currently available therapies (so called health technology
assessments, or HTAs) in order to obtain reimbursement or pricing approval. For example, the EU provides options for its Member
States to restrict the range of products for which their national health insurance systems provide reimbursement and to control the
prices of medicinal products for human use. EU Member States may approve a specific price for a product or it may instead adopt a
system of direct or indirect controls on the profitability of the company placing the product on the market. Other EU Member States
allow companies to fix their own prices for products, but monitor and control prescription volumes and issue guidance to physicians to
limit prescriptions. Recently, many countries in the EU have increased the level of discounting required in relation to the pricing of
pharmaceuticals and these efforts could continue as countries attempt to manage healthcare expenditures, especially in light of the
severe fiscal and debt crises experienced by many countries in the EU. The downward pressure on health care costs in general,
particularly prescription products, has become intense.
As a result, increasingly high barriers are being erected to the entry of new products. Political, economic, and regulatory
developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been
obtained. Reference pricing used by various EU Member States, and parallel trade (arbitrage between low-priced and high-priced
Member States), can further reduce prices. Special pricing and reimbursement rules may apply to orphan medicinal products.
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Inclusion of orphan medicinal products in reimbursement systems tend to focus on the medical usefulness, need, quality and economic
benefits to patients and the healthcare system as for any drug. Acceptance of any medicinal product for reimbursement may come with
cost, use and often volume restrictions, which again can vary by country. In addition, results-based rules of reimbursement may apply.
There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow
favorable reimbursement and pricing arrangements for any of our products, if approved in those countries.
Healthcare Law and Regulation
Healthcare providers and third-party payors play a primary role in the recommendation and prescription of pharmaceutical
products that are granted marketing approval. Arrangements with providers, consultants, third-party payors, and customers are subject
to broadly applicable fraud and abuse, anti-kickback, false claims laws, reporting of payments to physicians and teaching physicians
and patient privacy laws and regulations and other healthcare laws and regulations that may constrain our business and/or financial
arrangements. Restrictions under applicable federal and state healthcare laws and regulations, include the following:
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the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and
willfully soliciting, offering, paying, or receiving remuneration, directly or indirectly, overtly or covertly, in cash or in
kind, in exchange for or intended to induce or reward either the referral of an individual for, or the purchase, order or
recommendation of, any good or service, for which payment may be made, in whole or in part, under a federal healthcare
program such as Medicare and Medicaid;
the federal civil and criminal false claims laws, including the civil U.S. False Claims Act, and civil monetary penalties
laws, which prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to
the federal government, claims for payment that are false, fictitious, or fraudulent or knowingly making, using, or causing
to be made or used a false record or statement to avoid, decrease, or conceal an obligation to pay money to the federal
government. In addition, the government may assert that a claim including items and services resulting from a violation of
the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the U.S. False Claims Act;
the federal false statements statute prohibits knowingly and willfully falsifying, concealing, or covering up a material fact
or making any materially false 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 anti-inducement law, which prohibits, among other things, the offering or giving of remuneration, which includes,
without limitation, any transfer of items or services for free or for less than fair market value (with limited exceptions), to
a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection
of a particular supplier of items or services reimbursable by a federal or state governmental program;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health
Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing
regulations, collectively HIPAA, which imposes criminal and civil liability for knowingly and willfully executing, or
attempting to execute, a scheme to defraud any healthcare benefit program (including private payors) or obtain, by means
of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the
custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and
willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false
statements in connection with the delivery of, or payment for, healthcare benefits, items or services;
HIPAA, which impose obligations with respect to safeguarding the privacy, security, and transmission of individually
identifiable information that constitutes protected health information, including mandatory contractual terms and
restrictions on the use and/or disclosure of such information without proper authorization;
the federal transparency requirements known as the federal U.S. Physician Payments Sunshine Act, under the ACA, which
requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for
Medicare & Medicaid Services, or CMS, within the U.S. Department of Health and Human Services, or HHS, information
related to payments and other transfers of value made by that entity to physicians (currently defined to include doctors,
dentists, optometrists, podiatrists and chiropractors), certain non-physician providers such as physician assistants and
nurse practitioners, and teaching hospitals, and requires certain manufacturers and applicable group purchasing
organizations to report ownership and investment interests held by physicians or their immediate family members;
federal government price reporting laws, which require us to calculate and report complex pricing metrics in an accurate
and timely manner to government programs;
federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that
potentially harm consumers;
The Foreign Corrupt Practices Act prohibits companies and their intermediaries from making, or offering or promising to
make improper payments to non-U.S. officials for the purpose of obtaining or retaining business or otherwise seeking
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favorable treatment; and
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analogous laws and regulations in other national jurisdictions and states, such as state anti-kickback and false claims laws,
which may apply to healthcare items or services that are reimbursed by non-governmental third-party payors, including
private insurers.
Some state and other 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
pharmaceutical manufacturers to report information related to payments to physicians and other health care providers or marketing
expenditures.
State and other laws 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. For example, in
California, the California Consumer Protection Act, or CCPA, established a comprehensive 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. In addition, the
California Privacy Rights Act, or CPRA, imposes additional obligations on companies covered by the legislation. The CPRA
significantly modified the CCPA, including by expanding consumers’ rights with respect to certain sensitive personal information.
Similar laws have been passed in numerous other states and other states have proposed similar new privacy laws. Such proposed
legislation, if enacted, may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional
investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in
increased compliance costs and/or changes in business practices and policies. The existence of comprehensive privacy laws in
different states in the United States would make our compliance obligations more complex and costly and may increase the likelihood
that we may be subject to enforcement actions or otherwise incur liability for noncompliance. There are also states that are specifically
regulating health information. For example, Washington state recently passed a health privacy law that will regulate the collection and
sharing of health information, and the law also has a private right of action, which further increases the relevant compliance risk.
Connecticut and Nevada have also passed similar laws regulating consumer health data. In addition, other states have proposed and/or
passed legislation that regulates the privacy and/or security of certain specific types of information. For example, a small number of
states have passed laws that regulate biometric data specifically. These various privacy and security laws may impact our business
activities, including our identification of research subjects, relationships with business partners and ultimately the marketing and
distribution of our products. State laws are changing rapidly and there is discussion in the U.S. Congress of a new comprehensive
federal data privacy law to which we may likely become subject, if enacted.
Further data privacy and security laws and regulations in foreign jurisdictions that may be more stringent than those in the
United States (such as the European Union's GDPR).
All of these evolving compliance and operational requirements impose significant costs, such as costs related to organizational
changes, implementing additional protection technologies, training employees and engaging consultants and legal advisors, which are
likely to increase over time. In addition, such requirements may require us to modify our data processing practices and policies, utilize
management’s time and/or divert resources from other initiatives and projects. Any failure or perceived failure by us to comply with
any applicable federal, state or foreign laws and regulations relating to data privacy and security could result in damage to our
reputation, as well as proceedings or litigation by governmental agencies or other third parties, including class action privacy litigation
in certain jurisdictions, which would subject us to significant fines, sanctions, awards, injunctions, penalties or judgments. Any of the
foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.
Healthcare Reform
A primary trend in the U.S. healthcare industry and elsewhere is cost containment. There have been a number of federal and
state proposals during the last few years regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage
and reimbursement for drugs and other medical products, government control and other changes to the healthcare system in the United
States.
By way of example, the United States and state governments continue to propose and pass legislation designed to reduce the
cost of healthcare. In March 2010, the United States Congress enacted the ACA, which, among other things, includes changes to the
coverage and payment for products under government health care programs. Among the provisions of the ACA of importance to our
potential product candidates are:
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an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic
products, apportioned among these entities according to their market share in certain government healthcare programs,
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although this fee would not apply to sales of certain products approved exclusively for orphan indications;
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage
to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a
manufacturer’s Medicaid rebate liability;
expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for
both branded and generic drugs and revising the definition of “average manufacturer price,” or AMP, for calculating and
reporting Medicaid drug rebates on outpatient prescription drug prices and extending rebate liability to prescriptions for
individuals enrolled in Medicare Advantage plans;
addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are
calculated for products that are inhaled, infused, instilled, implanted or injected;
expanded the types of entities eligible for the 340B drug discount program;
established the Medicare Part D coverage gap discount program by requiring manufacturers to provide a 70% point-of-
sale-discount off the negotiated price of applicable products to eligible beneficiaries during their coverage gap period as a
condition for the manufacturers’ outpatient products to be covered under Medicare Part D, increased pursuant to the
Bipartisan Budget Act of 2018 which became effective as of 2019;
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical
effectiveness research, along with funding for such research; and
established the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery
models to lower Medicare and Medicaid spending, potentially including prescription product spending.
Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. For example, the
Budget Control Act of 2011, among other things, included aggregate reductions of Medicare payments to providers of up to 2% per
fiscal year, which will remain in effect through 2031. In addition, the Statutory Pay-As-You-Go Act of 2010, or PAYGO, requires that
automatic payment cuts of 4% be applied to Medicare and affects certain providers. These cuts were slated to go into effect January 1,
2023, but the Consolidated Appropriations Act, 2023, further delayed these cuts until 2025. The American Taxpayer Relief Act of
2012, which, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers, and
cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from
three to five years. In addition, the American Rescue Plan Act of 2021 eliminates the statutory Medicaid drug rebate cap, currently set
at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024.
These laws and regulations may result in additional reductions in Medicare and other healthcare funding and otherwise affect the
prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with which any
such product candidate is prescribed or used.
Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of
the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. It is unclear how other
healthcare reform measures of the Biden administration or other efforts, if any, to challenge, repeal or replace the ACA will impact
our business.
At the federal level, FDA released implementing regulations in 2020 for how states can build and submit importation plans for
drugs from Canada. Also in 2020, CMS stated drugs imported by states under this rule will not be eligible for federal Medicaid drug
rebates and manufacturers would not report these drugs for “best price” or Average Manufacturer Price purposes. Since imported
drugs are not considered covered outpatient drugs, CMS further stated it will not publish a National Average Drug Acquisition Cost
for these drugs. On January 5, 2024, Florida became the first state in the United States to receive the FDA's approval for its plan to
import certain prescription drugs from Canada. Importation of drugs from Canada may materially and adversely affect the price we
receive for any of our product candidates.
Further, on December 2, 2020, HHS published a regulation removing safe harbor protection for price reductions from
pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price
reduction is required by law. The rule also created a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe
harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. Pursuant to court order, the removal
and addition of the aforementioned safe harbors were delayed and recent legislation imposed a moratorium on implementation of the
rule until January 1, 2026. This deadline was further pushed back to January 1, 2027 by the Bipartisan Safer Communities Act and
later to January 1, 2032 by the Inflation Reduction Act of 2022 ("IRA").
There has also been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed
products, which has resulted in several recent Congressional inquiries and proposed bills designed to, among other things, bring more
transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government
program reimbursement methodologies for pharmaceutical products. Individual states in the United States have also become
increasingly active in enacting legislation and implementing regulations designed to control pharmaceutical product pricing, including
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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.
The IRA was signed into law in August 2022. The IRA includes several provisions that will impact our business to varying
degrees, including provisions that allow the U.S. government to negotiate and set price caps for Medicare Part B and Part D pricing
for certain high-cost, single-source drugs and biologics without generic or biosimilar competition; reduce the out-of-pocket cap for
Medicare Part D beneficiaries to $2,000 starting in 2025, effectively eliminating the so-called “donut hole” for Medicare Part
D; require companies to pay rebates to Medicare for drug prices that increase faster than inflation; and delay the rebate rule that
would limit the fees that pharmacy benefit managers can charge, among other areas. The effect of the IRA on our business and the
healthcare industry in general is not yet known.
At the state level, individual states are increasingly aggressive in passing legislation and implementing 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. In addition, regional health care authorities and individual hospitals are
increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their
prescription drug and other health care programs. These measures could reduce the ultimate demand for our products, once approved,
or put pressure on our product pricing. We expect that additional state and federal healthcare reform measures will be adopted in the
future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which
could result in reduced demand for our product candidates or additional pricing pressures.
There have been, and likely will continue to be, legislative and regulatory proposals at the national level in the United States and
other jurisdictions globally, as well as at some regional, state and/or local levels within the United States or other jurisdictions,
directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. Such reforms could have an
adverse effect on anticipated revenues 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.
Additional Regulation
In addition to the foregoing, state, and federal laws regarding environmental protection and hazardous substances, including the
Occupational Safety and Health Act, the Resource Conservation and Recovery Act, and the Toxic Substances Control Act, affect our
business. These and other laws govern the use, handling, and disposal of various biologic, chemical, and radioactive substances used
in, and wastes generated by, operations. If our operations result in contamination of the environment or expose individuals to
hazardous substances, we could be liable for damages and governmental fines. Equivalent laws have been adopted in third countries
that impose similar obligations.
Human Capital
As of December 31, 2023, we had 407 full-time employees. No employees were represented by labor unions or subject to
collective bargaining agreements. The majority of employees were based in Boston, Massachusetts with additional employees based in
Framingham, Massachusetts, Mission Bay, California and Switzerland. 74 employees held Ph.D., Pharm. D., or M.D. degrees. 355
engaged primarily in research and development or technical operations, and 52 engaged in business development, finance, information
systems, facilities, human resources, legal functions, or administrative support. We consider our employee relations to be good.
We are dedicated to conducting business with the highest standards of corporate responsibility. Our goal is to build a culture of
diverse and passionate people striving to positively impact patients, our communities, and broader society. Our human capital resource
priorities include attracting, recruiting, retaining, incentivizing and integrating our existing and new employees. We believe that a
diverse, equitable, and inclusive workplace allows our company to best fulfill our mission. We are committed to continuing our efforts
to increase diversity throughout our company and foster an inclusive work environment that supports our employees and the
communities we serve. We have established a Diversity, Equity and Inclusion Committee that is working to amplify this focus at the
company. In all the countries in which we operate, it is our policy to fully comply with all applicable laws regarding discrimination in
the workplace. We are committed to recruiting the best people for the job regardless of gender, race, ethnicity, age, disability, sexual
orientation, gender identity, cultural background, or religious belief.
The principal purposes of our comprehensive equity and cash compensation and benefits programs are to attract, motivate,
retain, and reward new and existing employees. We do this by using a mix of compensation elements that balance achievement of our
short-term goals with our long-term performance. In addition, employees are eligible to participate in our standard employee benefit
plans, such as our retirement, health and welfare benefits plans, including medical, dental, and life and disability insurance plans. We
also offer our employees the opportunity to participate in a tax-qualified retirement plan, or the 401(k) Plan, and have the ability to
make matching contributions under the 401(k) Plan, which is competitive with other companies in our industry.
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We consider our human capital resources strategy to be comprehensive and is built around our core way of working:
collaborative, undaunted, entrepreneurial, and results-oriented. We foster a strong relationship with and among our employees with
ongoing efforts such as employee surveys, training and development programs, and other programs, including skill development
courses, manager training, leadership development opportunities, tuition reimbursement and robust online course training libraries for
reference on a myriad of development topics. We also support cross-functional career development pathways, in addition to traditional
promotions within functions in the organization. We plan to continue to evolve and add to our suite of human capital resources as we
grow.
Information Available on the Internet
Investors and others should note that we announce material information to our investors using our investor relations website
(https://crisprtx.gcs-web.com/), SEC filings, press releases, public conference calls and webcasts. We use these channels as well as
social media to communicate with the public about our company, our business, our product candidates and other matters. It is possible
that the information we post on social media could be deemed to be material information. Therefore, we encourage investors, the
media, and others interested in our company to review the information we post on the social media channels listed on our investor
relations website. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, including
exhibits, proxy and information statements and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of
the Exchange Act are available on our website free of charge as soon as reasonably practicable after we electronically file such
material with, or furnish it to, the SEC at its website (https://www.sec.gov).
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Item 1A. Risk Factors.
This report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially
from those discussed in this report. Factors that could cause or contribute to these differences include, but are not limited to, those
discussed below and elsewhere in this report and in any documents incorporated in this report by reference.
You should carefully consider the following risk factors, together with all other information in this report, including our
financial statements and notes thereto, and in our other filings with the Securities and Exchange Commission. If any of the following
risks, or other risks not presently known to us or that we currently believe to not be significant, develop into actual events, then our
business, financial condition, results of operations or prospects could be materially adversely affected. If that happens, the market
price of our common shares could decline, and shareholders may lose all or part of their investment.
Risks Related to Our Financial Position and Need for Additional Capital
We Have Incurred Significant Operating Losses Since Our Inception And Anticipate That We Will Incur Continued Losses For
The Foreseeable Future.
We have funded our operations through public and private offerings of our equity securities, private placements of our preferred
shares, convertible loans and collaboration agreements with strategic partners. While we were profitable for the year ended December
31, 2021 due to an upfront payment associated with our collaboration with Vertex, we do not expect to be profitable in future years.
Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our shareholders’
deficit and working capital. We anticipate that our expenses will increase substantially if and as we:
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continue our clinical trials for our various programs;
continue our current research programs and our preclinical and clinical development of product candidates;
seek to identify additional research programs and additional product candidates;
conduct IND supporting preclinical studies and initiate clinical trials for our product candidates;
initiate preclinical studies and clinical trials for any other product candidates we identify and choose to develop;
expand, maintain, enforce and/or defend our intellectual property estate;
seek marketing approvals for any of our product candidates that successfully complete clinical trials;
further develop our gene editing technology;
hire additional clinical, quality control and scientific personnel;
establish, expand or contract for manufacturing capabilities;
add operational, financial and management information systems and personnel, including personnel to support our product
candidate development;
acquire or in-license other technologies; and
establish a sales, marketing, and distribution infrastructure to commercialize any products for which we, or our partners
and collaborators, may obtain or have obtained marketing approval.
As a result, we expect to continue to incur significant and increasing operating losses for the foreseeable future. Because of the
numerous risks and uncertainties associated with developing gene editing product candidates, we are unable to predict the extent of
any future losses or when we will become profitable, if at all. Even if we do become profitable, we may not be able to sustain or
increase our profitability on a quarterly or annual basis.
We Will Need To Raise Substantial Additional Funding, Which Will Dilute Our Shareholders. If We Are Unable To Raise
Capital When Needed, We Would Be Forced To Delay, Reduce Or Eliminate Some Of Our Product Development Programs Or
Commercialization Efforts.
The development of gene editing product candidates is capital intensive. We expect our expenses to increase in connection with
our ongoing activities, particularly as we continue the research and development of, initiate preclinical studies and clinical trials for
and seek marketing approval for our product candidates. In addition, since we and our partner, Vertex, received the first-ever
marketing approval of a CRISPR-based gene editing therapy, CASGEVY, in 2023 in certain jurisdictions, and have received a
subsequent approval in 2024, and if we obtain marketing approval for any of our product candidates, we expect to incur significant
commercialization expenses related to product sales, marketing, manufacturing and distribution to the extent that such sales,
marketing, manufacturing and distribution are not the responsibility of Bayer, Vertex or other future collaborators. We may also need
to raise additional funds sooner if we choose to pursue additional indications or geographies for our product candidates or otherwise
expand more rapidly than we presently anticipate. Accordingly, we will need to obtain substantial additional funding in connection
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with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay,
reduce or eliminate certain of our research and development programs or future commercialization efforts.
As of December 31, 2023 and 2022, we had cash, cash equivalents and marketable securities of approximately $1,695.7 million
and $1,868.4 million, respectively. With our cash, cash equivalents and marketable securities on hand as of December 31, 2023, we
expect cash, cash equivalents and marketable securities to be sufficient to fund our current operating plan through at least the next 24
months.
Our future capital requirements will depend on, and could increase significantly as a result of, many factors, including:
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the scope, progress, results and costs of clinical trials, drug discovery, preclinical development, and laboratory testing for
our wholly owned and partnered product candidates;
the scope, prioritization and number of our research and development programs;
the costs, timing and outcome of regulatory review of our product candidates;
the costs of establishing and maintaining a supply chain for the development and manufacture of our product candidates;
the success of our collaborations with Vertex;
our ability to establish and maintain additional collaborations on favorable terms, if at all;
the achievement of milestones or occurrence of other developments that trigger payments under any additional
collaboration agreements we obtain;
the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under future
collaboration agreements, if any;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property
rights and defending intellectual property-related claims;
the costs of fulfilling our obligations under the Consent to Assignments, Licensing and Common Ownership and
Invention Management Agreement to reimburse other parties for costs incurred in connection with the prosecution and
maintenance of associated patent rights;
the extent to which we acquire or in-license other product candidates and technologies;
the costs of establishing or contracting for manufacturing capabilities if we obtain regulatory approvals to manufacture our
product candidates;
the costs of establishing or contracting for sales and marketing capabilities if we obtain regulatory approvals to market our
product candidates; and
our ability to establish and maintain healthcare coverage and adequate reimbursement.
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 product candidates. We cannot guarantee that future financing will be available in sufficient
amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may adversely affect the holdings or the rights of
our shareholders 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 shareholders
and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a shareholder. 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 collaborators or otherwise at an earlier stage than otherwise would be desirable and
we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to
us, any of which may have a material adverse effect on our business, operating results and prospects.
If we are unable to obtain funding on a timely basis, we may be required to significantly curtail, delay or discontinue one or
more of our research or development programs or the commercialization of any product candidate, 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.
We Have A Limited Operating History, Which May Make It Difficult To Evaluate Our Technology And Product Development
Capabilities And Predict Our Future Performance.
Our overall development efforts are ongoing and the first clinical trial for any of our product candidates was initiated at the end
of 2018. In general, our programs require preclinical and clinical development; regulatory and marketing approval in multiple
jurisdictions; obtaining manufacturing supply, capacity, and expertise; building a commercial organization; substantial investment and
significant marketing efforts before we generate any revenue from product sales. Our product candidates must be approved for
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marketing by the FDA or certain other health regulatory agencies, including the EMA, before we may commercialize any product.
Although we and our partner, Vertex, received the first-ever marketing approval of a CRISPR-based gene-editing therapy,
CASGEVY, in 2023 in certain jurisdictions, and have received a subsequent approval in 2024, we cannot guarantee we and Vertex
will receive additional marketing approvals for CASGEVY or we will receive marketing approvals for our other product candidates in
the future. For additional information, see also “Risk Factors —Risks Related to Our Relationships with Third Parties—We Have
Partnered With Vertex On Our Lead Program CASGEVY; Vertex Has Significant Control Over The CASGEVY Program” and “Risk
Factors —Risks Related to Our Business, Technology and Industry—If We Are Unable To Advance Our Product Candidates To
Clinical Development, Obtain Regulatory Approval And Ultimately Commercialize Our Product Candidates, Or Experience
Significant Delays In Doing So, Our Business Will Be Materially Harmed.”
Our limited operating history, particularly in light of the rapidly evolving gene editing field, may make it difficult to evaluate
our technology and industry and predict our future performance. Our short history as an operating company makes any assessment of
our future success or viability subject to significant uncertainty. We will encounter risks and difficulties frequently experienced by
early stage companies in rapidly evolving fields. If we do not address these risks successfully, our business will suffer. Similarly, we
expect that our financial condition and operating results will fluctuate significantly from quarter to quarter and year to year due to a
variety of factors, many of which are beyond our control. As a result, our shareholders should not rely upon the results of any
quarterly or annual period as an indicator of future operating performance.
In addition, as a development stage company, we have encountered unforeseen expenses, difficulties, complications, delays and
other known and unknown circumstances. As we advance our product candidates, we will need to continue to transition from a
company with a research focus to a company focused on researching, developing, manufacturing and commercializing product
candidates, as applicable. We may not be successful in such a transition.
Our Ability To Use Tax Loss Carryforwards In Switzerland May Be Limited.
Under Swiss law, we are entitled to carry forward losses we incur for a period of seven years and we can offset future profits, if
any, against such losses. Tax losses are only finally assessed by the tax authorities when offset with taxable profit (which will not be
the case if we are loss making). If not used, these tax losses will expire seven years after the year in which they occurred. Due to our
limited income, there is a high risk that the tax loss carry forwards will expire partly or entirely and as a result they would not be
applied to reduce future cash tax payments.
Risks Related to Our Business, Technology and Industry
If We Are Unable To Advance Our Product Candidates To Clinical Development, Obtain Regulatory Approval And Ultimately
Commercialize Our Product Candidates, Or Experience Significant Delays In Doing So, Our Business Will Be Materially Harmed.
Our development efforts are ongoing and we have focused our research and development efforts to date on CRISPR/Cas9, gene
editing technology, and our initial product candidates. Our future success depends heavily on the successful development of our
CRISPR/Cas9 gene editing next-generation product candidates. We have invested substantially all of our efforts and financial
resources in the identification and development of our current product candidates. Our ability to generate product revenue will depend
heavily on the successful development and eventual commercialization of our product candidates, which may never occur. For
example, while we and our partner, Vertex, received the marketing approval of CASGEVY in 2023 in certain jurisdictions, and have
received a subsequent approval in 2024, we cannot guarantee we and Vertex will receive additional marketing approvals for
CASGEVY or we will receive marketing approvals for our other product candidates in the future, and our research programs,
including additional programs subject to current and future collaboration agreements with third parties, may fail to identify potential
product candidates for clinical development for a number of reasons or may fail to successfully advance any product candidates
through clinical development. Our potential product candidates, or our potential product candidates may be shown to have harmful
side effects or may have other characteristics or unforeseeable consequences that may make the product candidates impractical to
manufacture, unmarketable, or unlikely to receive marketing approval, or that lead to product-related claims or litigation, including
without limitation personal injury/product liability claims, adverse or serious adverse events, regulatory enforcement actions, or
product recalls or market withdrawals . We currently generate no revenue from sales of any product and we may never be able to
again research, develop or commercialize a marketable product.
We must file U.S. Investigational New Drug, or IND, applications, clinical trial applications, or CTAs, or their equivalents with
regulatory authorities to commence clinical trials. The filing of CTAs or INDs for any product candidate is subject to the identification
and selection of one or more guide RNAs with acceptable efficiency, among other activities. In addition, commencing any future
clinical trial is also subject to acceptance by the European regulatory authorities, or its equivalent, of our CTAs, or the FDA of our
INDs, and finalizing the trial design based on discussions with the applicable regulatory authorities. In the event that the European
regulatory authorities, FDA or their equivalent require us to complete additional preclinical studies or we are required to satisfy other
requests, our clinical trials may be delayed. Even after we receive and incorporate guidance from these regulatory authorities, they
could disagree that we have satisfied their requirements to commence our clinical trial or change their position on the acceptability of
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our trial design or the clinical endpoints selected, which may require us to complete additional preclinical studies or clinical trials or
impose stricter approval conditions than we currently expect. In addition, there is no certainty that the FDA or other similar health
regulatory agencies will continue to apply to all our CRISPR/Cas9 product candidates the same regulatory pathway and requirements
it applied to CASGEVY, and is applying to other ex vivo engineered therapeutics and in vivo therapies.
To become and remain profitable, we must develop and commercialize product candidates with significant market potential,
which will require us to be successful in a range of challenging activities. In general, our product candidates require preclinical and
clinical development; regulatory and marketing approval in multiple jurisdictions; obtaining manufacturing supply, capacity, and
expertise; building of a commercial organization; substantial investment and significant marketing efforts before we generate any
revenue from product sales. In addition, our product development programs must be approved for marketing by the FDA, EMA or
certain other health regulatory agencies, before we may commercialize our product candidates. We may never succeed in any or all of
these activities and, even if we do, we may never generate revenues that are significant or large enough to achieve profitability.
Although we and our partner, Vertex, received the first-ever marketing approval of a CRISPR-based gene-editing therapy,
CASGEVY, in 2023 in certain jurisdictions, and have received a subsequent approval in 2024, we cannot guarantee we and Vertex
will receive additional marketing approvals for CASGEVY or we will receive marketing approvals for our other product candidates in
the future, or that CASGEVY, or any other future product candidate we develop, will be profitable. For additional information, see
also “Risk Factors—Risks Related to Our Relationships with Third Parties—We Have Partnered With Vertex On Our Lead Program
CASGEVY; Vertex Has Significant Control Over The CASGEVY Program.”
If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure
to become and remain profitable would decrease our value and could impair our ability to raise capital, maintain our research and
development efforts, expand our business or continue our operations. A decline in our value also could cause shareholders to lose all
or part of their investment.
The success of our product candidates will depend on several factors, including the following:
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successful completion of clinical trials and preclinical studies;
sufficiency of our financial and other resources to complete the necessary clinical trials and preclinical studies;
ability to develop safe and effective delivery mechanisms for our in vivo therapeutic programs;
ability to identify optimal RNA sequences to guide genomic editing;
maintenance of current, and entry into additional, collaborations to further the development of our product candidates;
approval of CTAs or INDs for our product candidates to commence clinical trials;
successful enrollment in, and completion of, clinical trials and preclinical studies;
successful data from our clinical program that support an acceptable risk-benefit profile of our product candidates for the
intended patient populations;
receipt of regulatory and marketing approvals from applicable regulatory authorities;
establishing and maintaining arrangements with third-party manufacturers for clinical supply and commercial
manufacturing and, where applicable, commercial manufacturing capabilities;
successful development of our internal manufacturing processes and transfer to larger-scale facilities operated by either a
contract manufacturing organization or by us;
establishment and maintenance of patent and trade secret protection or regulatory exclusivity for our product candidates;
commercial launch of our product candidates, if and when approved, whether alone or in collaboration with others;
acceptance of the product candidates, if and when approved, by patients, the medical community and third-party payors;
effective competition with other therapies and treatment options;
establishment and maintenance of healthcare coverage and adequate reimbursement;
enforcement and defense of intellectual property rights and claims;
maintenance of a continued acceptable safety profile of the product candidates following approval; and
achieving desirable medicinal properties for the intended indications.
Additionally, because our technology involves gene editing across multiple cell and tissue types, we are subject to many of the
challenges and risks that gene therapies face, including:
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regulatory requirements and guidance governing gene and cell therapy products have changed frequently and may
continue to change in the future, including, e.g., the final guidance document titled “Human Gene Therapy Products
Incorporating Human Genome Editing” that the FDA issued in January 2024;
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to date, only a limited number of products that involve the genetic modification of patient cells have been approved in the
United States and the EU;
the administration processes or related procedures for our product candidates (e.g., treatment with myeloablative busulfan
conditioning prior to receiving CASGEVY or undergoing a lymphodepletion regimen prior to receiving our
immunotherapy product candidates);
improper modulation of a gene sequence, including unintended editing events, insertion of a gene sequence into certain
locations in a patient’s chromosome or other effects related to the technology underlying our product candidates could
lead to lymphoma, leukemia or other cancers, or other aberrantly functioning cells, or other diseases, including death;
transient expression of the Cas9 protein or other genome editing components of our product candidates could lead to
patients having an immunological reaction towards those cells, which could be severe or life-threatening;
corrective expression of a missing protein in patients’ cells could result in the protein being recognized as foreign, and
lead to a sustained immunological reaction against the expressed protein or expressing cells, which could be severe or life-
threatening; and
the FDA recommends a follow-up observation period of up to 15 years for all patients who receive treatment using gene
therapies, and we may need to adopt and support, and have adopted and are supporting for certain of our trials, such an
observation period for our product candidates.
If we do not succeed in one or more of these factors in a timely manner or at all, we could experience significant delays or an
inability to successfully commercialize our product candidates, which would materially harm our business. Ultimately, if we do not
receive regulatory approvals for our product candidates, we may not be able to continue our operations.
In addition, if any product candidates encounter safety or efficacy problems, development delays, regulatory issues or other
problems, our development plans and business could be significantly harmed. For the reasons described above, among others,
regulatory authorities, particularly the FDA, have requested, and may request in the future, additional preclinical studies for genome
editing products, such as additional studies related to toxicology, biodistribution or reproductive health, and/or preclinical studies
earlier in clinical development compared to other therapeutic modalities. Although to date the FDA has cleared the INDs that we have
submitted for certain of our clinical trials, including CTX112 and CTX131, it is possible that the FDA may impose requirements that
result in a delay of any of our programs or their regulatory approval. If we are unable to complete any required studies satisfactorily,
the FDA or other regulatory authorities could require that we exclude certain patient populations from clinical studies, place our
clinical studies on hold, or require us to cease further clinical studies or deny approval of such product candidates. Further,
competitors that are developing ex vivo or in vivo products with similar technology may experience problems with their product
candidates or programs that could in turn cause us to identify problems with our product candidates and programs, or cause the FDA
or other regulatory authorities to impose additional requirements, that could cause us to delay or pause development of our product
candidates. Any of these occurrences may harm our ability to identify and develop product candidates, and may harm our business,
financial condition, results of operations and prospects significantly. We cannot guarantee that the FDA or other regulatory authorities
will not change their requirements in the future or approve amendments to our INDs or equivalent regulatory filings, including for
CTX310 and CTX320 or our other product candidates on the timeline we expect.
Our CRISPR/Cas9 Gene Editing Product Candidates Are Based On A Relatively New Gene Editing Technology, Which Makes
It Difficult To Predict The Time And Cost Of Development And Of Subsequently Obtaining Regulatory Approval, If At All. There Have
Only Been A Limited Number Of Clinical Trials Of Product Candidates Based On Gene Editing Technology.
We aim to develop treatments and therapies for people suffering from serious diseases through transformative gene-based
medicines, including ex vivo engineered cell therapies and in vivo therapies. Although there have been significant advances in recent
years in the fields of gene therapy and genome editing, including CRISPR/Cas9 gene editing technology, such technologies, including
in vivo CRISPR-based genome editing technologies in particular, are relatively new and only a limited number of clinical trials of
product candidates based on such gene editing technologies have been commenced and their therapeutic utility is largely unproven. As
such it is difficult to accurately predict the developmental challenges we may incur for our product candidates as they proceed through
product discovery or identification, preclinical studies and clinical trials. For example, no genome editing in vivo therapy has been
approved by the FDA or other regulatory authorities. While we and our partner, Vertex, received the first-ever approval for an ex-vivo
CRISPR-based gene-editing therapy, CASGEVY, in 2023 in certain jurisdictions, and have received a subsequent approval in 2024,
we and Vertex cannot guarantee we will receive additional marketing approvals for CASGEVY or that we will receive marketing
approvals for our other product candidates in the future. In addition, because we have only recently commenced clinical trials for
certain of our other product candidates, we have not yet been able to fully assess safety in humans. There may be long-term effects
from treatment with any product candidates that we develop that we cannot predict at this time. Any product candidates we may
develop will act at the level of DNA, and, because animal DNA differs from human DNA, testing of our product candidates in animal
models may not be predictive of the results we observe in human clinical trials of our product candidates for either safety or efficacy.
Also, animal models may not exist for some of the diseases we choose to pursue in our programs. As a result of these factors, it is
more difficult for us to predict the time and cost of product candidate development, and we cannot predict whether the application of
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our gene editing technology, or any similar or competitive gene editing technologies, will result in the identification, development, and
regulatory approval of any products. There can be no assurance that any development problems we experience in the future related to
our gene editing technology or any of our research and development programs will not cause significant delays or unanticipated costs,
or that such development problems can be solved. Any of these factors may prevent us from completing our preclinical studies or any
clinical trials that we may initiate or commercializing any product candidates we may develop on a timely or profitable basis, if at all.
The clinical trial requirements of the FDA, the EMA and other regulatory authorities and the criteria these regulators use to
determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use
and market of the product candidate. Although we and our partner, Vertex, received the marketing approval of CASGEVY in 2023 in
certain jurisdictions, and have received a subsequent approval in 2024, we cannot guarantee we and Vertex will receive additional
marketing approvals for CASGEVY or we will receive marketing approvals for our other product candidates in the future, and the
regulatory approval process for product candidates such as ours remains uncertain and may be more expensive and take longer than
the approval process for product candidates based on other, better known or more extensively studied technologies. It is difficult to
determine how long it will take or how much it will cost to obtain regulatory approvals for our future product candidates in either the
United States or the EU or how long it will take to commercialize our product candidates. Delay or failure to obtain, or unexpected
costs in obtaining, the regulatory approval necessary to bring a potential product candidate to market could decrease our ability to
generate sufficient product revenue, and our business, financial condition, results of operations and prospects may be harmed.
Our Engineered Allogeneic T cell Product Candidates Represent A Novel Approach To Cancer Treatment That Creates
Significant Challenges For Us.
For our immuno-oncology programs, we are developing a pipeline of allogeneic T cell product candidates (including, for
example, CTX112 and CTX131) that are engineered from healthy donor T cells to express chimeric antigen receptors, or CARs, and
are intended for use in any patient with certain cancers. Unlike for autologous CAR T therapies, for allogeneic CAR T therapies, we
are reliant on receiving healthy donor material to manufacture our product candidates. Healthy donor T cells vary in type and quality,
and this variation makes producing standardized allogeneic CAR T product candidates challenging and makes the development and
commercialization pathway of those product candidates uncertain.
We have developed screening processes designed to enhance the quality and consistency of T cells used in the manufacture of
our CAR T cell product candidates, but our screening processes may fail to identify suitable donor material and we may discover
failures with the material after production. We may also have to update our specifications for new risks that may emerge, such as to
screen for new viruses.
We have strict specifications for donor material, which include specifications required by regulatory authorities. If we are
unable to identify and obtain donor material that satisfy specifications, agree with regulatory authorities on appropriate specifications,
or address variability in donor T cells, there may be inconsistencies in the product candidates we produce or we may be unable to
initiate or continue ongoing clinical trials on the timelines we expect, which could harm our reputation and adversely impact our
business and prospects.
In addition, approved autologous CAR T therapies and those under development have shown frequent rates of cytokine release
syndrome, neurotoxicity, serious infections, prolonged cytopenia and hypogammaglobulinemia, and other serious adverse events that
have resulted in patient deaths. We expect similar adverse events for our allogeneic CAR T product candidates. Moreover, patients
eligible for allogeneic CAR T cell therapies but ineligible for autologous CAR T cell therapies due to aggressive cancer and inability
to wait for autologous CAR T cell therapies may be at greater risk for complications and death from therapy. Our allogeneic CAR T
cell product candidates may also cause unique adverse events related to the differences between the donor and patients, such as Graft
versus Host Disease, or GvHD, or infusion reactions. GvHD results when allogeneic T cells start recognizing the patient’s normal
tissue as foreign.
We have designed our CRISPR/Cas9 gene editing technology to eliminate the T-cell receptor from the healthy donor T cells to
reduce the risk of GvHD from our product candidates, as well as to remove the class I major histocompatibility complex from the cell
surface in order to limit the patient’s immune system from attacking the allogeneic T cells and to improve the persistence of the CAR
T cells. However, the gene editing of our product candidates may not be successful in limiting the risk of GvHD or premature
rejection by the patient. In addition, results of our immuno-oncology clinical trials could reveal a high and unacceptable severity and
prevalence of side effects or unexpected characteristics.
If significant GvHD or other adverse events are observed with the administration of our product candidates, or if any of the
product candidates is viewed as less safe or effective than autologous therapies or other allogenic therapies, our ability to develop
allogeneic therapies may be adversely affected.
Further, in November 2023, the FDA announced that it would be conducting an investigation into reports of T-cell malignancies
following BCMA-directed or CD19-directed autologous chimeric antigen receptor, or CAR T cell immunotherapies following reports
of T cell lymphoma in patients receiving these therapies. In January 2024, the FDA determined that new safety information related to
T cell malignancies should be included in the labeling with boxed warning language on these malignancies for all BCMA- and CD19-
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directed genetically modified autologous T cell immunotherapies. FDA’s investigation into CAR T therapies and other similar actions
could result in increased government regulation, unfavorable public perception and publicity, and, although we are developing
allogeneic CAR T candidates, the FDA’s investigation could result in potential impacts on enrollment in our clinical trials, potential
regulatory delays in the testing or approval of our product candidates, stricter labeling requirements for those product candidates that
are approved, and a decrease in demand for any such product candidates.
The FDA, The NIH And The EMA Have Demonstrated Caution In Their Regulation Of Gene Therapy Treatments, And Ethical
And Legal Concerns About Gene Therapy And Genetic Testing May Result In Additional Regulations Or Restrictions On The
Development And Commercialization Of Our Product Candidates, Which May Be Difficult To Predict.
The FDA, NIH and the EMA have each expressed interest in further regulating biotechnology, including gene therapy and
genetic testing. For example, the EMA advocates a risk-based approach to the development of a gene therapy product. Agencies at
both the federal and state level in the United States, as well as the U.S. congressional committees and other governments or governing
agencies, have also expressed interest in further regulating the biotechnology industry. Such action may delay or prevent
commercialization of some or all of our product candidates.
Regulatory requirements in the United States and in other jurisdictions governing gene therapy products have changed
frequently and may continue to change in the future. The FDA has issued several guidance documents on gene therapy products. The
FDA established the Office of Therapeutic Products within its Center for Biologics Evaluation and Research to consolidate the review
of gene therapy and related products, and established the Cellular, Tissue and Gene Therapies Advisory Committee to advise this
review. In addition to the government regulators, the IBC and IRB of each institution at which we conduct clinical trials of our product
candidates, or a central IRB if appropriate, would need to review the proposed clinical trial to assess the safety of the trial. In addition,
adverse developments in clinical trials of gene therapy product candidates conducted by others may cause the FDA or other oversight
authorities to change the requirements for approval of any of our product candidates. Similarly, the EMA governs the development of
gene therapies in the EU and may issue new guidelines concerning the development and marketing authorization for gene therapy
products and require that we comply with these new guidelines. These regulatory review agencies and committees and the new
requirements or guidelines they promulgate may lengthen the regulatory review process, require us to perform additional studies or
trials, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and
commercialization of our product candidates or lead to significant post-approval limitations or restrictions. As we advance our product
candidates and seek regulatory approval, we will be required to consult with these regulatory agencies and committees and comply
with applicable requirements and guidelines. If we fail to do so, we may be required to delay or discontinue development of such
product candidates. These additional processes may result in a review and approval process that is longer than we otherwise would
have expected. Delays as a result of an increased or lengthier regulatory approval process or further restrictions on the development of
our product candidates can be costly and could negatively impact our or our collaborators’ ability to complete clinical trials and
commercialize our current and future product candidates in a timely manner, if at all.
If Any Of The Product Candidates We May Develop Or Administration Processes We Rely On Cause Undesirable Side Effects,
It Could Delay Or Prevent Their Regulatory Approval, Limit The Commercial Potential Or Result In Significant Negative
Consequences Following Any Potential Marketing Approval.
Product candidates we may develop may be associated with undesirable or unacceptable side effects, unexpected characteristics
or other serious adverse events, including death or off-target cuts of DNA, or the introduction of cuts in DNA at locations other than
the target sequence. These off-target cuts could lead to disruption of a gene or a genetic regulatory sequence at an unintended site in
the DNA, or, in those instances where we also provide a segment of DNA to serve as a repair template, it is possible that following
off-target cut events, DNA from such repair template could be integrated into the genome at an unintended site, potentially disrupting
another important gene or genomic element.
There also is the potential risk of delayed adverse events following exposure to gene editing therapy due to persistent biologic
activity of the genetic material or other components of products used to carry the genetic material. Possible adverse side effects that
could occur with treatment with gene editing products include an immunologic reaction after administration which could substantially
limit the effectiveness of the treatment.
Immunotherapy, and its method of action of harnessing the body’s immune system, is powerful and could lead to serious side
effects that we only discover in clinical trials. Unforeseen side effects could arise either during clinical development or, if such side
effects are rare, after our product candidates have been approved by regulatory authorities and the approved product has been
marketed, resulting in the exposure of additional patients. If our CRISPR/Cas9 gene editing technology demonstrates a similar effect,
we may decide or be required to halt or delay preclinical development, clinical development or commercialization of our product
candidates.
In addition to serious adverse events or side effects caused by any product candidate we may develop, the administration process
or related procedures also can cause undesirable side effects. For example, patients who receive CASGEVY or enroll in the ongoing
CASGEVY clinical trials have their own CRISPR/Cas9 edited-hematopoietic stem and progenitor cells, CASGEVY, infused back into
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the patient as part of a stem cell transplant, a process which involves, among other things, a patient being treated with myeloablative
busulfan conditioning. Patients undergoing stem cell transplants may also encounter side effects (ranging from mild to severe) that are
unrelated to the administration of a product candidate. Patients who enroll in our immunotherapy trials undergo a lymphodepletion
regimen, which generally includes fludarabine and cyclophosphamide that may cause serious adverse events. Because these regimens
will cause a transient and sometimes prolonged immune suppression, patients will have an increased risk of certain infections that may
be unable to be cleared by the patient and could ultimately lead to death. Any side effects may not be appropriately recognized or
managed by the treating medical staff. We or our collaborators expect to have to educate medical personnel using any product
candidates we may develop to understand the side effect profiles for our clinical trials and upon any commercialization of such
product candidates. Inadequate recognition or management of the potential side effects of such product candidates could result in
patient injury or death. If any undesirable or unacceptable side effects, unexpected characteristics or other serious adverse events
occur, our clinical trials or commercial distribution of any product candidates or products we develop alone or with collaborators
could be suspended or terminated, and our business and reputation could suffer substantial harm.
If in the future we are unable to demonstrate that such adverse events were caused by factors other than our product candidate or
approved products, the FDA, EMA or other comparable health regulatory authorities could order us to cease further clinical studies of,
or deny approval of, any product candidates we are able to develop for any or all targeted indications or cease the sale of approved
products. Even if we are able to demonstrate that all future serious adverse events are not product-related, such occurrences could
affect patient recruitment or the ability of enrolled patients to complete the trial. Moreover, if we elect, or are required, to delay,
suspend or terminate any clinical trial of any product candidate, the commercial prospects of such product candidates may be harmed
and our ability to generate product revenues from any of these product candidates may be delayed or eliminated. Any of these
occurrences may harm our ability to identify and develop product candidates, and may harm our business, financial condition, result of
operations and prospects significantly.
Additionally, if we successfully develop a product candidate and it receives marketing approval, the FDA could require us to
adopt a Risk Evaluation and Mitigation Strategy, or REMS, to ensure that the benefits of treatment with such product candidate
outweighs the risks for each potential patient, which may include, among other things, a medication guide outlining the risks of the
product for distribution to patients, a communication plan to health care practitioners, extensive patient monitoring, or distribution
systems and processes that are highly controlled, restrictive, and more costly than what is typical for the industry. Furthermore, if we
or others later identify undesirable side effects caused by any product candidate that we develop alone or with our collaborators,
several potentially significant negative consequences could result, including:
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regulatory authorities may revoke licenses or suspend, vary or withdraw approvals of such product candidate;
regulatory authorities may require additional warnings on the label;
we may be required to change the way a product candidate is administered or conduct additional clinical trials;
we could be sued and held liable for harm caused to patients; and
our reputation may suffer.
Moreover, gene therapy product candidates investigated by other parties have resulted in serious adverse events, including
deaths, and it is possible that the FDA or other regulatory authorities could impose a clinical hold on clinical trials of our product
candidates after becoming aware of adverse events with products or product candidates in the same class as our product candidates.
Any of these events could prevent us from achieving or maintaining market acceptance of our gene editing technology and any
product candidates we may identify and develop and could have a material adverse effect on our business, financial condition, results
of operations and prospects.
If We Experience Delays Or Difficulties In The Enrollment Of Patients In Clinical Trials, Our Receipt Of Necessary Regulatory
Approvals Could Be Delayed Or Prevented.
We or our collaborators may not be able to initiate or continue clinical trials for any product candidates we identify or develop if
we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or
analogous regulatory authorities outside the United States, or as needed to provide appropriate statistical power for a given trial.
Enrollment may be particularly challenging for any rare genetically defined diseases we may target in the future. In addition, if
patients are unwilling to participate in our gene editing trials because of negative publicity from adverse events related to the
biotechnology, gene therapy or gene editing fields, competitive clinical trials for similar patient populations, clinical trials with
competing products, or for other reasons, the timeline for recruiting patients, conducting studies and obtaining regulatory approval of
any product candidates we may develop may be delayed. Moreover, some of our competitors may have ongoing clinical trials for
product candidates that would treat the same indications as any product candidates we may develop, and patients who would otherwise
be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates.
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Patient enrollment is also affected by other factors, including:
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severity of the disease under investigation;
size of the patient population and process for identifying subjects;
design of the trial protocol;
availability of eligible prospective patients that are otherwise eligible patients for competitive clinical trials;
availability and efficacy of approved medications for the disease under investigation;
availability of genetic testing for potential patients;
ability to obtain and maintain subject consent;
risk that enrolled subjects will drop out before completion of the trial;
eligibility and exclusion criteria for the trial in question;
perceived risks and benefits of the product candidate under trial;
perceived risks and benefits of gene editing and cellular therapies as therapeutic approaches;
efforts to facilitate timely enrollment in clinical trials;
patient referral practices of physicians;
ability to monitor patients adequately during and after treatment; and
proximity and availability of clinical trial sites for prospective patients.
Enrollment delays in our clinical trials may result in increased development costs for any product candidates we may develop,
which would cause our value to decline and limit our ability to obtain additional financing. If we or our collaborators have difficulty
enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit, or terminate ongoing or
planned clinical trials, any of which would have an adverse effect on our business, financial condition, results of operations, and
prospects.
Positive Results From Early Preclinical Studies Or Preliminary Results from Clinical Trials Of Our Product Candidates Are
Not Necessarily Predictive Of The Results Of Later Preclinical Studies And Any Future Clinical Trials Of Our Product Candidates. If
We Cannot Replicate The Positive Results From Our Earlier Preclinical Studies Of Our Product Candidates In Our Later Preclinical
Studies, Clinical Trials And Future Clinical Trials, We May Be Unable To Successfully Develop, Obtain Regulatory Approval For
And Commercialize Our Product Candidates.
Any positive results from our preclinical studies or preliminary results from our clinical trials of our product candidates may not
necessarily be predictive of the results from required later preclinical studies and clinical trials. Preliminary, interim and top-line data
from clinical trials may change as more patient data become available. Preliminary, interim or top-line data from clinical trials are not
necessarily predictive of final results, including the results submitted in support of approval in a BLA or equivalent submission outside
the United States. Interim, top-line and preliminary data remain subject to audit and verification procedures that may result in the final
data being materially different from the preliminary data we previously announced. As a result, preliminary, interim and top-line data
should be viewed with caution until the final data are available. Material adverse changes in the final data compared to the interim
data could significantly harm our business prospects. Moreover, preliminary, interim and top-line data are subject to the risk that one
or more of the clinical outcomes may materially change as more patient data become available when patients mature on study, patient
enrollment continues or as other ongoing or future clinical trials with a product candidate further develop. For example, consistent
with the FDA's recommendation, certain of our clinical trials include a 15 year follow-up observation period in which we will
continue to collect patient data.
The information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically more
extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to
include in our disclosure. Any information we determine not to disclose may ultimately be deemed significant with respect to future
decisions, conclusions, views, activities or otherwise regarding a particular product candidate or our business. Similarly, even if we
are able to complete our planned preclinical studies or any future clinical trials of our product candidates according to our current
development timeline, the positive results from such preclinical studies and clinical trials of our product candidates may not be
replicated in subsequent preclinical studies or clinical trial results.
Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical
trials after achieving positive results in early-stage development and we cannot be certain that we will not face similar setbacks.
Similarly, many companies in the pharmaceutical and biotechnology industries have failed to receive regulatory approval despite
completing registration trials. These setbacks have been caused by, among other things, preclinical and other nonclinical findings
made while clinical trials were underway or safety or efficacy observations made in preclinical studies and clinical trials, including
previously unreported adverse events. Moreover, preclinical, nonclinical and clinical data are often susceptible to varying
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interpretations and analyses and many companies that believed their product candidates performed satisfactorily in preclinical studies
and clinical trials nonetheless failed to obtain FDA or EMA approval.
Even If We Complete The Necessary Preclinical Studies And Clinical Trials, The Marketing Approval Process Is Expensive,
Time-Consuming, And Uncertain And May Prevent Us From Obtaining Approvals For The Commercialization Of Any Product
Candidates We May Develop. If We Are Not Able To Obtain, Or If There Are Delays In Obtaining, Required Regulatory Approvals,
We Will Not Be Able To Commercialize, Or Will Be Delayed In Commercializing, Product Candidates We May Develop, And Our
Ability To Generate Revenue Will Be Materially Impaired.
Any product candidates we may develop and the activities associated with their development and commercialization, including
their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale, and
distribution, are subject to comprehensive regulation by the FDA and other regulatory authorities in the United States, by EMA in the
EU and by comparable authorities in other countries. Failure to obtain marketing approval for a product candidate will prevent us from
commercializing the product candidate in a given jurisdiction. While CASGEVY has received approval or clearance to be marketed
from certain regulatory authorities in certain jurisdictions, it is possible that none of our other product candidates or any product
candidates we may seek to develop, alone or in conjunction with collaborators, in the future will ever obtain regulatory approval or
clearance or that we and Vertex will receive additional marketing approvals for CASGEVY. For example, while we have multiple
product candidates in clinical development and advanced preclinical development for a range of diseases, we have not yet submitted
BLAs for any of our wholly-owned allogeneic CAR T product candidates to the FDA, or similar marketing applications to comparable
foreign authorities.
We have limited experience in submitting and supporting the applications necessary to gain regulatory and marketing approvals.
We expect to rely on third-party contract research organizations, or CROs, and/or regulatory consultants to assist us in this process for
our wholly-owned product candidates and, pursuant to our Amended A&R Vertex JDCA, we have relied on Vertex for submitting
such applications for our hemoglobinopathies product candidates. Submission of a BLA or other similar marketing applications to
comparable foreign authorities and securing regulatory approval requires the submission of extensive preclinical and clinical data and
supporting information to the various regulatory authorities for each therapeutic indication to establish the biologic product
candidate’s safety, purity, efficacy and potency, also known as safety and effectiveness, for each desired therapeutic indication. A
BLA must also include significant information regarding the chemistry, manufacturing and controls for the product candidate.
Securing regulatory approval also requires the submission of information about the product manufacturing process to, and inspection
of manufacturing facilities by, the relevant regulatory authority.
In general, the FDA requires the successful completion of two pivotal trials to support approval of a BLA, but in certain
circumstances, will approve a BLA based on only one pivotal trial; and 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. For example, there is no
assurance that data obtained at the completion of any of our clinical trials, including for our ongoing wholly-owned product
candidates, including CTX112 and CTX131, will indicate clinically meaningful benefit or support submission of a BLA, or will be
sufficiently robust from a safety and/or efficacy perspective to support either accelerated or conditional approval or full approval.
Moreover, there is no assurance that the data obtained to date in the ongoing clinical trials of CASGEVY and being submitted or
planned to be submitted is or will be sufficiently robust from a safety and/or efficacy perspective to support either accelerated or
conditional approval or full approval of a BLA or a foreign equivalent in all jurisdictions for which regulatory applications are
submitted. Depending on the outcome of these ongoing clinical trials, and robustness of the data submitted, once submitted, the FDA
may require that we conduct additional or larger pivotal trials before we can submit or obtain approval of a BLA. Furthermore, if any
undesirable or unacceptable side effects, unexpected characteristics or other serious adverse events occur, and if we are unable to
demonstrate such adverse events were caused by factors other than our product candidate, the FDA, EMA or other comparable health
regulatory authorities could suspend our clinical trial until we are able to gather sufficient information or order us to cease further
clinical studies of our product candidate. If this were to occur this would likely result in delays in our ability to submit a BLA for
regulatory approval. We may face similar challenges with foreign regulatory authorities.
Furthermore, failure of one or more clinical trials can occur at any stage in the clinical trial process. Any product candidates we
develop may not be effective, may be only moderately effective, or may prove to have undesirable or unintended side effects,
toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use. Accordingly,
the regulatory pathway for our product candidates is still uncertain, complex, and lengthy, and ultimately, approval may not be
obtained. 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.
The process of obtaining marketing approvals, both in the United States and in other foreign jurisdictions, is expensive, may
take many years if additional clinical trials are required, if approval is obtained at all, and can vary substantially based upon a variety
of factors, including the type, complexity, and novelty of the product candidates involved. Changes in marketing approval policies
during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for
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each submitted product application, may cause delays in the approval or rejection of an application. The FDA and comparable
authorities in other countries have substantial discretion in the approval process and may refuse to accept any application or may
decide that our data are insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying
interpretations of the data obtained from preclinical and clinical testing could delay, limit, or prevent marketing approval of a product
candidate. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that
render the approved product not commercially viable.
If we experience delays in obtaining approval or if we fail to obtain approval of any product candidates we may develop, the
commercial prospects for those product candidates may be harmed, and our ability to generate revenues will be materially impaired.
We May Never Obtain FDA Approval For Any Of Our Wholly-Owned Product Candidates In The United States, And Even If We
Do, We May Never Obtain Approval For Or Commercialize Any Of Our Wholly-Owned Product Candidates In Any Other
Jurisdiction, Which Would Limit Our Ability To Realize Their Full Market Potential.
In order to eventually market any of our product candidates in any particular jurisdiction, we must establish and comply with
numerous and varying regulatory requirements on a jurisdiction-by-jurisdiction basis regarding safety and efficacy. Approval by the
FDA in the United States, if obtained, does not ensure approval by regulatory authorities in other countries or jurisdictions. Similarly,
approval by foreign regulatory authorities does not ensure approval by the FDA. In addition, clinical trials conducted in one country
may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory
approval in any other country. Approval processes vary among countries and can involve additional product testing and validation and
additional administrative review periods. Seeking regulatory approval in multiple jurisdictions could result in difficulties and costs for
us and require additional preclinical studies or clinical trials which could be costly and time-consuming. Regulatory requirements can
vary widely from country to country and could delay or prevent the introduction of our products in certain countries. Regulatory
approval processes outside the United States involve all of the risks associated with FDA approval. We do not have any wholly-owned
product candidates approved for sale in any jurisdiction, including international markets, and, as a company, do not have experience in
obtaining regulatory approval in international markets. If we fail to comply with regulatory requirements in international markets or to
obtain and maintain required approvals, or if regulatory approvals in international markets are delayed, our target market will be
reduced and our ability to realize the full market potential of our products will be unrealized.
Breakthrough Therapy Designation, Fast Track Designation, Regenerative Medicine Advanced Therapy Designation or Priority
Review by the FDA, or PRIME Scheme by the EMA, Even If Granted for Any of Our Product Candidates, May Not Lead to a Faster
Development, Regulatory Review or Approval Process, and It May Not Increase the Likelihood That Any of Our Product Candidates
Will Receive Marking Approval.
We may seek a Breakthrough Therapy Designation for some of our product candidates. Designation as a breakthrough therapy
is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteria for designation as
a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a
Breakthrough Therapy Designation for a product candidate may not result in a faster development process, review or approval
compared to therapies considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA.
In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that such
product candidates no longer meet the conditions for qualification or decide that the time period for FDA review or approval will not
be shortened.
We have obtained and may seek Fast Track Designation for some of our product candidates. For instance, CASGEVY was
granted Fast Track Designation by the FDA for the treatment of TDT and SCD. The FDA has broad discretion whether or not to grant
this designation, so even if we believe a particular product candidate is eligible for this designation; we cannot assure you that the
FDA would decide to grant it. Even if we do receive Fast Track Designation, we may not experience a faster development process,
review or approval compared to conventional FDA procedures. For Fast Track products, sponsors may have greater interactions with
the FDA and the FDA may initiate review of sections of a Fast Track product's marketing application before the application is
complete. However, the FDA's time period goal for reviewing an application does not begin until the last section of the application is
submitted. The FDA may withdraw Fast Track Designation if it believes that the designation is no longer supported by data from our
clinical development program. Fast Track Designation alone does not guarantee qualification for the FDA's priority review
procedures.
We have obtained and may seek RMAT designation for some of our product candidates. For instance, CASGEVY was granted
RMAT designation by the FDA for the treatment of TDT and SCD. Products granted RMAT designation may be eligible for
accelerated approval on the basis of a surrogate or intermediate endpoint reasonably likely to predict long-term clinical benefit, or
reliance upon data obtained from a meaningful number of sites, including through expansion to additional sites. There can be no
assurance that the FDA would allow any of the product candidates we may develop to proceed on an accelerated approval pathway,
and even if the FDA did allow such pathway, there can be no assurance that such submission or application will be accepted or that
any expedited development, review or approval will be granted on a timely basis, or at all. RMAT-designated products that receive
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accelerated approval may, as appropriate, fulfill their post-approval requirements through the submission of clinical evidence, clinical
trials, patient registries, or other sources of real world evidence, such as electronic health records; through the collection of larger
confirmatory data sets; or via post-approval monitoring of all patients treated with such therapy prior to approval of the therapy. There
is no assurance that we will be able to obtain RMAT designation for other of our product candidates. RMAT designation does not
change the FDA's standards for product approval, and there is no assurance that such designation will result in expedited review or
approval or that the approved indication will not be narrower than the indication covered by the designation. Additionally, RMAT
designation can be revoked if the criteria for eligibility cease to be met as clinical data emerges. Further, even if we received
accelerated approval, any post-approval studies required to confirm and verify clinical benefit may not show such benefit, which could
lead to withdrawal of any approvals we have obtained. Receiving accelerated approval does not assure that the product’s accelerated
approval will eventually be converted to a traditional approval. Moreover, under the Food and Drug Omnibus Reform Act of 2022, or
FDORA, the FDA is permitted to require, as appropriate, that a post-approval confirmatory study or studies be underway prior to
approval or within a specified time period after the date of approval for a product granted accelerated approval. FDORA also requires
sponsors to send updates to the FDA every 180 days on the status of such studies, including progress toward enrollment targets, and
the FDA must promptly post this information publicly. FDORA also gives the FDA increased authority to withdraw approval of a
drug or biologic granted accelerated approval on an expedited basis if the sponsor fails to conduct such studies in a timely manner,
send the necessary updates to the FDA, or if such post-approval studies fail to verify the drug’s predicted clinical benefit. Under
FDORA, the FDA is empowered to take action, such as issuing fines, against companies that fail to conduct with due diligence any
post-approval confirmatory study or submit timely reports to the agency on their progress.
If the FDA determines that a product candidate offers a treatment for a serious condition and, if approved, the product would
provide a significant improvement in safety or effectiveness, the FDA may designate the product candidate for priority review. A
priority review designation means that the goal for the FDA to review an application is six months, rather than the standard review
period of ten months. The FDA has broad discretion with respect to whether or not to grant priority review status to a product
candidate, so even if we believe a particular product candidate is eligible for such designation or status, the FDA may decide not to
grant it. Moreover, a priority review designation does not necessarily result in expedited regulatory review or approval process or
necessarily confer any advantage with respect to approval compared to conventional FDA procedures. Receiving priority review from
the FDA does not guarantee approval within the six-month review cycle or at all.
Finally, we have obtained and may seek to qualify our product candidates under the PRIME scheme from the EMA. For
instance, CASGEVY was granted PRIME designation for the treatment of TDT and SCD. There is no assurance that we will be able
to obtain PRIME qualification for other of our product candidates. PRIME does not change the standards for product approval, and
there is no assurance that such qualification will result in expedited review or approval. Moreover, where, during the course of
development, a medicine no longer meets the eligibility criteria, support under the PRIME scheme may be withdrawn.
For additional information regarding Breakthrough Therapy Designation, Fast Track Designation, RMAT Designation and
priority review by the FDA, see the section entitled, “Business—Government Regulation—Licensure and Regulation of Biologics in
the United States – Expedited Programs.” For additional information regarding the PRIME scheme from the EMA, see the section
entitled “Business—Government Regulation—Regulation And Procedures Governing Approval Of Medicinal Products In Europe –
PRIME scheme.”
We May Seek Designation For Our Platform Technology As A Designated Platform Technology, But We Might Not Receive
Such Designation, And Even If We Do, Such Designation May Not Lead To A Faster Regulatory Review Or Approval Process.
We may seek designation for our platform technology as a designated platform technology. Under FDORA, a platform
technology incorporated within or utilized by a drug or biological product is eligible for designation as a designated platform
technology if (1) the platform technology is incorporated in, or utilized by, a drug approved under a BLA; (2) preliminary evidence
submitted by the sponsor of the approved or licensed drug, or a sponsor that has been granted a right of reference to data submitted in
the application for such drug, demonstrates that the platform technology has the potential to be incorporated in, or utilized by, more
than one drug without an adverse effect on quality, manufacturing, or safety; and (3) data or information submitted by the applicable
person indicates that incorporation or utilization of the platform technology has a reasonable likelihood to bring significant
efficiencies to the drug development or manufacturing process and to the review process. A sponsor may request the FDA to designate
a platform technology as a designated platform technology concurrently with, or at any time after, submission of an IND application
for a drug that incorporates or utilizes the platform technology that is the subject of the request. If so designated, the FDA may
expedite the development and review of any subsequent original BLA for a drug that uses or incorporates the platform technology.
Even if we believe our platform technology meets the criteria for such designation, the FDA may disagree and instead determine not
to grant such designation. In addition, the receipt of such designation for a platform technology does not ensure that a drug will be
developed more quickly or receive FDA approval. Moreover, the FDA may revoke a designation if the FDA determines that a
designated platform technology no longer meets the criteria for such designation.
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We May Be Unable To Obtain Orphan Drug Designation Or Exclusivity. If Our Competitors Are Able To Obtain Orphan Drug
Exclusivity For Products That Constitute The Same Drug And Treat The Same Indications As Our Product Candidates, We May Not
Be Able To Have Competing Products Approved By The Applicable Regulatory Authority For A Significant Period Of Time.
We have received orphan drug designation in the United States from the FDA for certain of our programs and the European
Commission for certain of our programs or partnered programs, including for CASGEVY for the treatment of TDT and SCD. We may
in the future seek orphan drug designation for certain of our other product candidates, but we may be unable to maintain orphan drug
designation or obtain any benefits associated with orphan drug designation, including market exclusivity.
Certain of our current product candidates and our future product candidates may target patient populations that are smaller than
the numbers required for orphan drug designation. If we request orphan drug designation for our product candidates, there can be no
assurances that FDA or the European Commission will grant any of our product candidates such designation. Additionally, the
designation of any of our product candidates as an orphan product does not guarantee that any regulatory agency will accelerate
regulatory review of, or ultimately approve, that product candidate, nor does it limit the ability of any regulatory agency to grant
orphan designation to product candidates of other companies that treat the same indications as our product candidates prior to our
product candidates receiving exclusive marketing approval.
Generally, if a product candidate 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 applicable
exclusivity period. The applicable period is seven years in the United States and 10 years in the European Union. The exclusivity
period in the United States can be extended by six months if the sponsor submits pediatric data that fairly respond to a written request
from the FDA for such data. The exclusivity period in the European Union can be extended by two years for medicines that have
complied with an agreed pediatric investigation plan prior to authorization of the product. The exclusivity period in the European
Union can also 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, because, for example, the product is sufficiently profitable so that market exclusivity is no longer justified.
Orphan drug exclusivity may be revoked if any regulatory agency determines that the request for designation was materially defective
or if the manufacturer is unable to assure sufficient quantity of the product to meet the needs of patients with the rare disease or
condition.
Even if we obtain orphan drug exclusivity for a product candidate, that exclusivity may not effectively protect the product
candidate from competition because different drugs can be approved for the same condition. In the United States, even after an orphan
drug is approved, the FDA may subsequently approve another drug for the same condition if the FDA concludes that the latter drug is
not the same drug, including if it is clinically superior in that it is shown to be safer, more effective or makes a major contribution to
patient care. In the European Union, marketing authorization may be granted to a similar medicinal product for the same orphan
indication if:
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the second applicant can establish in its application that its medicinal product, although similar to the orphan medicinal
product already authorized, is safer, more effective or otherwise clinically superior;
the holder of the marketing authorization for the original orphan medicinal product consents to a second orphan medicinal
product application; or
the holder of the marketing authorization for the original orphan medicinal product cannot supply sufficient quantities of
orphan medicinal product.
There is no assurance that we will be able to obtain orphan drug designation for other of our other product candidates. Orphan
drug designation does not change the standards for product approval, and there is no assurance that such designation will result in
expedited review or approval.
For additional information regarding orphan drug designation in the United States, see the section entitled, “Business —
Government Regulation — Licensure and Regulation of Biologics in the United States – Orphan Drug Designation.” For additional
information regarding orphan drug designation in the European Union, see the section entitled “Business — Government Regulation
— Regulation And Procedures Governing Approval Of Medicinal Products In Europe – Orphan Drug Designation and Exclusivity.”
Adverse Public Perception Of Gene Editing And Cellular Therapy Products May Negatively Impact Demand For, Or
Regulatory Approval Of, Our Product Candidates.
Our product candidates involve editing the human genome. The clinical and commercial success of our product candidates will
depend in part on public acceptance of the use of gene editing therapies for the prevention or treatment of human diseases. Public
attitudes may be influenced by claims that gene editing is unsafe, unethical, or immoral, and, consequently, our products may not gain
the acceptance of the public or the medical community. Negative public reaction to gene therapy in general could result in greater
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government regulation and stricter labeling requirements of gene editing products, including any of our product candidates, and could
cause a decrease in the demand for any products we may develop. Adverse public attitudes may adversely impact our ability to enroll
clinical trials. Moreover, our success will depend upon physicians prescribing, and their patients being willing to receive, treatments
that involve the use of product candidates we may develop in lieu of, or in addition to, existing treatments with which they are already
familiar and for which greater clinical data may be available.
In particular, gene editing technology is subject to public debate and heightened regulatory scrutiny due to ethical concerns
relating to the application of gene editing technology to human embryos or the human germline. For example, in April 2016, a group
of scientists reported on their attempts to edit the genome of human embryos to modify the gene for hemoglobin beta. This is the gene
in which a mutation occurs in patients with the inherited blood disorder beta thalassemia. Although this research was purposefully
conducted in embryos that were not viable, the work prompted calls for a moratorium or other types of restrictions on gene editing of
human eggs, sperm, and embryos. Additionally, in November 2018, Dr. Jiankui He, a biophysics researcher who was an associate
professor in the Department of Biology of the Southern University of Science and Technology in Shenzhen, China, reportedly claimed
he had created the first human genetically edited babies, twin girls. This claim, and another that Dr. He had helped create a second
gene-edited pregnancy, was subsequently confirmed by Chinese authorities and was negatively received by the public, in particular by
those in the scientific community. News reports indicate that Dr. He was sentenced to three years in prison and fined $430,000 in
December 2019 by the Chinese government for illegal medical practice in connection with such activities. In the wake of the claim,
the World Health Organization established a new advisory committee to create global governance and oversight standards for human
gene editing. The Alliance for Regenerative Medicine in Washington, D.C. has called for a voluntary moratorium on the use of gene
editing technologies, including CRISPR/Cas9, in research that involves altering human embryos or human germline cells and has also
released principles for the use of gene editing in therapeutic applications endorsed by a number of companies that use gene editing
technologies. Similarly, the NIH has announced that it would not fund any use of gene editing technologies in human embryos, noting
that there are multiple existing legislative and regulatory prohibitions against such work, including the Dickey-Wicker Amendment,
which prohibits the use of appropriated funds for the creation of human embryos for research purposes or for research in which human
embryos are destroyed. Laws in the UK prohibit genetically modified embryos from being implanted into women, but embryos can be
altered in research labs under license from the Human Fertilisation and Embryology Authority. Research on embryos is more tightly
controlled in many other European countries.
Although we do not use our technologies to edit human embryos or the human germline, such public debate about the use of
gene editing technologies in human embryos and heightened regulatory scrutiny could prevent or delay our development of product
candidates. More restrictive government regulations or negative public opinion would have a negative effect on our business or
financial condition and may delay or impair our development and commercialization of product candidates or demand for any
products we may develop. Adverse events in our preclinical studies or clinical trials or those of our competitors or of academic
researchers utilizing gene editing technologies, even if not ultimately attributable to product candidates we may identify and develop,
and the resulting publicity could result in increased governmental regulation, unfavorable public perception, potential regulatory
delays in the testing or approval of potential product candidates we may identify and develop, stricter labeling requirements for those
product candidates that are approved, and a decrease in demand for any such product candidates.
If We Are Unable To Establish Sales And Marketing Capabilities Or Enter Into Agreements With Third Parties To Sell And
Market Products Based On Our Technologies, We May Not Be Successful In Commercializing Our Products If And When Any
Products Candidates Are Approved And We May Not Be Able To Generate Any Revenue.
We do not currently have a sales or marketing infrastructure and, as a company, have no experience in the sale, marketing or
distribution of therapeutic products. To achieve commercial success for any approved product candidate for which we retain sales and
marketing responsibilities, we must build our sales, marketing, managerial and other non-technical capabilities or make arrangements
with third parties to perform these services. In the future, we may choose to build a focused sales and marketing infrastructure to sell,
or participate in sales activities with our collaborators for, some of our product candidates, if any are approved.
There are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with
third parties to perform these services. For example, recruiting and training a sales force is expensive and time consuming and could
delay any product launch. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing
capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization
expenses. This may be costly and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors that may inhibit our efforts to commercialize our product candidates on our own include:
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our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any
future product that we may develop;
the lack of complementary treatments to be offered by sales personnel, which may put us at a competitive disadvantage
relative to companies with more extensive product lines; and
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unforeseen costs and expenses associated with creating an independent sales and marketing organization.
If we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenue or the
profitability to us from these revenue streams is likely to be lower than if we were to market and sell any product candidates that we
develop ourselves. For example, pursuant to our Amended A&R Vertex JDCA, Vertex has the right to conduct all commercialization
activities relating to CASGEVY throughout the world and net profits and net losses, as applicable, incurred under the agreement are
allocated 40% to CRISPR and 60% to Vertex. In addition, we may not be successful in entering into arrangements with third parties to
sell and market our product candidates or may be unable to do so on terms that are favorable to us. We likely will have little control
over such third parties and any of them may fail to devote the necessary resources and attention to sell and market our product
candidates effectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with
third parties, we may not be successful in commercializing our product candidates. Further, our business, results of operations,
financial condition and prospects will be materially adversely affected.
Even If We, Or Any Collaborators We May Have, Obtain Marketing Approvals For Any Product Candidates We Develop, The
Terms Of Approvals And Ongoing Regulation Of Our Products Could Require The Substantial Expenditure Of Resources And May
Limit How We, Or They, Manufacture And Market Our Products, Which Could Materially Impair Our Ability To Generate Revenue.
Any product candidate for which we, or any collaborators we may have, obtain marketing approval, along with the
manufacturing processes, post-approval clinical data, labeling, advertising, and promotional activities for such product, will be subject
to continual requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of
safety and other post-marketing information and reports, registration and listing requirements, current Good Manufacturing Practice,
or cGMP, requirements relating to quality control, quality assurance and corresponding maintenance of records and documents and
requirements regarding recordkeeping. Even if marketing approval of a product candidate is granted, the approval may be subject to
limitations on the indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for
costly post-marketing testing and surveillance to monitor the safety or efficacy of the product. The FDA also may place other
conditions on approvals including the requirement for a REMS to assure the safe use of the product. If the FDA concludes a REMS is
needed, the sponsor of the BLA, must submit a proposed REMS before it can obtain approval. A REMS could include medication
guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and
other risk minimization tools.
Accordingly, assuming we, or any collaborators we may have, receive marketing approval for one or more product candidates
we develop, we, and such collaborators, and our and their contract manufacturers will continue to expend time, money, and effort in
all areas of regulatory compliance, including manufacturing, production, product surveillance, and quality control. In addition, 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.
If we and such collaborators are not able to comply with post-approval regulatory requirements, we and such collaborators could
have the marketing approvals for our products withdrawn by regulatory authorities and our, or such collaborators’, ability to market
any future products could be limited, which could adversely affect our ability to achieve or sustain profitability. Further, the cost of
compliance with post-approval regulations may have a negative effect on our business, operating results, financial condition, and
prospects.
Any Product Candidate For Which We, Or Any Collaborators We May Have, Obtain Marketing Approval Could Be Subject To
Restrictions Or Withdrawal From The Market, And We Or They May Be Subject To Substantial Penalties If We Or They Fail To
Comply With Regulatory Requirements Or If We Or They Experience Unanticipated Problems With Our Products, When And If Any
Of Them Are Approved.
The FDA and other regulatory agencies closely regulate the post-approval marketing and promotion of biologics to ensure that
they are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA and
other regulatory agencies impose stringent restrictions on manufacturers’ communications regarding off-label use, and if we, or any
collaborators we may have, do not market our products for their approved indications, we or they may be subject to enforcement
action for off-label marketing by the FDA and other federal and state enforcement agencies, including the United States Department of
Justice. Violation of the Federal Food, Drug, and Cosmetic Act and other statutes, including the False Claims Act, relating to the
promotion and advertising of prescription products may also lead to investigations or allegations of violations of federal and state
health care fraud and abuse laws and state consumer protection laws.
In addition, later discovery of previously unknown problems with a product candidate, including adverse events of unanticipated
severity or frequency, or with our or other collaborators’ manufacturing processes, or failure to comply with regulatory requirements,
may result in, among other things:
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restrictions on such products, manufacturers, or manufacturing processes;
restrictions on the labeling or marketing of a product;
restrictions on the distribution or use of a product;
requirements to conduct post-marketing clinical trials;
receipt of warning or untitled letters;
restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or
mandatory biologic recalls;
refusal to approve pending applications or supplements to approved applications that we or our collaborators submit;
fines, restitution, or disgorgement of profits or revenue;
suspension or withdrawal of marketing approvals or revocation of biologics licenses;
suspension of any ongoing clinical trials;
refusal to permit the import or export of our products;
product seizure or detention; and
injunctions or the imposition of civil or criminal penalties.
The FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay
regulatory approval of our product candidates. If we or our collaborators are slow or unable to adapt to changes in existing
requirements or the adoption of new requirements or policies, or if we or our collaborators are not able to maintain regulatory
compliance, we or our collaborators may lose any marketing approval that we or our collaborators may have obtained, which would
adversely affect our business, prospects and ability to achieve or sustain profitability.
Any government investigation of alleged violations of law, including investigations of any of our vendors, 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 also inhibit our or our collaborators’ ability to commercialize any product candidates we may develop and
adversely affect our business, financial condition, results of operations, and prospects.
The Commercial Success Of Any Of Our Products or Product Candidates Will Depend Upon Its Degree Of Market Acceptance
By Physicians, Patients, Third-party Payors And Others In The Medical Community.
Ethical, social and legal concerns about gene therapy could result in additional regulations restricting or prohibiting our
products. Even with the requisite approvals from FDA in the United States, the EMA in the EU and other regulatory authorities
internationally, the commercial success of our products or product candidates will depend, in significant part, on the acceptance of
physicians, patients and health care payors of gene therapy products in general, and our products or product candidates in particular, as
medically necessary, cost-effective and safe. Any product that we commercialize may not gain acceptance by physicians, patients,
health care payors and others in the medical community. The degree of market acceptance of gene therapy products and, in particular,
our product candidates, if approved for commercial sale, will depend on several factors, including:
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the efficacy, durability and safety of such product candidates as demonstrated in any future clinical trials;
the potential and perceived advantages of product candidates over alternative treatments;
the cost of treatment relative to alternative treatments;
the clinical indications for which the product candidate is approved by FDA, the EMA or other regulatory authorities;
patient awareness of, and willingness to seek, genotyping;
the willingness of physicians to prescribe new therapies;
the willingness of the target patient population to try new therapies;
the prevalence and severity of any side effects;
product labeling or product insert requirements of FDA, the EMA or other regulatory authorities, including any
limitations or warnings contained in a product’s approved labeling;
relative convenience and ease of administration;
the strength of marketing and distribution support;
the timing of market introduction of competitive products;
publicity concerning our products or competing products and treatments; and
sufficient third-party payor coverage and reimbursement.
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Even if a potential product displays a favorable efficacy and safety profile in preclinical studies and future clinical trials, market
acceptance of the product will not be fully known until after it is launched. If our product candidates do not achieve an adequate level
of acceptance following regulatory approval, if ever, we may not generate significant product revenue and may not become profitable.
We Face Significant Competition In The Biotechnology And Pharmaceutical Industries.
The biotechnology and pharmaceutical industries, including in the gene editing, gene therapy and cell therapy fields, are
characterized by rapidly advancing technologies, intense competition and a strong emphasis on intellectual property and proprietary
products. While we believe that our technology, development experience and scientific knowledge provide us with competitive
advantages, we currently face, and will continue to face, substantial competition from many different sources, including large
pharmaceutical, specialty pharmaceutical and biotechnology companies; academic institutions and governmental agencies; and public
and private research institutions, some or all of which may have greater access to capital or resources than we do. For any products
that we may ultimately commercialize, not only will we compete with any existing therapies and those therapies currently in
development, but we will also have to compete with new therapies that may become available in the future.
We compete in the segments of the pharmaceutical, biotechnology and other related markets that utilize technologies
encompassing genomic medicines to create therapies, including gene editing, gene therapy and cell therapy. In addition, we compete
with companies working to develop therapies in areas related to our specific research and development programs. Our platform and
product focus is on the development of therapies using CRISPR/Cas9 gene editing technology. For a detailed discussion of the
competition that we face with respect to our business, including our platform, product indications, other technologies (e.g. small
molecule, antibody, or protein therapies), gene editing technology, gene or cell therapies, intellectual property, new technologies,
personnel, clinical trial locations, reimbursement opportunities and collaborators, please see the section entitled “Business—
Competition”. If we are unable to compete successfully in this highly competitive biopharmaceutical industry, our business, financial
condition and results of operations could be materially adversely affected.
Even If We Are Able To Commercialize Any Product Candidates, Such Products May Become Subject To Unfavorable Pricing
Regulations, Third-party Reimbursement Practices, Or Healthcare Reform Initiatives, Which Would Harm Our Business.
The regulations that govern marketing approvals, pricing, and reimbursement for new biologic products vary widely from
country to country. 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. In some non-U.S. markets, prescription
pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might
obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our commercial
launch of the product, possibly for lengthy time periods, and negatively impact the revenues we are able to generate from the sale of
the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more product
candidates, even if any product candidates we may develop obtain marketing approval.
Our ability to commercialize any products successfully also will depend in part on the extent to which reimbursement for these
products and related treatments will be available from government health administration authorities, private health insurers, and other
organizations. Third-party payors, such as private health insurers, health maintenance organizations, and governmental programs such
as Medicare and Medicaid, decide which medications they will pay for and establish reimbursement levels. A primary trend in the
U.S. healthcare industry and elsewhere is cost containment. Governmental and private third-party payors have attempted to control
costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are requiring
that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical
products. We cannot be sure that reimbursement will be available for any product that we commercialize and, if reimbursement is
available, the level of reimbursement. Reimbursement may impact the demand for, or the price of, any product candidate for which we
obtain marketing approval. If reimbursement is not available or is available only to limited levels, we may not be able to successfully
commercialize any product candidate for which we obtain marketing approval.
There may be significant delays in obtaining reimbursement for newly approved products, and reimbursement coverage may be
more limited than the purposes for which the product is approved by the FDA or similar regulatory authorities outside the United
States. Moreover, eligibility for reimbursement does not imply that any product will be paid for in all cases or at a rate that covers our
costs, including research, development, manufacture, sale, and distribution. Interim reimbursement levels for new products, if
applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates may vary according to
the use of the product and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost
products and may be incorporated into existing payments for other services. Net prices for products may be reduced by mandatory
discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently
restrict imports of products from countries where they may be sold at lower prices than in the United States. Third-party payors often
rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies. Our inability to promptly
obtain coverage and profitable payment rates from both government-funded and private payors for any approved products we may
develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products,
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and our overall financial condition. For additional information, see the sections entitled “Business—Coverage, Pricing and
Reimbursement” and “Business—Healthcare Reform.” See also, “Risk Factors—Risks Related to Our Relationships with Third
Parties—We Have Partnered With Vertex On Our Lead Program CASGEVY; Vertex Has Significant Control Over The CAGEVY
Program.”
Risks Related to Our Relationships with Third Parties
Our Collaborators And Strategic Partners May Control Aspects Of Our Clinical Trials and Commercialization Efforts, Which
Could Result In Delays And Other Obstacles In The Commercialization Of Our Proposed Products And Materially Harm Our Results
Of Operations.
We have entered into strategic collaborations and licenses, including, for example, with Vertex, and may enter into additional
collaborations and licenses with other third parties in the future. For some programs, we also depend on, or may in the future depend
on, third-party collaborators and strategic partners to design and conduct our clinical trials, and for any approved products, the
commercialization of such products. Some of these collaborations provide us with important technologies in order to more fully
develop our product candidates and we may enter into collaborations with other companies to provide us with important technologies
or funding for our programs. The success of these arrangements will depend heavily on the efforts and activities of our collaborators
and licensing partners.
Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these
collaborations and collaborators may not perform their obligations as expected. In some situations, we may not be able to influence
our collaboration partners’ decisions regarding the development and commercialization of our partnered product candidates, and as a
result, our collaboration partners may not pursue or prioritize the development and commercialization of those partnered product
candidates in a manner that is in our best interest. In addition, collaborators could independently develop, or develop with third parties,
products that compete directly or indirectly with our product candidates if the collaborators believe that the competitive products are
more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours.
Disagreements between parties to a collaboration arrangement regarding clinical development and commercialization matters can lead
to delays in the development process or commercializing the applicable product candidate and, in some cases, termination of the
collaboration arrangement or result in litigation or arbitration, which would be time-consuming and expensive. Collaborators may also
fail to comply with applicable regulatory requirements regarding the development, manufacture, distribution or marketing of a product
candidate or product. Licensors generally have sole discretion in determining the efforts and resources that they will apply to the
licensed products.
As a result, we may not be able to conduct any of our partnered programs in the manner or on the time schedule we currently
contemplate, which may negatively impact our business operations. In addition, if any of these collaborators or strategic partners
withdraw support for our programs or proposed products or otherwise impair their development or commercialization, our business
could be negatively affected. Additionally, if one of our collaborators terminates its agreement with us, we may find it more difficult
to attract new collaborators and our perception in the business and financial communities could be adversely affected.
We Have Partnered With Vertex On Our Lead Program CASGEVY; Vertex Has Significant Control Over The CASGEVY
Program.
We have entered into a series of agreements with Vertex that contemplate certain research, development, manufacturing and
commercialization activities involving various targets. Pursuant to these agreements, Vertex has sole authority to conduct certain
activities. For example, under our 2015 Collaboration Agreement with Vertex to research, develop and commercialize new treatments
aimed at the underlying genetic causes of human diseases, Vertex had sole authority to select genetic targets to pursue and we do not
have control over the development of any product candidates for the selected genetic targets. In addition, under our 2019
Collaboration Agreement with Vertex, Vertex has sole authority to develop and commercialize products for the treatment of DMD and
DM1 under the agreement (subject to our option to co-develop and co-commercialize products for the treatment of DM1).
Additionally, under the Amended A&R Vertex JDCA, subject to the terms and conditions of such agreement, Vertex has the
right to conduct all research, development, manufacturing and commercialization activities relating to the specified product candidates
and products (including CASGEVY, which received approval or clearance to be marketed for the treatment of for TDT and SCD from
certain regulatory authorities in certain jurisdictions in 2023 and a subsequent approval in 2024) throughout the world subject to our
reserved right to conduct certain activities. While we will continue to participate in certain aspects of such activities in an observer
capacity unless and to the extent otherwise agreed to by the parties, and we and Vertex have an equal number of representatives on the
joint oversight committee and transition committee, Vertex controls the development of CASGEVY or any future product candidates
subject to the Amended A&R Vertex JDCA.
Our lack of control over the clinical development, manufacturing, regulatory submission and commercialization activities in
certain of our agreements with Vertex could cause delays or other difficulties in the development and commercialization of product
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candidates, including CASGEVY, which may prevent among other things, completion of intended IND filings in a timely fashion, if
at all, or the completion of or cause a delay in BLA filings or other applicable regulatory or required pricing approvals.
We must rely on Vertex to manufacture and commercialize CASGEVY. For example, the manufacture of cell and genetic
therapies requires significant expertise, and even with the relevant experience and expertise, manufacturers of cell and genetic therapy
products often encounter difficulties in production, including difficulties with production costs and yields, quality control, and
compliance with federal, state and foreign regulations. We cannot make any assurances that Vertex will not encounter any of these
problems or that it will be able to resolve or address problems that occur in a timely manner, or at all. In addition, to increase
production to commercial levels, Vertex is making significant investments to coordinate manufacturing, testing, and logistics activities
at a larger scale across multiple facilities to serve the geographies in which CASGEVY is approved. We cannot make any assurances
that Vertex will be able to increase production to commercial levels in a timely manner, or at all. In addition, we must rely on Vertex
to obtain pricing approvals in certain jurisdictions, establish and maintain relationships with authorized treatment centers that will be
treating the patients who receive CASGEVY, and manage manufacturing capabilities and supply chain operations in the coordination
and delivery of CASGEVY to patients at such authorized treatment centers. We have no involvement in these and other
commercialization efforts for CASGEVY from which we may receive revenue and cannot control the extent or effectiveness of such
commercialization efforts. Our revenues from CASGEVY may fall below our expectations and the expectations of our shareholders,
which could have a material adverse effect on our results of operations and the market price of our common shares. In addition, the net
profits and net losses, as applicable, incurred under the Amended A&R Vertex JDCA are allocated 40% to CRISPR and 60% to
Vertex. Vertex may have additional expenditures related to the CASGEVY program that we cannot predict and that we will be
required to pay our portion of or agree to pay a portion of in the future pursuant to the agreement.
In addition, the termination of any of our agreements with Vertex would prevent us from receiving any milestone, royalty
payments and other benefits under such agreement, which could have a materially adverse effect on our results of operations and the
market price of our common shares.
If Conflicts Arise Between Us And Our Collaborators Or Strategic Partners, These Parties May Act In A Manner Adverse To Us
And Could Limit Our Ability To Implement Our Strategies.
If conflicts arise between our corporate or academic collaborators or strategic partners and us, the other party may act in a
manner adverse to us and could limit our ability to implement our strategies. Some of our academic collaborators and strategic
partners are conducting multiple product development efforts within each area that is the subject of the collaboration with us. Our
collaborators or strategic partners, however, may develop, either alone or with others, products in related fields that are competitive
with the products or potential products that are the subject of these collaborations. Competing products, either developed by the
collaborators or strategic partners or to which the collaborators or strategic partners have rights, may result in the withdrawal of
partner support for our product candidates.
Current or future collaborators or strategic partners could also become our competitors in the future. Our collaborators or
strategic partners could develop competing products, preclude us from entering into collaborations with their competitors, fail to
obtain timely regulatory approvals, terminate their agreements with us prematurely, or fail to devote sufficient resources to the
development and commercialization of products. Any of these developments could harm our product development efforts.
Our Collaborators Or Strategic Partners May Decide To Adopt Alternative Technologies Or May Be Unable To Develop
Commercially Viable Products With Our Technology, Which Would Negatively Impact Our Financial Results And Our Strategy To
Develop These Products.
Our collaborators or strategic partners may adopt alternative technologies, which could decrease the marketability of our
CRISPR/Cas9 gene editing technology. Additionally, because our current collaborators or strategic partners are and we anticipate that
any future collaborators or strategic partners will be working on more than one development project, they could choose to shift their
resources to projects other than those they are working on with us. If they do so, this would delay our ability to test our technology and
would delay or terminate the development of potential products based on our CRISPR/Cas9 gene editing technology. Further, our
collaborators and strategic partners may elect not to develop products arising out of our collaborative and strategic partnering
arrangements or to devote sufficient resources to the development, manufacturing, marketing or sale of these products. For example,
ViaCyte (a wholly owned subsidiary of Vertex) elected to opt-out of our diabetes collaboration. As a result, going forward we will be
solely responsible for the costs associated with the diabetes program and we will owe ViaCyte certain opt-out royalties pursuant to the
ViaCyte JDCA, which will increase our expenses. Furthermore, the failure to develop and commercialize a product candidate pursuant
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to our agreements with our current or future collaborators would prevent us from receiving future milestone and royalty payments
which would negatively impact our financial results.
We May Seek To Establish Additional Collaborations And, If We Are Not Able To Establish Them On Commercially Reasonable
Terms, We May Have To Alter Our Development And Commercialization Plans.
Our product candidate development programs and the potential commercialization of our product candidates will require
substantial additional cash to fund expenses. For some of our product candidates, we may decide to collaborate with additional
pharmaceutical and biotechnology companies for the development and potential commercialization of those product candidates.
We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for any
additional collaborations will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms
and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors. Those factors may
include the design or results of clinical trials, the likelihood of approval by FDA or similar regulatory authorities outside the United
States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product
candidate to patients, the potential of competing drugs, the existence of uncertainty with respect to our ownership of technology,
which can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry and market
conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that
may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product
candidate. The terms of any additional collaborations or other arrangements that we may establish may not be favorable to us.
We may also be restricted under existing collaboration agreements from entering into future agreements on certain terms with
potential collaborators. For example, we have granted exclusive rights to Vertex for certain genetic targets, and during the term of the
collaboration agreements, we will be restricted from granting rights to other parties to use our gene editing technology to pursue
therapies that address these genetic targets. The non-competition provisions in such agreements could limit our ability to enter into
strategic collaborations with future collaborators.
We may not be able to negotiate additional collaborations on a timely basis, on acceptable terms, or at all. Collaborations are
complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business
combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators. If we
are unable to negotiate and enter into new collaborations, we may have to curtail the development of the product candidate for which
we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delay its
potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake
development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or
commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable
terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to
market and generate product revenue or engage in workforce reductions to save capital.
We Rely On and Expect To Rely On Third Parties To Conduct Our Clinical Trials And Certain Aspects Of Our Preclinical
Studies For Our Product Candidates. If These Third Parties Do Not Successfully Carry Out Their Contractual Duties, Comply With
Regulatory Requirements Or Meet Expected Deadlines, We May Not Be Able To Obtain Regulatory Approval For Or Commercialize
Our Product Candidates And Our Business Could Be Substantially Harmed.
We expect to rely on medical institutions, clinical investigators, contract laboratories and other third parties, such as CROs, to
conduct future clinical trials and we currently rely on third parties to conduct certain aspects of our preclinical studies for our product
candidates. Nevertheless, we are responsible for ensuring that each of our preclinical studies, clinical trials and any future preclinical
studies and clinical trials we sponsor are conducted in accordance with the applicable protocol, legal and regulatory requirements and
scientific standards and our reliance on CROs will not relieve us of our regulatory responsibilities. For example, we will remain
responsible for ensuring that each such study or clinical trial is conducted in accordance with the general investigational plan and
protocols for such study or trial. Moreover, the FDA requires us to comply with regulations, commonly referred to as Good Clinical
Practices, or GCPs, for conducting, recording, and reporting the results of clinical trials to assure that data and reported results are
credible and accurate and that the rights, integrity, and confidentiality of trial participants are protected. We also are required to
register ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database, ClinicalTrials.gov,
within certain timeframes. Failure to do so can result in fines, adverse publicity, and civil and criminal sanctions. For any violations of
laws and regulations during the conduct of our preclinical studies and clinical trials, we could be subject to warning letters or
enforcement action that may include civil penalties up to and including criminal prosecution. We also rely on and expect to continue
to rely on contract manufacturing organizations to produce certain of our clinical trial materials. See, for example, "Risk Factors--
Risks Related to Manufacturing--We Expect To Rely On Third Parties To Manufacture Our Clinical Product Supplies, And We Intend
To Rely On Third Parties For At Least A Portion Of The Manufacturing Process Of Our Product Candidates. Our Business Could Be
Harmed If The Third Parties Experience Supply Chain Shortages, Fail To Provide Us With Sufficient Quantities Of Product Inputs Or
Fail To Do So At Acceptable Quality Levels Or Prices" for additional information.
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We and our CROs will be required to comply with regulations, including GCPs, for conducting, monitoring, recording and
reporting the results of preclinical studies and clinical trials to ensure that the data and results are scientifically credible and accurate
and that the trial patients are adequately informed, among other things, of the potential risks of participating in clinical trials and their
rights are protected. These regulations are enforced by the FDA, the Competent Authorities of the Member States of the European
Economic Area and comparable health regulatory authorities for any drugs in clinical development. The FDA enforces GCP
regulations through periodic inspections of clinical trial sponsors, principal investigators and trial sites. If we or our CROs fail to
comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and FDA or comparable
health regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We
cannot assure you that, upon inspection, the FDA will determine that any of our future clinical trials will comply with GCPs. In
addition, our future clinical trials must be conducted with product candidates produced in accordance with the requirements in cGMP
regulations. Our failure or the failure of our CROs to comply with these regulations may require us to repeat clinical trials, which
would delay the regulatory approval process and could also subject us to enforcement action and require significantly greater
expenditures.
Although we generally design the clinical trials for our product candidates and intend to design the clinical trials for our future
product candidates, CROs conduct and will continue to conduct all of the clinical trials. As a result, many important aspects of our
development programs, including their conduct and timing, will be outside of our direct control. Our reliance on third parties to
conduct future preclinical studies and clinical trials will also result in less direct control over the management of data developed
through preclinical studies and clinical trials than would be the case if we were relying entirely upon our own staff. Communicating
with outside parties can also be challenging, potentially leading to mistakes as well as difficulties in coordinating activities. Outside
parties may:
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have staffing difficulties;
fail to comply with contractual obligations;
experience regulatory compliance issues;
undergo changes in priorities or become financially distressed; or
form relationships with other entities, some of which may be our competitors.
These factors may materially adversely affect the willingness or ability of third parties to conduct our preclinical studies and
clinical trials and may subject us to unexpected cost increases that are beyond our control. If the CROs do not perform preclinical
studies and future clinical trials in a satisfactory manner, breach their obligations to us or fail to comply with regulatory requirements,
the development, regulatory approval and commercialization of our product candidates may be delayed, we may not be able to obtain
regulatory approval and commercialize our product candidates, or our development programs may be materially and irreversibly
harmed. If we are unable to rely on preclinical and clinical data collected by our CROs, we could be required to repeat, extend the
duration of, or increase the size of any clinical trials we conduct and this could significantly delay commercialization and require
significantly greater expenditures.
Our Relationships With Healthcare Providers, Physicians, And Third-party Payors Are Subject To Applicable Anti-kickback,
Fraud And Abuse And Other Healthcare Laws And Regulations, Which Could Expose Us To Criminal Sanctions, Civil Penalties,
Exclusion From Government Healthcare Programs, Contractual Damages, Reputational Harm And Diminished Profits And Future
Earnings.
To the extent that we commercialize product candidates or provide support and assistance to collaborators who commercialize
medical products, we will be subject to additional healthcare statutory and regulatory requirements and enforcement by the U.S.
federal government and states as well as other national, regional or local governments in other jurisdictions in which we conduct our
business.
Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of any
products or product candidates that we may develop for which we obtain marketing approval. Our current and future arrangements
with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations
that may constrain the business or financial arrangements and relationships through which we market, sell, and distribute our product
candidates for which we obtain marketing approval. See the section entitled “Business—Healthcare Law and Regulation.”
The provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement,
purchase, supply, order, or use of medicinal products is prohibited in the EU. The provision of benefits or advantages to induce or
reward improper performance generally is also governed by the national anti-bribery laws of EU Member States, and the Bribery Act
2010 in the UK. Infringement of these laws could result in substantial fines and imprisonment. EU Directive 2001/83/EC, which is the
EU Directive governing medicinal products for human use, further provides that, where medicinal products are being promoted to
persons qualified to prescribe or supply them, no gifts, pecuniary advantages or benefits in kind may be supplied, offered or promised
to such persons unless they are inexpensive and relevant to the practice of medicine or pharmacy. This provision has been transposed
into the Human Medicines Regulations 2012 and so remains applicable in the UK despite its departure from the EU.
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Payments made to physicians in certain EU 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 EU Member States. These requirements are provided in the national
laws, industry codes, or professional codes of conduct applicable in the EU Member States. Failure to comply with these requirements
could result in reputational risk, public reprimands, administrative penalties, fines, or imprisonment.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations
will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply
with current or future statutes, regulations, or case law involving applicable fraud and abuse or other healthcare laws and regulations.
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, including activities that may
be conducted by sales and marketing team we establish, are found to be in violation of any of these laws or any other governmental
regulations that may apply to us, we may be subject to significant civil, criminal, and administrative penalties, damages, fines,
exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our
operations. If any of the physicians or other providers or entities with whom we expect to do business is found to be not in compliance
with applicable laws, they may be subject to criminal, civil, or administrative sanctions, including exclusions from government funded
healthcare programs. Liabilities they incur pursuant to these laws could result in significant costs or an interruption in operations,
which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Risks Related to Manufacturing
Gene Editing Products Are Novel And May Be Complex And Difficult To Manufacture. We Could Experience Manufacturing
Problems That Result In Delays In The Development Or Commercialization Of Our Product Candidates Or Otherwise Harm Our
Business.
The manufacturing process used to produce CRISPR/Cas9-based product candidates are novel, may be complex, and there is
limited industry experience implementing and executing such processes to meet clinical and commercial production demand. Several
factors could cause production interruptions, including inability to develop novel manufacturing processes, equipment malfunctions,
facility contamination, raw material shortages or contamination, natural disasters, including pandemics, disruption in utility services,
human error or disruptions in the operations of our suppliers, including acquisition of a supplier by a third party or declaration of
bankruptcy. The expertise required to manufacture these product candidates may be unique to a particular contract manufacturing
organization, and as a result, it would be difficult and time consuming to find an alternative contract manufacturing organization.
Failure or process defects in any of the interrelated systems at either our manufacturing facility or those of our third-party
manufacturers, could adversely impact our ability to manufacture and supply cell therapy product candidates and certain components
thereof intended for research, clinical and, if approved, commercial production.
Our product candidates will require processing steps that are more complex than those required for most small molecule drugs.
Moreover, unlike small molecules, the physical and chemical properties of biologics generally cannot be fully characterized. As a
result, assays of the finished product may not be sufficient to ensure that the product will perform in the intended manner.
Accordingly, we will employ multiple steps to control the manufacturing process to assure that the process works and the product
candidate is made strictly and consistently in compliance with the process. Problems with the manufacturing process, even minor
deviations from the normal process, could result in product defects or manufacturing failures that result in lot failures, product recalls,
product liability claims or insufficient inventory, or other supply disruptions. If microbial, viral or other contaminations are discovered
in our product candidates or in the manufacturing facilities in which our product candidates are made, production at such
manufacturing facilities may be interrupted for an extended period of time to investigate and remedy the contamination. We may
encounter problems achieving adequate quantities and quality of clinical grade materials that meet FDA, the EMA or other applicable
standards or specifications with consistent and acceptable production yields and costs.
In addition, the FDA, the EMA and other health regulatory authorities may require us to submit samples of any lot of any
approved product together with the protocols showing the results of applicable tests at any time. Under some circumstances, the FDA,
the EMA or other health regulatory authorities may require that we not distribute a lot until the relevant agency authorizes its release.
Slight deviations in the manufacturing process, including those affecting quality attributes and stability, may result in unacceptable
changes in the product that could result in lot failures or product recalls. Lot failures could cause us to delay product launches or
clinical trials and we may need to conduct product recalls, all of which could be costly to us and otherwise harm our business,
financial condition, results of operations and prospects. Problems in our manufacturing process could restrict our ability to meet
market demand for our products.
We also may encounter problems hiring and retaining directly or through contract manufacturing organizations the experienced
scientific, quality assurance, quality control and manufacturing personnel needed to operate our manufacturing processes, which could
result in delays in production or difficulties in maintaining compliance with applicable regulatory requirements. Any problems in our
supply chain, manufacturing process or facilities could result in delays in planned clinical trials and increased costs, and could make
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us a less attractive collaborator for potential partners, including larger pharmaceutical companies and academic research institutions,
which could limit our access to additional attractive development programs. Problems in our manufacturing process could restrict our
ability to meet potential future market demand for products.
Our partner, Vertex, is the manufacturer and exclusive license holder of CASGEVY. For additional information regarding the
manufacture of CASGEVY, please see “Risk Factors—Risks Related to Our Relationships with Third Parties—We Have Partnered
With Vertex On Our Lead Program CASGEVY; Vertex Has Significant Control Over The CAGEVY Program.”
The Manufacturing Facilities For Our Product Candidates Are Subject To Rigorous Regulations And Failure To Obtain Or
Maintain Regulatory Approvals Or Operate In Line With Established cGMPs And International Best Practices Could Delay Or
Impair Our Ability To Commercialize Our Product Candidates.
We and the third-party manufacturers of our product candidates are subject to applicable cGMPs prescribed by the FDA and
other rules and regulations prescribed by the EMA and other regulatory authorities. To obtain FDA and EMA approval for our product
candidates in the United States and Europe, we need to undergo strict pre-approval inspections of our or our third-party manufacturing
facilities. When inspecting our or our contractors' manufacturing facilities, the FDA or EMA might cite cGMP deficiencies, both
minor and significant, which we may not be required to disclose. Remediating deficiencies can be laborious and costly and consume
significant periods of time. Moreover, if the FDA or EMA notes deficiencies as a result of its inspection, it will generally reinspect the
facility to determine if the deficiency has been remediated to its satisfaction. The FDA or EMA may note further deficiencies as a
result of its reinspection, either related to the previously identified deficiency or otherwise. If we or the manufacturers of our product
candidates cannot satisfy the FDA and EMA as to compliance with cGMP in a timely basis, marketing approval for our product
candidates could be seriously delayed, which in turn would delay commercialization of our product candidates.
We Are Subject To Regulatory And Operational Risks Associated With Our Internal Manufacturing Facility.
We have an approximately 50,000 square foot cell therapy manufacturing facility in Framingham, Massachusetts intended for
clinical and commercial production of our product candidates and certain components thereof for certain of our programs. We are
following cGMP processes necessary to release product for our clinical trials and meet all requirements from regulatory agencies,
including the FDA, to allow us to support research, clinical and commercial production of our wholly-owned cell therapy product
candidates and certain components thereof for certain of our programs. We can provide no assurances that we will be able to support
or operate our facility to support our intended internal manufacturing capabilities and/or needs or comply with regulatory agency
requirements. While the design of our facility is based on current standards for biotechnology facilities, it was not pre-approved by
any regulatory agency, nor has the facility been inspected by any regulatory agency such as the FDA. In constructing our facility in
Framingham, Massachusetts, we have incurred substantial expenditures, and expect to incur significant additional expenditures
operating our facility in the future.
We Expect To Rely On Third Parties To Manufacture Our Clinical Product Supplies, And We Intend To Rely On Third Parties
For At Least A Portion Of The Manufacturing Process Of Our Product Candidates. Our Business Could Be Harmed If The Third
Parties Experience Supply Chain Shortages, Fail To Provide Us With Sufficient Quantities Of Product Inputs Or Fail To Do So At
Acceptable Quality Levels Or Prices. Our Third Party Contract Manufacturing Partners Are Subject To Regulatory And Operational
Risks.
Although we have established internal manufacturing capabilities and have established our own cell therapy manufacturing
facility, we still rely on outside vendors to manufacture supplies and process our product candidates in connection with any clinical
trial we undertake of such product candidates. We have not yet caused any product candidates to be manufactured or processed on a
commercial scale and may not be able to do so for any of our product candidates. We will make changes as we work to optimize the
manufacturing process, and we cannot be sure that even minor changes in the process will result in therapies that are safe and
effective.
The facilities used to manufacture our product candidates must be evaluated by the FDA, or other health regulatory agencies in
other jurisdictions, pursuant to inspections that will be conducted after we submit an application to the FDA or other health regulatory
agencies. We will not control the manufacturing process of, and will be completely dependent on, our contract manufacturing partners
for compliance with regulatory requirements, known as cGMP requirements, for manufacture of our product candidates. If our
contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory
requirements of the FDA or other regulatory authorities, they will not be able to secure and/or maintain regulatory approval for their
manufacturing facilities or regulatory authorities may cite them for deficiencies, and we may not be able to obtain or may be delayed
in obtaining regulatory approval from the FDA or other regulatory authorities for our product candidates. In addition, we have no
direct control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified
personnel. If the FDA or a comparable health regulatory authority does not approve these facilities or cites these facilities for
deficiencies for the manufacture of our product candidates or if it withdraws any such approval or cites deficiencies in the future, we
may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory
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approval for or market our product candidates, if approved. In addition, if our contract manufacturers are unable to timely perform or
become distracted as a result of actions taken by the FDA or a comparable health regulatory authority or as a result of the coronavirus
pandemic, we may experience manufacturing delays or may need to find alternative manufacturing facilities, which in each case,
would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.
Our reliance on a limited number of third-party manufacturers exposes us to a number of risks, including the following:
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we may be unable to identify manufacturers on acceptable terms or at all because the number of potential manufacturers is
limited;
a new manufacturer would have to be educated in, or develop substantially equivalent processes for, the production of our
product candidates;
a change in manufacturers or certain changes in manufacturing processes/procedures will require that we conduct a
manufacturing comparability study to verify that any new manufacturer or manufacturing process/procedures will produce
our product candidate according to the specifications previously submitted to the FDA or other regulatory authority, and
such study may be unsuccessful;
our third-party manufacturers might be unable to timely manufacture our product candidates or produce the quantity and
quality required to meet our clinical and commercial needs, if any;
contract manufacturers may not be able to execute our manufacturing procedures and other logistical support requirements
appropriately;
our contract manufacturers may not perform as agreed, may not devote sufficient resources to our product candidates or
may not remain in the contract manufacturing business for the time required to supply our clinical trials;
manufacturers are subject to ongoing periodic unannounced inspection by the FDA and corresponding state agencies to
ensure strict compliance with cGMP and other government regulations and corresponding foreign standards and we have
no control over third-party manufacturers’ compliance with these regulations and standards;
we may not own, or may have to share, the intellectual property rights to any improvements made by our third-party
manufacturers in the manufacturing process for our product candidates;
our third-party manufacturers could breach or terminate their agreements with us;
raw materials and components used in the manufacturing process, particularly those for which we have no other source or
supplier, may not be available or may not be suitable or acceptable for use due to material or component defects;
our contract manufacturers and critical reagent suppliers may be subject to inclement weather, as well as natural or man-
made disasters;
our contract manufacturers may have unacceptable or inconsistent product quality success rates and yields, and we have
no direct control over our contract manufacturers’ ability to maintain adequate quality control, quality assurance and
qualified personnel; and
our contract manufacturers may manufacture defective or otherwise dangerous products that could result in injury to
consumers during clinical trials or once commercialized for sale to the public, if not discovered by us.
Each of these risks could delay or prevent the completion of our clinical trials or the approval of any of our product candidates
by the FDA, result in higher costs or adversely impact commercialization of our product candidates, if approved. In addition, we will
rely on third parties to perform certain specification tests on our product candidates prior to delivery to patients. If these tests are not
appropriately done and test data are not reliable, patients could be put at risk of serious harm and the FDA could place significant
restrictions on our company until deficiencies are remedied.
Risks Related to Employee Matters, Managing Growth and Other Risks Related to Our Business
Our Future Success Depends On Our Ability To Retain Key Executives And To Attract, Retain And Motivate Qualified
Personnel.
We are highly dependent on the research and development, clinical, commercial and business development expertise of Dr.
Samarth Kulkarni, our Chief Executive Officer, as well as the other principal members of our management, scientific and clinical
team. Although we have entered into employment agreements with our executive officers, each of them may terminate their
employment with us at any time. We do not maintain “key person” insurance for any of our executives or other employees. In
addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and
development and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may
have commitments under consulting or advisory contracts with other entities that may limit their availability to us. The loss of the
services of our executive officers or other key employees or consultants could impede the achievement of our research, development
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and commercialization objectives and seriously harm our ability to successfully implement our business strategy. If we are unable to
retain high quality personnel, our ability to pursue our growth strategy will be limited.
We will also need to recruit and retain qualified scientific, clinical and commercial personnel as we advance the development of
our product candidates and product pipeline. We may be unable to hire, train, retain or motivate these key personnel on acceptable
terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience
competition for the hiring of scientific, clinical and commercial personnel from universities and research institutions. Failure to
succeed in clinical trials may make it more challenging to recruit and retain qualified scientific personnel.
Swiss Corporate Governance With Respect To Executive Compensation May Affect Our Business.
Swiss corporate law, among other things, (a) requires an annual binding shareholder “say on pay” vote with respect to the
compensation of members of our executive management team and board of directors, (b) generally prohibits the making of severance,
advance, transaction premiums and similar payments to members of our executive management and board of directors and (c) requires
companies to specify various compensation-related matters in their articles of association, thus requiring them to be approved by a
shareholders’ vote. At our annual general meetings, our shareholders are required to approve the maximum aggregate compensation of
our board of directors and our executive management team. Swiss law further provides for criminal penalties against directors and
members of executive management in case of non-compliance with certain of the requirements regarding compensation. Such
provisions may negatively affect our ability to attract and retain executive management and members of our board of directors.
Our Employees, Principal Investigators, Consultants And Commercial Partners May Engage In Misconduct Or Other Improper
Activities, Including Non-compliance With Regulatory Standards And Requirements And Insider Trading.
We are exposed to the risk of fraud or other misconduct by our employees, consultants, commercial partners, and principal
investigators. Misconduct by these parties could include intentional failures to comply with FDA regulations or the regulations
applicable in the EU and other jurisdictions, provide accurate information to the FDA, the European Commission, and other regulatory
authorities, comply with healthcare fraud and abuse laws and regulations in the United States and in other jurisdictions, report
financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business
arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct,
kickbacks, self-dealing and other abusive practices. These laws and regulations restrict or prohibit a wide range of pricing,
discounting, marketing and promotion, sales commission, customer incentive programs, and other business arrangements. Such
misconduct also could involve the improper use of information obtained in the course of clinical trials or interactions with the FDA or
other regulatory authorities, which could result in regulatory sanctions and cause serious harm to our reputation. We have adopted a
code of conduct applicable to all of our employees, but it is not always possible to identify and deter employee misconduct, and the
precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in
protecting us from government investigations or other actions or lawsuits stemming from a failure to comply with these laws or
regulations. Additionally, we are subject to the risk that a person could allege such fraud or other misconduct, even if none occurred. If
any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could
have a significant impact on our business, financial condition, results of operations, and prospects, including the imposition of civil,
criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other
federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings and curtailment of our
operations, any of which could adversely affect our ability to operate our business and our results of operations.
If We Fail To Comply With Environmental, Health And Safety Laws And Regulations, We Could Become Subject To Fines Or
Penalties Or Incur Costs That Could Harm Our Business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory
procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of
hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste
products. We contract with third parties for the disposal of these materials and wastes. We will not be able to eliminate the risk of
contamination or injury from these materials. In the event of contamination or injury resulting from any use by us of hazardous
materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur
significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and
regulations. These current or future laws and regulations may impair our research, development or production efforts. Our failure to
comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
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We Are At Risk of Product Liability And Other Product-Related Claims And Lawsuits, Which Could Cause Us To Incur
Substantial Liabilities And Could Limit Commercialization Of Any Product Candidates That We May Develop.
We will face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials
and will face an even greater risk of claims and litigation relating to our products if and when we commercially sell any product
candidates that we may develop. For example, we may be sued, or claims may be made against us, if our informed consents for
subjects or patients in any clinical trials are or are alleged to be inadequate or inaccurate in any way or fail to fully inform subjects or
patients of any potential risks involved with their participation or other material or required information. We may also be sued, or
claims may be made against us, if our product candidates cause or are perceived or alleged to cause injury, or even death, or are found
to be otherwise unsuitable during clinical trials, manufacturing, marketing or after sale and use by consumers or when used in
conjunction with other medications, even if recommended for such use. Any such product liability claims may include, without
limitation, allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence,
strict liability, fraud/misrepresentation, inadequate labeling, marketing, or promotional claims or a breach of warranties, among other
claims. Claims could also be asserted under state consumer protection laws, common law, or other statutes or regulations.
If we cannot successfully defend ourselves against product liability claims or other claims relating to our products, including
without limitation that our products caused injuries or death, we could incur substantial liabilities or be required to limit
commercialization of our product candidates, as well as risk corresponding regulatory enforcement action. Even successful defense
would require significant financial and management resources. Even if our agreements with any past or future corporate collaborators
entitle us to indemnification in whole or in part against losses, such indemnification may not be available or adequate should any
claim arise. Regardless of merit or eventual outcome, liability claims may result in, among other things:
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decreased demand or a decline in price for any product candidates that we may develop;
injury to our reputation and significant negative media attention;
withdrawal of clinical trial participants and inability to enroll future participants;
significant costs to defend the related litigation;
substantial monetary awards to trial participants or patients;
initiation of investigations by regulatory authorities or other regulatory actions or proceedings;
loss of revenue;
product recalls, withdrawals or labeling, packaging, marketing or promotional modifications or restrictions;
diversion of management's time and our resources; and
the inability to commercialize any product candidates that we may develop.
Although we have obtained product liability insurance coverage, it may not be adequate to cover all liabilities that we may
incur. Further, we anticipate that we will need to increase our insurance coverage if we successfully commercialize any product
candidate. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonable cost or in
an amount adequate to satisfy any liability that may arise. We may have to pay any amounts awarded by a court or negotiated in a
settlement that exceed our coverage limitations or that are not covered by our insurance, or under any indemnification agreements with
collaborators, and we may not have, or be able to obtain, sufficient capital to pay such amounts.
If We Fail To Establish And Maintain Proper And Effective Internal Control Over Financial Reporting, Our Operating Results
And Our Ability To Operate Our Business Could Be Harmed.
Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce
accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently. We are
required to comply with the requirements of The Sarbanes-Oxley Act of 2002, or SOX, which requires that we maintain effective
internal control over financial reporting and disclosure controls and procedures. In particular, we must perform system and process
evaluation, document our controls and perform testing of our key control over financial reporting to allow management and our
independent public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by
Section 404 of SOX. Our testing, or the subsequent testing by our independent public accounting firm, may reveal deficiencies in our
internal control over financial reporting that are deemed to be material weaknesses. If we are not able to comply with the requirements
of Section 404 in a timely manner, or if we or our accounting firm identify deficiencies in our internal control over financial reporting
that are deemed to be material weaknesses, the market price of our stock would likely decline and we could be subject to lawsuits,
sanctions or investigations by regulatory authorities, which would require additional financial and management resources.
We continue to invest in more robust technology and in more resources in order to manage those reporting requirements.
Implementing the appropriate changes to our internal controls may distract our officers and employees, result in substantial costs if we
implement new processes or modify our existing processes and require significant time to complete. Any difficulties or delays in
implementing these controls could impact our ability to timely report our financial results. In addition, we currently rely on a manual
process in some areas which increases our exposure to human error or intervention in reporting our financial results. For these reasons,
we may encounter difficulties in the timely and accurate reporting of our financial results, which would impact our ability to provide
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our investors with information in a timely manner. As a result, our investors could lose confidence in our reported financial
information, and our stock price could decline.
In addition, any such changes do not guarantee that we will be effective in maintaining the adequacy of our internal controls,
and any failure to maintain that adequacy could prevent us from accurately reporting our financial results. Also, please see, "Risk
Factors--Risks Related to Information Security and Data Privacy--Our Internal Computer Systems, Or Those Of Our Collaborators
Or Other Contractors Or Consultants, May Fail Or Suffer Security Breaches, Which Could Result In A Material Disruption Of Our
Product Development Programs."
Our Business Operations Have a Substantial International Footprint and We May Further Expand In The Future, Which
Presents Challenges In Managing Our Business Operations.
We are headquartered in Zug, Switzerland and have offices in the United States. In addition, we may expand our international
operations into other countries in the future. While we have acquired significant management and other personnel with substantial
experience, conducting our business in multiple countries subjects us to a variety of risks and complexities that may materially and
adversely affect our business, results of operations, financial condition and growth prospects, including, among other things:
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the increased complexity and costs inherent in managing international operations;
diverse regulatory, financial and legal requirements, and any future changes to such requirements, in one or more
countries where we are located or do business;
country-specific tax, labor and employment laws and regulations;
challenges inherent in efficiently managing employees in diverse geographies, including the need to adapt systems,
policies, benefits and compliance programs to differing labor and other regulations;
liabilities for activities of, or related to, our international operations or product candidates;
changes in currency rates; and
regulations relating to data security and the unauthorized use of, or access to, commercial and personal information.
We continue to expand our operations, and our corporate structure and tax structure is complex. In connection with our current
and future potential partnerships, we are actively engaged in developing and applying technologies and intellectual property with a
view toward commercialization of products globally, often with commercialization partners. In connection with those activities, we
already have and will likely continue to engage in complex cross-border and global transactions involving our technology, intellectual
property and other assets, between us and other entities such as partners and licensees, and between us and our subsidiaries. Such
cross-border and global arrangements are both difficult to manage and can potentially give rise to complexities in areas such as tax
treatment, particularly since we are subject to multiple tax regimes and different tax authorities can also take different views from each
other, even as regards the same cross-border transaction or arrangement. There can be no assurance that we will effectively manage
this increased complexity without experiencing operating inefficiencies, control deficiencies or tax liabilities. Significant management
time and effort is required to effectively manage the increased complexity of our company, and our failure to successfully do so could
have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Risks Related to Intellectual Property
If We Are Unable To Obtain Or Protect Intellectual Property Rights Related to Our Proprietary Gene Editing Technology And
Product Candidates, We May Not Be Able To Compete Effectively In Our Markets.
Our success depends in large part on our ability to obtain and maintain proprietary or intellectual property protection in the
United States and other jurisdictions with respect to our CRISPR/Cas9 platform technology and any proprietary product candidates
and technology we develop. We rely upon a combination of intellectual property rights, including patent rights, trade secret protection
and confidentiality agreements to protect the intellectual property related to our gene editing technology and product candidates.
Presently we have rights to certain intellectual property, through licenses from third parties and under patent rights that we own, to
develop our gene editing technology and/or product candidates. For example, through our 2014 exclusive license with Dr.
Charpentier, we exclusively license certain rights to a worldwide patent portfolio, including more than one hundred (100) granted or
allowed patents, as well as pending patent applications, which covers various aspects of our gene editing platform technology,
including, for example, compositions of matter (e.g., CRISPR/Cas9 systems), and methods of use, including the use of a
CRISPR/Cas9 system for gene editing. We refer to this worldwide patent portfolio as the “Patent Portfolio”. In addition, we have filed
numerous patent applications covering our product candidates, which cover various aspects of our product candidates, including, for
example, compositions of matter, as well as methods of making and using.
We seek to protect our proprietary position by in-licensing intellectual property to cover our platform technology and filing
patent applications in the United States and in other jurisdictions related to our technologies and product candidates that are important
to our business. We also rely on trade secrets, know-how and continuing technological innovation to develop and maintain our
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proprietary and intellectual property position. If we or our licensors are unable to obtain or maintain patent protection with respect to
our CRISPR/Cas9 platform technology and any proprietary products and technology we develop, our business, financial condition,
results of operations and prospects could be materially harmed.
However, the strength of patents in the biotechnology and pharmaceutical field generally, and the genome-editing field in
particular, involves complex legal and scientific questions and can be uncertain and we cannot offer any assurances about which, if
any, patent rights that we own or in-license will issue, the breadth of any such patent rights or whether any issued patents will be
found invalid and unenforceable or will be threatened by third parties. For example, the scope of patent protection that will be
available to us in the United States and in other countries is uncertain. Changes in either the patent laws or their interpretation in the
United States and other countries may diminish our ability to protect our intellectual property, obtain, maintain, defend and enforce
our intellectual property rights and, more generally, could affect the value of our intellectual property or narrow the scope of our
owned and in-licensed patents. With respect to both in-licensed and owned intellectual property, we cannot predict whether the patent
applications we and our licensors are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any
issued patents will provide sufficient protection from competitors, or if any such patents will be found invalid, unenforceable or not
infringed if challenged by our competitors.
The patent prosecution process is expensive, time-consuming, and complex, and we may not be able to file, prosecute, maintain,
enforce, or license all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we
will fail to identify patentable aspects of our research and development output in time to obtain patent protection. Although we enter
into non-disclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research
and development output, such as our employees, corporate collaborators, outside scientific collaborators, CROs, contract
manufacturers, consultants advisors, and other third parties, any of these parties may breach the agreements and disclose such output
before a patent application is filed, thereby jeopardizing our ability to seek patent protection. In addition, numerous U.S. and foreign
issued patents and pending patent applications owned by third parties exist in the fields in which we are developing our gene editing
technology and/or product candidates. It is possible that we have failed to identify relevant third-party patents or applications.
Furthermore, publications of discoveries in the scientific literature often lag behind the actual discoveries and patent applications in
the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore,
we cannot know with any degree of certainty whether the inventors of our licensed patents and applications were the first to make the
inventions claimed in our owned or any licensed patents or pending patent applications, or that we were the first to file for patent
protection of such inventions. Moreover, there is no assurance that all of the potentially relevant prior art relating to our owned and in-
licensed patents and patent applications has been found, which can invalidate a patent or prevent a patent from issuing from a pending
patent application.
The ultimate outcome of any pending or allowed patent application or granted patent is uncertain and the coverage claimed in a
patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. Even if
patent applications we license or own currently in the future issue as patents, they may not issue in a form that will provide us with
any meaningful protection, prevent competitors or other third parties from competing with us, or otherwise provide us with any
competitive advantage.
Additionally, the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability and our owned and
in-licensed patents may be challenged in the courts or patent offices in the United States and in other jurisdictions. There is a
substantial amount of litigation as well as administrative proceedings for challenging patents, including interference, derivation,
reexamination, and other post-grant proceedings before the USPTO and oppositions and other comparable proceedings in foreign
jurisdictions, involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, and we
expect this to be true for the CRISPR/Cas9 space as well. See “Risk Factors —Risks Related to Intellectual Property—Third-party
Claims Of Intellectual Property Infringement Against Us, Our Licensors Or Our Collaborators May Prevent Or Delay Our Product
Discovery and Development Efforts” for more information. Such challenges may result in loss of exclusivity or freedom to operate or
in patent claims being narrowed, revoked, invalidated or held unenforceable, in whole or in part, which could limit our ability to
practice the invention or stop others from using or commercializing similar or identical technology and products, or limit the duration
of the patent protection of our technology and products. Given the amount of time required for the development, testing and regulatory
review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are
commercialized. As a result, our owned and in-licensed patent portfolio may not provide us with sufficient rights to exclude others
from commercializing products similar or identical to ours.
Competitors may also claim that they invented the inventions claimed in such issued patents or patent applications prior to our
inventors, or may have filed patent applications before our inventors did. A competitor may also claim that our products and
technology infringe its patents and that we therefore cannot practice our technology as claimed under our patent applications, if issued.
An adverse determination in any such claim may result in our inability to manufacture or commercialize products without infringing
third-party patent rights. Competitors may also contest our patents, if issued, by showing that the invention was not patent-eligible,
was not novel, was obvious or that the patent claims failed any other requirement for patentability. An adverse determination in any
such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights or allow third parties to
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commercialize our technology or products and compete directly with us, without payment to us.
Moreover, we, or one of our licensors, may have to participate in additional interference proceedings declared by the USPTO to
determine priority of invention or in post-grant challenge proceedings, such as oppositions in a non-U.S. patent office, that challenge
priority of invention or other features of patentability. Such challenges may result in loss of patent rights, loss of exclusivity or
freedom to operate, or in patent claims being narrowed, revoked, invalidated or held unenforceable, in whole or in part, which could
limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the
patent protection of our technology and product candidates. Such proceedings also may result in substantial cost and require
significant time from our scientists and management, even if the eventual outcome is favorable to us.
Further, even if they are unchallenged, our owned and in-licensed 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. If the breadth
or strength of protection provided by the patent applications we hold is threatened, this could dissuade companies from collaborating
with us to develop, and could threaten our ability to commercialize, product candidates. Consequently, we do not know whether any of
our genome-editing platform advances and product candidates will be protectable or remain protected by valid and enforceable
patents. Our competitors or other third parties may be able to circumvent our patents by developing similar or alternative technologies
or products in a non-infringing manner. For example, we are aware that third parties have suggested the use of the CRISPR
technology in conjunction with a protein other than Cas9. Our owned and in-licensed patents may not cover such technology. If our
competitors commercialize the CRISPR technology in conjunction with a protein other than Cas9, our business, financial condition,
results of operations, and prospects could be materially adversely affected. Further, if we encounter delays in our clinical trials, the
period of time during which we could market product candidates under patent protection would be reduced.
Because our gene editing technology and product candidates could require the use of proprietary rights held by third parties, the
growth of our business could depend in part on our ability to acquire, in-license, or use these proprietary rights. We may be unable to
acquire or in-license such intellectual property rights from third parties that we identify. 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. Furthermore, as industry, government,
academia and other biotechnology and pharmaceutical research expands and more patents are issued, the risk increases that our
product candidates may give rise to claims of infringement of the patent rights of others. We cannot guarantee that our gene editing
technology, product candidates or the use of such product candidates do not infringe third-party patents. Because patent rights are
granted jurisdiction-by-jurisdiction, our freedom to practice certain technologies, including our ability to research, develop and
commercialize our product candidates, may differ by country.
Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on
our business. Our pending and future patent applications or the patent applications that we obtain rights to through in-licensing
arrangements may not result in patents being issued which protect our technology or future product candidates, in whole or in part, or
which effectively prevent others from commercializing competitive technologies and products.
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, information or
technology that is not covered by patents. However, trade secrets can be difficult to protect. We seek to protect our proprietary
technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and
contractors. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of
our premises and physical and electronic security of our information technology systems. While we have confidence in these
individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies
for any breach. In addition, our trade secrets may otherwise become known or be independently discovered by competitors.
Although we expect all of our employees and consultants to assign their inventions to us, and all of our employees, consultants,
advisors and any third parties who have access to our proprietary know-how, information or technology to enter into confidentiality
agreements, we cannot provide any assurances that all such agreements have been duly executed or that our trade secrets and other
confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or
independently develop substantially equivalent information and techniques. Misappropriation or unauthorized disclosure of our trade
secrets could impair our competitive position and may have a material adverse effect on our business. Additionally, if the steps taken
to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating the
trade secret. In addition, others may independently discover our trade secrets and proprietary information. For example, the FDA, as
part of its Transparency Initiative, is currently considering whether to make additional information publicly available on a routine
basis, including information that we may consider to be trade secrets or other proprietary information, and it is not clear at the present
time how the FDA’s disclosure policies may change in the future, if at all.
Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws
of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in
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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.
Third-party Claims Of Intellectual Property Infringement Against Us, Our Licensors Or Our Collaborators May Prevent Or
Delay Our Product Discovery and Development Efforts.
Our commercial success depends in part on our avoiding infringement of the valid patents and proprietary rights of third parties.
Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist in the fields in which we
are developing our product candidates. As industry, government, academia and other biotechnology and pharmaceutical research
expands and more patents are issued, the risk increases that our product candidates may give rise to claims of infringement of the
patent rights of others. We cannot guarantee that our technology, future product candidates or the use of such product candidates do
not infringe third-party patents. It is also possible that we have failed to identify relevant third-party patents or applications. Because
patent rights are granted jurisdiction-by-jurisdiction, our freedom to practice certain technologies, including our ability to research,
develop and commercialize our product candidates, may differ by country.
Third parties may assert that we infringe their patents or that we are otherwise employing their proprietary technology without
authorization, and may sue us. There may be third-party patents of which we are currently unaware with claims to compositions,
formulations, methods of manufacture or methods of use or treatment that cover product candidates we discover and develop. Because
patent applications can take many years to issue, there may be currently pending patent applications that 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 or the manufacture, use or sale of our product candidates infringes upon these patents. If any such third-party patents
were held by a court of competent jurisdiction to cover our technologies or product candidates, the holders of any such patents may be
able to block our ability to commercialize the applicable product candidate unless we obtain a license under the applicable patents, or
until such patents expire or are finally determined to be held invalid or unenforceable. Such a license may not be available on
commercially reasonable terms or at all. If we are unable to obtain a necessary license to a third-party patent on commercially
reasonable terms, our ability to commercialize our product candidates may be impaired or delayed, which could in turn significantly
harm our business.
Third-party Claims Of Intellectual Property May Prevent Or Delay Our Product Discovery and Development Efforts.
Third parties may seek to claim intellectual property rights that encompass or overlap with intellectual property that we own or
license from them or others. Legal proceedings may be initiated to determine the scope and ownership of these rights, and could result
in our loss of rights, including injunctions or other equitable relief that could effectively block our ability to further develop and
commercialize our product candidates. Interference or derivation proceedings provoked by third parties or brought by the USPTO may
be necessary to determine the priority of inventions with respect to, or the correct inventorship of, our patents or patent applications or
those of our licensors. An unfavorable outcome could result in a loss of our current patent rights and 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. Litigation, interference or derivation proceedings may result in a
decision adverse to our interests and, even if we are successful, may result in substantial costs and distract our management and other
employees.
For example, third parties could assert that we do not have rights to certain CRISPR/Cas9 technologies, or could assert and have
asserted in the past, that the CVC Group does not have rights to certain CRISPR/Cas9 technologies, including inventorship and
ownership rights to some of the CVC Group’s patents, or that such rights are limited.
Specifically, the Broad Institute and Massachusetts Institute of Technology and, in some instances, the President and Fellows of
Harvard College, which we refer to individually and collectively as the “Broad” owns a patent family that includes issued patents in
the United States and Europe that claim certain aspects of CRISPR/Cas9 systems to edit DNA in eukaryotic cells, including human
cells. In January 2016, the USPTO declared an interference (Interference No. 106,048, or ‘048 interference) between one of the then
pending U.S. patent applications (now issued as U.S. Patent No. 10,266,850) included in the Patent Portfolio and twelve issued U.S.
patents owned jointly by the Broad to determine which set of inventors invented first and, thus, is entitled to patents on the invention
in the United States. The PTAB concluded that the declared interference should be discontinued because the involved claim sets were
considered patentably distinct from each other. Following appeal by the CVC Group, on September 10, 2018, the Federal Circuit
affirmed the PTAB’s decision to terminate the interference proceeding without determining which inventors actually invented the use
of the CRISPR/Cas9 genome editing technology in eukaryotic cells.
Further, in June 2019, the USPTO declared a second interference (Interference No. 106,115, or ‘115 interference) between
fourteen (14) pending U.S. patent applications co-owned by the CVC Group and thirteen (13) patents and a patent application co-
owned by the Broad. The Broad patents include those that were the subject of the ‘048 interference. In September 2020, the PTAB
issued an order that, among other matters, advanced the proceeding to the priority phase. In February 2022, PTAB issued a Decision
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of Priority and Judgment finding that Broad has priority over CVC Group with respect to the subject matter of the interference. The
CVC Group has appealed this decision to the Federal Circuit. Any final decision by the Federal Circuit can be further appealed to the
Supreme Court.
In addition to the Broad, other third parties, such as Vilnius University, ToolGen, Inc., MilliporeSigma (a subsidiary of Merck
KGaA and formerly known as “Sigma-Aldrich”) and Harvard University, filed patent applications claiming CRISPR/Cas9-related
inventions around or within a year after the CVC Group application was filed and allege (or may allege) that they invented one or
more of the inventions claimed by the CVC Group before the CVC Group. If the USPTO deems the scope of the claims of one or
more of these parties to sufficiently overlap with the allowable claims from the CVC Group application, the USPTO could declare
other interference proceedings to determine the actual inventor of such claims. For example, in December 2020, the USPTO declared
an interference (Interference No. 106,127, or ‘127 interference) between a ToolGen patent application that claims certain aspects of
CRISPR/Cas9 systems to edit DNA in eukaryotic cells, including human cells, and the same fourteen pending U.S. patent applications
co-owned by the CVC Group that are involved in the ‘115 interference. This interference has been stayed pending a decision by the
Federal Circuit in the ‘115 interference. The PTAB’s judgment may be appealed to the Federal Circuit, and thru to the Supreme Court.
In addition, in June 2021, the USPTO declared an interference (Interference No. 106,132, or ‘132 interference) between a
MilliporeSigma patent application that claims certain aspects of CRISPR/Cas9 systems to edit DNA in eukaryotic cells, including
human cells, and the same fourteen pending U.S. patent applications co-owned by the CVC Group that are involved in the ‘115
interference. This interference has been stayed pending a decision by the Federal Circuit in the ‘115 interference. Ultimately, the
PTAB’s judgment may be appealed to the Federal Circuit, and thru to the Supreme Court.
Each of the CVC Group, the Broad, ToolGen, Vilnius University, MilliporeSigma and Harvard University can pursue existing
or new patent applications in the United States and elsewhere. Because the CVC Group and these other third parties all allege owning
intellectual property claiming overlapping aspects of CRISPR/Cas9 systems and methods to edit DNA in eukaryotic cells, including
human cells, our ability to market and sell CRISPR/Cas9-based human therapeutics may be adversely impacted depending on the
scope and actual ownership over the inventions claimed in the competing patent portfolios.
Going forward, the USPTO could declare new interferences with the CVC Group, or us individually, related to the uses of the
CRISPR/Cas9 technologies. Furthermore, we and the CVC Group continue to prosecute other patent claims covering the
CRISPR/Cas9 inventions, which could also result in allowable or issued patents in the United States. Certain of the claims being
prosecuted by the CVC Group and us, if found allowable by the USPTO, could lead to interference proceedings against patents or
patent applications owned by third parties, including those listed above. If the USPTO deems the scope of the claims of one or more of
these parties to sufficiently overlap with the allowable claims from a patent or patent application within the Patent Portfolio or our
portfolio of patents, the USPTO could declare other interference proceedings to determine the first inventor of such claims. We cannot
be certain which of these results, if any, will actually occur. If there are additional interferences, either party to the interference could
again appeal an adverse decision to the Federal Circuit. Additionally, any of the CVC Group’s existing or new patents or our existing
or new patents could be the subject of other challenges to their validity or enforceability. The effects that any such results may have on
us and our intellectual property position are currently unknown.
If any third party were to succeed in its interference and prevail in their inventorship claims or obtain patent claims that cover
our product candidates or related activities through these various legal proceedings, such party could seek to assert its issued patents
against us based on our CRISPR/Cas9-based activities, including commercialization. Third parties asserting their patent rights against
us may seek and obtain injunctive or other equitable relief, which could effectively limit or block our ability to further develop and
commercialize our product candidates. If we are found to infringe a third party’s valid intellectual property rights, we could be
required to obtain a license from such third party to continue developing and marketing our products and technology, or avoid or
invalidate such third party’s intellectual property. These third parties would be under no obligation to grant to us any such license and
such licenses may not be available on commercially reasonable terms or at all, or may be non-exclusive. If we are unable to obtain and
maintain such licenses, we and our partners may need to cease the practice of our core gene editing, and the development,
manufacture, and commercialization of one or more of the product candidates we may develop. In addition, we could be found liable
for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of
infringement could prevent us from commercializing one or more of our product candidates, force us to redesign our infringing
products or force us to cease some or all of our business operations, any of which could materially harm our business and could
prevent us from further developing and commercializing our proposed future product candidates thereby causing us significant harm.
The loss of exclusivity or the narrowing of our patent claims could limit our ability to stop others from using or commercializing
similar or identical technology and products. Claims that we have misappropriated the confidential information or trade secrets of
third parties could have a similar negative impact on our business. Any of the foregoing could result in a material adverse effect on our
business, financial condition, results of operations, or prospects. Defense of these claims, regardless of their merit, would involve
substantial litigation expense, would be a substantial diversion of management and other employee resources from our business and
may impact our reputation.
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In any case, it may be years before there is a final determination on priority. Pursuant to the terms of the license agreement with
Dr. Charpentier, we are responsible for covering or reimbursing Dr. Charpentier’s patent prosecution, defense and related costs
associated with our in-licensed technology.
Third-party owned IP relating to CRISPR/Cas9 or other related technologies necessary to develop, manufacture and
commercialize viable CRISPR/Cas9 therapeutics – such as compositions of the products or components, methods of treatment,
delivery technologies, chemical modifications, and analytical and manufacturing methods – could adversely impact our ability to
ultimately market and sell products. Third parties may own intellectual property, including patents, that cover all or aspects of our
technologies and potential products, and may be necessary for us to develop or commercialize viable products. If we are unable to
successfully license, avoid or challenge such third-party intellectual property, we may not be able to develop and commercialize viable
products in all or certain jurisdictions. In addition, if the intellectual property covering our products or technologies that we own or
license were to be legally impaired or lost, we may be unable to realize sufficient financial returns to support the development or
commercialization of our products.
Further, third parties routinely file international counterparts of their U.S. applications, some of which have been granted or
could in the future be granted in Europe and/or other non-U.S. jurisdictions. We, as well as other parties have initiated opposition
proceedings against some of these grants, and we may in the future oppose other grants to these or other applicants. Similarly, our
intellectual property is and may in the future become involved in opposition proceedings in Europe or other jurisdictions, such as, for
example, in Australia, Japan, China, and India. These oppositions could lead to the revocation of the patents in whole or in part, or
could lead to the claims being narrowed in a way that could impair or preclude our ability to enforce the patents against competitors in
Europe. For example, in February 2018, several parties filed oppositions in the European Patent Office to the grant of our first in-
licensed European patent. Later in 2018 and in 2019, several parties filed oppositions in the European Patent Office to the grant of
both our second and third in-licensed European patents. Opposition proceedings can lead to the revocation of a patent in its entirety;
the maintenance of the patent as granted, or the maintenance of a patent in amended form. Opposition proceedings typically take years
to resolve, including the time taken by appeals that can be filed by any of the parties. We cannot guarantee the outcome of the
oppositions to our in-licensed European patent, and an adverse result could preclude us from enforcing our rights in Europe against
third parties. For example, in early 2020, the European Patent Office upheld our first in-licensed European patent in amended form; in
late 2021, they revoked our second European patent; and in 2022, the European Patent Office upheld our third European patent in
amended form. The decisions on the first and third European patents have been appealed and the appeal is pending.
We are unable to predict the outcome of these matters and are unable to make a meaningful estimate of the amount or range of
loss, if any, that could result from an unfavorable outcome. In the future, we may become party to legal matters and claims arising in
the ordinary course of business, the resolution of which we do not anticipate would have a material adverse impact on our financial
position, results of operations or cash flows.
Our Rights To Develop And Commercialize Our Technology And Product Candidates Are Subject, In Part, To The Terms And
Conditions Of Licenses Granted To Us By Others.
We are reliant upon licenses to certain intellectual property from third parties that are important or necessary to the development
of our gene editing technology and product candidates. These and other licenses may not provide exclusive rights to use such
intellectual property and technology in all relevant fields of use or cover all territories in which we may wish to develop or
commercialize our technology and products in the future. As a result, we may not be able to prevent competitors from developing and
commercializing competitive products in territories included in all of our licenses.
Moreover, under our in-license agreements, including our 2014 exclusive license agreement with Dr. Charpentier, we will be
required to pay royalties based on our revenues from sales of our products utilizing the licensed technologies and these royalty
payments could adversely affect the overall profitability for us of any products that we may seek to commercialize. Under each of our
in-license agreements with Dr. Charpentier, we have an obligation to use commercially reasonable efforts to develop and obtain
regulatory approval to market a licensed therapeutic product. Our in-license agreements with Dr. Charpentier also include an
obligation to file an IND (or its equivalent in a major market country) by April 2021 and an obligation to file an IND (or its equivalent
in a major market country) by April 2024. While we met the obligation to file an IND by April 2021, we may not be successful in
meeting other remaining obligations in the future on a timely basis or at all. Our failure to meet the remaining obligations may give
Dr. Charpentier the right to terminate our license rights. We will need to outsource and rely on third parties for many aspects of the
clinical development of the products covered under our license agreements. Delay or failure by these third parties could adversely
affect our ability to meet our diligence obligations and the continuation of our license agreements with third-party licensors.
In spite of our best efforts, our licensors might conclude that we have materially breached our license agreements and might
therefore terminate the license agreements, thereby removing our ability to develop and commercialize products and technology
covered by these license agreements. If these in-licenses are terminated, or if the underlying patents fail to provide the intended
exclusivity, competitors would have the freedom to seek regulatory approval of, and to market, products identical to ours. In addition,
we may seek to obtain additional licenses from our licensors and, in connection with obtaining such licenses, we may agree to amend
our existing licenses in a manner that may be more favorable to the licensors, including by agreeing to terms that could enable third
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parties (potentially including our competitors) to receive licenses to a portion of the intellectual property that is subject to our existing
licenses. Any of these events could have a material adverse effect on our competitive position, business, financial conditions, results
of operations, and prospects.
The Intellectual Property That Protects Our Core Gene Editing Technology Is Jointly Owned, And Our License Is From Only
One Of The Joint Owners, Materially Limiting Our Rights In The United States And In Other Jurisdictions.
The Patent Portfolio we have exclusively licensed from Dr. Charpentier is the core patent protection for our gene editing
technology. However, that family includes other named inventors who assigned their rights either to California or Vienna. As such,
the Patent Portfolio is currently co-owned by Dr. Charpentier, California, and Vienna. On December 15, 2016, we entered into a
Consent to Assignments, Licensing and Common Ownership and Invention Management Agreement, or IMA, with California, Vienna
and their licensees including Caribou and Caribou’s licensee Intellia Therapeutics. Under the IMA, the co-owners provided reciprocal
worldwide cross-consents to each of the other co-owners’ licensees and sublicensees, and agreed to a number of other commitments
and obligations with respect to supporting and managing the underlying CRISPR/Cas9 gene editing intellectual property, including a
cost-sharing agreement. As explained more fully below, that leaves us in a position of holding only non-exclusive or co-exclusive
rights to the patent rights that protect our core gene editing technology, and we must continue to satisfy our contractual obligations
under the IMA in order to maintain the effectiveness of the consents by California and Vienna to our license from Dr. Charpentier.
In the United States, each co-owner has the freedom to license and exploit the technology. As a result, we do not have exclusive
access to any intellectual property rights that Dr. Charpentier co-owns with another entity, such as California and Vienna. Our license
with Dr. Charpentier is therefore non-exclusive with respect to such co-owned rights. Furthermore, in the United States each co-owner
is required to be joined as a party to any claim or action we may wish to bring to enforce those patent rights. Moreover, in the United
States, non-exclusive licenses have no standing to bring a patent infringement action before a court. Therefore, for the patents owned
with California and Vienna we have no ability to pursue third-party infringement claims without cooperation of California and Vienna
and potentially their licensees. Although we have entered into the IMA with Vienna and California and their licensees, which provides
for, among other things, notice of and coordination in the event of third-party infringement of the patent rights within the Patent
Portfolio, there can be no assurance that Vienna and California will cooperate with us in any future infringement. If we are unable to
enforce our core patent rights licensed from Dr. Charpentier, we may be unable to prevent third parties from competing with us and
may be unable to persuade companies to sublicense our technology, either of which could have a material adverse effect on our
business.
We May Experience Disputes With The Third Parties That We In-license Intellectual Property Rights From Or Those We
License Intellectual Property To. Any Disputes With These Parties Could Adversely Affect Our Business And We Could Lose License
Rights That Are Important To Our Business.
We license the intellectual property that covers our gene editing technology from a third party, and we expect to continue to in-
license additional third-party intellectual property rights as we expand our gene editing technology. Disputes may arise with the third
parties from whom we license our intellectual property rights from for a variety of reasons, 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, or derive from, 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 and obligations associated
with sublicensing;
our diligence obligations under the license agreement and what activities satisfy those diligence obligations;
the inventorship and 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.
In addition, the agreements under which we currently license intellectual property or technology from third parties, or maintain
consents under the IMA, are complex, and certain provisions in such agreements may be susceptible to multiple interpretations, or
may conflict in such a way that puts us in breach of one or more agreements, which would make us susceptible to lengthy and
expensive disputes with one or more of our licensing partners or the parties to the IMA. The resolution of any contract interpretation
disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or
technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could
have a material adverse effect on our business, financial condition, results of operations, and prospects. Moreover, if disputes over
intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on
commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which
could have a material adverse effect on our business, financial conditions, results of operations, and prospects.
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Similarly, as we continue to enter into license agreements, collaboration agreements and partnerships with third-parties to
expand our development programs, we have, and expect to continue to, out-license some of our intellectual property to these third-
parties. Disputes may arise with these third parties to whom we out-license our intellectual property rights for a variety of reasons,
including, the scope of rights granted under any such agreement and other interpretation-related issues. Any disputes with our current
or future collaboration partners or licensees regarding the scope of intellectual property rights granted to such partner or licensee by us
could result in the delay of development programs and would make us susceptible to lengthy and expensive disputes with our partners
or licensees.
We May Not Be Successful In Obtaining Or Maintaining Necessary Rights To Any Product Candidates or Other Technologies
We May Develop Through Acquisitions And In-Licenses.
We currently have rights to intellectual property, through in-licenses from third parties, to identify and develop product
candidates, as well as use other technologies. Many pharmaceutical companies, biotechnology companies, and academic institutions
are competing with us in the field of gene editing technology and filing patent applications potentially relevant to our business. For
example, we are aware of several third-party patent applications that, if issued, may be construed to cover our gene editing technology
and product candidates. In order to avoid infringing these third-party patents, we may find it necessary or prudent to obtain licenses
from such third-party intellectual property holders. We may also require licenses from third parties for certain modified or improved
components of gene editing technology, such as modified nucleic acids or proteins, as well as non-CRISPR/Cas9 technologies such as
delivery methods that we are evaluating for use with product candidates we may develop. In addition, with respect to any patents we
co-own with third parties, we may require licenses to such co-owners’ interest to such patents. However, we may be unable to secure
such licenses or otherwise acquire or in-license any compositions, methods of use, processes, or other intellectual property rights from
third parties that we identify as necessary for product candidates we may develop and gene editing technology. The licensing or
acquisition of third-party intellectual property rights is a competitive area, and companies that may be more established, or have
greater resources than we do may be pursuing strategies to license or acquire third-party intellectual property rights that we may
consider attractive or necessary. More established companies may have a competitive advantage over us due to their size, capital
resources and greater clinical development and commercialization capabilities. 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 or at all. There can be no assurance that
we will be able to successfully complete such negotiations and ultimately acquire the rights to the intellectual property surrounding the
additional product candidates or technology that we may seek to acquire. If we are unable to successfully obtain rights to required
third-party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon
development of the relevant program, technology, or product candidate, or discontinue the practice of our core CRISPR/Cas9 gene
editing technology, which could have a material adverse effect on our business, financial condition, results of operations, and
prospects.
Issued Patents Covering Our Technology And Product Candidates Could Be Found Invalid Or Unenforceable If Challenged In
Court or before the USPTO or comparable foreign authority.
If we or one of our licensors initiated legal proceedings against a third party to enforce a patent covering a product candidate we
may develop or our technology, including CRISPR/Cas9, the defendant could counterclaim that such patent is invalid or
unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are
commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including
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 USPTO, or made a misleading statement, during
prosecution.
Third parties have raised challenges to the validity of certain of our in-licensed patent applications, such as our in-licensed
CRISPR/Cas9 patent applications in the context of third-party observations and oppositions filed, for example, in Europe, Australia,
Japan, China and India, and in the U.S. interferences, and may in the future raise similar claims related to our in-licensed and owned
patent applications and patents before administrative bodies in the United States or in other jurisdictions, even outside the context of
litigation. Mechanisms for challenging the validity of patents in patent offices include re-examination, post-grant review, inter partes
review, interference proceedings, derivation proceedings, and equivalent proceedings in non-U.S. jurisdictions (e.g., opposition
proceedings). Such proceedings could – after exhausting available appeals – result in the loss of our patent applications or patents, or
their narrowing in such a way that they no longer cover our technology or platform, or any product candidates that we may develop.
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. If a third party were to prevail on a legal assertion of invalidity or
unenforceability, we would lose at least part, and perhaps all, of the patent protection on our technology or platform, or any product
candidates that we may develop. Such a loss of patent protection would have a material adverse impact on our business, financial
condition, results of operations, and prospects.
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The Intellectual Property Landscape Around Gene Editing Technology, Including CRISPR/Cas9, Is Highly Dynamic, And Third
Parties May Initiate And Prevail In Legal Proceedings Alleging That The Patents That We In-License Or Own Are Invalid Or That
We Are Infringing, Misappropriating, Or Otherwise Violating Their Intellectual Property Rights, The Outcome Of Which Would Be
Uncertain And Could Have A Material Adverse Effect On The Success Of Our Business.
The field of gene editing, especially in the area of gene editing technology, is still in its infancy. Due to the intense research and
development that is taking place by several companies, including us and our competitors, in this field, the intellectual property
landscape is in flux, and it may remain uncertain for the coming years. There may be significant intellectual property related litigation
and proceedings relating to our owned and in-licensed, and other third party, intellectual property and proprietary rights in the future.
Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market, and sell
any product candidates that we may develop and use our proprietary technologies without infringing, misappropriating, or otherwise
violating the intellectual property and proprietary rights of third parties. The biotechnology and pharmaceutical industries are
characterized by extensive litigation regarding patents and other intellectual property rights. We are subject to and may in the future
become party to, or threatened with, adversarial proceedings or litigation regarding intellectual property rights with respect to our
technology and any product candidates we may develop, including re-examination interference proceedings, post-grant review, inter
partes review, and derivation proceedings before the USPTO and similar proceedings in other jurisdictions such as oppositions before
the European Patent Office. Third parties may assert infringement claims against us based on existing patents or patents that may be
granted in the future, regardless of their merit. If we are unable to prove that these patents are invalid and we are not able to obtain or
maintain a license on commercially reasonable terms, such patents could have a material adverse effect on the conduct of our business.
If we are found to infringe such third-party patents, we and our partners may be required to pay damages, cease commercialization of
the infringing technology, including our core CRISPR/Cas9 gene editing technology, or obtain a license from such third parties, which
may not be available on commercially reasonable terms or at all.
Even if we believe third-party intellectual property claims are without merit, there is no assurance that a court would find in our
favor on questions of infringement, validity, enforceability, ownership, or priority. A court of competent jurisdiction could hold that
these third-party patents are valid, enforceable, and infringed, which could materially and adversely affect our ability to commercialize
any product candidates we may develop and any other product candidates or technologies covered by the asserted third-party patents.
In order to successfully challenge the validity of any such U.S. patent in federal court, we would need to overcome a presumption of
validity. As this burden is a high one requiring us to present clear and convincing evidence as to the invalidity of any such U.S. patent
claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such U.S. patent. If we are found
to infringe a third party’s intellectual property rights, and we are unsuccessful in demonstrating that such patents are invalid or
unenforceable, we could be required to obtain a license from such third party to continue developing, manufacturing, and marketing
any product candidates we may develop and our technology. However, we may not be able to obtain any required license on
commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our
competitors and other third parties access to the same technologies licensed to us, and it could require us to make substantial licensing
and royalty payments. We also could be forced, including by court order, to cease developing, manufacturing, and commercializing
the infringing technology or product candidates. In addition, we could be found liable for significant monetary damages, including
treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. Claims that
we have misappropriated the confidential information or trade secrets of third parties could have a similar material adverse effect on
our business, financial condition, results of operations, and prospects.
Intellectual Property Litigation Could Cause Us To Spend Substantial Resources And Distract Our Personnel From Their
Normal Responsibilities.
Litigation or other legal proceedings relating to intellectual property claims, with or without merit, is unpredictable and
generally expensive and time-consuming and is likely to divert significant resources from our core business, including distracting our
technical and management personnel from their normal responsibilities and generally harm our business. Furthermore, because of the
substantial amount of discovery required in connection with intellectual property litigation in certain countries, including the United
States, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In
addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if
securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our
common shares. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for
development activities or any future sales, marketing or distribution activities.
We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our
competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater
financial resources. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing or misappropriating
or successfully challenging our intellectual property rights. Uncertainties resulting from the initiation and continuation of patent
litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
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Some Intellectual Property Which We Have In-licensed May Have Been Discovered Through Government Funded Programs
And Thus May Be Subject To Federal Regulations Such As “march-in” Rights, Certain Reporting Requirements And A Preference
For U.S.-based Manufacturers. Compliance With Such Regulations May Limit Our Exclusive Rights, And Limit Our Ability To
Contract With Non-U.S. Manufacturers.
The intellectual property rights to which we have in-licensed under Dr. Charpentier’s joint interest are co-owned by California,
which has indicated that one or more of the inventions were made under Grant No. GM081879 awarded by the National Institute of
Health. These rights are therefore subject to certain federal regulations. The U.S. government has certain rights pursuant to the Bayh-
Dole Act of 1980, or Bayh-Dole Act, to patents covering government rights in certain inventions developed under a government-
funded program. These rights include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any
governmental purpose. In addition, the U.S. government has the right to require us to grant exclusive, partially exclusive, or non-
exclusive licenses to any of these inventions to a third party if it determines that: (i) adequate steps have not been taken to achieve
practical application of the invention in the field of use; (ii) government action is necessary to meet public health or safety needs; or
(iii) government action is necessary to meet requirements for public use under federal regulations, also referred to as “march-in
rights.” The U.S. government also has the right to take title to these inventions if we, or the applicable contractor, fail to disclose the
invention to the government and fail to file an application to register the intellectual property within specified time limits. Intellectual
property generated under a government funded program is also subject to certain reporting requirements, compliance with which may
require us or the applicable contractor to expend substantial resources. In addition, the U.S. government requires that any products
embodying the subject invention or produced through the use of the subject invention be manufactured substantially in the United
States. The manufacturing preference requirement can be waived if the owner of the intellectual property can show that reasonable but
unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture
substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible. This preference
for U.S. manufacturers may limit our ability to contract with non-U.S. product manufacturers for products covered by such intellectual
property. To the extent any of our current or future patents covering inventions is generated through the use of U.S. government
funding, the provisions of the Bayh-Dole Act may similarly apply.
We May Not Be Able To Protect Our Intellectual Property And Proprietary Rights Throughout The World.
Filing, prosecuting and defending patents on our product candidates in all countries throughout the world would be prohibitively
expensive. The requirements for patentability may differ in certain countries, particularly in developing countries. Moreover, our
ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in intellectual property
laws various jurisdictions worldwide. Additionally, the patent laws of some countries do not afford intellectual property protection to
the same extent as the laws of the United States. For example, unlike patent law in the United States, the patent law in Europe and
many other jurisdictions precludes the patentability of methods of treatment of the human body and imposes substantial restrictions on
the scope of claims it will grant if broader than specifically disclosed embodiments.
Many companies have encountered significant problems in protecting and defending intellectual property rights in various
jurisdictions globally. 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 pursued and 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 product candidates, and our patents or other intellectual
property rights may not be effective or sufficient to prevent them from competing. 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 intellectual property and proprietary rights generally. Proceedings to enforce our
intellectual property and proprietary rights in various jurisdictions globally 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, could put 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 and proprietary rights around the world may be inadequate to obtain a significant
commercial advantage from the intellectual property that we develop or license.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties.
In addition, many countries limit the enforceability of patents against third parties, including government agencies or government
contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent.
If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our
competitive position may be impaired, and our business, financial condition, results of operations, and prospects may be adversely
affected. Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming
process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries, and we will not have
the benefit of patent protection in such countries.
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Changes To The Patent Law In The United States And Other Jurisdictions Could Diminish The Value Of Patents In General,
Thereby Impairing Our Ability To Protect Our Product Candidates.
Our success, like other companies in the biotech and pharmaceutical sectors, relies heavily on intellectual property, especially
patents. Patent acquisition and enforcement in our industry are complex, expensive, and uncertain due to technical and legal
intricacies.
Changes in patent laws or their interpretation can exacerbate these uncertainties and increase costs, particularly with the shift in
the United States from a "first to invent" to a "first-to-file" patent system since March 2013. This change means that the first applicant,
not necessarily the first inventor, can secure a patent. As patent applications are confidential initially, it is uncertain whether we were
the first to file or invent our technology.
The Leahy-Smith America Invents Act introduced significant changes, including a lower burden of proving patent invalidity in
USPTO proceedings compared to federal courts, which could make it easier for third parties to challenge our patents. Recent decisions
from the U.S. Supreme Court and U.S. Court of Appeals for the Federal Circuit have also narrowed patent protections and weakened
patent owners' rights, creating uncertainty about patent validity and enforceability. These changes, along with potential future legal
developments, could weaken our ability to secure new patents or enforce existing ones.
Geopolitical events can also affect patent processes. For instance, U.S. and foreign government actions regarding Russia's
invasion of Ukraine might impede patent filing and maintenance in Russia. A 2022 Russian decree allows exploitation of patents from
certain foreign entities without consent, potentially affecting our competitive position and business.
Furthermore, the recently-formed European Unified Patent Court, or UPC, allows for centralized patent revocation proceedings
in the EU. Although we do not currently own European patents that become subject to this court's jurisdiction, our future European
patents that become subject to this court's jurisdiction could present risks that might affect our business and commercialization efforts
in Europe. The UPC's evolving laws may affect our ability to defend or enforce those European patents. We may opt out of the UPC's
jurisdiction for our future European patents, but compliance challenges remain.
Overall, the evolving patent laws present ongoing challenges and may affect our business and intellectual property strategy.
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 on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages
over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of
procedural, documentary, fee payment and other similar provisions during the patent application process. Although an inadvertent
lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are
situations in which noncompliance 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. Noncompliance events that could result in abandonment or lapse of a patent
or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees, and failure to
properly legalize and submit formal documents. In any such event, our competitors might be able to enter the market, which would
have a material adverse effect on our business.
If We Are Unable To Protect The Confidentiality Of Our Trade Secrets, Our Business And Competitive Position Would Be
Harmed.
In addition to seeking patents for some of our technology and product candidates, we also rely on trade secrets and
confidentiality agreements to protect our unpatented know-how, technology, and other proprietary and confidential information and to
maintain our competitive position. Trade secrets and know-how can be difficult to protect. In particular, we anticipate that with respect
to our technology platform, these trade secrets and know-how will over time be disseminated within the industry through independent
development, the publication of journal articles describing the methodology, and the movement of personnel from academic to
industry scientific positions.
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We seek to protect these trade secrets and other proprietary technology, in part, by entering into non-disclosure and
confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific
collaborators, CROs, contract manufacturers, consultants, advisors, and other third parties. We also enter into confidentiality and
invention or patent assignment agreements with our employees and consultants. We cannot guarantee that we have entered into such
agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes. Despite
these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and
we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or
misappropriated a trade secret is difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, some courts
inside and outside the United States are less willing or unwilling to protect proprietary information. If we are unable to prevent
unauthorized material disclosure of our intellectual property to third parties, or misappropriation of our intellectual property by third
parties, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect
our business, operating results, and financial condition. If any of our trade secrets were to be lawfully obtained or independently
developed by a competitor or other third party, we would have no right to prevent them, or those to whom they communicate it, from
using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently
developed by a competitor or other third party, our competitive position would be materially and adversely harmed.
If We Do Not Obtain Patent Term Extension And Data Exclusivity For Any Product Candidates We May Develop, Our Business
May Be Materially Harmed.
Depending upon the timing, duration and specifics of any FDA marketing approval of any product candidates we may develop,
one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term
Restoration Action of 1984, or Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent extension term of up
to five years as compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend
the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only
those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. However, we may
not be granted an extension because of, for example, failing to exercise due diligence during the testing phase or regulatory review
process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to
satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we
request. If we are unable to obtain patent term extension or if the term of any such extension is less than we request, we will be unable
to rely on our patent position to forestall the marketing of competing products following our patent expiration, and our business,
financial condition, results of operations, and prospects could be materially harmed.
Intellectual Property Rights Do Not Necessarily Address All Potential Threats.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have
limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:
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others may be able to make gene therapy products that are similar to any product candidates we may develop or utilize
similar gene therapy technology but that are not covered by the claims of the patents that we license or may own in the
future;
we, or our license partners or current or future collaborators, might not have been the first to make the inventions covered
by the issued patent or pending patent application that we license or may own in the future;
we, or our license partners or current or future collaborators, might not have been the first to file patent applications
covering certain of our or their inventions;
others may independently develop similar or alternative technologies or duplicate any of our technologies without
infringing our owned or licensed intellectual property rights;
it is possible that our pending licensed patent applications or those that we may own in the future will not lead to issued
patents;
issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our
competitors;
our competitors might conduct research and development activities in countries where we do not have patent rights and
then use the information learned from such activities to develop competitive products for sale in our major commercial
markets;
we may not develop additional proprietary technologies that are patentable;
the patents of others may harm our business; and
we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may
subsequently file a patent covering such intellectual property.
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Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of
operations, and prospects.
We May Be Subject To Claims That Our Employees, Consultants, Or Advisors Have Wrongfully Used Or Disclosed
Confidential Information Of Their Current Or Former Employers Or Other Third Parties Or Claims Asserting Ownership Of What
We Regard As Our Own Intellectual Property.
Many of our employees, consultants, and advisors are currently or were previously employed at universities or other
biotechnology or pharmaceutical companies. Although we try to ensure that our employees, consultants, and advisors 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 these individuals have
used or disclosed confidential information or intellectual property, including trade secrets or other proprietary information, of any such
individual’s current or former employer or other third party. 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.
Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to our
management and employees.
In addition, while it is our policy to require our employees and contractors who may be involved in the conception or
development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in
executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The
assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be
forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we
regard as our intellectual property. Such claims could have a material adverse effect on our business, financial condition, results of
operations, and prospects.
If Our Trademarks Are Not Adequately Protected, Then We May Not Be Able To Build Name Recognition In Our Markets Of
Interest And Our Business May Be Adversely Affected.
If our trademarks are not adequately protected, then we may not be able to build name recognition in our markets of interest and
our business may be adversely affected. Our unregistered trademarks may be challenged, infringed, circumvented or declared generic
or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks, which we need to build
name recognition among potential partners or customers in our markets of interest. At times, competitors may adopt trademarks
similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could
be potential trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations
of our unregistered trademarks. Over the long term, if we are unable to successfully register our trademarks and establish name
recognition based on our trademarks, then we may not be able to compete effectively and our business may be adversely affected. Our
efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual
property may be ineffective and could result in substantial costs and diversion of resources and could adversely impact our financial
condition or results of operations.
Risks Related to The Ownership of Our Common Shares
We Have Broad Discretion In The Use Of Our Cash Reserves And May Not Use Such Cash Reserves Effectively.
Our management has broad discretion to use our cash reserves and could use our cash reserves in ways that do not improve our
results of operations or enhance the value of our common shares. The failure by our management to apply these funds effectively
could result in financial losses that could have a material adverse effect on our business, cause the price of our common shares to
decline, and delay the development or commercialization of our product candidates. Pending their use, we may invest our cash
reserves in a manner that does not produce income or that loses value.
Sales Of A Substantial Number Of Our Common Shares In The Public Market Could Cause Our Share Price To Fall.
Sales of a substantial number of our common shares in the public market or the perception that these sales might occur could
depress the market price of our common shares, could make it more difficult for you to sell your common shares at a time and price
that you deem appropriate and could impair our ability to raise capital through the sale of additional equity securities. We are unable
to predict the effect that sales may have on the prevailing market price of our common shares. For example, we actively maintain a
sales agreement with Jefferies under which we are able to offer and sell, from time to time at our sole discretion through Jefferies, as
our sales agent, our common shares, par value of CHF 0.03 per share. As of December 31, 2023, we have $385.6 million remaining
under our current prospectus supplement and have issued and sold an aggregate of 1.5 million common shares at an average price of
$139.91 per share for aggregate proceeds of $211.5 million, which were net of equity issuance costs of $2.9 million.
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We Do Not Expect To Pay Dividends In The Foreseeable Future.
We have not paid any dividends since our incorporation. Even if future operations lead to significant levels of distributable
profits, we currently intend that any earnings will be reinvested in our business and that no dividends will be paid prior to the time we
have an established revenue stream to support continuing dividends. The proposal to pay future dividends to shareholders will in
addition effectively be at the discretion of our board of directors and shareholders after taking into account various factors including
our business prospects, cash requirements, financial performance and new product development. In addition, payment of future
dividends is subject to certain limitations pursuant to Swiss law or by our articles of association. Accordingly, investors cannot rely on
dividend income from our common shares and any returns on an investment in our common shares will likely depend entirely upon
any future appreciation in the price of our common shares. Dividends, if any, paid on our common shares are subject to Swiss federal
withholding tax, except if paid out of reserves from capital contributions, or Kapitaleinlagen. For additional information, please see
"Risk Factors—Risks Related to The Ownership of Our Common Shares—Our Status As A Swiss Corporation May Limit Our
Flexibility With Respect To Certain Aspects Of Capital Management And May Cause Us To Be Unable To Make Distributions
Without Subjecting Our Shareholders To Swiss Withholding Tax".
We Are A Swiss Corporation. The Rights Of Our Shareholders May Be Different From The Rights Of Shareholders In
Companies Governed By The Laws Of U.S. Jurisdictions.
We are a Swiss corporation. Our corporate affairs are governed by our articles of association and by Swiss law. The rights of our
shareholders and the responsibilities of members of our board of directors may be different from the rights and obligations of
shareholders and directors of companies governed by the laws of U.S. jurisdictions. In the performance of its duties, our board of
directors is required by Swiss law to consider the interests of our Company, our shareholders and our employees with due observation
of the principles of reasonableness and fairness. It is possible that the board of directors will consider interests that are different from,
or in addition to, your interests as a shareholder. Swiss corporate law limits the ability of our shareholders to challenge resolutions
made or other actions taken by our board of directors in court. Our shareholders generally are not permitted to file a suit to reverse a
decision or an action taken by our board of directors but are instead only permitted to seek damages for breaches of the duty of care
and loyalty. As a matter of Swiss law, shareholder claims against a member of our board of directors for breach of the duty of care and
loyalty would have to be brought in Zug, Switzerland, or where the relevant member of our board of directors is domiciled. In
addition, under Swiss law, any claims by our shareholders against us must be brought exclusively in Zug, Switzerland.
As A Swiss Corporation, We Are Subject To Swiss Legal Provisions That May Limit Our Flexibility To Swiftly Implement
Certain Initiatives Or Strategies.
We are required, from time to time, to evaluate the carrying amount of our investments in affiliates, as presented on our Swiss
standalone balance sheet. If we determine that the carrying amount of any such investment exceeds its fair value, we may conclude
that such investment is impaired. The recognized loss associated with such a non-cash impairment could result in our net assets no
longer covering our statutory share capital and statutory capital reserves. Under Swiss law, if our net assets cover less than 50 percent
of our statutory share capital, statutory capital reserves and statutory earnings reserves that are not repayable to shareholders, the board
of directors must take appropriate measure to overcome the situation and, if necessary, convene a general meeting of shareholders and
propose measures to remedy such a capital loss. The appropriate measures depend on the relevant circumstances and the magnitude of
the recognized loss and may include seeking shareholder approval for offsetting the aggregate loss, or a portion thereof, with our
statutory capital reserves including qualifying additional paid-in capital otherwise available for distributions to shareholders or raising
new equity. Depending on the circumstances, we may also need to use qualifying additional paid-in capital available for distributions
in order to reduce our accumulated net loss and such use might reduce our ability to make distributions without subjecting our
shareholders to Swiss withholding tax. These Swiss law requirements could limit our flexibility to swiftly implement certain initiatives
or strategies.
Anti-takeover Provisions In Our Articles Of Association Could Make An Acquisition Of Our Company, Which May Be
Beneficial To Our Shareholders, More Difficult And May Prevent Attempts By Our Shareholders To Replace Or Remove Our Current
Management.
Provisions in our articles of association may discourage, delay or prevent an acquisition of our Company or changes in the
composition of our board of directors. Among other things, these provisions require the approval of at least two thirds of represented
shares present or voting at a shareholder meeting for the removal of a member of our board of directors and to increase the maximum
number of members of our board of directors; limit the accumulated voting rights of any person or entity to 15% of our registered
share capital; limit the voting rights of an acquirer of more than 5% of our registered share capital in a transaction or series of
transactions in which our board of directors did not provide for an exemption, which could prevent or delay a change in control of our
Company; provide that the board of directors is authorized to conduct one or more increases of the Company’s share capital, at any
time until June 8, 2028, or the expiry of the capital band, if earlier (see “Risk Factors—Risks Related to The Ownership of Our
Common Shares—Our Status As A Swiss Corporation May Limit Our Flexibility With Respect To Certain Aspects Of Capital
Management And May Cause Us To Be Unable To Make Distributions Without Subjecting Our Shareholders To Swiss Withholding
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Tax”), to issue a specified number of shares within the limit of the capital band, which under our current capital band is approximately
sixteen percent of the share capital registered in the commercial register, and to limit or withdraw the preemptive rights of existing
shareholders in various circumstances; provide for a conditional share capital that authorizes the issuance of additional shares up to a
maximum amount of approximately thirty-five percent of the share capital registered in the commercial register, without obtaining
additional shareholder approval, (i) through the exercise of conversion and/or option rights granted in connection with bonds or
similar instruments, including convertible debt instruments, and (ii) in connection with the exercise of options granted to employees or
other service providers of the Company or any of its subsidiaries; and provide that a merger or demerger transaction requires the
affirmative vote of at least two thirds of the shares represented at a shareholders’ meeting.
Although we believe these provisions collectively provide for an opportunity to obtain greater value for shareholders by
requiring potential acquirors to negotiate with our board of directors, they would apply even if an offer rejected by our board were
considered beneficial by some shareholders. In addition, these provisions may frustrate or prevent any attempts by our shareholders to
replace or remove our current management by making it more difficult for shareholders to replace members of our board of directors,
which is responsible for appointing the members of our management.
Our Common Shares Are Issued Under The Laws Of Switzerland, Which May Not Protect Investors In A Similar Fashion
Afforded By Incorporation In A U.S. State.
We are organized under the laws of Switzerland. However, there can be no assurance that Swiss law will not change in the
future or that it will serve to protect investors in a similar fashion afforded under corporate law principles in the United States, which
could adversely affect the rights of investors.
Our Status As A Swiss Corporation May Limit Our Flexibility With Respect To Certain Aspects Of Capital Management And
May Cause Us To Be Unable To Make Distributions Without Subjecting Our Shareholders To Swiss Withholding Tax.
Our articles of association as in force allow our shareholders to introduce a capital band authorizing the board of directors to
increase the share capital without additional shareholder approval. The capital band approved by our shareholders will expire on June
8, 2028 and is limited to approximately sixteen percent of our currently registered share capital pursuant to the articles of association
in force. Subject to specified exceptions, Swiss law grants preemptive rights to existing shareholders to subscribe to any new issuance
of shares. Swiss law also does not provide as much flexibility in the various terms that can attach to different classes of shares as the
laws of some other jurisdictions. Swiss law also reserves for approval by shareholders certain corporate actions over which a board of
directors would have authority in some other jurisdictions. For example, the payment of dividends and the cancellation of treasury
shares must be approved by shareholders. These Swiss law requirements relating to our capital management may limit our flexibility,
and situations may arise where greater flexibility would have provided substantial benefits to our shareholders.
Under Swiss law, a Swiss corporation may pay dividends only if the corporation has sufficient distributable profits, or if the
corporation has distributable reserves, each as evidenced by its audited standalone statutory balance sheet, and after allocations to
reserves required by Swiss law and our articles of association have been deducted. Freely distributable reserves are generally booked
either as "statutory capital reserves" (gesetzliche Kapitalreserven, contributions received from shareholders) or in the statutory or
voluntary "retained earnings.” Distributions may be made out of registered share capital—the aggregate par value of a company’s
registered shares—only by way of a capital reduction. We will not be able to pay dividends or make other distributions to shareholders
on a Swiss withholding tax-free basis in excess of our aggregate qualifying contributions and registered share capital unless we
increase our share capital or our reserves from capital contributions. We would also be able to pay dividends out of distributable
profits or freely distributable reserves, but such dividends would be subject to Swiss withholding taxes. There can be no assurance that
we will have sufficient distributable profits, capital reserves, retained earnings or registered share capital to pay a dividend or effect a
capital reduction, that our shareholders will approve dividends or capital reductions proposed by us or that we will be able to meet the
other legal requirements for dividend payments or distributions as a result of capital reductions.
Dividends and similar cash or in-kind distributions made by the Company to a shareholder (including liquidation proceeds and
stock dividends) are subject to Swiss withholding tax (Verrechnungssteuer), currently at a rate of 35% (applicable to the gross amount
of the taxable distribution). The Company is obliged to deduct the Swiss withholding tax from the gross amount of any taxable
distribution and to pay the tax to the Swiss Federal Tax Administration within 30 calendar days of the due date of such distribution.
However, the repayment of the nominal value of the shares and any repayment of qualifying additional paid-in capital (capital
contribution reserves (Reserven aus Kapitaleinlagen)) are not subject to Swiss withholding tax. The Swiss withholding tax will also
apply to payments (exceeding the respective share capital and used capital contribution reserves) upon a repurchase of shares by the
Company, (i) if the Company’s share capital is reduced upon such repurchase (redemption of shares), (ii) if the total of repurchased
shares exceeds 10% of the Company’s share capital or (iii) if the repurchased shares are not resold within six years after the
repurchase. This six-year deadline to resell the repurchased shares is suspended for so long as the shares are reserved to cover
obligations under convertible bonds, option bonds or employee stock option plans (in the case of employee stock option plans, the
maximum suspension is six years). In the event of a taxable share repurchase, Swiss withholding tax is imposed on the difference
between the repurchase price and the sum of the nominal value of the repurchased shares and capita contribution reserves paid back
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upon the repurchase.
Swiss resident individuals who hold their shares as private assets, or Resident Private Shareholders, are in principle eligible for a
full refund or credit against income tax of the Swiss withholding tax if they duly report the underlying income in their income tax
return. In addition, (i) corporate and individual shareholders who are resident in Switzerland for tax purposes, (ii) corporate and
individual shareholders who are not resident in Switzerland, and who, in each case, hold their shares as part of a trade or business
carried on in Switzerland through a permanent establishment with fixed place of business situated in Switzerland for tax purposes and
(iii) Swiss resident private individuals who, for income tax purposes, are classified as “professional securities dealers” for reasons of,
inter alia, frequent dealing, or leveraged investments, in shares and other securities (collectively, “Domestic Commercial
Shareholders”) are in principle eligible for a full refund or credit against income tax of the Swiss withholding tax if they duly report
the underlying income in their income statements or income tax return, as the case may be.
Shareholders who are not resident in Switzerland for tax purposes, and who, during the respective taxation year, have not
engaged in a trade or business carried on through a permanent establishment with fixed place of business situated in Switzerland for
tax purposes, and who are not subject to corporate or individual income taxation in Switzerland for any other reason (collectively,
“Non-Resident Shareholders”) may be entitled to a total or partial refund of the Swiss withholding tax if the country in which such
recipient resides for tax purposes maintains a bilateral treaty, or Tax Treaty, for the avoidance of double taxation with Switzerland and
further conditions of such Tax Treaty are met.
A U.S. shareholder that qualifies for benefits under the U.S.-Swiss Tax Treaty, may apply for a refund of the tax withheld in
excess of the 15% treaty rate (or in excess of the 5% reduced treaty rate for qualifying corporate shareholders with at least 10% voting
rights, or for a full refund in the case of qualified pension funds). Non-Resident Shareholders should be aware that the procedures for
claiming treaty benefits (and the time required for obtaining a refund) may differ from country to country. Non-Resident Shareholders
should consult their own legal, financial or tax advisors regarding receipt, ownership, purchases, sale or other dispositions of shares
and the procedures for claiming a refund of the Swiss withholding tax.
Certain U.S. Shareholders May Be Subject To Adverse U.S. Federal Income Tax Consequences If We Are A Controlled Foreign
Corporation.
Each “Ten Percent Shareholder” (as defined below) in a non-U.S. corporation that is classified as a “controlled foreign
corporation,” or a CFC, for United States federal income tax purposes generally is required to include in income for U.S. federal tax
purposes such Ten Percent Shareholder’s pro rata share of the CFC’s “Subpart F income” and investment of earnings in U.S. property,
even if the CFC has made no distributions to its shareholders. Subpart F income generally includes dividends, interest, rents and
royalties, gains from the sale of securities and income from certain transactions with related parties. For tax years beginning after
December 31, 2017, each Ten Percent Shareholder of a CFC is also required to include in income such Ten Percent Shareholder’s
share of “global intangible low-taxed income” with respect to such CFC. In addition, a Ten Percent Shareholder that realizes gain
from the sale or exchange of shares in a CFC may be required to classify a portion of such gain as dividend income rather than capital
gain. A non-U.S. corporation generally will be classified as a CFC for United States federal income tax purposes if Ten Percent
Shareholders own, directly or indirectly, more than 50% of either the total combined voting power of all classes of stock of such
corporation entitled to vote or of the total value of the stock of such corporation. A “Ten Percent Shareholder” is a United States
person (as defined by the U.S. Internal Revenue Code of 1986, as amended, or the Code, who owns or is considered to own 10% or
more of (1) the total combined voting power of all classes of stock entitled to vote or (2) the value of all classes of stock of such
corporation. The determination of CFC status is complex and includes attribution rules, the application of which is not entirely certain.
During our 2023 taxable year we believe that we had certain shareholders that were Ten Percent Shareholders for U.S. federal
income tax purposes. However, our CFC status for the taxable year ending on December 31, 2023 and our current taxable year is
unknown and we may be a CFC for the taxable year ending on December 31, 2023, our current taxable year or a following year. In
addition, recent changes to the attribution rules relation to the determination of CFC status may make it difficult to determine our CFC
status for any taxable year. Furthermore, it is possible that our non-United States subsidiaries will be CFCs for the current taxable year
or a future taxable year even if we are not a CFC for such taxable year(s). U.S. holders should consult their own tax advisors with
respect to the potential adverse U.S. tax consequences of becoming a Ten Percent Shareholder in a CFC. If we are classified as both a
CFC and a passive foreign investment company, or PFIC, we generally will not be treated as a PFIC with respect to those U.S. holders
that meet the definition of a Ten Percent Shareholder during the period in which we are a CFC.
Certain U.S. Shareholders May Suffer Adverse Tax Consequences If We Are Characterized As A Passive Foreign Investment
Company.
Generally, if, for any taxable year, at least 75% of our gross income is passive income, or at least 50% of the value of our assets
is attributable to assets that produce passive income or are held for the production of passive income, including cash, we would be
characterized as a PFIC for U.S. federal income tax purposes. For purposes of these tests, passive income includes dividends, interest,
and gains from the sale or exchange of investment property and rents and royalties other than rents and royalties which are received
from unrelated parties in connection with the active conduct of a trade or business. If we are characterized as a PFIC, U.S. holders of
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our common shares may suffer adverse tax consequences, including having gains realized on the sale of the common shares treated as
ordinary income, rather than capital gain, the loss of the preferential rate applicable to dividends received on the common shares by
individuals who are U.S. holders, and having interest charges apply to distributions by us and the proceeds of sales of the common
shares.
Our status as a PFIC will depend on the composition of our income and the composition and value of our assets which may be
determined in part by reference to the quarterly market value of our common shares, which may be volatile. Our status may also
depend, in part, on how, and how quickly, we utilize the cash proceeds from prior offerings in our business. Our status as a PFIC is a
fact-intensive determination made on an annual basis and we cannot provide any assurances regarding our PFIC status for any past,
current or future taxable years.
Because it is possible we were a PFIC for the 2022 taxable year, we provided information necessary for our shareholders to
make a qualified electing fund, or QEF, election with respect to us for the 2022 taxable year. We provided such information on our
website (www.crisprtx.com). A U.S. holder that makes a QEF election with respect to our shares is required to include a pro rata share
of our income on a current basis, whether or not we make distributions. For the 2022 taxable year, the Company-wide amount of
ordinary earnings and net capital gain for purposes of the QEF inclusion rules was $0.0 million of ordinary earnings and $0.0 net
capital gain, and we may have material amounts of ordinary earnings and/or net capital gain for purposes of the QEF inclusion rules in
the 2023 taxable year or future taxable years. Although we have not yet determined whether we are a PFIC for the 2022 taxable year
or the current taxable year, it is possible that we may be a PFIC for the 2022 taxable year and / or current taxable year as well. We will
endeavor to provide to you, for each taxable year that we are or may be a PFIC, a PFIC Annual Information Statement containing
information necessary for you to make a QEF election with respect to us. Alternatively, a U.S. holder may be able to make a mark-to-
market election, assuming that our shares constitute “marketable” securities under the Code, which generally avoids the adverse
consequences of PFIC status discussed above, but would require a U.S. holder to annually report as ordinary income any increase in
value of our shares during the year (as well as generally allowing deductions for any decrease in the value of our shares).
If we are determined to be a PFIC, a U.S. holder will generally be treated as owning a proportionate amount (by value) of shares
owned by us in any of our direct or indirect subsidiaries that are also PFICs, each a lower-tier PFIC, and will be subject to similar
adverse rules with respect to distributions from, or dispositions of, such lower-tier PFICs, in each case as if such U.S. holder held such
shares directly (even if such U.S. holder does not receive the proceeds of such distributions or dispositions directly). We have not
determined whether any of our subsidiaries (including TRACR and CRISPR Therapeutics Ltd.) are or may be lower-tier PFICs for
any prior taxable year, the current taxable year or future taxable years, and we do not intend to do so. We also do not intend to make
available the information necessary for U.S. holders to make a QEF election with respect to any lower-tier PFICs and therefore you
should expect that you will not be able to make a QEF election with respect to them. You are urged to consult your own tax advisors
regarding our PFIC status and the tax considerations relevant to an investment in a PFIC, including the availability, and advisability,
of, and procedure for making, a QEF election or a mark to market election with respect to us, and the application of the PFIC rules to
any of our subsidiaries.
U.S. Shareholders May Not Be Able To Obtain Judgments Or Enforce Civil Liabilities Against Us Or Our Executive Officers Or
Members Of Our Board Of Directors.
We are organized under the laws of Switzerland and our registered office and domicile is located in Zug, Switzerland.
Moreover, previously certain of our directors and executive officers were not residents, and again in the future could not be residents,
of the United States, and all or a substantial portion of the assets of such persons were located, or could be in the future, located,
outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon us
or upon such persons or to enforce against them judgments obtained in U.S. courts, including judgments in actions predicated upon the
civil liability provisions of the federal securities laws of the United States. We have been advised by our Swiss counsel that there is
doubt as to the enforceability in Switzerland of original actions, or in actions for enforcement of judgments of U.S. courts, of civil
liabilities to the extent solely predicated upon the federal and state securities laws of the United States. Original actions against
persons in Switzerland based solely upon the U.S. federal or state securities laws are governed, among other things, by the principles
set forth in the Swiss Federal Act on Private International Law. This statute provides that the application of provisions of non-Swiss
law by the courts in Switzerland shall be precluded if the result is incompatible with Swiss public policy. Also, mandatory provisions
of Swiss law may be applicable regardless of any other law that would otherwise apply.
Switzerland and the United States do not have a treaty providing for reciprocal recognition and enforcement of judgments in
civil and commercial matters. The recognition and enforcement of a judgment of the courts of the United States in Switzerland is
governed by the principles set forth in the Swiss Federal Act on Private International Law. This statute provides in principle that a
judgment rendered by a non-Swiss court may be enforced in Switzerland only if:
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the non-Swiss court had jurisdiction pursuant to the Swiss Federal Act on Private International Law;
the judgment of such non-Swiss court has become final and non-appealable;
the judgment does not contravene Swiss public policy;
the court procedures and the service of documents leading to the judgment were in accordance with the due process of
law; and
no proceeding involving the same position and the same subject matter was first brought in Switzerland, or adjudicated in
Switzerland, or was earlier adjudicated in a third state and this decision is recognizable in Switzerland.
Risks Related to Information Security and Privacy
We May Fail To Comply With Evolving European And Other Privacy Laws.
We are subject to European privacy laws, such as the GDPR, where we collect and use personal data related to Europe,
including in connection with conducting our clinical trials in the EEA and the and Swiss data protection regime. The GDPR imposes
a broad range of strict requirements on companies subject to the GDPR, including requirements relating to processing health and other
sensitive data, obtaining consent of the individuals to whom the personal data relates, having legal bases for processing personal data
relating to identifiable individuals and transferring such information outside the EEA, including to the United States, providing details
to those individuals regarding the processing of their personal data, implementing safeguards to protect the security and confidentiality
of personal data, having data processing agreements with third parties who process personal data, responding to individuals’ requests
to exercise their rights in respect of their personal information, reporting security breaches involving personal data to the competent
national data protection authority and affected individuals, appointing data protection officers, conducting data protection impact
assessments, ensuring certain accountability measures and record-keeping. The GDPR also imposes strict rules on the transfer of
personal data outside of the EEA and UK to countries that do not ensure an adequate level of protection, like the United States in
certain circumstances unless a valid GDPR transfer mechanism (for example, the European Commission approved Standard
Contractual Clauses, or the “SCCs”, and the UK International Data Transfer Agreement/Addendum, or the “UK IDTA”) has been put
in place. Where relying on the SCCs /UK IDTA for data transfers, we may also be required to carry out transfer impact assessments to
assess whether the recipient is subject to local laws which allow public authority access to personal data. Any inability to transfer
personal data from the EEA and UK to the United States in compliance with data protection laws may impede our ability to conduct
trials and may adversely affect our business and financial position.
Failure to comply with the GDPR and any supplemental EEA Member State or UK national data protection laws which may
apply by virtue of the location of the individuals whose personal data we collect, may result in substantial penalties, including
potential fines of up to the greater of €20 million (£17.5 million under the UK GDPR) or 4% of our total worldwide annual turnover.
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 remains a rigorous and time-intensive process that may increase the cost of doing business or require companies to change their
business practices to ensure full compliance. In particular, EEA Member States have implemented national laws which may partially
deviate from the EU GDPR and impose different and more restrictive obligations from country to country, so that we do not expect to
operate in a uniform legal landscape in the EEA. Also, as it relates to processing and transfer of genetic data, the GDPR specifically
allows EU Member State nations to enact laws that impose additional and more specific requirements or restrictions, and European
laws have historically differed quite substantially in this field, leading to additional uncertainty.
The UK’s data protection regime is independent from but aligned to the EU’s data protection regime. Although the UK is
regarded as a third country under the EU’s GDPR, the European Commission (“EC”) has now issued a decision recognizing the UK as
providing adequate protection under the EU GDPR and, therefore, transfers of personal data originating in the EEA to the UK remain
unrestricted. Like the EU GDPR, the UK GDPR restricts personal data transfers outside the UK to countries not regarded by the UK
as providing adequate protection. The UK government has confirmed that personal data transfers from the UK to the EEA remain free
flowing. The UK Government has also now introduced a Data Protection and Digital Information Bill, or Data Reform Bill into the
UK legislative process to reform the UK’s data protection regime following Brexit. If passed, the final version of the Data Reform Bill
may have the effect of further altering the similarities between the UK and EEA data protection regime and threaten the UK adequacy
decision from the European Commission. The respective provisions and enforcement of the EU GDPR and UK GDPR may further
diverge in the future and create additional regulatory challenges and uncertainties. This lack of clarity on future UK laws and
regulations and their interaction with EU laws and regulations could add legal risk, complexity and cost to our handling of personal
data and our privacy and data security compliance programs and could require us to implement different compliance measures for the
UK and the EEA.
In addition, we must also ensure that we maintain adequate safeguards to enable the transfer of personal data outside of the EEA
or the UK, in particular to the United States, in compliance with European data protection laws. In some cases, we rely upon the
recently updated standard contractual clauses (new standard contractual clauses) to legitimize transfers of personal data out of the
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EEA from controllers or processors established outside the EEA (and not subject to the GDPR). The UK is not subject to the EC's new
standard contractual clauses but has published its own transfer mechanism, the International Data Transfer Agreement, which enables
transfers from the UK. Changes with respect to any of these matters may lead to additional costs and increase our overall risk
exposure. The EU and United States have adopted its adequacy decision for the EU-U.S. Data Privacy Framework (“Framework”),
which entered into force on July 11, 2023. This Framework provides that the protection of personal data transferred between the EU
and the U.S. is comparable to that offered in the EU. This provides a further avenue to ensuring transfers to the United States are
carried out in line with GDPR. There has been an extension to the Framework to cover UK transfers to the United States. The
Framework could be challenged like its predecessor frameworks.
Switzerland has adopted a revised data protection regime. As a general matter, Switzerland’s national data protection regime is
aligned to the EU’s data protection regime. Switzerland’s data protection regime has similar restrictions on data transfers from
Switzerland to recipients outside the EEA and UK. It is expected that the restrictions will change to facilitate data transfers from
Switzerland to recipients in the United States under the Framework.
We expect that we will continue to face uncertainty as to whether our efforts to comply with any obligations under European
privacy laws will be sufficient. A failure to comply with European data protection laws, could result in data protection authority
enforcement action, which could result in fines and other penalties, private litigation or adverse publicity and could negatively affect
our operating results and business. Any such investigation or charges by European data protection authorities could have a negative
effect on our existing business and on our ability to attract and retain new clients or pharmaceutical partners. Claims that we have
violated individuals' privacy rights, failed to comply with data protection laws, or breached our contractual obligations, even if we are
not found liable, could be expensive and time consuming to defend and could result in adverse publicity that could harm our business.
Artificial intelligence presents risks and challenges that can impact our business including by posing security risks to our
confidential information, proprietary information, and personal data.
Issues in the development and use of artificial intelligence, combined with an uncertain regulatory environment, may result in
reputational harm, liability, or other adverse consequences to our business operations. As with many technological innovations,
artificial intelligence presents risks and challenges that could impact our business. We may adopt and integrate generative artificial
intelligence tools into our systems for specific use cases reviewed by legal and information security. Our vendors may incorporate
generative artificial intelligence tools into their offerings without disclosing this use to us, and the providers of these generative
artificial intelligence tools may not meet existing or rapidly evolving regulatory or industry standards with respect to privacy and data
protection and may inhibit our or our vendors’ ability to maintain an adequate level of service and experience. If we, our vendors, or
our third-party partners experience an actual or perceived breach or privacy or security incident because of the use of generative
artificial intelligence, we may lose valuable intellectual property and confidential information and our reputation and the public
perception of the effectiveness of our security measures could be harmed. Further, bad actors around the world use increasingly
sophisticated methods, including the use of artificial intelligence, to engage in illegal activities involving the theft and misuse of
personal information, confidential information, and intellectual property. Any of these outcomes could damage our reputation, result
in the loss of valuable property and information, and adversely impact our business.
Our Internal Information Technology Systems, Or Those Of Our Collaborators Or Other Contractors Or Consultants, May Fail
Or Suffer Security Breaches, Which Could Result In A Material Disruption Of Our Product Development Programs.
Our internal information technology systems and those of our current and any future collaborators and other contractors or
consultants are vulnerable to damage from computer viruses, ransomware, unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures. While we have not experienced any such material system failure, accident or security
breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a disruption of our
development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other
similar disruptions. For example, the loss of clinical trial data from future clinical trials could result in delays in our regulatory
approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security
breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary
information, we could incur liability, our competitive position could be harmed and the further development and commercialization of
our product candidates could be delayed.
We could be subject to risks caused by misappropriation, misuse, leakage, falsification encryption through ransomware, or
intentional or accidental release or loss of information maintained in the information systems and networks of our company and our
vendors, including personal information of our employees and study subjects, and company and vendor confidential data. In addition,
outside parties may attempt to penetrate our systems or those of our vendors or fraudulently induce our personnel or the personnel of
our vendors to disclose sensitive information in order to gain access to our data and/or systems. We may experience threats to our data
and systems, including malicious codes and viruses, phishing and other cyber-attacks such as a denial of service and insider threats.
The number and complexity of these threats continue to increase over time. If a material breach of our information technology systems
or those of our vendors occurs, the market perception of the effectiveness of our security measures could be harmed and our reputation
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and credibility could be damaged. We could be required to expend significant amounts of money and other resources to repair or
replace information systems or networks. In addition, we could be subject to regulatory actions and/or claims made by individuals and
groups in private litigation involving privacy issues related to data collection and use practices and other data privacy laws and
regulations, including claims for misuse or inappropriate disclosure of data, as well as unfair or deceptive practices. Although we
develop and maintain systems and controls designed to prevent these events from occurring, and we have a process to identify and
mitigate threats, the development and maintenance of these systems, controls and processes is costly and requires ongoing monitoring
and updating as technologies change and efforts to overcome security measures become increasingly sophisticated. Moreover, despite
our efforts, the possibility of these events occurring cannot be eliminated entirely. As we outsource more of our information systems
to vendors, engage in more electronic transactions with payors and patients, and rely more on cloud-based information systems, the
related security risks will increase and we will need to expend additional resources to protect our technology and information systems.
In addition, there can be no assurance that our internal information technology systems or those of our third-party contractors, or our
consultants’ efforts to implement adequate security and control measures, will be sufficient to protect us against breakdowns, service
disruption, data deterioration or loss in the event of a system malfunction, or prevent data from being stolen or corrupted in the event
of a cyberattack, security breach, industrial espionage attacks or insider threat attacks which could result in financial, legal, business or
reputational harm.
General Risks
We Incur Significant Costs As A Result Of Operating As A Public Company And Our Management Is Required To Devote
Substantial Time To Compliance Initiatives And Corporate Governance Practices.
As a public company, we incur significant legal, accounting and other expenses. SOX, the Dodd-Frank Wall Street Reform and
Consumer Protection Act, the listing requirements of The Nasdaq Global Market, and other applicable securities rules and regulations
impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial
controls and corporate governance practices. Our management and other personnel devote a substantial amount of time towards
maintaining compliance with these requirements. Moreover, these requirements increase our legal and financial compliance costs and
make some activities more time-consuming and costly.
Pursuant to SOX Section 404, we are required to furnish a report by our management on our internal control over financial
reporting, including an attestation report on internal control over financial reporting issued by our independent registered public
accounting firm. In this regard, we incur substantial accounting expenses and expend significant management efforts. Our testing may
reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses or significant
deficiencies. If we identify one or more material weaknesses, or significant deficiencies that we cannot remediate in a timely manner,
it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.
The Market Price Of Our Common Shares Has Been Volatile and Fluctuate Substantially, Which Could Result In Substantial
Losses For Shareholders.
Our share price has been, and in the future may be, subject to substantial volatility. In addition, the stock market in general, and
Nasdaq listed biopharmaceutical companies in particular have experienced extreme price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of these companies. For example, our shares traded within a range of a high
price of $220.20 and a low price of $11.63 per share for the period beginning on October 19, 2016, our first day of trading on the
Nasdaq Global Market, through December 31, 2023. As a result of this volatility, our shareholders could incur substantial losses. In
addition, the market price for our common shares may be influenced by many factors, including:
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the success of existing or new competitive products or technologies;
the timing and results of any product candidates that we may develop;
commencement or termination of collaborations for our product development and research programs;
failure or discontinuation of any of our product development and research programs;
results of preclinical studies, clinical trials, or regulatory approvals of product candidates of our competitors, or
announcements about new research programs or product candidates of our competitors;
developments or changing views regarding the use of genomic products, including those that involve gene editing;
regulatory or legal developments in the United States and other countries;
developments or disputes concerning patent applications, issued patents, or other proprietary rights;
the recruitment or departure of key personnel;
the level of expenses related to any of our research programs, clinical development programs, or product candidates that
we may develop;
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the results of our efforts to discover, develop, acquire or in-license additional product candidates or products;
actual or anticipated changes in estimates as to financial results, development timelines, or recommendations by securities
analysts;
announcement or expectation of additional financing efforts;
sales of our common shares by us, our insiders, or other shareholders;
expiration of market stand-off or lock-up agreements;
variations in our financial results or those of companies that are perceived to be similar to us;
changes in estimates or recommendations by securities analysts, if any, that cover our common shares;
changes in the structure of healthcare payment systems;
market conditions in the pharmaceutical and biotechnology sectors;
general economic, industry and market conditions; and
the other factors described in this “Risk Factors” section.
These and other market and industry factors may cause the market price and demand for our common shares to fluctuate
substantially, regardless of our actual operating performance, which may limit or prevent investors from readily selling their common
shares and may otherwise negatively affect the liquidity of our common shares. In the past, when the market price of a stock has been
volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our
shareholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the
time and attention of our management.
Unfavorable Global Economic Conditions Could Adversely Affect Our Business, Financial Condition Or Results Of Operations.
Our results of operations could be adversely affected by general conditions in the global economy, disruption of global financial
markets and a recession or market correction, including, for example, as a result of the coronavirus pandemic, political unrest,
including as a result of geopolitical tension such as a deterioration in the relationship between the United States and China, escalation
of tensions between China and Taiwan, the ongoing military conflict between Russia and Ukraine and related sanctions imposed
against Russia, or the Israel-Hamas war, and other global macroeconomic factors such as inflation. Such conditions could reduce our
ability to access capital, which could in the future negatively affect our liquidity and could materially affect our business and the value
of our common stock.
Our Business May Be Adversely Affected By A Pandemic, Epidemic Or Outbreak Of An Infectious Disease, Such As The Recent
Coronavirus Pandemic And The Emergence of Additional Variants.
Our business could be adversely affected by health epidemics in regions where we have concentrations of clinical trial sites or
other business activities and could cause significant disruption in the operations of third-party contract manufacturers and contract
research organizations upon whom we rely, as well as our ability to recruit patients for our clinical trials.
The recent coronavirus pandemic had unpredictable impacts on global societies, economies, financial markets, and business
practices around the world. For example, we experienced, and may experience again, some temporary delays or disruptions due to the
coronavirus pandemic, including pauses in and delays to patient dosing, limited or reduced patient access to ICU beds, hospitals and
healthcare resources generally, delayed initiation of new clinical trial sites and limited on-site personnel support at various trial sites.
In addition, certain of our third-party manufacturers and suppliers paused their operations as a result of the pandemic, and may in the
future pause their operations again if additional waves of the coronavirus or other pandemics impact local communities and/or as a
result of national and local regulations. While the global public health emergency declaration related to the coronavirus ended in May
2023, we continue to actively monitor and manage our response and continue to evaluate the actual and potential impacts to our
business operations, including on our ongoing and planned clinical trials. We will continue to work closely with our third-party
vendors, collaborators, and other parties in order to seek to advance our programs and pipeline of product candidates, while keeping
the health and safety of our employees and their families, partners, third-party vendors, healthcare providers, patients and communities
a top priority.
Conditions in the banking system and financial markets, including the failure of banks and financial institutions, could have an
adverse effect on our operations and financial results.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial
institutions, transactional counterparties or other companies in the financial services industry or the financial services industry
generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to
market-wide liquidity problems. For example, in March 2023, the Federal Deposit Insurance Corporation took control and was
appointed receiver of Silicon Valley Bank, Signature Bank and Silvergate Capital Corp., after each bank was unable to continue their
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operations. Since then, additional financial institutions have experienced similar failures and have been placed into receivership. It is
possible that other banks will face similar difficulty in the future. These events exposed vulnerabilities in the banking sector, including
legal uncertainties, significant volatility and contagion risk, and caused market prices of regional bank stocks to plummet. If, for
example, other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions
affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be
threatened. While it is not possible at this time to predict the extent of the impact that high market volatility and instability of the
banking sector could have on economic activity and our business in particular, the failure of other banks and financial institutions and
the measures taken by governments, businesses and other organizations in response to these events could adversely impact our
business, financial condition and results of operations.
If Securities Analysts Do Not Publish Research Or Reports About Our Business Or If They Publish Negative Evaluations Of Our
Common Shares, The Price Of Our Common Shares Could Decline.
The trading market for our common shares will rely in part on the research and reports that industry or financial analysts publish
about us or our business. If one or more of the analysts covering our business downgrade their evaluations of our common shares, the
price of our common shares could decline. If one or more of these analysts cease to cover our common shares, we could lose visibility
in the market for our common shares, which in turn could cause our common share price to decline.
Our Business Is Subject To Economic, Political, Regulatory And Other Risks Associated With International Operations.
Our business is subject to risks associated with conducting business internationally. We and a number of our suppliers and
collaborative and clinical study relationships are located outside the United States. Accordingly, our future results could be harmed by
a variety of factors, including:
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economic weakness, including inflation, or political instability in particular non-U.S. economies and markets;
differing regulatory requirements for drug approvals in non-U.S. countries;
potentially reduced protection for intellectual property rights;
difficulties in compliance with non-U.S. laws and regulations;
changes in non-U.S. regulations and customs, tariffs and trade barriers;
changes in non-U.S. currency exchange rates and currency controls;
changes in a specific country’s or region’s political or economic environment;
trade protection measures, import or export licensing requirements or other restrictive actions by U.S. or non-U.S.
governments;
negative consequences from changes in tax laws;
compliance with tax, employment, immigration and labor laws for employees living or traveling outside the United States;
workforce uncertainty in countries where labor unrest is more common than in the United States;
difficulties associated with staffing and managing international operations, including differing labor relations;
production shortages resulting from any events affecting raw material supply or manufacturing capabilities outside the
United States; and
business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters including
floods and fires.
Disruptions At The FDA, The SEC and Other Government Agencies Caused By Funding Shortages Or Potential Funding
Shortages Could Hinder Their Ability To Hire And Retain Key Leadership And Other Personnel, Prevent New Products And Services
From Being Developed Or Commercialized In A Timely Manner, Or Otherwise Prevent Those Agencies From Performing Normal
Business Functions, Which Could Negatively Impact Our Business And Our Timelines.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget
and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy
changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC
and other government agencies on which our operations may rely is subject to the impacts of political events, which are inherently
fluid and unpredictable.
Disruptions at the FDA and other agencies may slow the time necessary for new drugs to be reviewed and/or approved by
necessary government agencies, which could adversely affect our business. For example, over the last several years, the U.S.
government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical
FDA, SEC and other government employees and stop critical activities. If a prolonged government shutdown occurs, it could
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significantly impact the ability of the FDA and the SEC to timely review and process our submissions, which could have a material
adverse effect on our business and our timelines.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
Cybersecurity Risk Management
In the ordinary course of our business, we use, store and process data including data of our employees, partners, collaborators,
and vendors. We also process anonymized information about participants in clinical trials involving certain of our product candidates.
We have implemented a cybersecurity risk management program that is designed to identify, assess, and mitigate risks from
cybersecurity threats to this data and our systems.
Our cybersecurity risk management program includes a number of components, including information security program
assessments and continuous monitoring of critical risks from cybersecurity threats using automated tools. We periodically engage
third parties to conduct risk assessments on our systems, including penetration testing and other vulnerability analyses. Our finance
department, with the assistance of outside technical advisors, periodically conducts an internal assessment of different systems to
assess our risk management processes, including cybersecurity risk management. Additionally, we have implemented an employee
education program that is designed to raise awareness of cybersecurity threats, including risks posed by phishing attempts. This
training is included during the employee onboarding process and periodically thereafter. As part of our cybersecurity risk
management program, we maintain processes to assess and review the cybersecurity practices of third-party vendors and suppliers.
Prior to engaging third-party vendors and key suppliers, we conduct a security assessment and, as appropriate, include security
requirements in contracts. We, like other companies in our industry, face a number of cybersecurity risks in connection with our
business. Although our business strategy, results of operations, and financial condition have not, to date, been materially affected by
risks from cybersecurity threats, including as a result of previously identified cybersecurity incidents, we have, from time to time,
experienced threats to and security incidents related to our data and systems, including phishing attacks. For more information on our
cybersecurity related risks, see “Risk Factors—Risks Related to Information Security and Privacy—Our Internal Information
Technology Systems, Or Those Of Our Collaborators Or Other Contractors Or Consultants, May Fail Or Suffer Security Breaches,
Which Could Result In A Material Disruption Of Our Product Development Programs.”
Governance
Under the ultimate direction of our chief executive officer, or CEO, and our executive management team (including our General
Counsel who serves as our Chief Compliance Officer), with oversight from our Audit Committee of the Board of Directors, or Audit
Committee, our Head of Information Technology, or Head of IT, has primary responsibility for assessing, operating and managing our
cybersecurity threat management program. Our Head of IT meets periodically with our Chief Compliance Officer to discuss current
developments in the cybersecurity landscape and our cybersecurity risk management program, including providing updates regarding
the sources and nature of critical risks we face and how the IT department assesses those risks, including the likelihood of such risks,
the severity of impact, and progress on vulnerability remediation.
Our Chief Compliance Officer and Head of IT consult with other members of our information technology department, and with
third parties with expertise in cybersecurity, including a virtual Chief Information Security Officer, or vCISO, to develop strategies to
assess, address and align cybersecurity efforts with our business objectives and operational requirements. The Head of IT role is
currently held by an individual who has over 20 years of experience with information security and business systems, including digital
infrastructure and cybersecurity. The individual currently operating as our vCISO has over 15 years of experience in providing
services as an enterprise vCISO across various industries, including life sciences and national defense and has advised various
agencies of the U.S. federal government.
As part of our Board of Directors’, or Board’s, enterprise risk management program, our Board has responsibility for oversight
of cybersecurity risk management. Our Board has delegated to our Audit Committee oversight of our cybersecurity risk management
program, including oversight of information security and cybersecurity threats and related compliance and disclosure requirements.
On an annual basis, our Head of IT and vCISO provide an update to our Audit Committee regarding our cybersecurity risk
management program, including as relates to critical cybersecurity risks, ongoing cybersecurity initiatives and strategies, and
applicable regulatory requirements and industry standards. The Audit Committee periodically reports on cybersecurity risk
management to the full Board of Directors.
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Item 2. Properties.
Our principal executive offices are located in Zug, Switzerland pursuant to a real estate lease agreement with a term that renews
every three months. Our U.S. headquarters for research and development is located at 105 West First Street, Boston, Massachusetts
where we lease approximately 263,500 square feet of laboratory and office space. The facility is leased through October 2034 with an
option to extend the term of the lease for two additional five-year periods.
In May 2020, we entered into a lease agreement for a 50,249 square foot building in Framingham, Massachusetts, which we are
using as a cell therapy manufacturing facility for clinical production, and plan to use for commercial production, of our investigational
cell therapy product candidates. This facility is leased through March 2036 with an option to extend the term of the lease for two
additional seven-year periods.
We also lease laboratory and office space, for example, in San Francisco, California. We believe that our facilities are adequate
for our current needs and that suitable additional or substitute space would be available if needed.
Item 3. Legal Proceedings.
In the ordinary course of business, we are or have been from time to time involved in lawsuits, investigations, proceedings and
threats of litigation related to, among other things, our intellectual property estate (including the Patent Portfolio), commercial
arrangements and other matters. Such proceedings may include quasi-litigation, inter partes administrative proceedings in the U.S.
Patent and Trademark Office and the European Patent Office or patent offices in other countries, involving our intellectual property
estate including the Patent Portfolio. The outcome of any of the foregoing, is inherently uncertain. In addition, litigation and related
matters are costly and may divert the attention of our management and other resources that would otherwise be engaged in other
activities. If we were unable to prevail in any such proceedings, our business, results of operations, liquidity and financial condition
could be adversely affected.
Item 4. Mine Safety Disclosures.
Not applicable.
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
PART II
Market Information
Our common shares are traded on The Nasdaq Global Market under the symbol “CRSP.”
Stock Performance Graph
The following performance graph and related information shall not be deemed to be “soliciting material” or to be “filed” with
the Securities and Exchange Commission, or SEC, for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or
the Exchange Act, nor shall such information be incorporated by reference into any future filing under the Exchange Act or Securities
Act of 1933, as amended, or the Securities Act, except to the extent that we specifically incorporate it by reference into such filing.
The graph set forth below compares the cumulative total stockholder return on our shares between December 31, 2018 and
December 31, 2023, 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, 2018 in our common shares, 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. The stock price performance included in this graph is not necessarily indicative of
future stock price performance.
Comparison of Total Return Among CRISPR Therapeutics AG, the NASDAQ Composite Index and the NASDAQ
Biotechnology Index
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Swiss Tax Considerations
Swiss Withholding Tax
Under present Swiss tax law, dividends due and similar cash or in-kind distributions made by us to a shareholder (including
liquidation proceeds and stock dividends) are subject to Swiss federal withholding tax (Verrechnungssteuer) (“Withholding Tax”),
currently at a rate of 35% (applicable to the gross amount of the taxable distribution). We are obliged to deduct the Withholding Tax
from the gross amount of any taxable distribution and to pay the tax to the Swiss Federal Tax Administration within 30 calendar days
of the due date of such distribution. However, the repayment of the nominal value of shares and any repayment of qualifying
additional paid-in capital (capital contribution reserves (Reserven aus Kapitaleinlagen)) are not subject to the Withholding Tax. The
Withholding Tax will also apply to payments (exceeding the respective share capital and used capital contribution reserves) upon a
repurchase of shares by us, (i) if our share capital is reduced upon such repurchase (redemption of shares), (ii) if the total of
repurchased shares exceeds 10% of our share capital or (iii) if the repurchased shares are not resold within six years after the
repurchase. This six year deadline to resell the repurchased shares is suspended for so long as the shares are reserved to cover
obligations under convertible bonds, option bonds or employee stock option plans (in the case of employee stock option plans, the
maximum suspension is six years). In the event of a taxable share repurchase, Withholding Tax is imposed on the difference between
the repurchase price and the sum of the nominal value of the repurchased shares and qualifying additional paid-in capital paid back
upon the repurchase.
Swiss resident individuals who hold their shares as private assets (“Resident Private Shareholders”) are in principle eligible for a
full refund or credit against income tax of the Withholding Tax if they duly report the underlying income in their income tax return. In
addition, (i) corporate and individual shareholders who are resident in Switzerland for tax purposes, (ii) corporate and individual
shareholders who are not resident in Switzerland, and who, in each case, hold their shares as part of a trade or business carried on in
Switzerland through a permanent establishment with fixed place of business situated in Switzerland for tax purposes and (iii) Swiss
resident private individuals who, for income tax purposes, are classified as “professional securities dealers” for reasons of, inter alia,
frequent dealing, or leveraged investments, in shares and other securities (collectively, “Domestic Commercial Shareholders”) are in
principle eligible for a full refund or credit against income tax of the Withholding Tax if they duly report the underlying income in
their income statements or income tax return, as the case may be.
Shareholders who are not resident in Switzerland for tax purposes, and who, during the respective taxation year, have not
engaged in a trade or business carried on through a permanent establishment with fixed place of business situated in Switzerland for
tax purposes, and who are not subject to corporate or individual income taxation in Switzerland for any other reason (collectively,
“Non-Resident Shareholders”) may be entitled to a total or partial refund of the Withholding Tax if the country in which such
recipient resides for tax purposes maintains a bilateral treaty for the avoidance of double taxation with Switzerland (“Tax Treaty”) and
further conditions of such Tax Treaty are met. Non-Resident Shareholders should be aware that the procedures for claiming treaty
benefits (and the time required for obtaining a refund) may differ from country to country. Non-Resident Shareholders should consult
their own legal, financial or tax advisors regarding receipt, ownership, purchases, sale or other dispositions of shares and the
procedures for claiming a refund of the Withholding Tax.
Automatic Exchange of Information
The Automatic Exchange of Information in Tax Matters (the “AEI”) is a global initiative led by the Organization for Economic
Co-operation and Development. It aims to establish a universal standard for automatic exchange of tax information and to increase tax
transparency.
Jurisdictions that are committed to implement or have implemented the AEI (such as Switzerland, the EU member countries and
many other jurisdictions worldwide) require their Reporting Financial Institutions in accordance with the respective local
implementing law to determine the tax residence(s) of their account holders and controlling persons (as applicable) and, in case of
reportable accounts, report certain identification information, account information and financial information (including the account
balance and related payments such as interest, dividends, other income and gross proceeds) to the local tax authority which will then
exchange the information received with the tax authorities in the relevant reportable jurisdictions.
A list of the AEI agreements of Switzerland in effect or signed and becoming effective can be found on the website of the State
Secretariat for International Financial Matters.
Swiss Federal Stamp Taxes
The issuance of the shares and the sale pursuant to and in the course of an offering is subject to Swiss federal securities issuance
stamp tax (Emissionsabgabe) of 1% and would be borne by us.
The subsequent purchase or sale of our shares, whether by Resident Private Shareholders, Domestic Commercial Shareholders
or Non-Resident Shareholders (secondary market transactions), may be subject to the Swiss federal securities transfer stamp tax
(Umsatzabgabe) at a current rate of up to 0.15%, calculated on the purchase price or the sale proceeds, respectively, if (i) such transfer
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occurs through or with a Swiss or Liechtenstein bank or by or with involvement of another Swiss securities dealer as defined in the
Swiss federal stamp tax duty act and (ii) no exemption applies.
Swiss Federal, Cantonal and Communal Individual Income Tax and Corporate Income Tax
Non-Resident Shareholders
Non-Resident Shareholders are not subject to any Swiss federal, cantonal or communal income tax on dividend payments and
similar distributions because of the mere holding of our shares. The same applies for capital gains on the sale of shares. For
Withholding Tax consequences, see above.
Resident Private Shareholders and Domestic Commercial Shareholders
Resident Private Shareholders who receive dividends and similar cash or in-kind distributions (including liquidation proceeds as
well as stock dividends or taxable repurchases of shares as described above), which are not repayments of the nominal value of the
shares or qualifying additional paid-in capital, are required to report such receipts in their individual income tax returns and are subject
to Swiss federal, cantonal and communal income tax on any net taxable income for the relevant tax period. Furthermore, for Swiss
federal individual income tax purposes, dividends and similar distributions as described above are only taxed at 70% on federal level
(Teilbesteuerung), if the investment amounts to at least 10% of our share capital. On cantonal and communal level similar provisions
were introduced but the regulations may vary, depending on the canton of residency.
A gain or a loss by Resident Private Shareholders realized upon the sale or other disposition of shares to a third party will
generally be a tax-free private capital gain or a not tax-deductible capital loss, as the case may be.
Domestic Commercial Shareholders who receive dividends and similar cash or in-kind distributions (including liquidation
proceeds as well as bonus shares) are required to recognize such payments in their income statements for the relevant tax period and
are subject to Swiss federal, cantonal and communal individual or corporate income tax, as the case may be, on any net taxable
earnings accumulated (including the dividends) for such period. Domestic Commercial Shareholders who are corporate taxpayers may
qualify for participation relief on dividend distributions (Beteiligungsabzug), if shares held have a market value of at least CHF 1
million or represent at least 10% of our share capital or give entitlement to at least 10% of our profit and reserves, respectively.
Domestic Commercial Shareholders are required to recognize a gain or loss realized upon the disposal of shares in their income
statement for the respective taxation period and are subject to Swiss federal, cantonal and communal individual or corporate income
tax, as the case may be, on any net taxable earnings (including the gain or loss realized on the sale or other disposition of shares) for
such taxation period. For Domestic Commercial Shareholders who are individual taxpayers, a gain realized upon the disposal of shares
is taxed at 70% on federal level (Teilbesteuerung), if (i) the investment is held in connection with the conduct of a trade or business or
qualifies as an opted business asset (gewillkürtes Geschäftsvermögen) according to Swiss tax law, (ii) the sold shares reflect an interest
in the share capital of a company of at least 10% and (iii) were held for at least one year. On cantonal and communal level similar
provisions were introduced, but the regulations may vary depending on the canton of residency. Domestic Commercial Shareholders
who are corporate taxpayers may be entitled to participation relief (Beteiligungsabzug), if shares sold during the tax period (i) reflect
an interest in the share capital of a company of at least 10% or if such shares sold allow for at least 10% of the profit and reserves and
(ii) were held for at least one year. The participation relief applies to the difference between the sale proceeds and the initial costs of
the participation (Gestehungskosten), resulting in the taxation of a recapture of previous write-downs of the participation.
Swiss Wealth Tax and Capital Tax
Non-Resident Shareholders
Non-Resident Shareholders holding our shares are not subject to cantonal and communal wealth or annual capital tax because of
the mere holding of such shares.
Resident Private Shareholders and Domestic Commercial Shareholders
Resident Private Shareholders are required to report their shares as part of their private wealth and are subject to cantonal and
communal wealth tax. Domestic Commercial Shareholders are required to report their shares as part of their business wealth or taxable
capital, as defined, and are subject to cantonal and communal wealth or annual capital tax.
Swiss Facilitation of the Implementation of the U.S. Foreign Account Tax Compliance Act
Switzerland has concluded an intergovernmental agreement with the United States to facilitate the implementation of the
Foreign Account Tax Compliance Act. The agreement ensures that the accounts held by U.S. persons with Swiss financial institutions
are disclosed to the U.S. tax authorities either with the consent of the account holder or by means of group requests within the scope of
administrative assistance. Information will not be transferred automatically in the absence of consent, and instead will be exchanged
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only within the scope of administrative assistance on the basis of the double taxation agreement between the United States and
Switzerland. On October 8, 2014, the Swiss Federal Council approved a mandate for negotiations with the United States on changing
the current direct notification-based regime to a regime where the relevant information is sent to the Swiss Federal Tax
Administration, which in turn provides the information to the U.S. tax authorities.
THE DISCUSSION ABOVE IS A SUMMARY OF MATERIAL SWISS TAX CONSIDERATIONS. IT DOES NOT COVER
ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PARTICULAR SHAREHOLDER. EACH SHAREHOLDER IS
URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT IN LIGHT OF THE
SHAREHOLDER’S OWN CIRCUMSTANCES.
Holders
As of February 16, 2024, we had approximately 17 holders of record of our common shares. This number does not include
beneficial owners whose shares were held in street name.
Dividends
We have not paid any cash dividends on our common shares since inception and do not anticipate paying cash dividends in the
foreseeable future.
Securities authorized for issuance under equity compensation plans
Information about our equity compensation plans is incorporated herein by reference to Item 12 of Part III of this Annual Report
on Form 10-K.
Item 6. Reserved
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our
consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the
information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including
information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that
involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this
Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-
looking statements contained in the following discussion and analysis.
Overview
We are a leading gene editing company focused on the development of CRISPR/Cas9-based therapeutics. CRISPR/Cas9 is a
revolutionary technology for gene editing, the process of precisely altering specific sequences of genomic DNA. We aim to apply this
technology to disrupt, delete, correct and insert genes to treat genetic diseases and to engineer advanced cellular therapies. We have
advanced this technology from discovery to an approved medicine with unparalleled speed, culminating in the landmark first approval
of a CRISPR-based therapy, CASGEVY (exagamglogene autotemcel [exa-cel]), in 2023 with our collaborators at Vertex
Pharmaceuticals Incorporated, or Vertex. We believe that the combination of our technology, research and development capabilities,
and proven ability to execute may enable us to create an entirely new class of highly effective and potentially curative therapies for
patients with both rare and common diseases for whom current biopharmaceutical approaches have had limited success.
The use of CRISPR/Cas9 for gene editing was co-invented by one of our scientific founders, Dr. Emmanuelle Charpentier, the
Acting and Founding Director of the Max Planck Unit for the Science of Pathogens in Berlin, Germany. Dr. Charpentier and her
collaborators published work elucidating the mechanism by which the Cas9 endonuclease, a key component of CRISPR/Cas9, can be
programmed to cut double-stranded DNA at specific locations. Dr. Charpentier and her collaborator, Dr. Jennifer Doudna of the
University of California, Berkeley, shared the 2020 Nobel Prize in Chemistry for their groundbreaking work. We acquired exclusive
rights to intellectual property encompassing CRISPR/Cas9 and related technologies from Dr. Charpentier and continue to strengthen
our intellectual property estate through our own research and additional in-licensing efforts, furthering our leadership in gene editing
therapeutics.
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We have established a portfolio of therapeutic programs spanning four core franchises:
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Hemoglobinopathies: Our most advanced program, CASGEVY, has received approval in the United States and other
countries for the treatment of eligible patients with severe SCD or TDT, two genetic disorders of hemoglobin, or
hemoglobinopathies, with high unmet medical need. In addition, we have further research efforts on targeted conditioning
and in vivo editing of hematopoietic stem cells that have the potential to expand the number of patients that could benefit
significantly.
Immuno-oncology and autoimmune: We are progressing multiple next-generation gene-edited cell therapy programs,
including allogeneic CAR T candidates for the treatment of hematological and solid tumor cancers and autoimmune
diseases.
In vivo approaches: We are advancing a portfolio of programs leveraging in vivo editing for both common and rare
diseases, starting with the treatment and prevention of cardiovascular disease.
Type 1 diabetes: We have multiple parallel efforts using allogeneic, gene-edited, hypoimmune, stem cell-derived beta
cells to address T1D without the need for chronic immunosuppression.
Depending on the program, we take either an ex vivo approach, in which we edit cells outside of the human body before
administering them to the patient, or an in vivo editing approach, where we deliver the CRISPR-based therapeutic directly to target
cells within the human body. In addition, we continue to innovate on our platform to develop next-generation technologies that can
enable new therapies. Through these efforts, we aim to unlock the full potential of CRISPR/Cas9 to create medicines that can
transform the lives of patients.
Our mission is to create transformative gene-based medicines for serious human diseases. We believe that our innovative
research, translational expertise and clinical development experience position us as a leader in the development of CRISPR-based
therapeutics.
Hemoglobinopathies
CASGEVY is a non-viral, ex vivo CRISPR/Cas9 gene-edited cell therapy, in which a patient’s own hematopoietic stem and
progenitor cells are edited at the erythroid specific enhancer region of the BCL11A gene through a precise double-strand break. This
edit results in the production of high levels of fetal hemoglobin in red blood cells, which can compensate for the defective adult
hemoglobin in patients with SCD and TDT. CASGEVY is the first therapy to emerge from our strategic partnership with Vertex
Pharmaceuticals Incorporated, or Vertex, and is being advanced under a joint development and commercialization agreement between
us and Vertex and certain of its affiliates.
In 2023, CASGEVY became the first-ever approved CRISPR-based gene-editing therapy in the world. To date, CASGEVY has
been approved in the United States, Europe, Great Britain, Saudi Arabia, and Bahrain for the treatment of eligible patients 12 years
and older with SCD or TDT. Efficacy data presented to date support the profile of this therapy as a potential one-time functional cure
for people with severe SCD and TDT.
Immuno-Oncology and Autoimmune
We believe CRISPR/Cas9 has the potential to create the next generation of CAR T cell therapies that may have a superior
product profile and allow broader patient access compared to current autologous therapies. We are advancing several cell therapy
programs for oncology and/or autoimmune indications, including two next-generation allogeneic CAR T programs, CTX112 targeting
CD19 and CTX131 targeting CD70. These product candidates incorporate two novel gene edits—knock-out of Regnase-1 and knock-
out of transforming growth factor-beta receptor type 2, or TGFBR2—designed to enhance CAR T potency and reduce CAR T
exhaustion. Emerging pharmacology data, including pharmacokinetics, from ongoing clinical trials of CTX112 and CTX131, indicate
that the novel potency gene edits lead to significantly higher CAR T cell expansion and functional persistence in patients compared to
our first-generation candidates that did not incorporate these edits. In addition, the next-generation candidates exhibit increased
manufacturing robustness, with a higher and more consistent number of CAR T cells produced per batch. We are producing CTX112
and CTX131 for clinical trials at our internal GMP manufacturing facility.
CTX112 is being investigated in an ongoing clinical trial designed to assess the safety and efficacy of the candidate in adult
patients with relapsed or refractory CD19-positive B-cell malignancies who have received at least two prior lines of therapy. In
addition, we plan to initiate a clinical trial of CTX112 in systemic lupus erythematosus in the first half of 2024, with the potential to
expand into additional autoimmune indications in the future. CTX131 is being investigated in an ongoing clinical trial designed to
assess the safety and efficacy of the candidate in adult patients with relapsed or refractory solid tumors. In addition, we plan to expand
trials of CTX131 into hematologic malignancies, including T- and B-cell malignancies.
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In Vivo
Our in vivo gene editing strategy focuses on gene disruption and whole gene correction – the two technologies required to
address the vast majority of the most prevalent severe monogenic diseases as well as many common diseases. We have established a
leading platform for in vivo gene editing and are rapidly advancing a broad portfolio of in vivo programs. Our first in vivo programs
target the liver, taking advantage of validated LNP, delivery technologies, and aim to treat diseases where we can produce a strong
therapeutic effect by safely disrupting a gene with well-understood genetic association. For example, our first two in vivo programs,
CTX310 and CTX320, aim to address cardiovascular disease by disrupting the validated targets ANGPTL3 and Lp(a), respectively.
We have initiated Phase 1 clinical trials for both CTX310 and CTX320. Building upon CTX310 and CTX320, we have a number of
earlier stage investigational in vivo programs leveraging gene disruption in the liver for both rare and common diseases. In addition,
we have programs focused on gene correction in the liver, including programs leveraging technologies developed by our CRISPR-X
research team. Finally, we are pursuing additional delivery technologies, including further advancements to nanoparticle technology
and AAV vectors, for delivery to tissues beyond the liver, including hematopoietic stem cells.
Type 1 Diabetes
We are advancing a series of programs focused on the development of gene-edited stem cell-derived therapies for the treatment
of T1D. We believe our gene editing capabilities have the potential to enable a beta-cell replacement product candidate that may
deliver durable benefit to patients without the need for long-term immunosuppression. We have three parallel efforts to achieve this
goal. First, our most advanced product candidate, CTX211, is an allogeneic, gene-edited, hypoimmune, stem cell derived product
candidate in a device that is implanted into patients and intended to produce insulin in a glucose-dependent manner. This program,
formerly known as VCTX211, originated from our collaboration with ViaCyte, Inc., a subsidiary of Vertex, and was developed by
applying our gene editing technology to ViaCyte’s proprietary stem cell capabilities. CTX211 is being investigated in an ongoing
Phase 1/2 clinical trial designed to assess the safety, tolerability and efficacy of CTX211 in adult patients with T1D. Second, we have
research efforts focused on a deviceless beta cell replacement approach consisting of unencapsulated beta cells derived from edited
stem cells. Third, we have granted a non-exclusive license to certain of our CRISPR/Cas9 intellectual property to Vertex to accelerate
Vertex’s development of hypoimmune cell therapies for T1D, for which we received $170 million in upfront and milestone payments
in 2023 and remain eligible to receive additional research and development milestones and royalties on future products.
CRISPR-X
While we have made significant progress with our current portfolio of programs, we recognize that we need to continue to
innovate to unlock the full power of gene editing and bring potentially transformative therapies to even more patients. We have a
dedicated early-stage research team called CRISPR-X that focuses on innovating next-generation editing modalities. CRISPR-X is
developing technologies to enable whole gene correction and insertion without requiring homology-directed repair or viral delivery of
DNA, such as all-RNA gene correction, non-viral delivery of DNA and novel gene insertion techniques.
Manufacturing
The manufacturing processes for cell and genetic therapies are complex and require customized systems, equipment, facilities
and expertise for each program and therapy. Due to the critical importance of high-quality manufacturing and control of production
timing and know-how, we are establishing internal manufacturing capabilities and have established our own cell therapy
manufacturing facility to support our multifaceted strategy to develop treatments and therapies for people suffering from serious
diseases through transformative gene-based medicines. We have an approximately 50,000 square foot manufacturing facility in
Framingham, Massachusetts intended for clinical and commercial production of our product candidates and certain components
thereof for certain of our programs. Our operations at this facility are compliant with current Good Manufacturing Practice, or cGMP,
and in 2023 we began manufacturing CTX112 and CTX131 at this facility for our clinical trials of these product candidates.
In addition to utilizing our internal manufacturing facility, we expect we will continue to rely on external manufacturing
capabilities realized via contract manufacturing organization relationships in the United States and abroad. We have entered into
certain manufacturing and supply arrangements with third-party suppliers to support production of our product candidates and their
components. We plan to continue to rely on qualified third-party organizations to produce or process bulk compounds, formulated
compounds, viral vectors or engineered cells for IND-supporting activities and early stage clinical trials.
Partnerships
Given the numerous potential therapeutic applications for CRISPR/Cas9, we have partnered strategically to broaden the
indications we can pursue and to accelerate programs by accessing specific technologies and/or disease-area expertise. For additional
information regarding certain of these partnerships, please see “Business—Strategic Partnerships and Collaborations.”
Vertex. We established our initial collaboration agreement in 2015 with Vertex, which focused on TDT, SCD, cystic fibrosis and
select additional indications. In December 2017, we entered into a joint development and commercialization agreement with Vertex
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pursuant to which, among other things, we are co-developing and co-commercializing CASGEVY for TDT and SCD. In April 2021,
we and Vertex amended and restated our existing joint development and commercialization agreement, pursuant to which, among
other things, we will continue to develop and commercialize CASGEVY for TDT and SCD in partnership with Vertex. We also
entered into a strategic collaboration and license agreement with Vertex in June 2019 for the development and commercialization of
products for the treatment of Duchenne muscular dystrophy, or DMD, and myotonic dystrophy type 1, or DM1 and, in March 2023,
we entered into a non-exclusive license agreement with Vertex for Vertex to utilize our gene editing technology in diabetes.
ViaCyte. We entered into a research and collaboration agreement in September 2018 with ViaCyte to pursue the discovery,
development and commercialization of gene-edited allogeneic stem cell therapies for the treatment of diabetes, and in July 2021, we
entered into a joint development and commercialization agreement with ViaCyte, or the ViaCyte JDCA. In connection with entering
into the ViaCyte JDCA, our existing research collaboration agreement with ViaCyte expired in accordance with its terms. In the third
quarter of 2022, Vertex announced it had acquired ViaCyte and the rights to the ViaCyte Collaboration Field, and in March 2023, we
entered into an amendment to the ViaCyte JDCA pursuant to which, among other things, we adjusted certain rights and obligations of
the parties thereunder. In December 2023, ViaCyte elected to opt-out of the collaboration with us for the co-development and co-
commercialization of gene-edited stem cell therapies for the treatment of diabetes. Per the opt-out terms, once the opt-out is complete,
the on-going collaboration assets will be wholly owned by us, subject to a royalty on future sales owed to ViaCyte. The opt-out
became effective in early February 2024. The ViaCyte collaboration assets include CTX211 (formerly VCTX211), an allogeneic,
gene-edited, hypoimmune, stem cell derived product candidate in a device that is implanted into patients and intended to produce
insulin in a glucose-dependent manner. We are continuing to advance a Phase 1 clinical trial for CTX211 for the treatment of T1D.
Bayer. We entered into an option agreement in the fourth quarter of 2019 with Bayer pursuant to which Bayer has an option to
co-develop and co-commercialize two products that we advance for the diagnosis, treatment, or prevention of certain autoimmune
disorders, eye disorders, or hemophilia A disorders for a specified period of time, or, under certain circumstances, exclusively license
such optioned products.
Other Partnerships. We have entered into a number of additional collaborations and license agreements to support and
complement our hematopoietic stem cell, immuno-oncology and autoimmune, in vivo and T1D programs and platform, including
agreements with: Nkarta, Inc. to develop and commercialize products leveraging donor-derived, gene-edited CAR-NK cells; Capsida
Biotherapeutics, Inc. to develop in vivo gene editing therapies delivered with engineered AAV vectors; Roswell Park Comprehensive
Cancer Center to advance a gene-edited autologous CAR T program against a new target; MaxCyte, Inc. on ex vivo delivery for our
hemoglobinopathy and immuno-oncology programs; CureVac AG on optimized mRNA constructs and manufacturing for certain in
vivo programs; and KSQ Therapeutics, Inc. on intellectual property for our allogeneic immuno-oncology programs.
Financial Overview
Since our inception in October 2013, we have devoted substantially all of our resources to our research and development efforts,
undertaking drug discovery and preclinical development activities, building and protecting our intellectual property estate, establishing
internal manufacturing capabilities, organizing and staffing our company, business planning, raising capital and providing general and
administrative support for these operations. To date, we have primarily financed our operations through private placements of our
preferred shares, common share issuances, convertible loans and payments related to certain of our collaboration agreements with
strategic partners.
While we were in a net income position in certain previous years due to upfront payments associated with our collaborations
with Vertex, we have a history of recurring losses and expect to continue to incur losses for the foreseeable future. Our net losses may
fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase as we continue our
current research programs and development activities; seek to identify additional research programs and additional product candidates;
conduct initial drug application supporting preclinical studies and initiate clinical trials for our product candidates; initiate preclinical
testing and clinical trials for any other product candidates we identify and develop; maintain, defend, protect and expand our
intellectual property estate; further develop our gene editing platform; hire additional research, clinical and scientific personnel; incur
facilities costs associated with such personnel growth; establish internal manufacturing capabilities and infrastructure; and incur
additional costs associated with operating as a public company.
Revenue recognition
We have not generated any revenue to date from product sales. During the years ended December 31, 2023, 2022 and 2021, we
recognized $370.0 million, $0.4 million and $913.1 million, respectively, of collaboration revenue, which is primarily related to our
collaboration agreements with Vertex.
For the years ended December 31, 2023, 2022 and 2021, we generated $1.2 million, $0.8 million and $1.9 million, respectively,
of grant revenue related to certain contracts with not-for-profit entities.
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For additional information about our revenue recognition policy, see Note 2 and Note 8 of the notes to our audited consolidated
financial statements included in this Annual Report on Form 10-K.
Research and development expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our product
discovery efforts and the development of our product candidates, which include:
•
•
•
•
•
•
employee-related expenses, including salaries, benefits and equity-based compensation expense;
costs of services performed by third parties that conduct research and development and preclinical activities on our behalf;
costs of purchasing lab supplies and non-capital equipment used in our preclinical activities and in manufacturing
preclinical study materials, as well as supplies and materials used to manufacture clinical drug material;
consultant fees;
facility costs, including rent, depreciation and maintenance expenses; and
fees and other payments related to acquiring and maintaining licenses under our third-party licensing agreements.
Our external research and development expenses support our various preclinical and clinical programs, and as such we do not
break down external research and development expenses further. Our internal research and development expenses consist of payroll
and benefits expenses, facilities expense, and other indirect research and development expenses incurred in support of overall research
and development activities and as such are not allocated to a specific development stage or therapeutic area. Research and
development costs are expensed as incurred. Nonrefundable advance payments for research and development goods or services to be
received in the future are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the
services are performed. At this time, we cannot reasonably estimate or know the nature, timing or estimated costs of the efforts that
will be necessary to complete the development of any product candidates we may identify and develop. This is due to the numerous
risks and uncertainties associated with developing such product candidates, including the uncertainty of:
•
•
•
•
•
•
•
•
•
•
•
successful completion of preclinical studies and IND-enabling studies;
successful enrollment in, and completion of, clinical trials;
receipt of marketing approvals from applicable regulatory authorities;
establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
obtaining and maintaining patent and trade secret protection and non-patent exclusivity;
launching commercial sales of the product, if and when approved, whether alone or in collaboration with others;
acceptance of the product, if and when approved, by patients, the medical community and third-party payors;
effectively competing with other therapies and treatment options;
a continued acceptable safety profile following approval;
enforcing and defending intellectual property and proprietary rights and claims; and
achieving desirable medicinal properties for the intended indications.
A change in the outcome of any of these variables with respect to the development of any product candidates or the subsequent
commercialization of any product candidates we may successfully develop could significantly change the costs, timing and viability
associated with the development of that product candidate.
Research and development activities are central to our business model. We expect our research and development costs to
increase for the foreseeable future as our current development programs progress, new programs are added and as we continue to
prepare regulatory filings. These increases will likely include the costs related to the implementation and expansion of clinical trial
sites and related patient enrollment, monitoring, program management and manufacturing expenses for current and future clinical
trials.
General and administrative expenses
General and administrative expenses consist primarily of employee related expenses, including salaries, benefits and equity-
based compensation, for personnel in executive, finance, accounting, business development and human resources functions. Other
significant costs include facility costs not otherwise included in research and development expenses, legal fees relating to patent and
100
corporate matters and fees for accounting and consulting services.
We expect to continue to incur general and administrative expenses consistent with general and administrative functions at
research and development companies of our size and stage of development, which may increase in the future to support continued
research and development activities, and potential commercialization of our product candidates. In addition, we anticipate ongoing
expenses related to the reimbursements of third-party patent related expenses in connection with certain of our in-licensed intellectual
property.
Collaboration expense, net
Collaboration expense, net, consists of operating expenses related to the CASGEVY program under our collaboration with
Vertex. Under the Amended A&R Vertex JDCA, we have an option to defer our portion of specified costs on the CASGEVY program
in excess of $110.3 million for the years ended December 31, 2022, 2023 and 2024. The $110.3 million for 2023 does not include
amounts attributable to our share of certain costs arising from a license agreement between Vertex and a third party, which we agreed
to pay to Vertex upon the occurrence of an event specified in Amendment No. 1 to the A&R Vertex JDCA and further described in
Note 8 of the notes to our consolidated financial statements included in this Annual Report on Form 10-K. We exercised our option to
defer our portion of specified costs incurred in 2022 and 2023 for the CASGEVY program in excess of the amounts described above.
Any deferred amounts are only payable to Vertex as an offset against future profitability of the CASGEVY program and the amounts
payable are capped at a specified maximum amount per year.
Other income (net)
Other income consists primarily of interest income earned on investments.
Critical Accounting Policies and Significant Judgments and Estimates
This discussion and analysis of our financial condition and results of operations is based on our financial statements, which we
have prepared in accordance with U.S. generally accepted accounting principles. We believe that several accounting policies are
important to understanding our historical and future performance. We refer to these policies as critical because these specific areas
generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different
estimates—which also would have been reasonable—could have been used. On an ongoing basis, we evaluate our estimates and
judgments, including those described in greater detail below. We base our estimates on historical experience and other market-specific
or other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in the notes to our financial statements included elsewhere
in this Annual Report on Form 10-K, we believe that the following accounting policies are the most critical to aid you in fully
understanding and evaluating our financial condition and results of operations.
Revenue
Accounting Standards Codification Topic 606, Revenue from Contracts with Customers, or ASC 606, applies to all contracts
with customers, except for contracts that are within the scope of other standards, such as leases and collaboration arrangements. To
determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the
following five steps:
1) Identify the contract with the customer
A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights
regarding the goods or services to be transferred and identifies the related payment terms, (ii) the contract has commercial substance
and (iii) we determine that collection of substantially all consideration for goods and services that are transferred is probable based on
the customer’s intent and ability to pay the promised consideration.
2) Identify the performance obligations in the contract
Performance obligations promised in a contract are identified based on the goods and services that will be transferred to the
customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or
together with other available resources, and are distinct in the context of the contract, whereby the transfer of the good or service is
separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods and services, we
must apply judgment to determine whether promised goods and services are capable of being distinct and distinct in the context of the
contract. If these criteria are not met, the promised goods and services are accounted for as a combined performance obligation.
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3) Determine the transaction price
The transaction price is determined based on the consideration to which we will be entitled in exchange for transferring goods
and services to the customer. To the extent the transaction price includes variable consideration, such as research, development,
regulatory and commercial milestones, we determine if it is probable that we will receive such amounts and there is no risk of a
significant revenue reversal. When we cannot conclude that receipt of such amounts is probable, we constrain the related variable
consideration resulting in its exclusion from transaction consideration. In determining the portion of the transaction consideration to be
constrained, we consider the probability and uncertainty that the related research, developmental, regulatory and commercial
milestones will be achieved given the nature of research and clinical development and the stage of the underlying programs. This
assessment is performed at each reporting period. In making this evaluation, we consider both internal and external information
available, including information from industry publications and other relevant factors. Changes to the constraint of variable
consideration can have a material effect on the amount of revenue recognized in the period.
4) Allocate the transaction consideration to performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction consideration is allocated to the single
performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction consideration
to each performance obligation on a relative standalone selling price basis unless the transaction consideration is variable and meets
the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance
obligation. The consideration to be received is allocated among the separate performance obligations based on relative standalone
selling prices. In determining these estimated standalone selling prices, we make a number of significant judgments including, for
licenses, management’s assumptions regarding probability weighted projected discounted cash flows for each of the collaboration
development programs. The estimated standalone selling prices are sensitive to changes in assumptions, such as probabilities of
scientific success, discount rate and certain assumptions that form the basis of forecasted cash flows. In developing these assumptions,
management considers both internal and external information available, including information from other guideline companies within
the same industry and other relevant factors. Changes to these assumptions can have a material effect on the allocation of the
transaction consideration to performance obligations, as well as the amount and timing of revenue recognized.
5) Recognize revenue when or as we satisfy a performance obligation
We satisfy performance obligations over time or at a point in time, depending on the nature of the performance obligation.
Revenue is recognized over time if the customer simultaneously receives and consumes the benefits provided by the entity’s
performance, the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or
the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment
for performance completed to date. If the entity does not satisfy a performance obligation over time, the related performance
obligation is satisfied at a point in time by transferring the control of a promised good or service to a customer.
Collaboration Arrangements
We record the elements of our collaboration agreements that represent joint operating activities in accordance with ASC 808,
Collaborative Arrangements, or ASC 808. Accordingly, the elements of the collaboration agreements that represent activities in which
both parties are active participants and to which both parties are exposed to the significant risks and rewards that are dependent on the
commercial success of the activities, are recorded as collaborative arrangements.
We evaluate the proper presentation of the commercial activities and the profit and loss sharing associated with the collaboration
agreements. ASC 808 states that when payments between parties in a collaborative arrangement are not within the scope of other
authoritative accounting literature, the income statement classification should be based on the nature of the arrangement, the nature of
its business operations and the contractual terms of the arrangement. To the extent that these payments are not within the scope of
other authoritative accounting literature, the income statement classification for the payments shall be based on an analogy to
authoritative accounting literature or if there is no appropriate analogy, a reasonable, rational, and consistently applied accounting
policy election.
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. Examples of estimated accrued research and
development expenses include fees paid to:
•
CROs in connection with clinical studies;
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•
•
•
investigative sites in connection with clinical studies;
vendors in connection with preclinical development activities; and
vendors related to development, manufacturing and distribution of clinical trial materials.
We base our expenses related to clinical studies on our estimates of the services received and efforts expended pursuant to
contracts with multiple 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.
Equity-Based Compensation
Our share-based compensation programs grant awards that have included stock options, restricted stock units and restricted
stock awards. Grants are awarded to employees and non-employees, including directors.
We account for our stock-based compensation awards in accordance with ASC Topic 718, Compensation—Stock Compensation,
or ASC 718. ASC 718 requires all stock-based payments to employees and non-employee directors, including grants of employee
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. We use the Black-Scholes option pricing model to determine the fair
value of options granted.
We account for forfeitures as they occur instead of estimating forfeitures at the time of grant and revising those estimates in
subsequent periods if actual forfeitures differ from its estimates. Stock-based compensation expense recognized in the financial
statements is based on awards for which performance or service conditions are expected to be satisfied.
Our stock-based awards are subject to service or performance-based vesting conditions. Compensation expense related to
awards to employees, directors and non-employees 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 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 expense restricted stock unit awards to employees based on the fair value of the award on a straight-line basis over the
associated service period of the award.
We estimate the fair value of our option awards to employees, directors and non-employees 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. In 2023, we changed our calculation for our
volatility estimate from using a blend of the Company's data as well as peer company data to using the historical volatility of the
Company's publicly traded stock for awards granted during the year. In prior periods, expected volatility was calculated based on a
blend of the Company’s reported volatility data for the length of time that market data is available for the Company’s stock and the
historical data for a representative group of publicly traded companies, for which historical information is available. For these
analyses, the Company selected companies with comparable characteristics to itself including enterprise value, risk profiles, position
within the industry, and with historical share price information sufficient to meet the expected life of the stock-based awards. The
Company computed the historical volatility data using the daily closing prices during the equivalent period of the calculated expected
term of its stock-based awards. We have estimated the expected term of our employee stock options using the “simplified” method,
whereby, the expected term equals the arithmetic average of the vesting term and the original contractual term of the option due to its
lack of sufficient historical data. The risk-free interest rates for periods within the expected term of the option are based on the U.S.
Treasury securities with a maturity date commensurate with the expected term of the associated award. We have never paid, and do
not expect to pay, dividends in the foreseeable future.
Recent Accounting Pronouncements
Refer to Note 2 of the notes to our consolidated financial statements included in this Annual Report on Form 10-K for a
discussion of recent accounting pronouncements.
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Results of Operations
The following is a discussion of the components of results of operations. This section generally discusses 2023 and 2022 items
and year-to-year comparisons between 2023 and 2022. Discussions of 2021 items and year-to-year comparisons between 2022 and
2021 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022
filed with the SEC on February 21, 2023.
Comparison of Years Ended December 31, 2023 and 2022
The following table summarizes our results of operations for the years ended December 31, 2023 and 2022, together with the
dollar change in those items:
Revenue:
Collaboration revenue
Grant revenue
Total revenue
Operating expenses:
Research and development
General and administrative
Collaboration expense, net
Total operating expenses
Loss from operations
Other income, net
Net loss before income taxes
(Provision) benefit for income taxes
Net loss
Collaboration Revenue
Years Ended December 31,
2023
2022
(in thousands)
Period to
Period Change
$
370,000 $
1,206
371,206
436 $
762
1,198
369,564
444
370,008
387,332
76,162
130,250
593,744
(222,538)
71,816
(150,722)
(2,888)
461,645
102,464
110,250
674,359
(673,161)
22,661
(650,500)
325
$ (153,610) $ (650,175) $
(74,313)
(26,302)
20,000
(80,615)
450,623
49,155
499,778
(3,213)
496,565
Collaboration revenue was $370.0 million for the year ended December 31, 2023, compared to $0.4 million for the year ended
December 31, 2022. Collaboration revenue for the year ended December 31, 2023 was primarily associated with the $370.0 million of
payments from Vertex in connection with (i) the approval of CASGEVY, which triggered Vertex’s obligation to make a $200.0
million milestone payment to us, which is included in accounts receivable in the accompanying consolidated balance sheets as of
December 31, 2023, and (ii) the Non-Ex License Agreement, pursuant to which we agreed to license to Vertex, on a non-exclusive
basis, certain of our gene editing intellectual property to exploit certain products for the diagnosis, treatment or prevention of diabetes
type 1, diabetes type 2 or insulin dependent / requiring diabetes throughout the world, which resulted in upfront and milestone
payments of $170.0 million in 2023. Collaboration revenue was not significant for the year ended December 31, 2022. Refer to Note 8
of the notes to our consolidated financial statements included in this Annual Report on Form 10-K for a description of revenue
recognized related to Vertex.
Grant Revenue
Grant revenue was $1.2 million and $0.8 million, respectively, for the years ended December 31, 2023 and 2022.
Research and Development Expenses
Research and development expenses were $387.3 million for the year ended December 31, 2023, compared to $461.6 million
for the year ended December 31, 2022. The following table summarizes our research and development expenses for the years ended
December 31, 2023 and 2022, together with the changes in those items in dollars (in thousands):
External research and development expenses
Employee related expenses
Facility expenses
Stock-based compensation expenses
Other expenses
Sublicense and license fees
$
Years Ended December 31,
Period to Period
2023
2022
Change
$
130,124
83,316
105,875
46,356
2,703
18,958
$
197,742
81,683
114,591
53,956
2,864
10,809
(67,618)
1,633
(8,716)
(7,600)
(161)
8,149
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Total research and development expenses
$
387,332
$
461,645
$
(74,313)
The decrease of approximately $74.3 million was primarily attributable to the following:
•
•
•
•
$67.6 million of decreased external research and development costs, primarily associated with a decrease in variable
external research and manufacturing costs;
$8.7 million of decreased facility expenses due to incurring rent expense on both our current and previous U.S.
headquarters for research and development for a portion of 2022, whereas in 2023, we did not incur any rent expense on
our previous U.S. headquarters for research and development due to the termination of the lease;
$7.6 million of decreased stock-based compensation expenses primarily due to an overall decrease in the fair value of
equity awards granted in 2023 and 2022; offset by
$8.1 million of increased sublicense and license fees, primarily attributable to research and development licenses and
milestones due to strategic partners in connection with the advancement of our clinical programs.
General and administrative expenses
General and administrative expenses were $76.2 million for the year ended December 31, 2023, compared to $102.5 million for
the year ended December 31, 2022. The decrease of $26.3 million was primarily attributable to decreased stock-based compensation,
decreased professional services including intellectual property costs, decreased facility costs as described above, as well as decreased
headcount-related expenses.
Collaboration expense, net
Collaboration expense, net, was $130.3 million for the year ended December 31, 2023, compared to $110.3 million for the year
ended December 31, 2022. The increase of $20.0 million was attributable to our share of certain costs arising from a license
agreement between Vertex and a third party, which we agreed to pay to Vertex upon the occurrence of an event specified in
Amendment No. 1 to the A&R Vertex JDCA and further described in Note 8 of the notes to our consolidated financial statements
included in this Annual Report on Form 10-K.
We exercised our option to defer our portion of specified costs incurred in 2022 and 2023 for the CASGEVY program in excess
of the deferral limit under the A&R Vertex JDCA, as amended. We deferred $80.9 million and $36.1 million of our share of costs
incurred under the A&R Vertex JDCA, as amended, for 2023 and 2022, respectively. These deferred costs will be recognized by us
when recoverability of such deferred amounts by Vertex is probable and the amount can be reasonably estimated. As of December 31,
2023, no such deferred amounts have been recognized. Refer to Note 8 for further discussion of our arrangements with Vertex.
Other income, net
Other income, net, was $71.8 million for the year ended December 31, 2023, compared to $22.7 million for the year ended
December 31, 2022. The increase in other income, net, was due to higher interest rates.
Liquidity and Capital Resources
Sources of Liquidity
We have predominantly incurred losses and cumulative negative cash flows from operations since our inception. As of
December 31, 2023, we had $1,695.7 million in cash, cash equivalents and marketable securities, of which approximately $2.7 million
was held outside of the United States, and an accumulated deficit of $999.7 million. We anticipate that we will continue to incur losses
for at least the next several years. We expect to continue to incur research and development costs and general and administrative
expenses, as well as expenses related to potential commercialization of our product candidates, consistent with costs associated with
research and development at companies of our size and stage of development, 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.
At-the-Market Offerings
In August 2019, we entered into an Open Market Sale AgreementSM with Jefferies under which we were able to offer and sell,
from time to time at our sole discretion through Jefferies, as our sales agent, our common shares, par value of CHF 0.03 per share, or
the August 2019 Sales Agreement. In connection with the August 2019 Sales Agreement, as amended, we have filed several
prospectus supplements with the SEC to offer and sell, from time to time, common shares.
In 2021, we issued and sold 1.4 million common shares at an average price of $168.23 per share for aggregate proceeds of
$224.5 million, which were net of equity issuance costs of $3.1 million. An additional $2.3 million of stamp taxes related to this
amount was paid in 2021.
105
In 2022, the sale of common shares pursuant to the 2019 Sales Agreement and the current prospectus supplement was not
significant.
In 2023, we issued and sold 0.5 million common shares at an average price of $72.32 per share for aggregate proceeds of $32.7
million, which were net of equity issuance costs of $0.4 million. An additional $0.3 million of stamp taxes related to this amount was
paid in 2023.
As of December 31, 2023, we have $385.6 million remaining under our current prospectus supplement and have issued and sold
an aggregate of 1.5 million common shares at an average price of $139.91 per share for aggregate proceeds of $211.5 million, which
were net of equity issuance costs of $2.9 million.
Sources of Liquidity
Cash Flows
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Annual Report on
Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” Part II, Item 7
of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on February 21, 2023.
The following table provides information regarding our cash flows for each of the periods below:
Net cash used in operating activities
Net cash provided by (used in) investing activities
Net cash provided by financing activities
Effect of exchange rate changes on cash
Increase (decrease) in cash and restricted cash
Operating Activities
Years Ended December 31,
2023
2022
(in thousands)
$
$
(260,375) $
374,647
62,664
73
177,009 $
(495,741)
(258,655)
38,592
(80)
(715,884)
Net cash used in operating activities was $260.4 million for the year ended December 31, 2023, compared to net cash used in
operating activities of $495.7 million for the year ended December 31, 2022. The decrease in cash used in operating activities was
primarily driven by $170.0 million of upfront and milestone payments from Vertex, as well as reductions in research and development
and general and administrative expenses as described above.
Investing Activities
Net cash provided by investing activities for the year ended December 31, 2023 was $374.6 million and consisted primarily of
maturities of marketable securities in excess of purchases of marketable securities of $386.6 million. Net cash used in investing
activities for the year ended December 31, 2022 was $258.7 million and consisted primarily of purchases of marketable securities in
excess of maturities of marketable securities of $221.5 million, as well as purchases of property, plant and equipment of $37.2 million.
Financing Activities
Net cash provided by financing activities for the year ended December 31, 2023 was $62.7 million and consisted of net proceeds
of $32.7 million from the issuance of common shares and net proceeds of $29.9 million from stock option exercises and employee
stock purchase plan, or ESPP, contributions. Net cash provided by financing activities for the year ended December 31, 2022 was
$38.6 million and consisted primarily of net proceeds of $37.6 million from stock option exercises and ESPP contributions.
Funding Requirements
Our primary uses of capital are, and we expect will continue to be, research and development activities, manufacturing
activities, compensation and related expenses, laboratory and related supplies, legal and other regulatory expenses, patent prosecution
filing, defense and intellectual property maintenance costs, and general overhead costs, including costs associated with operating as a
public company. We expect to continue to incur operating expenses consistent with costs associated with research and development at
companies of our size and stage of development, which may increase in the future to support continued research and development
activities and potential commercialization of our product candidates.
Although we and our partner, Vertex, received marketing approval of CASGEVY in 2023 in certain jurisdictions, and have
received a subsequent approval in 2024, most of our programs are still in early stages of development and the outcome of these efforts
is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development, manufacture and
commercialization of any current or future product candidates, if approved, or whether, or when, we may achieve profitability. Until
such time as we can generate substantial product revenues, if ever, we expect to finance our cash needs through a combination of
106
equity financings, debt financings and payments received in connection with our collaboration agreements. We intend to consider
opportunities to raise additional funds through the sale of equity or debt securities when market conditions are favorable to us to do so.
However, the trading prices for our common shares and other biopharmaceutical companies have been highly volatile. As a result, we
may face difficulties raising capital through sales of our common shares or such sales may be on unfavorable terms. In addition, a
recession, depression or other sustained adverse market event, including resulting from the continued spread of the coronavirus or the
recent failure of certain banks and financial institutions in the United States and globally, could materially and adversely affect our
business and the value of our common shares. To the extent that we raise additional capital through the future sale of equity or debt
securities, the ownership interests of our shareholders will be diluted, and the terms of these securities may include liquidation or other
preferences that adversely affect the rights of our existing shareholders. If we raise additional funds through collaboration
arrangements in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or product
candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt
financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization
efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Outlook
Based on our research and development plans and our timing expectations related to the progress of our programs, we expect
our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditures
for at least the next 24 months without giving effect to any additional proceeds we may receive under our collaboration with Vertex
and any other capital raising transactions we may complete. We have based this estimate on assumptions that may prove to be wrong,
and we could use our capital resources sooner than we expect. Given our need for additional financing to support the long-term
clinical development of our programs, we intend to consider additional financing opportunities when market terms are favorable to us.
Our ability to generate revenue and achieve profitability depends significantly on our success in many areas, including:
developing our delivery technologies and our gene editing technology platform; selecting appropriate product candidates to develop;
completing research and preclinical and clinical development of selected product candidates; obtaining regulatory approvals and
marketing authorizations for product candidates for which we complete clinical trials; developing a sustainable and scalable
manufacturing process for product candidates; launching and commercializing product candidates for which we obtain regulatory
approvals and marketing authorizations, either directly or with a collaborator or distributor; obtaining market acceptance of our
product candidates, either directly or with a collaborator or distributor, if approved, including for CASGEVY; addressing any
competing technological and market developments; negotiating favorable terms in any collaboration, licensing or other arrangements
into which we may enter; maintaining good relationships with our collaborators and licensors; maintaining, defending, protecting and
expanding our estate of intellectual property rights, including patents, trade secrets and know-how; and attracting, hiring and retaining
qualified personnel.
Contractual and Other Obligations
Operating lease and sublease obligations
Our operating lease obligations primarily consist of lease payments on our office and laboratory facility in Boston,
Massachusetts, as well as lease payments on our cell manufacturing facility in Framingham, Massachusetts, which are described in
further detail in Note 7 of our consolidated financial statements included in this Annual Report on Form 10-K. Future contractual
payments on operating lease and sublease obligations due within one year of December 31, 2023 are $28.7 million, and future
contractual payments on operating lease and sublease obligations due greater than one year from December 31, 2023 are $293.9
million.
Other obligations
Under the A&R Vertex JDCA, as amended, we are allowed to defer a portion of our share of costs under the arrangement if
spending on the CASGEVY program exceeds specified amounts. Any deferred amounts are only payable to Vertex as an offset
against future profitability of the CAGEVY program and the amounts payable are capped at a specified maximum amount per year.
Deferred costs associated with the CASGEVY program have not been recognized as of December 31, 2023 because a reasonable
estimate of future payments against future profitability cannot be made.
In the normal course of business, we enter into agreements with contract research organizations for clinical trials and clinical
supply manufacturing and with vendors for preclinical research studies and other services and products for operating purposes. These
contracts are generally cancelable at any time by us upon less than 180 days’ prior written notice. Certain of these agreements require
us to pay milestones to such third parties upon achievement of certain development, regulatory or commercial milestones as further
described in Note 9 of our consolidated financial statements included in this Annual Report on Form 10-K. Amounts related to
contingent milestone payments are not considered contractual obligations as they are contingent on the successful achievement of
certain development, regulatory approval and commercial milestones, which may not be achieved.
We also have obligations to make future payments to third parties that become due and payable on the achievement of certain
milestones, including future payments to third parties with whom we have entered into research, development and commercialization
107
agreements. We have not included these commitments on our balance sheet because the achievement and timing of these milestones is
not fixed and determinable.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Sensitivity
We are exposed to market risk related to changes in interest rates. As of December 31, 2023, we had cash, cash equivalents and
marketable securities of $1,695.7 million, primarily invested in U.S. Treasury securities and government agency securities, corporate
bonds, commercial paper and money market accounts invested in U.S. government agency securities. Due to the conservative nature
of these instruments, we do not believe that we have a material exposure to interest rate risk. If interest rates were to increase or
decrease by 1%, the fair value of our investment portfolio would increase or decrease by an immaterial amount.
Foreign Currency Exchange Rate Risk
As a result of our foreign operations, we face exposure to movements in foreign currency exchange rates, primarily the Swiss
Franc and British Pound, against the U.S. dollar. The current exposures arise primarily from cash, accounts payable and intercompany
receivables and payables. Changes in foreign exchange rates affect our consolidated statement of operations and distort comparisons
between periods. To date, foreign currency transaction gains and losses have not been material to our financial statements, and we
have not engaged in any foreign currency hedging transactions.
Inflation
Inflation generally affects us by increasing our cost of labor, clinical trial and manufacturing costs. We do not believe that
inflation had a material effect on our business, financial condition or results of operations during the years ended December 31, 2023,
2022 and 2021.
Item 8. Financial Statements and Supplementary Data.
The consolidated 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 chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as
of the end of the period covered by this Annual Report on Form 10-K, have concluded that, based on such evaluation, our disclosure
controls and procedures were effective. In designing and evaluating the disclosure controls and procedures, our management
recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-
benefit relationship of possible controls and procedures.
Management's Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control
over financial reporting is defined in Rule 13a-15(f) and Rule 15d-15(f) promulgated under the Securities Exchange Act of 1934, as
amended, 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. Our internal control over financial reporting includes those policies and procedures that:
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and
dispositions of the 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
108
•
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.
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.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023.
In making this assessment, it used the criteria set forth in the Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework)(COSO). Based on its assessment, our management has
concluded that, as of December 31, 2023, the Company’s internal control over financial reporting is effective based on those criteria.
Our independent registered public accounting firm, Ernst & Young LLP, issued an attestation report on our internal control over
financial reporting. See below.
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 13a-15(f) and
15(d)-15(f) promulgated under the Securities Exchange Act of 1934, during the fourth quarter of 2023 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.
109
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of CRISPR Therapeutics AG
Opinion on Internal Control Over Financial Reporting
We have audited CRISPR Therapeutics AG’s internal control over financial reporting as of December 31, 2023, 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, CRISPR Therapeutics AG (the Company) maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2023, 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, 2023 and 2022, the related consolidated statements of operations
and comprehensive (loss) income, shareholders’ equity and cash flows for each of the three years in the period ended December 31,
2023, and the related notes and our report dated February 21, 2024 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 21, 2024
110
Item 9B. Other Information.
On December 6, 2023, Dr. Katherine High, a member of our Board of Directors, adopted a trading arrangement intended to
satisfy the affirmative defense conditions of Securities Exchange Act Rule 10b5-1(c) (a "Rule 10b5-1 trading arrangement") with
respect to the sale of up to an aggregate of 22,000 common shares of the Company pursuant to the terms of such trading plan. Dr.
High's Rule 10b5-1 trading arrangement is active through March 31, 2025.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
111
Item 10. Directors, Executive Officers and Corporate Governance.
PART III
The information required by this item is incorporated by reference to our Proxy Statement for our 2024 Annual General Meeting
of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2023.
Item 11. Executive Compensation.
The information required by this item is incorporated by reference to our Proxy Statement for our 2024 Annual General Meeting
of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2023.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this item is incorporated by reference to our Proxy Statement for our 2024 Annual Meeting of
Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2023.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item is incorporated by reference to our Proxy Statement for our 2024 Annual General Meeting
of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2023.
Item 14. Principal Accountant Fees and Services.
The information required by this item is incorporated by reference to our Proxy Statement for our 2024 Annual General Meeting
of Shareholders to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2023.
112
Item 15. Exhibits and Financial Statement Schedules.
(a)(1) Financial Statements.
PART IV
See the “Index to Consolidated Financial Statements” on page F-1 below for the list of financial statements filed as part of this
report.
(a)(2) Schedules other than that listed above have been omitted because of the absence of conditions under which they are
required or because the required information is included in the financial statements or the notes thereto.
(a)(3) Exhibits.
The exhibits required by Item 601 of Regulation S-K and Item 15(b) of this Annual Report are listed in the Exhibit Index below.
The exhibits listed in the Exhibit Index below are filed or incorporated by reference as part of this Annual Report on Form 10-K.
(b) Exhibit Index.
Exhibit
Number
Description
3.1
4.1*
10.1†
10.2†
10.3†
10.4
10.5#
10.6#
10.7#
10.8#
10.9#
Amended and Restated Articles of Association of CRISPR Therapeutics AG, dated June 8, 2023 (incorporated herein by
reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on June 9, 2023).
Description of Capital Shares.
License Agreement, dated April 15, 2014, by and between CRISPR Therapeutics AG and Emmanuelle Marie
Charpentier (incorporated herein by reference to Exhibit 10.5 to the Company’s Registration Statement on Form S-1
filed on October 7, 2016).
License Agreement, dated April 15, 2014, by and between TRACR Hematology Limited and Emmanuelle Marie
Charpentier (incorporated herein by reference to Exhibit 10.6 to the Company’s Registration Statement on Form S-1
filed on October 7, 2016).
Patent Assignment Agreement, dated November 7, 2014, by and between CRISPR Therapeutics AG, Emmanuelle Marie
Charpentier, the University of Vienna and Ines Fonfara (incorporated herein by reference to Exhibit 10.7 to the
Company’s Registration Statement on Form S-1 filed on October 7, 2016).
Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.8 to the Company’s Registration
Statement on Form S-1 filed on October 7, 2016).
Employment Agreement, dated December 1, 2017, by and between CRISPR Therapeutics AG and Rodger Novak
(incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 21,
2017).
Mandate Agreement, dated December 27, 2019, by and between CRISPR Therapeutics AG and Oriolus Consulting LLC
(incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 27,
2019).
Termination Agreement, dated December 27, 2019, by and between CRISPR Therapeutics AG and Rodger Novak
(incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 27,
2019).
Second Amended and Restated Employment Agreement, dated October 2, 2017, by and between CRISPR Therapeutics,
Inc. and Samarth Kulkarni (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form
8-K filed on October 2, 2017).
Employment Agreement, dated May 31, 2017, by and between CRISPR Therapeutics, Inc. and James R. Kasinger
(incorporated herein by reference to Exhibit 10.16 to the Company’s Annual Report on Form 10-K filed on March 8,
2018).
113
10.10#
10.11#
10.12#
10.13#
10.14#
10.15#
10.15.1#
10.15.2#
10.15.3#
10.15.4#
10.15.5#
10.15.6#
10.16#
10.16.1#
10.16.2#
10.16.3#
Employment Agreement, dated October 14, 2021, by and between CRISPR Therapeutics, Inc. and Brendan Smith
(incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 14,
2021).
Employment Agreement, dated May 23, 2022, by and between CRISPR Therapeutics, Inc. and Phuong Khanh Morrow
(incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 8,
2022).
Employment Agreement, dated March 14, 2023, by and between CRISPR Therapeutics, Inc. and Raju Prasad, Ph.D.
(incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 14,
2023).
Senior Executive Cash Incentive Bonus Plan (incorporated herein by reference to Exhibit 10.26 to the Company’s
Annual Report on Form 10-K filed on March 8, 2018).
CRISPR Therapeutics AG 2015 Stock Option and Grant Plan (incorporated herein by reference to Exhibit 10.14 to the
Company’s Registration Statement on Form S-1 filed on September 9, 2016).
CRISPR Therapeutics AG Amended and Restated 2016 Stock Option and Incentive Plan (incorporated herein by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 2, 2017).
Form of Incentive Stock Option Agreement under CRISPR Therapeutics AG’s Amended and Restated 2016 Stock
Option and Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form
10-Q filed on November 8, 2017).
Form of Non-Qualified Stock Option Agreement for Company Employees under CRISPR Therapeutics AG’s Amended
and Restated 2016 Stock Option and Incentive Plan (incorporated herein by reference to Exhibit 10.3 to the Company’s
Current Report on Form 10-Q filed on November 8, 2017).
Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under CRISPR Therapeutics AG’s
Amended and Restated 2016 Stock Option and Incentive Plan (incorporated herein by reference to Exhibit 10.4 to the
Company’s Current Report on Form 10-Q filed on November 8, 2017).
Form of Restricted Stock Award Agreement under CRISPR Therapeutics AG’s Amended and Restated 2016 Stock
Option and Incentive Plan (incorporated herein by reference to Exhibit 10.5 to the Company’s Current Report on Form
10-Q filed on November 8, 2017).
Form of Restricted Stock Award Agreement for Company Employees under CRISPR Therapeutics AG’s Amended and
Restated 2016 Stock Option and Incentive Plan (incorporated herein by reference to Exhibit 10.6 to the Company’s
Current Report on Form 10-Q filed on November 8, 2017).
Form of Restricted Stock Award Agreement for Non-Employee Directors under CRISPR Therapeutics AG’s Amended
and Restated 2016 Stock Option and Incentive Plan (incorporated herein by reference to Exhibit 10.7 to the Company’s
Current Report on Form 10-Q filed on November 8, 2017).
CRISPR Therapeutics AG 2018 Stock Option and Incentive Plan and forms of agreements thereunder (incorporated
herein by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 filed on June 1, 2018).
Form of Incentive Stock Option Agreement under CRISPR Therapeutics AG’s 2018 Stock Option and Incentive Plan
(incorporated herein by reference to Exhibit 99.2 to the Company’s Registration Statement on Form S-8 filed on June 1,
2018).
Form of Non-Qualified Stock Option Agreement for Company Employees under CRISPR Therapeutics AG’s 2018
Stock Option and Incentive Plan (incorporated herein by reference to Exhibit 99.3 to the Company’s Registration
Statement on Form S-8 filed on June 1, 2018).
Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under CRISPR Therapeutics AG’s 2018
Stock Option and Incentive Plan (incorporated herein by reference to Exhibit 99.4 to the Company’s Registration
Statement on Form S-8 filed on June 1, 2018).
10.16.4#
Form of Restricted Stock Award under CRISPR Therapeutics AG’s 2018 Stock Option and Incentive Plan (incorporated
herein by reference to Exhibit 99.5 to the Company’s Registration Statement on Form S-8 filed on June 1, 2018).
114
10.16.5#
10.16.6#
10.17#
10.18#
10.19#
10.20#
10.21#
10.22†
10.23†
10.24†
10.25†
10.26†
10.27†
10.28†^
Form of Restricted Stock Award Agreement for Company Employees under CRISPR Therapeutics AG’s 2018 Stock
Option and Incentive Plan (incorporated herein by reference to Exhibit 99.6 to the Company’s Registration Statement on
Form S-8 filed on June 1, 2018).
Form of Restricted Stock Award for Non-Employee Directors under CRISPR Therapeutics AG’s 2018 Stock Option and
Incentive Plan (incorporated herein by reference to Exhibit 99.7 to the Company’s Registration Statement on Form S-8
filed on June 1, 2018).
Amendment No. 1 to the 2018 Stock Option and Incentive Plan (incorporated herein by reference to Appendix A to the
Company’s Definitive Proxy Statement on Schedule 14A filed on April 30, 2019).
Amendment No. 2 to the 2018 Stock Option and Incentive Plan (incorporated herein by reference to Appendix A to the
Company’s Definitive Proxy Statement on Schedule 14A filed on April 24, 2020).
Amendment No. 3 to the 2018 Stock Option and Incentive Plan (incorporated herein by reference to Appendix A to the
Company's Definitive Proxy Statement on Schedule 14A filed on April 25, 2022).
Amendment No. 4 to the 2018 Stock Option and Incentive Plan (incorporated herein by reference to Appendix B to the
Company's Definitive Proxy Statement on Schedule 14A filed on April 26, 2023).
CRISPR Therapeutics AG 2016 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 10.16 to the
Company’s Registration Statement on Form S-1 filed on September 9, 2016).
Consent to Assignments, Licensing and Common Ownership and Invention Management Agreement for a
Programmable DNA Restriction Enzyme for Genome Editing, dated December 15, 2016, by and among CRISPR
Therapeutics AG, The Regents of the University of California, University of Vienna, Dr. Emmanuelle Charpentier,
Intellia Therapeutics, Inc., Caribou Biosciences, Inc., ERS Genomics Ltd., and TRACR Hematology Ltd. (incorporated
herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 16, 2016).
Strategic Collaboration, Option and License Agreement, dated October 26, 2015, by and among CRISPR Therapeutics
AG, CRISPR Therapeutics Limited, CRISPR Therapeutics, Inc., TRACR Hematology Limited, Vertex Pharmaceuticals,
Incorporated and Vertex Pharmaceuticals (Europe) Limited (incorporated herein by reference to Exhibit 10.4 to the
Company’s Registration Statement on Form S-1 filed on October 7, 2016).
Amendment No. 1 to the Strategic Collaboration, Option and License Agreement by and between, on the one hand,
Vertex Pharmaceuticals Incorporated and Vertex Pharmaceuticals (Europe) Limited, and on the other hand, CRISPR
Therapeutics AG, CRISPR Therapeutics, Inc., CRISPR Therapeutics Limited and TRACR Hematology Ltd., dated as of
December 12, 2017 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on
December 18, 2017).
Amendment No. 2 to the Strategic Collaboration, Option and License Agreement by and between, on the one hand,
Vertex Pharmaceuticals Incorporated and Vertex Pharmaceuticals (Europe) Limited, and on the other hand, CRISPR
Therapeutics AG, CRISPR Therapeutics, Inc., CRISPR Therapeutics Limited and TRACR Hematology Ltd., dated as of
June 6, 2019 (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed
on July 29, 2019).
Strategic Collaboration and License Agreement dated June 6, 2019, between CRISPR Therapeutics AG and Vertex
Pharmaceuticals Incorporated (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on
Form 10-Q filed on July 29, 2019).
First Amendment to the Strategic Collaboration and License Agreement dated March 17, 2021, between CRISPR
Therapeutics AG and Vertex Pharmaceuticals Incorporated (incorporated herein by reference to Exhibit 10.3 to the
Company’s Quarterly Report on Form 10-Q filed on April 27, 2021).
Amended and Restated Joint Development and Commercialization Agreement between, on the one hand, Vertex
Pharmaceuticals Incorporated and Vertex Pharmaceuticals (Europe) Limited, and on the other hand, CRISPR
Therapeutics AG, CRISPR Therapeutics Limited, CRISPR Therapeutics, Inc., and TRACR Hematology Ltd., dated as of
April 16, 2021 (incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed
on April 27, 2021).
10.29†^
Amendment No. 1 to the Amended and Restated Joint Development and Commercialization Agreement, dated
December 12, 2023, by and between, on the one hand, Vertex Pharmaceuticals Incorporated and Vertex Pharmaceuticals
(Europe) Limited, and on the other hand, CRISPR Therapeutics AG, CRISPR Therapeutics Limited, CRISPR
115
Therapeutics, Inc., and TRACR Hematology Ltd. (incorporated herein by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on December 13, 2023).
10.30†^
Non-Exclusive License Agreement, dated March 23, 2023, by and between Vertex Pharmaceuticals Incorporated and
CRISPR Therapeutics AG (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form
8-K filed on March 27, 2023).
10.31†
10.32^
10.33^
10.34^
10.35†
10.36
10.37
21.1*
23.1*
31.1*
31.2*
32.1+
Option Agreement, dated December 13, 2019, between CRISPR Therapeutics AG and Bayer HealthCare LLC
(incorporated herein by reference to Exhibit 10.31 to the Company’s Annual Report on Form 10-K filed on February 12,
2020).
Lease, dated May 5, 2020, by and between CRISPR Therapeutics, Inc. and CRP/KING 33 NY AVE. OWNER, L.L.C.
(incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on April 27,
2021).
First Amendment to Lease dated December 2, 2020, by and between CRISPR Therapeutics, Inc. and CRP/KING 33 NY
AVE. OWNER, L.L.C. (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form
10-Q filed on April 27, 2021).
Second Amendment to Lease dated April __, 2021, by and between CRISPR Therapeutics, Inc. and 33 NYA OWNER
(DE) LLC, as successor in interest to CRP/KING 33 NY AVE. OWNER, L.L.C. (incorporated herein by reference to
Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on July 29, 2021).
Lease, dated July 24, 2020, by and between CRISPR Therapeutics, Inc. and 105 W First Street Owner, L.L.C.
(incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on July 27,
2020).
Letter Agreement dated January 6, 2022, by and between CRISPR Therapeutics, Inc. and 105 W First Street Owner,
L.L.C. (incorporated herein by reference to Exhibit 10.37 to the Company’s Annual Report on Form 10-K filed on
February 15, 2022).
Lease Commencement Date Agreement, dated May 1, 2022, by and between CRISPR Therapeutics AG and 105 W First
Street Owner, L.L.C. (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-
Q filed on August 8, 2022).
Subsidiaries of the Registrant
Consent of Ernst & Young LLP
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under 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 Rules 13a-14(a) and 15d-14(a) under 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.
97.1*
CRISPR Therapeutics AG Policy Relating to Recovery of Erroneously Awarded Compensation
101.INS
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File as its XBRL tags
are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Filed herewith.
+ Furnished herewith.
† Certain portions of this exhibit have been omitted because they are not material and the registrant customarily and actually treats that
information as private or confidential.
# A management contract or compensatory plan or arrangement required to be filed as an exhibit pursuant to Item 15(a)(3) of Form
10-K.
^ Certain exhibits and schedules to these agreements have been omitted pursuant to Item 601 of Regulation S-K. The registrant will
furnish copies of any of the exhibits and schedules to the Securities and Exchange Commission upon request.
116
Item 16. Form 10-K Summary
None.
117
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
Date: February 21, 2024
CRISPR Therapeutics AG
By:
/s/ Samarth Kulkarni
Samarth Kulkarni
Chief Executive Officer
SIGNATURES AND POWER OF ATTORNEY
We, the undersigned directors and officers of CRISPR Therapeutics AG (the “Company”), hereby severally constitute and
appoint Samarth Kulkarni, Raju Prasad and James R. Kasinger, 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, as amended, this Report has been signed below by the
following persons on behalf of the Registrant in the capacities and on the dates indicated.
Name
Title
/s/ Samarth Kulkarni
Samarth Kulkarni
Chief Executive Officer, Chairman and Director
(Principal Executive Officer)
/s/ Raju Prasad
Raju Prasad
/s/ Ali Behbahani
Ali Behbahani
/s/ Maria Fardis
Maria Fardis
/s/ H. Edward Fleming, Jr.
H. Edward Fleming, Jr.
/s/ Simeon J. George
Simeon J. George
/s/ John Greene
John Greene
/s/ Katherine High
Katherine A. High
/s/ Douglas Treco
Douglas A. Treco
/s/ Raju Prasad
Raju Prasad
Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
Date
February 21, 2024
February 21, 2024
February 21, 2024
February 21, 2024
February 21, 2024
February 21, 2024
February 21, 2024
February 21, 2024
February 21, 2024
Authorized Representative in the United States
February 21, 2024
118
CRISPR Therapeutics AG
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 42)
Consolidated Balance Sheets
Consolidated Statements of Operations and Comprehensive (Loss) Income
Consolidated Statements of Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Pages
F-1
F-3
F-4
F-5
F-6
F-7
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of CRISPR Therapeutics AG
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of CRISPR Therapeutics AG (the Company) as of December 31, 2023
and 2022, the related consolidated statements of operations and comprehensive (loss) income, shareholders’ equity and cash flows for
each of the three years in the period ended December 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2023, 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, 2023, 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 21, 2024 expressed an unqualified opinion thereon.
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 Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material
to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the
critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures
to which it relates.
F-1
Description of the
Matter
Estimation of Variable Consideration for ongoing Collaboration Agreements
As discussed in Note 8 to the consolidated financial statements, the Company has multiple ongoing collaboration
agreements which include rights to future payments totaling up to approximately $2.3 billion as of December 31,
2023 that are payable upon the achievement of various developmental, regulatory and commercial milestones related
to certain programs under development. These future payments represent variable consideration that is included in
the transaction price for these collaboration agreements to the extent that the Company determines it is probable that
a significant revenue reversal of cumulative revenue recognized under the contract will not occur. When the Company
cannot conclude that it is probable that a significant revenue reversal of cumulative revenue under the contract will
not occur, the Company constrains the related variable consideration resulting in its exclusion from the transaction
price. The Company’s estimation of variable consideration to be constrained impacts the reported amounts of revenue
and deferred revenue within the consolidated financial statements.
In determining the portion of the transaction price to be constrained, management considers the probability and
uncertainty of whether the related developmental, regulatory and commercial milestones will be achieved given the
nature of clinical development and the stage of the underlying programs. This assessment is performed at each
reporting period. In making this evaluation, management considers both internal and external information available
including information from industry publications, the stage of development of the underlying programs and other
relevant factors. Changes to the constraint of variable consideration can have a material effect on the amount of
revenue recognized in the financial reporting period. As a result, auditing the accounting for the application of
constraint to variable consideration required complex auditor judgement.
How We Addressed
the Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the
Company’s revenue recognition process. For example, we tested controls over management's estimation of the total
transaction price for its collaboration agreements including those related to the application of constraint to variable
consideration associated with future developmental, regulatory and commercial milestones.
To audit the Company’s judgements related to the application of constraint to variable consideration, we performed
audit procedures that included, among others, evaluating the Company’s judgements related to the probability of
achieving the related future developmental, regulatory and commercial milestones. To evaluate the Company’s
estimated probability of achieving developmental, regulatory and commercial milestones, we considered the nature
of clinical development and the stage of development of the underlying programs in relation to relevant external data
and assessed the reasonableness of the probabilities of achieving the milestones through inspection of observable
third-party information. We also discussed the probability of achieving the milestones in relation to each program’s
phase of development with the personnel involved in oversight of the Company’s collaborations.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2015.
Boston, Massachusetts
February 21, 2024
F-2
CRISPR Therapeutics AG
Consolidated Balance Sheets
(in thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Accounts receivable
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Marketable securities, non-current
Intangible assets, net
Restricted cash
Operating lease assets
Other non-current assets
Total assets
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable
Accrued expenses
Deferred revenue, current
Accrued tax liabilities
Operating lease liabilities
Other current liabilities
Total current liabilities
Deferred revenue, non-current
Operating lease liabilities, net of current portion
Other non-current liabilities
Total liabilities
Commitments and contingencies (Note 9)
Shareholders’ equity:
Common shares, CHF 0.03 par value, 126,536,183 and 150,347,467 shares
authorized at December 31, 2023 and 2022, respectively, 80,214,694 and
78,692,766 shares issued at December 31, 2023 and 2022, respectively,
80,044,378 and 78,512,450 shares outstanding at December 31, 2023 and 2022,
respectively
Treasury shares, at cost, 170,316 and 180,316 shares at December 31, 2023
and 2022, respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income (loss)
Total shareholders’ equity
Total liabilities and shareholders’ equity
December 31,
2023
2022
$
$
$
389,477
1,304,215
200,000
14,386
1,908,078
151,945
1,973
16
11,591
153,993
1,975
2,229,571
38,147
45,335
4,105
438
15,625
5,141
108,791
14,012
223,007
958
346,768
211,885
1,603,433
—
37,708
1,853,026
163,634
53,130
71
11,635
156,921
4,640
2,243,057
27,428
77,682
—
135
15,842
20
121,107
12,323
228,179
5,969
367,578
2,497
2,441
(62)
2,878,155
(999,700)
1,913
1,882,803
2,229,571
$
(63)
2,734,838
(846,090)
(15,647)
1,875,479
2,243,057
$
$
$
$
See accompanying notes to these consolidated financial statements.
F-3
CRISPR Therapeutics AG
Consolidated Statements of Operations and Comprehensive (Loss) Income
(In thousands, except share and per share data)
2023
Years Ended December 31,
2022
2021
Revenue:
Collaboration revenue
Grant revenue
Total revenue
Operating expenses:
Research and development
General and administrative
Collaboration expense, net
Total operating expenses
(Loss) income from operations
Other income:
Other income, net
Total other income, net
Net (loss) income before income taxes
(Provision) benefit for income taxes
Net (loss) income
Foreign currency translation adjustment
Unrealized gain (loss) on marketable securities
Comprehensive (loss) income
Net (loss) income per common share — basic
Basic weighted-average common shares outstanding
Net (loss) income per common share — diluted
Diluted weighted-average common shares outstanding
$
$
370,000
1,206
371,206
$
436
762
1,198
387,332
76,162
130,250
593,744
(222,538)
71,816
71,816
(150,722)
(2,888)
(153,610)
73
17,487
(136,050) $
461,645
102,464
110,250
674,359
(673,161)
22,661
22,661
(650,500)
325
(650,175)
(80)
(10,500)
(660,755) $
913,081
1,882
914,963
340,567
99,690
101,178
541,435
373,528
6,003
6,003
379,531
(1,870)
377,661
(11)
(4,973)
372,677
$
$
$
(1.94) $
(8.36) $
79,220,930
77,746,575
(1.94) $
(8.36) $
79,220,930
77,746,575
4.97
75,948,686
4.70
80,393,496
See accompanying notes to these consolidated financial statements.
F-4
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F
CRISPR Therapeutics AG
Consolidated Statements of Cash Flows
(In thousands)
Operating activities
Net (loss) income
Reconciliation of net (loss) income to net cash used in operating activities:
Depreciation and amortization
Equity-based compensation
Other non-cash items, net
Acquired in-process research and development
Changes in:
Accounts receivable
Prepaid expenses and other assets
Accounts payable and accrued expenses
Deferred revenue
Operating lease assets and liabilities
Other liabilities, net
Net cash (used in) provided by operating activities
Investing activities
Purchase of property, plant and equipment
Purchase of in-process research and development
Purchases of marketable securities
Maturities of marketable securities
Net cash provided by (used in) investing activities
Financing activities
Proceeds from issuance of common shares, net of issuance costs
Proceeds from exercise of options and ESPP contributions, net of issuance costs
Net cash provided by financing activities
Effect of exchange rate changes on cash
Increase (decrease) in cash
Cash, cash equivalents and restricted cash, beginning of period
Cash, cash equivalents and restricted cash, end of period
Supplemental disclosure of non-cash investing and financing activities
Property and equipment purchases in accounts payable and accrued expenses
Equity issuance costs in accounts payable and accrued expenses
Reconciliation to amounts within the consolidated balance sheets
Cash and cash equivalents
Prepaid expenses and other current assets
Restricted cash
Total
2023
Years Ended December 31,
2022
2021
$
(153,610) $
(650,175) $
377,661
19,837
81,028
(16,545)
2,500
(200,000)
23,219
(20,247)
5,794
(2,461)
110
(260,375)
(9,470)
(2,500)
(1,065,911)
1,452,528
374,647
32,721
29,943
62,664
73
177,009
224,060
401,068
725
417
$
$
$
24,172
97,947
12,470
—
305
1,598
5,164
(1,011)
15,310
(1,521)
(495,741)
(37,188)
—
(1,417,800)
1,196,333
(258,655)
970
37,622
38,592
(80)
(715,884)
939,944
224,060
2,121
99
2023
As of December 31,
2022
389,477
—
11,591
401,068
$
211,885
540
11,635
224,060
$
$
$
$
17,953
102,390
14,109
—
(161)
(13,912)
37,514
(783)
9,506
(5,305)
538,972
(81,705)
—
(1,509,327)
555,602
(1,035,430)
213,267
37,678
250,945
(11)
(245,524)
1,185,468
939,944
8,348
334
2021
923,031
—
16,913
939,944
$
$
$
$
See accompanying notes to these consolidated financial statements.
F-6
CRISPR Therapeutics AG
Notes to Consolidated Financial Statements
1. Organization and Operations
CRISPR Therapeutics AG (“CRISPR” or the “Company”) was incorporated on October 31, 2013 in Basel, Switzerland. The
Company was established to translate CRISPR/Cas9, a genome editing technology, into transformative gene-based medicines for the
treatment of serious human diseases. The foundational intellectual property underlying the Company’s operations was licensed to the
Company in April 2014. The Company devotes substantially all of its efforts to product research and development activities, initial
market development and raising capital. The Company’s principal offices are in Zug, Switzerland, with the U.S. headquarters for
research and development in Boston, Massachusetts, additional research and development based in San Francisco, CA, and a cell
therapy manufacturing facility in Framingham, Massachusetts.
The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, risks of
failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product candidate that it may
identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, third party
collaborations, dependence on key personnel, protection of proprietary technology, compliance with government regulations,
development by competitors of technological innovations and ability to transition from pilot-scale manufacturing to large-scale
production of products.
The Company had an accumulated deficit of $999.7 million as of December 31, 2023 and has financed its operations to date
from a series of preferred shares and convertible loan issuances, proceeds obtained from its initial public offering, subsequent public
offerings of its common shares, at-the-market offerings, as well as upfront fees and milestones received under its collaboration and
joint venture arrangements. The Company will require additional capital to fund its research and development and ongoing operating
expenses.
As of December 31, 2023, the Company had cash, cash equivalents and marketable securities of $1,695.7 million. While the
Company was in a net income position in certain previous years due to upfront payments associated with the Company's
collaborations with Vertex Pharmaceuticals Incorporated and certain of its subsidiaries, or Vertex, the Company has a history of
recurring losses and expects to continue to incur losses for the foreseeable future. The Company expects its cash and cash equivalents
and marketable securities will be sufficient to fund current planned operations for at least the next twenty-four months.
2. Summary of Significant Accounting Policies and Basis of Presentation
Basis of Presentation and Use of Estimates
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally
accepted in the United States of America, or GAAP, and include the accounts of the Company and its wholly-owned subsidiaries as of
December 31, 2023. All intercompany accounts and transactions have been eliminated. Any reference in these notes to applicable
guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting
Standards Codification, or ASC, and Accounting Standards Updates, or ASUs, of the Financial Accounting Standards Board.
Beginning in 2022, collaboration costs under the Vertex Agreements (as defined in Note 8) accounted for under ASC 808,
Collaborative Agreements, or ASC 808, are presented within “collaboration expense, net” in the consolidated statements of operations
and comprehensive (loss) income. As a result, collaboration costs under the Vertex Agreements accounted for under ASC 808 for year
ended December 31, 2021 have been reclassified to conform to the current presentation. No subtotals in the prior period’s
consolidated financial statements were impacted. Refer to Note 8 to these consolidated financial statements for further discussion on
the Vertex Agreements.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company’s management
evaluates its estimates, which include, but are not limited to, revenue recognition, equity-based compensation expense and reported
amounts of research and development expenses during the period. Significant estimates in these consolidated financial statements
have been made in connection with revenue recognition and equity-based compensation expense. The Company bases its estimates on
historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances.
Actual results may differ from those estimates or assumptions.
Segment Information
The Company and the Company’s chief operating decision maker, namely, the chief executive officer, view the Company’s
operations and manage its business as one operating segment, which is the business of discovering, developing and commercializing
therapies derived from or incorporating genome-editing technology.
F-7
Foreign Currency Translation and Transactions
The majority of the Company’s operations occur in entities that have the U.S. dollar as their functional currency. Non-U.S.
dollar denominated functional currency subsidiaries have assets and liabilities translated into U.S. dollars at rates of exchange in effect
at the end of the year. Revenue and expense amounts are translated using the average exchange rates for the period. Net unrealized
gains and losses resulting from foreign currency translation are included in “Accumulated other comprehensive (loss) income.” Net
foreign currency exchange transaction gains or losses are included in “Other income, net” on the Company’s consolidated statement of
operations, the impact of which is not significant.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of three months or less from the purchase date to be cash
equivalents. As of December 31, 2023 and 2022, the Company had $389.5 million and $211.9 million in cash and cash equivalents,
respectively.
Restricted Cash
As of December 31, 2023 and 2022, the Company had $11.6 million and $12.2 million, respectively, in restricted cash
representing letters of credit securing the Company’s obligations under certain leased facilities, as well as certain credit card
arrangements. The letters of credit are secured by cash held in a restricted depository account, with $0.0 million and $0.5 million,
respectively, included in prepaid expenses and other current assets in the accompanying consolidated balance sheets as of
December 31, 2023 and 2022, and $11.6 million and $11.6 million, respectively, included in restricted cash in the accompanying
consolidated balance sheets as of December 31, 2023 and 2022.
Marketable Securities
As of December 31, 2023 and 2022, the Company had $1,306.2 million and $1,656.6 million, respectively, in marketable
securities. The Company’s investment strategy is focused on capital preservation. The Company invests in instruments that meet the
credit quality standards outlined in the Company’s investment policy. The Company classifies marketable securities with a remaining
maturity, when purchased, of greater than three months as available-for-sale. Marketable securities are classified as current assets on
the consolidated balance sheets if the marketable securities are available to be converted into cash to fund current operations.
Marketable securities in an unrealized loss position for greater than one year with a remaining maturity date greater than one year are
classified as non-current assets.
Marketable securities classified as Level 2 within the valuation hierarchy generally consist of U.S. Treasury securities and
government agency securities, corporate bonds, and commercial paper. Debt securities are carried at fair value with the unrealized
gains and losses included in other comprehensive (loss) income as a component of stockholders’ equity until realized. Any premium
arising at purchase is amortized to interest expense over the period of the earliest call date, and any discount arising at purchase is
accreted to interest income over the life of the instrument. Realized gains and losses on debt securities are determined using the
specific identification method and are included in other income, net.
The Company assesses its available-for-sale debt securities under the available-for-sale debt security impairment model in ASU
2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements, or 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, 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.
Concentrations of Credit Risk and Off-balance Sheet Risk
Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash, cash equivalents
and marketable securities. The Company’s cash is held in accounts with financial institutions that management believes are
creditworthy. The Company has not experienced any credit losses in such accounts and does not believe it is exposed to any
significant credit risk on these funds. The Company has no financial instruments with off-balance sheet risk of loss.
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 — Quoted prices in active markets that are accessible at the market date for identical unrestricted assets or liabilities.
F-8
Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other inputs for which all significant inputs are observable or can be
corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the
assets or liabilities.
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 Measurement). The carrying amount of accounts receivable, other receivables, accounts payable and accrued expenses as
reported on the consolidated balance sheets as of December 31, 2023 and 2022, approximate fair value, due to the short-term duration
of these instruments.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation. Maintenance and repairs that do not improve or
extend the lives of the respective assets are expensed to operations as incurred. Upon disposal, the related cost and accumulated
depreciation is removed from the accounts and any resulting gain or loss is included in the results of operations. Depreciation is
recorded using the straight-line method over the estimated useful lives of the respective assets, which are as follows:
Asset
Computer equipment
Furniture, fixtures and other
Laboratory equipment
Leasehold improvements
Impairment of Long-lived Assets
Estimated useful life
3 years
5 years
5 years
Shorter of useful life or remaining lease term
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.
Revenue Recognition
The Company records revenue in accordance with ASC 606, Revenue from Contracts with Customers, or ASC 606. ASC 606
applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases and
collaboration arrangements. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC
606, the entity performs the following five steps:
1) Identify the contract with the customer
A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each
party’s rights regarding the goods or services to be transferred and identifies the related payment terms, (ii) the contract has
commercial substance and (iii) the Company determines that collection of substantially all consideration for goods and services that
are transferred is probable based on the customer’s intent and ability to pay the promised consideration.
2) Identify the performance obligations in the contract
Performance obligations promised in a contract are identified based on the goods and services that will be transferred to the
customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or
together with other available resources, and are distinct in the context of the contract, whereby the transfer of the good or service is
separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods and services, the
Company must apply judgment to determine whether promised goods and services are capable of being distinct and distinct in the
context of the contract. If these criteria are not met, the promised goods and services are accounted for as a combined performance
obligation.
F-9
3) Determine the transaction price
The transaction price is determined based on the consideration to which the Company will be entitled in exchange for
transferring goods and services to the customer. To the extent the transaction price includes variable consideration such as research,
development, regulatory and commercial milestones, the Company determines if it is probable that it will receive such amounts and
there is no risk of a significant revenue reversal. When the Company cannot conclude that receipt of such amounts is probable, the
Company constrains the related variable consideration resulting in its exclusion from transaction consideration. In determining the
portion of the transaction consideration to be constrained, the Company considers the probability and uncertainty that the related
research, developmental, regulatory and commercial milestones will be achieved given the nature of research and clinical development
and the stage of the underlying programs. This assessment is performed at each reporting period. In making this evaluation, the
Company considers both internal and external information available, including information from industry publications and other
relevant factors. Changes to the constraint of variable consideration can have a material effect on the amount of revenue recognized in
the period.
4) Allocate the transaction consideration to performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction consideration is allocated to the single
performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction consideration
to each performance obligation on a relative standalone selling price basis unless the transaction consideration is variable and meets
the criteria to be allocated entirely to a performance obligation or to a distinct service that forms part of a single performance
obligation. The consideration to be received is allocated among the separate performance obligations based on relative standalone
selling prices. In determining these estimated standalone selling prices, the Company makes a number of significant judgments
including, for licenses, management’s assumptions regarding probability weighted projected discounted cash flows for each of the
collaboration development programs. The estimated standalone selling prices are sensitive to changes in assumptions, such as
probabilities of scientific success, discount rate and certain assumptions that form the basis of forecasted cash flows. In developing
these assumptions, management considers both internal and external information available, including information from other guideline
companies within the same industry and other relevant factors. Changes to these assumptions can have a material effect on the
allocation of the transaction consideration to performance obligations, as well as the amount and timing of revenue recognized.
5) Recognize revenue when or as the Company satisfies a performance obligation
The Company satisfies performance obligations over time or at a point in time, depending on the nature of the performance
obligation. Revenue is recognized over time if the customer simultaneously receives and consumes the benefits provided by the
entity’s performance, the entity’s performance creates or enhances an asset that the customer controls as the asset is created or
enhanced, or the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable
right to payment for performance completed to date. If the entity does not satisfy a performance obligation over time, the related
performance obligation is satisfied at a point in time by transferring the control of a promised good or service to a customer.
Accounts Receivable
The Company's accounts receivable consist primarily of milestones due under its licensing agreements accounted for under ASC
606. Accounts receivable consisted of $200.0 million as of December 31, 2023 and is due from Vertex as a result achievement of a
$200.0 million milestone upon regulatory approval of CASGEVY (formerly exagamglogene autotemcel, or exa-cel, or CTX001), as
described further in Note 8. Accounts receivable was $0.0 million as of December 31, 2022. Vertex is a creditworthy entity that
maintains an ongoing relationship with the Company and as such, the Company does not have an allowance for estimated credit losses
recorded related to these other receivables.
Contract Balances
The Company recognizes a contract asset when the Company transfers goods or services to a customer before the customer pays
consideration or before payment is due, excluding any amounts presented as an accounts receivable. A contract asset is an entity’s
right to consideration in exchange for goods or services that the entity has transferred to a customer. Contract liabilities, or deferred
revenue, primarily relate to contracts where we have received payment, but we have not yet satisfied the related performance
obligations. Contract assets are not significant as of December 31, 2023 and 2022. Contract liabilities recorded as deferred revenue as
of December 31, 2023 are $12.3 million, which was unchanged from December 31, 2022. The contract liability recorded as deferred
revenue is related to the Vertex Agreements described in Note 8.
Collaboration Arrangements
The Company records the elements of its collaboration agreements that represent joint operating activities in accordance with
ASC 808. Accordingly, the elements of the collaboration agreements that represent activities in which both parties are active
participants and to which both parties are exposed to the significant risks and rewards that are dependent on the commercial success of
the activities, are recorded as collaborative arrangements.
F-10
The Company evaluates the proper presentation of the commercial activities and the profit and loss sharing associated with the
collaboration agreements. ASC 808 states that when payments between parties in a collaborative arrangement are not within the scope
of other authoritative accounting literature, the income statement classification should be based on the nature of the arrangement, the
nature of its business operations and the contractual terms of the arrangement. To the extent that these payments are not within the
scope of other authoritative accounting literature, the income statement classification for the payments shall be based on an analogy to
authoritative accounting literature or if there is no appropriate analogy, a reasonable, rational and consistently applied accounting
policy election.
Collaboration costs under the Vertex Agreements accounted for under ASC 808 are presented within “collaboration expense,
net” in the consolidated statements of operations and comprehensive (loss) income. Refer to Note 8 to these consolidated financial
statements for further discussion on the Vertex Agreements.
Other Receivables
Amounts due from collaboration partners where an arrangement is accounted for under ASC 808 are considered other
receivables and are included within prepaid and other current assets in the consolidated balance sheets. Other receivables consisted of
$6.5 million and $11.2 million as of December 31, 2023 and 2022, respectively and are due from Vertex. Other receivables are
recorded at invoiced amounts due under the Vertex collaboration agreement, as described further in Note 8.
Vertex is a creditworthy entity that maintains an ongoing relationship with the Company and as such, the Company does not
have an allowance for estimated credit losses recorded related to these other receivables.
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 and other related costs. Research and development costs, including up-front fees and milestones paid
to collaborators, are also expensed as incurred. In circumstances where amounts have been paid in excess of costs incurred, the
Company records a prepaid expense. The Company accrues costs for clinical trial activities based upon estimates of the services
received and related expenses incurred that have yet to be invoiced by the contract research organizations, clinical study sites,
laboratories, consultants or other clinical trial vendors that perform the activities. The Company recognizes the reimbursement
associated with collaborative activities to its collaborative partners, excluding collaboration costs under the Vertex Agreements
accounted for under ASC 808, as a reduction to research and development expense in the period the services are provided. Costs
associated with collaborative activities to collaborative partners accounted for under ASC 808 and included in research and
development expense was not significant for the years ended December 31, 2023, 2022 and 2021.
Leases
The Company accounts for its leases in accordance with ASC 842, Leases, or ASC 842. At the inception of an arrangement, the
Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the
arrangement. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and short-term and
long-term lease liabilities, as applicable. The Company does not have any material financing leases.
Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease
payments over the expected remaining lease term. Certain adjustments to the right-of-use asset may be required for items such as
incentives received. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes
its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company could borrow on a
collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.
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 of renewal.
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.
F-11
Equity Based Compensation Expense
The Company’s share-based compensation programs grant awards that have included stock options, restricted stock units and
restricted stock awards. Grants are awarded to employees and non-employees, including directors.
The Company accounts for its stock-based compensation awards in accordance with ASC Topic 718, Compensation—Stock
Compensation, or ASC 718. ASC 718 requires all stock-based payments to employees and non-employee directors, including grants
of employee stock options and restricted stock units and modifications to existing stock options, to be recognized in the consolidated
statements of operations and comprehensive (loss) income based on their fair values. The Company uses the Black-Scholes option
pricing model to determine the fair value of options granted.
The Company accounts for forfeitures as they occur instead of estimating forfeitures at the time of grant and revising those
estimates in subsequent periods if actual forfeitures differ from its estimates. Stock-based compensation expense recognized in the
financial statements is based on awards for which performance or service conditions are expected to be satisfied.
The Company’s stock-based awards are subject to service or performance-based vesting conditions. Compensation expense
related to awards to employees, directors and non-employees 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 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 expenses restricted stock unit awards to employees based on the fair value of the award on a straight-line basis
over the associated service period of the award.
The Company estimates the fair value of its option awards to employees, directors and non-employees 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. In 2023, we changed our
calculation for our volatility estimate from using a blend of the Company's data as well as peer company data to using the historical
volatility of the Company's publicly traded stock for awards granted during the year. In prior periods, expected volatility was
calculated based on a blend of the Company’s reported volatility data for the length of time that market data is available for the
Company’s stock and the historical data for a representative group of publicly traded companies, for which historical information is
available. For these analyses, the Company selected companies with comparable characteristics to itself including enterprise value,
risk profiles, position within the industry, and with historical share price information sufficient to meet the expected life of the stock-
based awards. The Company computed the historical volatility data using the daily closing prices during the equivalent period of the
calculated expected term of its stock-based awards. The Company has estimated the expected term of its employee stock options using
the “simplified” method, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term
of the option, due to its lack of sufficient historical data. The risk-free interest rates for periods within the expected term of the option
are based on the U.S. Treasury securities with a maturity date commensurate with the expected term of the associated award. The
Company has never paid, and does not expect to pay, dividends in the foreseeable future.
Patent Costs
Costs to secure and prosecute patent applications and other legal costs related to the protection of the Company’s intellectual
property are expensed as incurred and are classified as general and administrative expenses in the Company’s consolidated statements
of operations.
Income Taxes
Income taxes are recorded in accordance with ASC Topic 740, Income Taxes, or ASC 740, which provides for deferred taxes
using an asset and liability approach. Under this method, deferred tax assets and liabilities are determined based on the difference
between the financial reporting and tax reporting basis of assets and liabilities and are measured using enacted tax rates and laws that
are expected to be in effect when 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 has
evaluated available evidence and concluded that the Company may not realize all the benefit of its deferred tax assets; therefore, a
valuation allowance has been established for the amount of the deferred tax assets that the Company does not believe is more likely
than not to be realized.
The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions
exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The
determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position
as well as consideration of the available facts and circumstances. As of December 31, 2023 and 2022, the Company does not have any
significant uncertain tax positions. The Company’s practice is to recognize interest and/or penalties related to income tax matters in
income tax expense. See Note 14 for further details.
F-12
Comprehensive (Loss) Income
Comprehensive (loss) income consists of net income or loss and other comprehensive (loss) income. Other comprehensive
(loss) income consists of foreign currency translation adjustments and unrealized losses on marketable securities.
Net (Loss) Income Per Share Attributable to Common Shareholders
Basic net (loss) income per share is calculated by dividing net (loss) income attributable to common shareholders by the
weighted-average number of common shares outstanding during the period. Diluted net (loss) income per share is calculated by
dividing the net (loss) income attributable to common shareholders by the weighted-average number of common equivalent shares
outstanding for the period, including any dilutive effect from outstanding stock options and restricted stock units using the treasury
stock method. See Note 12 for further details.
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard
setting bodies that the Company adopts as of the specified effective date. The Company does not believe that the adoption of recently
issued standards have or may have a material impact on its consolidated financial statements and disclosures.
3. Marketable Securities
A summary of the Company’s cash equivalents and marketable securities as of December 31, 2023 and 2022, which are
recorded at fair value (and excludes $197.8 million and $159.3 million of cash at December 31, 2023 and 2022, respectively) is shown
below (in thousands):
December 31, 2023
Cash equivalents:
Money market funds
U.S. Treasury securities
Total cash equivalents
Marketable securities:
U.S. Treasury securities
Corporate debt securities
Certificates of deposit
Government-sponsored enterprise securities
Commercial paper
Total marketable securities
Total cash equivalents and marketable securities
December 31, 2022
Cash equivalents:
Money market funds
Corporate debt securities
Commercial paper
Total cash equivalents
Marketable securities:
Corporate debt securities
Certificates of deposit
Government-sponsored enterprise securities
Commercial paper
Total marketable securities
Total cash equivalents and marketable securities
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
$
$
$
$
185,990
5,731
191,721
22,963
883,550
47,282
195,106
155,403
1,304,304
1,496,025
Amortized
Cost
17,766
2,151
32,675
52,592
1,236,770
92,417
79,746
263,231
1,672,164
1,724,756
$
$
$
$
— $
—
—
45
3,367
—
377
32
3,821
3,821
$
— $
—
—
—
(1,559)
—
(352)
(26)
(1,937)
(1,937) $
185,990
5,731
191,721
23,008
885,358
47,282
195,131
155,409
1,306,188
1,497,909
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
— $
—
—
615
—
11
—
626
626
$
— $
(2)
—
(2)
(15,006)
—
(712)
(509)
(16,227)
(16,229) $
17,766
2,149
32,675
52,590
1,222,379
92,417
79,045
262,722
1,656,563
1,709,153
As of December 31, 2023 marketable securities were in a net unrealized gain position of $1.9 million. As of December 31, 2022,
marketable securities were in a net unrealized loss position of $15.6 million. The Company has recorded a net unrealized gain of $17.5
million for the year ended December 31, 2023, related to its debt securities. The Company has recorded a net unrealized loss of $10.5
million during the year ended December 31, 2022, related to its debt securities. These amounts are included in comprehensive loss on
the condensed consolidated statements of operations and comprehensive loss.
F-13
As of December 31, 2023 and 2022, the aggregate fair value of marketable securities that were in an unrealized loss position for
less than twelve months was $463.5 million and $628.4 million, respectively. As of December 31, 2023 and 2022, the aggregate fair
value of marketable securities that were in an unrealized loss position for more than twelve months was $138.4 million and $619.2
million, respectively. Of this amount, securities totaling $2.0 million and $53.1 million as of December 31, 2023 and December 31,
2022, respectively, will mature beyond one year.
The Company determined that there was no material credit risk of the above investments as of December 31, 2023 and 2022.
The Company has the intent and ability to hold such securities until recovery. As a result, the Company did not record any charges for
credit-related impairments for its marketable securities for the years ended December 31, 2023 and 2022. No available-for-sale debt
securities held as of December 31, 2023 had remaining maturities greater than thirty months.
4. Fair Value Measurement
The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and
indicate the fair value hierarchy classification of such fair values as of December 31, 2023 and 2022 (in thousands):
Cash and cash equivalents:
Cash
Money market funds
U.S. Treasury securities
Marketable securities:
U.S. Treasury securities
Corporate debt securities
Certificates of deposit
Government-sponsored enterprise securities
Commercial paper
Total
Cash and cash equivalents:
Cash
Money market funds
Corporate debt securities
Commercial paper
Marketable securities:
Corporate debt securities
Certificates of deposit
Government-sponsored enterprise securities
Commercial paper
Other non-current assets
Total
Total
197,756
185,990
5,731
23,008
885,358
47,282
195,131
155,409
1,695,665
Total
159,295
17,766
2,149
32,675
1,222,379
92,417
79,045
262,722
2,212
1,870,660
$
$
$
$
$
$
$
$
Fair Value Measurements at
December 31, 2023
Level 1
Level 2
Level 3
197,756
185,990
—
—
—
—
—
—
383,746
$
$
— $
—
5,731
23,008
885,358
47,282
195,131
155,409
1,311,919
$
Fair Value Measurements at
December 31, 2022
Level 1
Level 2
Level 3
159,295
17,766
—
—
—
—
—
—
—
177,061
$
$
— $
—
2,149
32,675
1,222,379
92,417
79,045
262,722
—
1,691,387
$
—
—
—
—
—
—
—
—
-
—
—
—
—
—
—
—
—
2,212
2,212
Marketable securities classified as Level 2 within the valuation hierarchy generally consist of U.S. Treasury securities and
government agency securities, corporate bonds, and commercial paper. The Company estimates the fair values of these marketable
securities by taking into consideration valuations obtained from third-party pricing sources.
F-14
5. Property and Equipment, net
Property and equipment, net, consists of the following (in thousands):
Computer equipment
Furniture, fixtures, and other
Laboratory equipment
Leasehold improvements
Construction work in process
Total property and equipment, gross
Accumulated Depreciation
Total property and equipment, net
As of December 31,
2023
2022
$
$
3,739
8,109
41,411
143,260
8,859
205,378
(53,433)
151,945
$
$
3,618
8,109
37,897
141,680
6,162
197,466
(33,832)
163,634
Depreciation expense for the year ended December 31, 2023, 2022 and 2021 was $19.8 million, $24.1 million, and
$17.9 million, respectively.
6. Accrued Expenses
Accrued expenses consist of the following (in thousands):
Payroll and employee-related costs
Research costs
Collaboration costs
Licensing fees
Professional fees
Intellectual property costs
Accrued property and equipment
Other
Total
7. Leases
As of December 31,
2023
2022
$
$
17,347
16,962
2,395
3,143
2,515
1,642
630
701
45,335
$
$
19,241
35,010
11,177
983
4,927
3,936
1,244
1,164
77,682
In May 2020, the Company entered into a lease agreement for a cell therapy manufacturing facility in Framingham,
Massachusetts, or the Framingham Lease, for clinical and commercial production of the Company’s investigational cell therapy
product candidates. The Framingham Lease expires in March 2036 and the Company has an option to extend the term of the lease for
two additional seven-year periods. The right-of-use asset and corresponding lease liability does not include the additional seven-year
periods under the renewal option as the Company is not reasonably certain to exercise that option.
In July 2020, the Company entered into a lease agreement for an office and laboratory facility in Boston, Massachusetts, with a
commencement date of June 1, 2021, or the 2020 Lease. At lease commencement, the Company recorded a right-of-use asset of
$149.8 million and a corresponding operating lease liability of $147.9 million. Tenant incentives of $49.2 million were recorded as a
reduction to the operating lease asset and liability at lease commencement. The lease expires in March 2034 and the Company has an
option to extend the term of the lease for two additional five-year periods. The right-of-use asset and corresponding lease liability does
not include the additional five-year periods under the renewal option as the Company is not reasonably certain to exercise that option.
Subsequent to signing the 2020 Lease, the Company amended its leases for its primary office and research facility in Cambridge,
Massachusetts in 2021, which resulted in a termination in 2022.
The Company also rents certain office space in Zug, Switzerland, on a short-term basis for which a right-of-use asset and
liability are not recorded, in accordance with the practical expedient elected.
The Company has embedded leases in certain research and license agreements for which the Company has recorded a right of
use asset and liability. These arrangements are not significant in comparison to the Company’s total operating lease assets and
liabilities. In addition, the Company has identified certain short-term leases embedded within its manufacturing contracts which are
not recorded on the Company’s balance sheet in accordance with the practical expedient elected.
The Company identified and assessed the following estimates in recognizing the right-of-use asset and corresponding liability:
F-15
•
•
Expected lease term: The expected lease term includes noncancelable lease periods and, when applicable, periods covered
by an option to extend the lease if the Company is reasonably certain to exercise that option, as well as periods covered by
an option to terminate the lease if the Company is reasonably certain not to exercise that option.
Incremental borrowing rate: As the discount rates in the Company’s leases are not implicit, the Company estimated the
incremental borrowing rate based on the rate of interest the Company would have to pay to borrow a similar amount on a
collateralized basis over a similar term.
The following table summarizes the lease assets and liabilities as of December 31, 2023 and 2022 (in thousands):
Assets
Operating lease assets
Total lease assets
Liabilities
Current
Operating lease liabilities
Non-current
Operating lease liabilities, net of current portion
Total lease liabilities
As of December 31,
2023
2022
$
$
153,993
153,993
$
15,625
223,007
238,632
$
156,921
156,921
15,842
228,179
244,021
The following table summarizes operating lease costs included in research and development and general and administrative
expense, as well as sublease income for the years ended December 31, 2023, 2022 and 2021 (in thousands):
Operating lease costs
Short-term lease costs
Variable lease costs
Sublease income
Net lease cost
2023
Years Ended December 31,
2022
2021
$
$
25,870
—
14,387
(137)
40,120
$
$
34,896
824
11,882
—
47,602
$
$
22,520
11,087
8,402
(5,253)
36,756
The following table summarizes the maturity of undiscounted payments due under lease liabilities and the present value of those
liabilities as of December 31, 2023 (in thousands):
2024
2025
2026
2027
2028
Thereafter
Total
Present value adjustment
Present value of lease liabilities
Total
28,703
28,825
29,402
28,669
28,146
178,884
322,629
(83,997)
238,632
$
$
The following table summarizes the lease term (in years) and discount rate for operating leases as of December 31, 2023 and
2022:
Weighted-average remaining lease term
Weighted-average discount rate
As of December 31,
2023
2022
10.8
5.9%
11.8
5.9%
F-16
The following table summarizes the cash paid for amounts included in the measurement of lease liabilities for the years ended
December 31, 2023, 2022 and 2021 (in thousands):
Cash paid for amounts included in measurement of lease
liabilities:
Operating cash flows used in operating leases
$
(27,310) $
(17,004) $
(19,753)
2023
Years Ended December 31,
2022
2021
Operating lease non-cash items:
Right-of-use assets increased (decreased) through lease
modifications and reassessments
Right-of-use assets obtained in exchange for operating
lease liabilities
Leasehold improvements paid directly by landlord
2,660
7,552
—
1,208
—
19,252
(14,230)
152,486
30,500
8. Significant Contracts
Agreements with Vertex
For purposes of this Note 8 and Note 9, CASGEVY (exagamglogene autotemcel [exa-cel]), formerly CTX001, is referred to as
“CASGEVY”.
2015 collaboration
In 2015, the Company entered into a strategic collaboration, option and license agreement, or the 2015 Collaboration
Agreement, with Vertex. The 2015 Collaboration Agreement is focused on the use of the Company’s CRISPR/Cas9 gene editing
technology to discover and develop potential new treatments aimed at the underlying genetic causes of human disease. The Company
and Vertex amended the 2015 Collaboration Agreement in 2017 and 2019 with Amendment No. 1 and Amendment No. 2,
respectively, namely to clarify Vertex’s option rights under the 2015 Collaboration Agreement and to modify certain definitions and
provisions of the 2015 Collaboration Agreement to make them consistent with the JDA (as defined below) and the 2019 Collaboration
Agreement (as defined below). In 2017, Vertex exercised an option granted to it under the 2015 Collaboration Agreement to obtain a
co-exclusive license to develop and commercialize hemoglobinopathy and beta-globin targets, and in 2019, Vertex exercised the
remaining options granted to it under the 2015 Collaboration Agreement to exclusively license certain collaboration targets developed
under the 2015 Collaboration Agreement.
Hemoglobinopathies collaboration
In 2017, following Vertex's exercise of its option to obtain a co-exclusive license to develop and commercialize
hemoglobinopathy and beta-globin targets, the Company and Vertex entered into a joint development and commercialization
agreement, or the JDA, and agreed for potential hemoglobinopathy treatments, including CASGEVY, the Company and Vertex would
share equally all research and development costs and worldwide revenues. In 2021, the Company and Vertex amended and restated
the JDA, or the A&R Vertex JDCA, pursuant to which the parties agreed to, among other things, (a) adjust the governance structure
for the collaboration and adjust the responsibilities of each party thereunder, whereby Vertex leads and has all decision making (i.e.,
control) in relation to the CASGEVY program prospectively; (b) adjust the allocation of net profits and net losses between the parties
with respect to CASGEVY only, which will be allocated 40% to the Company and 60% to Vertex, prospectively; and (c) exclusively
license (subject to the Company’s reserved rights to conduct certain activities) certain intellectual property rights to Vertex relating to
the specified product candidates and products (including CASGEVY) that may be researched, developed, manufactured and
commercialized on a worldwide basis under the A&R Vertex JDCA. Additionally, the A&R Vertex JDCA allows the Company to
defer a portion of its share of costs under the arrangement if spending on the CASGEVY program exceeds specified amounts through
2024. In December 2023, the Company entered into an amendment to the A&R Vertex JDCA, or Amendment No. 1 to the A&R
Vertex JDCA, with Vertex related to the global development, manufacturing, and commercialization of CASGEVY. Pursuant to
Amendment No. 1 to the A&R Vertex JDCA, among other things, the Company and Vertex agreed to (a) allocate certain costs arising
from a license agreement with a third party, resulting in a current payment due to Vertex by the Company of $20.0 million upon an
event specified in Amendment No. 1 to the A&R Vertex JDCA, and (b) adjust, under certain specified circumstances, the timing of
and portion of the Company’s share of costs it is permitted to defer under the agreement. Any deferred amounts under the A&R
Vertex JDCA, as amended, are only payable to Vertex as an offset against future profitability of the CASGEVY program and the
amounts payable are capped at a specified maximum amount per year.
F-17
In connection with the closing of the transaction contemplated by the A&R Vertex JDCA, the Company received a $900.0
million up-front payment from Vertex. Additionally, in December 2023, the Company and Vertex received approval of CASGEVY
by the U.S. Food and Drug Administration, or the FDA. The FDA’s approval of CASGEVY triggered Vertex’s obligation to make a
$200.0 million milestone payment to the Company, which is included in accounts receivable in the accompanying consolidated
balance sheets as of December 31, 2023.
DMD and DM1 exclusive license
In 2019, the Company and Vertex entered into a series of agreements, including a strategic collaboration and license agreement,
or the 2019 Collaboration Agreement, for the development and commercialization of products for the treatment of Duchenne muscular
dystrophy, or DMD, and myotonic dystrophy Type 1, or DM1. For the DMD and DM1 programs, Vertex is responsible for all
research, development, manufacturing and commercialization activities and all related costs. Upon IND filing, the Company has the
option to forego the DM1 milestones and royalties, and instead, co-develop and co-commercialize all DM1 products globally in
exchange for payment of 50% of research and development costs incurred by Vertex from the effective date of the agreement through
IND filing.
Collaboration in the field of diabetes
In 2021, the Company and ViaCyte, Inc., or ViaCyte, entered into a joint development and commercialization agreement, or the
ViaCyte JDCA, to jointly develop and commercialize product candidates and shared products for the diagnosis, treatment or
prevention of diabetes type 1, diabetes type 2 or insulin dependent / requiring diabetes throughout the world. In the third quarter of
2022, Vertex acquired ViaCyte, and ViaCyte became a wholly-owned subsidiary of Vertex. In March 2023, (1) the Company and
ViaCyte entered into an amendment to the ViaCyte JDCA, or the ViaCyte JDCA Amendment, and adjusted certain rights and
obligations of the Company and ViaCyte under the ViaCyte JDCA, and (2) the Company and Vertex entered into a non-exclusive
license agreement, or the Non-Ex License Agreement, pursuant to which the Company agreed to license to Vertex, on a non-exclusive
basis, certain of its gene editing intellectual property to exploit certain products for the diagnosis, treatment or prevention of diabetes
type 1, diabetes type 2 or insulin dependent / requiring diabetes throughout the world. Subsequently, ViaCyte elected to opt-out of the
ViaCyte JDCA. Per the opt-out terms, the on-going collaboration assets will now be wholly owned by the Company, subject to a
royalty on future sales owed to ViaCyte. The opt-out will become effective in early February 2024.
In connection with entering into the Non-Ex License Agreement, the Company received a $100.0 million up front payment from
Vertex. Under the Non-Ex License Agreement, the Company is eligible to receive milestone payments from Vertex of up to $230.0
million, in the aggregate and inclusive of a $70.0 million research milestone achieved in the second quarter of 2023. The milestones
are dependent on the achievement of pre-determined research, development and commercial milestones for certain products utilizing
the licensed intellectual property. Additionally, the Company is eligible to receive tiered royalties on the sales of certain products in
the low to mid-single digits.
Accounting Analysis
For purposes of this Note 8, the 2015 Collaboration Agreement, Amendment No. 1, Amendment No. 2, A&R Vertex JDCA,
Amendment No. 1 to the A&R Vertex JDCA and 2019 Collaboration Agreement are collectively referred to as the “Vertex
Agreements” and the Non-Ex License Agreement and ViaCyte JDCA Amendment are collectively referred to as the “March 2023
Agreements.”
The Vertex Agreements and the March 2023 Agreements include components of a customer-vendor relationship as defined
under ASC 606, collaborative arrangements as defined under ASC 808, Collaborative Agreements, or ASC 808, and research and
development costs as defined under ASC 730, Research and Development, or ASC 730. Specifically, with regards to the March 2023
Agreements, the Company concluded that the non-exclusive license is a performance obligation under ASC 606 and the ongoing
research and development services under the ViaCyte JDCA Amendment are a unit of account under ASC 808.
Accounting Analysis Under ASC 606
March 2023 Agreements
Identification of the Contract
The March 2023 Agreements were negotiated as a package with a single commercial objective and, as such, the March 2023
Agreements were combined for accounting purposes and treated as a single arrangement. The Company determined for accounting
purposes that the combined contract terminates the original ViaCyte JDCA and created a new contract.
F-18
Identification of Performance Obligations
The Company concluded the transfer of the non-exclusive license, including certain modified rights and obligations provided as
part of the ViaCyte JDCA Amendment to support the delivery of the license, was both capable of being distinct and distinct within the
context of the contract.
Determination of Transaction Price
The initial transaction price was comprised of the upfront payment of $100.0 million.
In the second quarter of 2023, the Company adjusted the transaction price to include $70.0 million in previously constrained
variable consideration related to a research milestone which was achieved in the second quarter of 2023. The Company determined
that all other possible variable consideration resulting from milestones and royalties discussed below was fully constrained as of
December 31, 2023. The Company will re-evaluate the transaction price in each reporting period.
Allocation of Transaction Price to Performance Obligations
The Company identified one performance obligation for the March 2023 Agreements and, as a result, no allocation of the
transaction price was required.
Recognition of Revenue
The Company determined the non-exclusive license, including certain modified rights and obligations provided as part of the
ViaCyte JDCA Amendment to support the delivery of the license, represented functional intellectual property, as the intellectual
property provides Vertex with the ability to perform a function or task in the form of research and development in the field of diabetes.
In 2023, the Company recognized revenue of $100.0 million for the non-exclusive license at the onset of the arrangement, as this was
the point in time in which the non-exclusive license was delivered.
In 2023, revenue from variable consideration of $70.0 million was recognized related to a research milestone that was achieved
during the second quarter of 2023. Revenue recognized under the March 2023 Agreements for year ended December 31, 2023 was
$170.0 million in aggregate.
Milestones under the Non-Ex License Agreement
As of December 31, 2023, the Company is eligible to receive potential future milestone payments from Vertex of up to $160.0
million in the aggregate under the Non-Ex License Agreement depending on the achievement of pre-determined research,
development and commercial milestones for certain products utilizing the licensed intellectual property. Additionally, the Company is
eligible to receive tiered royalties on the sales of certain products in the low to mid-single digits.
Each of the remaining milestones under the Non-Ex License Agreement are fully constrained as of December 31, 2023. There is
uncertainty as to whether the events to obtain the research and developmental milestones will be achieved given the nature of clinical
development and the stage of the CRISPR/Cas9 technology. The remaining research, development and regulatory milestones will be
constrained until it is probable that a significant revenue reversal will not occur. Commercial milestones and royalties relate
predominantly to a license of intellectual property and are determined by sales or usage-based thresholds. The commercial milestones
and royalties are accounted for under the royalty recognition constraint and will be accounted for as constrained variable
consideration. The Company applies the royalty recognition constraint for each commercial milestone and will not recognize revenue
for each until the subsequent sale of a licensed product (achievement of each) occurs.
Accounting for the A&R Vertex JDCA
Identification of the Contract
The A&R Vertex JDCA represented a contractual modification to the JDA. For accounting purposes, the A&R Vertex JDCA
was treated as a separate contract.
Identification of Performance Obligations
The Company concluded the A&R Vertex JDCA contained a single material promise, an exclusive worldwide license granting
Vertex an additional 10% economic interest in the CASGEVY program and the right to control development and commercialization of
CASGEVY, or the “CASGEVY Exclusive License.” The Company concluded the CASGEVY Exclusive License was both capable of
being distinct and distinct within the context of the A&R Vertex JDCA, and the CASGEVY Exclusive License was sold at its
estimated standalone selling price, or “ESSP.” As such, the CASGEVY Exclusive License represented a separate performance
obligation.
F-19
Determination of Transaction Price
The transaction price was comprised of the upfront payment of $900.0 million. The Company determined that all other possible
variable consideration resulting from milestones and royalties discussed above was fully constrained at the time of the transaction. The
Company re-evaluates the transaction price in each reporting period.
In the fourth quarter of 2023, the Company adjusted the transaction price to include $200.0 million in previously constrained
variable consideration related to a milestone which was achieved upon approval of CASGEVY by the FDA in December 2023. The
Company determined that all other possible variable consideration resulting from milestones and royalties under the A&R Vertex
JDCA was fully constrained as of December 31, 2023.
Allocation of Transaction Price to Performance Obligations
The selling price of the performance obligation was determined based on the Company’s ESSP. The Company developed the
ESSP for the CASGEVY Exclusive License with the objective of determining the price at which it would sell such an item if it were
to be sold regularly on a standalone basis.
The ESSP for the CASGEVY Exclusive License was determined to be approximately $900.0 million. The ESSP was
determined based on 10% of the probability and present value adjusted cash flows from projected worldwide net profit for CASGEVY
based on probability assessments, projections based on internal forecasts, industry data, and information from other guideline
companies within the same industry and other relevant factors. As the Company determined the CASGEVY Exclusive License was
the only performance obligation, the entire transaction price was allocated to the CASGEVY Exclusive License. The aforementioned
ESSP reflects the level of risk and expected probability of success inherent in the nature of the associated research area.
Recognition of Revenue
The Company determined that the CASGEVY Exclusive License represented functional intellectual property, as the intellectual
property provides Vertex with the ability to perform a function or task in the form of research and development, manufacturing and
commercialization. As such, the revenue related to the CASGEVY Exclusive License was recognized at the point in time, which was
upon transfer in the second quarter of 2021.
In 2023, revenue from variable consideration of $200.0 million was recognized related to a milestone that was achieved during
the fourth quarter of 2023. Revenue recognized under the A&R Vertex JDCA, as amended, for year ended December 31, 2023 was
$200.0 million.
Accounting for the 2019 Collaboration Agreements
The 2019 Agreements represented a contract modification to the 2015 Agreements. As a result, the 2019 Agreements and the
2015 Agreements are combined for accounting purposes and treated as a single arrangement. Transactions under the 2019
Agreements were not material for the twelve months ended December 31, 2023 and 2022. For the twelve months ended December 31,
2021, the Company recognized $12.0 million in revenue related to a milestone under the 2019 Agreements.
The Company determined that all other possible variable consideration remaining under the 2019 Agreements resulting from
milestones and royalties discussed above was fully constrained as of December 31, 2023. The Company will re-evaluate the
transaction price in each reporting period.
Revenue recognized in connection with the Vertex Agreements and March 2023 Agreements
Revenue recognized under the Vertex Agreements and March 2023 Agreements for the year ended December 31, 2023 was
$370.0 million and was comprised of (i) revenue related to the $200.0 million milestone under the A&R Vertex JDCA, (ii) revenue
related to the $100.0 million upfront payment received in connection with the March 2023 Agreements, and (iii) revenue related to the
$70.0 million milestone achieved in 2023 under the March 2023 Agreements.
Revenue recognized under the Vertex Agreements for the year ended December 31, 2022 was not material.
Revenue recognized under the Vertex Agreements for the year ended December 31, 2021 was $913.1 million and was
comprised of (i) revenue related to the exclusive worldwide license for CASGEVY of $900.0 million, (ii) revenue related to the
second DM1 milestone under the 2019 Agreements of $12.0 million, and (iii) revenue recognized in connection with research and
development services.
As of December 31, 2023 and 2022 there was no current deferred revenue related to the collaboration with Vertex, respectively.
As of December 31, 2023 and 2022, there was $12.3 million of non-current deferred revenue, respectively, related to the collaboration
with Vertex. The transaction price allocated to the remaining performance obligations was $12.3 million.
F-20
Milestones under the Vertex Agreements
The Company has evaluated the milestones that may be received in connection with the Vertex Agreements.
Under the 2015 Collaboration Agreement and subsequent amendments, the Company is eligible to receive up to $410.0 million
in additional development, regulatory and commercial milestones and royalties on net product sales for each of the three collaboration
targets that Vertex licensed in 2019. Each milestone is payable only once per collaboration target, regardless of the number of
products directed to such collaboration target that achieve the relevant milestone event.
The Company is eligible to receive potential future payments of up to $775.0 million under the 2019 Collaboration Agreement
based upon the successful achievement of specified development, regulatory and commercial milestones for the DMD and DM1
programs. The Company is also eligible to receive tiered royalties on future net sales on any products that may result from this
collaboration; however, the Company has the option to forego the DM1 milestones and royalties to co-develop and co-commercialize
all DM1 products globally.
The Company has the option to conduct research at their own cost in certain defined areas that, if beneficial to the CASGEVY
program and CASGEVY ultimately achieves regulatory approval in such areas, then the Company could be entitled to certain
milestone payments aggregating to high eight digits from Vertex.
Each of the remaining milestones described above are fully constrained as of December 31, 2023. There is uncertainty that the
events to obtain the research and developmental milestones will be achieved given the nature of clinical development and the stage of
the CRISPR/Cas9 technology. The remaining research, development and regulatory milestones will be constrained until it is probable
that a significant revenue reversal will not occur. Commercial milestones and royalties relate predominantly to a license of intellectual
property and are determined by sales or usage-based thresholds. The commercial milestones and royalties are accounted for under the
royalty recognition constraint and will be accounted for as constrained variable consideration. The Company applies the royalty
recognition constraint for each commercial milestone and will not recognize revenue for each until the subsequent sale of a licensed
product (achievement of each) occurs.
Accounting Analysis under ASC 808
Vertex Agreements
In connection with the Vertex Agreements, the Company identified the following collaborative elements, which are accounted
for under ASC 808: (i) development and commercialization services for shared products, including any transition services related to
CASGEVY under the A&R Vertex JDCA; (ii) R&D Services for follow-on products; and (iii) committee participation. The related
impact of the cost sharing is included within collaboration expense, net, in the consolidated statements of operations and
comprehensive (loss) income.
During the years ended December 31, 2023, 2022 and 2021, the Company recognized $130.3 million, $110.3 million and
$101.2 million of collaboration expense, net, related to the CASGEVY program, respectively. Collaboration expense, net, during the
years ended December 31, 2023, 2022 and 2021 was net of $18.0 million, $37.8 million and $47.4 million of reimbursements from
Vertex related to the CASGEVY program, respectively.
Under the A&R Vertex JDCA, the Company has an option to defer its portion of specified costs on the CASGEVY program in
excess of $110.3 million for the years ended December 31, 2022, 2023 and 2024. The $110.3 million does not include a $20.0 million
payment to Vertex recognized in the fourth quarter of 2023 and paid in the first quarter of 2024 in connection with Amendment No. 1
to the A&R Vertex JDCA. For the years ended December 31, 2023 and 2022, the Company exercised its option to defer specified
costs on the CASGEVY program in excess of $110.3 million, which is further discussed in Note 9.
9. Commitments and Contingencies
Intellectual Property Agreements
Charpentier License Agreements
In April 2014, the Company entered into certain technology license agreements with Dr. Emmanuelle Charpentier pursuant to
which the Company licensed certain intellectual property rights under joint ownership from Dr. Charpentier to develop and
commercialize products for the treatment or prevention of human diseases. In connection therewith, Dr. Charpentier is entitled to
receive nominal clinical milestone payments, low single digit percentage of sublicensing payments received under any sublicense
agreement with a third party, and low single-digit percentage royalties based on annual net sales of licensed products and services by
the Company and its affiliates and sublicensees. The Company paid an immaterial amount of fees to Dr. Charpentier under the
Charpentier License Agreements.
F-21
Research, Manufacturing and License Agreements
The Company has engaged several research institutions and companies to identify new delivery strategies and applications of
the Company’s gene editing technology. The Company is also a party to a number of license agreements which require significant
upfront payments and may be required to make future royalty payments and potential milestone payments from time to time. In
addition, the Company is also a party to intellectual property agreements, which require maintenance and milestone payments from
time to time. Further, the Company is a party to a number of manufacturing agreements that require upfront payments for the future
performance of services.
In association with these agreements, on a product-by-product basis, the counterparties are eligible to receive up to low eight-
digit potential payments upon specified research, development and regulatory milestones. In addition, on a product-by-product basis,
the counterparties are eligible to receive potential commercial milestone payments based on specified annual sales thresholds. The
potential payments are low-single digit percentages of the specified annual sales thresholds. The counterparties are also eligible to
receive low single-digit royalties on future net sales.
Under certain circumstances and if certain contingent future events occur, Vertex is eligible to receive up to $395.0 million in
potential specified research, development, regulatory and commercial milestones and tiered single-digit percentage royalties on future
net sales related to a specified target under an amendment to the 2015 Collaboration Agreement. Vertex also has the option to conduct
research at their own cost in certain defined areas that, if beneficial to the CASGEVY program and ultimately achieves regulatory
approval, then the Company could owe Vertex certain milestone payments aggregating to high eight digits, subject to certain
limitations on the profitability of the CASGEVY program.
Under the A&R Vertex JDCA, the Company has an option to defer specified costs on the CASGEVY program in excess of
$110.3 million for the years ended December 31, 2022, 2023 and 2024. The $110.3 million for 2023 does not include amounts
attributable to our share of certain costs arising from a license agreement between Vertex and a third party, which we agreed to pay to
Vertex upon the occurrence of an event specified in Amendment No. 1 to the A&R Vertex JDCA. In 2023 and 2022, the Company
exercised its option to defer specified costs on the CASGEVY program in excess of the deferral limit under A&R Vertex JDCA. The
Company deferred $80.9 million and $36.1 million of its share of costs incurred under the arrangement for the years ended
December 31, 2023 and 2022, respectively, as spending on the CASGEVY program exceeded a specified amount. Any deferred
amounts are only payable to Vertex as an offset against future profitability of the CASGEVY program and the amounts payable are
capped at a specified maximum amount per year. These deferred costs on the CASGEVY program will be recognized by us when
recoverability of such deferred amounts by Vertex is probable and the amount can be reasonably estimated. As of December 31, 2023
and 2022, no such deferred amounts have been recognized . Refer to Note 8 for further discussion on the Company’s arrangements
with Vertex.
Litigation
In the ordinary course of business, the Company is from time to time involved in lawsuits, investigations, proceedings and
threats of litigation related to, among other things, the Company’s intellectual property estate (including certain in-licensed intellectual
property), commercial arrangements and other matters. Such proceedings may include quasi-litigation, inter partes administrative
proceedings in the U.S. Patent and Trademark Office, the European Patent Office and patent offices in other countries involving the
Company’s intellectual property estate including certain in-licensed intellectual property. The outcome of any of the foregoing, is
inherently uncertain. In addition, litigation and related matters are costly and may divert the attention of Company’s management and
other resources that would otherwise be engaged in other activities. If the Company is unable to prevail in any such proceedings, the
Company’s business, results of operations, liquidity and financial condition could be adversely affected.
10. Share Capital
All of the Company's common shares are authorized under Swiss corporate law with a nominal value of 0.03 CHF per share.
Though the nominal value of common shares is stated in Swiss francs, the Company continues to use U.S. dollars as its reporting
currency for preparing the condensed consolidated financial statements.
As of December 31, 2023, the Company's share capital consists of 83,538,347 registered common shares with a nominal value
of CHF 0.03 per share, 8,202,832 registered common shares reserved for potential issuance of bonds or similar instruments, and
20,989,313 registered common shares reserved for the Company's employee equity incentive plans. In addition, the Board of Directors
is authorized to conduct one or more increases of the share capital at any time until June 8, 2028, or the expiry of the capital band if
F-22
earlier, within a lower limit of CHF 2,506,150.41 and an upper limit of CHF 2,920,321.14, corresponding to 13,805,691 registered
common shares with a nominal value of CHF 0.03 each to be fully paid in.
Common Share Issuances
At-the-Market Offerings
In August 2019, the Company entered into an Open Market Sale AgreementSM with Jefferies LLC, or Jefferies, under which the
Company was able to offer and sell, from time to time at its sole discretion through Jefferies, as its sales agent, its common shares, or
the August 2019 Sales Agreement. In connection with the August 2019 Sales Agreement, as amended, the Company has filed several
prospectus supplements with the SEC to offer and sell, from time to time, common shares.
In 2021, the Company issued and sold 1.4 million common shares at an average price of $168.23 per share for aggregate
proceeds of $224.5 million, which were net of equity issuance costs of $3.1 million. An additional $2.3 million of stamp taxes related
to this amount was paid in 2021.
In 2022, the sale of common shares pursuant to the 2019 Sales Agreement and the current prospectus supplement was not
significant.
In 2023, the Company issued and sold 0.5 million common shares at an average price of $72.32 per share for aggregate proceeds
of $32.7 million, which were net of equity issuance costs of $0.4 million. An additional $0.3 million of stamp taxes related to this
amount was paid in 2023.
As of December 31, 2023, the Company has $385.6 million remaining under its current prospectus supplement and has issued
and sold an aggregate of 1.5 million common shares at an average price of $139.91 per share for aggregate proceeds of $211.5 million,
which were net of equity issuance costs of $2.9 million.
Common Share Characteristics
The Common Shares have the following characteristics:
Voting Rights
The holders of common shares are entitled to one vote for each common share held at all meetings of shareholders.
Dividends
The holders of common shares are entitled to receive dividends, if and when resolved upon by the general meeting of
shareholders based on a respective proposal by the Board of Directors and provided that the Company disposes of sufficient freely
distributable reserves. As of December 31, 2023, no dividends have been declared or paid since the Company’s inception.
Liquidation
The holders of the common shares are entitled to share ratably in the Company’s assets available for distribution to shareholders
in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or upon the occurrence of a
deemed liquidation event.
11. Equity-based Compensation
Option and Grant Plans
In April 2015, the Company’s shareholders approved the 2015 Stock Option and Grant Plan, or the 2015 Plan, and in July 2016,
the Company’s shareholders approved the 2016 Stock Option and Incentive Plan, or the 2016 Plan. In May 2018, the Company’s
shareholders approved the 2018 Stock Option and Incentive Plan, or the 2018 Plan (collectively, the “Plans”). Subsequent to the IPO,
no further options were granted under the 2015 Plan. The Plans provide for the issuance of equity awards in the form of restricted
shares, options to purchase common shares which may constitute incentive stock options, or ISOs, or non-statutory stock options, or
NSOs, unrestricted stock unit grants, and qualified performance and market-based awards to eligible employees, officers, directors,
non-employee consultants and other key personnel. Terms of the equity awards, including vesting requirements, are determined by the
Company’s board of directors, subject to the provisions of the Plans. Options granted by the Company typically vest over four years
and have a contractual life of ten years. Restricted stock unit grants typically vest over two to four years. At December 31, 2023, the
Company had 28,405,365 common shares authorized for issuance under the 2018 Plan and 10,588,249 common shares available for
future grant under the 2018 Plan.
F-23
Equity-Based Compensation Expense
The Company recognized stock-based compensation expense totaling $81.0 million, $97.9 million, and $102.4 million during
the years ended December 31, 2023, 2022 and 2021, respectively. Stock-based compensation expense by classification within the
consolidated statements of operations and comprehensive (loss) income is as follows (in thousands):
Research and development
General and administrative
Total
2023
Years Ended December 31,
2022
46,356
34,672
81,028
$
$
53,956
43,991
97,947
$
$
$
$
2021
59,683
42,707
102,390
As of December 31, 2023, there was $80.3 million and $72.0 million of unrecognized compensation expense related to unvested
stock options and restricted stock units, respectively, that is expected to be recognized over a weighted-average period of 2.3 and 2.4
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:
Options granted
Weighted-average exercise price
Weighted-average grant date fair value
Assumptions:
Expected volatility
Expected term (in years)
Risk-free interest rate
Expected dividend yield
Years Ended December 31,
2023
1,860,485
45.47
28.39
2022
1,492,589
60.19
38.54
2021
1,616,255
124.32
77.38
$
$
$
$
$
$
65.1%
6.0
4.1%
0.0%
70.2%
6.0
2.6%
0.0%
70.3%
6.0
1.0%
0.0%
The following table summarizes stock option activity under the Company’s equity award plans (intrinsic value in thousands):
Outstanding at December 31, 2022
Granted
Exercised
Cancelled or forfeited
Outstanding at December 31, 2023
Exercisable at December 31, 2023
Vested and expected to vest at December 31, 2023
Shares
7,230,233
1,860,485
(742,291)
(1,144,055)
7,204,372
4,861,029
7,204,372
$
$
$
$
Weighted-
Average
Exercise Price
60.22
45.47
38.53
82.84
55.05
53.73
55.05
Weighted-
Average
Remaining
Contractual
Term (years)
Aggregate
Intrinsic
Value
7.0
$
32,131
6.7
5.7
6.7
$
$
$
115,681
88,206
115,681
The total intrinsic value (the amount by which the fair market value exceeded the exercise price) of stock options exercised
during the year ended December 31, 2023, 2022 and 2021 was $13.9 million, $40.8 million, and $119.5 million, respectively.
As of December 31, 2023, options to purchase 1,085,467 common shares subject to performance-based vesting conditions were
vested, as performance conditions were satisfied in prior years, and there were 202,208 options to purchase common shares subject to
performance-based vesting conditions outstanding. Activity related to stock options subject to performance-based vesting conditions is
included in the table above.
As of December 31, 2023, options to purchase 150,000 common shares subject to market-based vesting conditions were vested,
as market conditions were satisfied in prior years. 150,000 options to purchase common shares subject to market-based vesting
conditions were outstanding as of December 31, 2023.
The Company did not grant stock options subject to performance-based or market-based vesting conditions during 2023, 2022,
and 2021.
F-24
Restricted Stock Units
The following table summarizes the restricted stock unit activity under the Company’s equity award plans:
Unvested balance at December 31, 2022
Granted
Vested
Cancelled or forfeited
Unvested balance at December 31, 2023
Shares
1,325,185
1,078,114
(277,808)
(344,076)
1,781,415
$
$
Weighted-
Average
Grant Date
Fair Value
80.13
49.52
96.23
70.29
61.00
During the years ended December 31, 2023, 2022 and 2021, the total fair value of restricted stock units vested was $14.1
million, $14.3 million, and $45.3 million, respectively.
During 2022, the Company granted 150,000 performance stock units with market-based vesting conditions in which the
recipient is eligible to receive between zero and 150,000 common shares at the end of a three-year service period based upon
achieving a specified average stock price. Expense for these awards is being recognized over the requisite service period. As of
December 31, 2023, 150,000 of the performance stock units were unvested. Activity related to stock units subject to market-based
vesting conditions is included in the table above.
The Company did not grant restricted stock units subject to performance-based or market-based vesting conditions during 2023
and 2021.
Award modifications
Equity award modifications for certain equity awards held by departing employees for the years ended December 31, 2023,
2022 and 2021 were not material to the Company's stock-based compensation expense.
Employee Stock Purchase Plan
On July 19, 2016, the Company’s board of directors adopted its 2016 Employee Stock Purchase Plan, or the ESPP Plan, which
was subsequently approved by its shareholders and became effective on October 19, 2016. The ESPP Plan authorizes the initial
issuance of up to a total of 0.4 million shares of the Company’s common stock to participating employees. The Company activated its
ESPP Plan on January 1, 2020. The Company issued 53,282, 36,559 and 21,590 shares under the ESPP Plan during the years ended
December 31, 2023, 2022 and 2021, respectively.
12. Net (Loss) Income Per Share Attributable to Common Shareholders
Basic net (loss) income per share is calculated by dividing net (loss) income attributable to common shareholders by the
weighted-average number of common shares outstanding during the period. Diluted net (loss) income per share is calculated by
dividing the net (loss) income attributable to common shareholders by the weighted-average number of common share equivalents
outstanding for the period, including any dilutive effect from outstanding stock options and warrants using the treasury stock method.
The Company’s net (loss) income is net (loss) income attributable to common shareholders for all periods presented.
The following table sets forth the computation of basic and diluted net (loss) income per share for the periods ended (in
thousands, except share and per share amounts):
Net (loss) income
Basic weighted-average common shares outstanding
Effect of potentially dilutive securities:
Outstanding options
Unvested restricted common shares
Diluted weighted-average common shares outstanding
Net (loss) income per common share — basic
Net (loss) income per common share — diluted
Year ended December 31,
2022
2021
2023
$ (153,610) $ (650,175) $
79,220,930
77,746,575
377,661
75,948,686
—
—
79,220,930
$
$
(1.94) $
(1.94) $
— 3,990,579
454,231
—
80,393,496
77,746,575
4.97
4.70
(8.36) $
(8.36) $
F-25
The Company did not include the securities in the following table in the computation of the net (loss) income per share
calculations because the effect would have been anti-dilutive during each period:
Outstanding options
Unvested restricted common shares
ESPP
Total
Year ended December 31,
2022
2023
7,204,372
1,781,415
16,026
9,001,813
7,230,233
1,325,185
19,105
8,574,523
2021
1,765,881
225,904
6,671
1,998,456
13. 401(k) Savings Plan
The Company established a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code (the “401(k)
Plan”) in November 2016. 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. The Company contributed $3.0 million, $3.2 million,
and $3.4 million to the 401(k) Plan for the years ended December 31, 2023, 2022 and 2021, respectively.
14. Income Taxes
The Company is subject to U.S. federal and various state corporate income taxes as well as taxes in foreign jurisdictions for the
foreign parent and where foreign subsidiaries have been established.
Net (loss) income before taxes
For the years ended December 31, 2023, 2022 and 2021, the (loss) income before provision for income taxes consist of the
following (in thousands):
Domestic
Foreign
Total
Years Ended December 31,
2022
2023
$
30,357 $
1,321 $
(181,079)
(651,821)
$ (150,722) $ (650,500) $
2021
4,569
374,962
379,531
F-26
The benefit from (provision for) income taxes consist of the following (in thousands):
Current income taxes:
Federal
State
Foreign
Total current income taxes
Deferred income taxes:
Federal
State
Foreign
Total deferred income taxes
Total income tax benefit (provision)
Years Ended December 31,
2022
2023
2021
$
$
$
(2,318) $
(994)
—
(3,312)
424
—
—
424
(2,888) $
(444) $
(241)
—
(685)
1,010
—
—
1,010
325 $
(80)
(42)
0
(122)
(1,748)
—
—
(1,748)
(1,870)
A reconciliation of income tax expense computed at the statutory corporate income tax rate to the effective income tax rate for
the years ended December 31, 2023, 2022 and 2021 is as follows:
Income tax expense at statutory rate
State income tax, net of federal benefit
Nondeductible expenses
Foreign rate differential
Statutory to US GAAP permanent differences
Stock-based compensation
Impact of deferred rate change
Research credits
Change in valuation allowance
Other Rate Items
Effective income tax rate
Years Ended December 31,
2022
2021
2023
11.9%
2.3%
(0.2)%
(2.1)%
0.0%
(4.0)%
0.1%
8.2%
(17.2)%
(0.9)%
(1.9%)
11.9%
1.2%
(0.2)%
(0.1)%
0.0%
(0.2%)
(0.1)%
3.3%
(15.8)%
0.0%
—
11.9%
(1.0)%
0.7%
0.6%
0.0%
(2.5)%
0.0%
(4.2)%
(5.0)%
0.0%
0.5%
The federal statutory rate reflects the Switzerland mixed company service rate.
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 are comprised of the following (in thousands):
Years Ended December 31,
2023
2022
$
133,384 $
4,485
65,177
15,987
18,346
70,404
307,783
(227,615)
80,168
(38,725)
(42,058)
(4)
—
(80,787)
$
(619) $
118,432
4,782
66,436
10,154
18,034
63,416
281,254
(198,279)
82,975
(41,206)
(42,678)
(18)
(209)
(84,111)
(1,136)
Deferred tax assets:
Net operating loss carryforwards
Accruals and reserves
Operating lease liabilities
Other deferred tax assets
Stock-based compensation
Research credit
Total deferred tax assets
Less valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Depreciation
Operating lease assets
Intangible assets
Other deferred tax liabilities
Total deferred tax liabilities
Long term deferred taxes
F-27
The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on
the Company’s history of worldwide operating losses, the Company has concluded that it is more-likely-than-not that the benefit of its
U.S. and non-U.S. deferred tax assets will not be realized. Accordingly, as of December 31, 2023 and 2022, the Company has
provided a full valuation allowance against its net deferred tax assets in Switzerland and the United Kingdom. The Company has also
provided a valuation allowance against the U.S. deferred tax assets that cannot be realized by existing deferred tax liabilities based
upon when they are scheduled to reverse. The valuation allowance increased by $29.3 million during 2023, which is primarily
attributable to increase in net operating loss carryforwards as a result of current year net loss.
As of December 31, 2023, the Company had no available U.S. federal net operating loss carryforwards. As of December 31,
2023, the Company had available non-U.S. net operating loss carryforwards of $2,223.3 million of which $1,115.6 million relate to
Switzerland, $1,115.6 million relate to the Canton of Zug, and $2.1 million relate to the Company’s wholly-owned subsidiary in the
United Kingdom. The net operating losses generated in Switzerland and the Canton of Zug begin to expire in 2027 and the net
operating losses generated in the United Kingdom can be carried forward indefinitely.
As of December 31, 2023, the Company had U.S. domestic federal research and development credit carryforwards of $28.2
million that begin to expire in 2040 for federal purposes, which are net of uncertain tax positions of $18.1 million. As of December 31,
2023, the Company had U.S. domestic federal orphan drug credit carryforwards of $27.0 million which begin to expire in 2040 for
federal purposes, which are net of uncertain tax positions of $11.5 million. As of December 31, 2023, the Company had U.S. domestic
state research and development credit carryforwards of $19.3 million which begin to expire in 2035, which are net of uncertain tax
positions of $12.8 million.
ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statement by
prescribing the minimum recognition threshold and measurement of a tax position taken or expected to be taken in a tax return.
As of December 31, 2023, the Company had gross unrecognized tax benefits of $44.1 million of which $40.1 million would
favorably impact the effective tax rate if recognized. The Company will recognize interest and penalties related to uncertain tax
positions in income tax expense. As of December 31, 2023, 2022 and 2021, the Company had no accrued interest or penalties related
to uncertain tax positions and no amounts have been recognized in the Company’s consolidated statements of operations and
comprehensive loss.
The aggregate changes in gross unrecognized tax benefits were as follows (in thousands):
Balance at beginning of year
Increases for tax positions taken during current period
Increases for tax positions taken in prior periods
Decreases for tax positions taken during current period
Decreases for tax positions taken in prior periods
Balance at end of year
Years Ended December 31,
2022
2023
2021
$
$
34,536 $
9,703
—
—
(91)
44,148 $
21,395 $
10,439
2,702
—
—
34,536 $
11,967
9,911
—
—
(483)
21,395
The Company files income tax returns in the U.S. federal jurisdiction, Massachusetts, California and certain non-U.S.
jurisdictions. The Company is subject to U.S. federal, Massachusetts, California and non-U.S. income tax examinations by authorities
for tax years ending after December 31, 2019. Research credits generated in prior tax years that are closed for examination may still be
adjusted upon future examination if they have or will be used in a future period. The Company is subject to income tax examinations
by authorities in its non-U.S. jurisdictions for all years.
15. Subsequent Events
On February 13, 2024, the Company entered into an investment agreement for the sale of approximately $280.0 million of its
common shares to a group of institutional investors in a registered direct offering, at a price per share of $71.50. The financing is
subject to customary closing conditions.
F-28
BOARD OF DIRECTORS
EXECUTIVE COMMITTEE
CORPORATE HEADQUARTERS
Baarerstrasse 14
14
a
6300 Zug
630
Switzerland
US OFFICES
105 West First Street
South Boston, MA 02127
455 Mission Bay Boulevard Southh
San Francisco, CA 94158
Dr. Samarth Kulkarni
Chairman and Chief Executive Officer
Dr. Samarth Kulkarni
Chief Executive Officer
ve O
Pr
Dr. Raju Prasad
cial O
Chief Financial Officer
James R. Kasingerer
General Counsel
Dr. Ali Behbahani
Partner and Co-Head of Healthcare,
New Enterprise Associates
Dr. Maria Fardis
Chief Executive Officer,
Lassen Therapeutics
Dr. H. Edward Fleming, Jr.
Executive Vice President, Enavate
Sciences
Dr. Simeon J. George
Chief Executive Officer
SR One Capital Management, LP
John T. Greene
Executive Vice President and Chief
Financial Officer, Discover Financial
Services
Dr. Katherine A. High
Visiting Professor, Rockefeller University
Dr. Douglas A. Treco
Lead Independent Director
(cid:36)(cid:73)(cid:74)(cid:70)(cid:71)(cid:3)(cid:38)(cid:89)(cid:70)(cid:68)(cid:86)(cid:85)(cid:74)(cid:87)(cid:70)(cid:3)(cid:48)(cid:71)(cid:109)(cid:68)(cid:70)(cid:83)(cid:3)(cid:66)(cid:79)(cid:69)(cid:3)(cid:36)(cid:73)(cid:66)(cid:74)(cid:83)(cid:78)(cid:66)(cid:79)(cid:13)
(cid:42)(cid:79)(cid:80)(cid:91)(cid:90)(cid:78)(cid:70)(cid:3)(cid:49)(cid:73)(cid:66)(cid:83)(cid:78)(cid:66)
TRANSFER AGENT AND REGISTRAR
INDEPENDENT AUDITORS
LEGAL COUNSEL
Equiniti Trust Company
48 Wall Street, Floor 23
New York, NY 10005
www.equiniti.com
Ernst & Young AG
Basel, Switzerland
Ernst & Young LLP
Boston, MA
2024 ANNUAL GENERAL MEETING
W
Walder Wyss AG
Zurich, Switzerlandland
Wyss
urich
Goodwin Procter, LLP
Boston, MA
n Pr
The 2024 Annual General Meeting of Shareholders will be held on May 30, 2024 at 8:00 A.M. Central European Summer Time
(2:00 A.M. Eastern Daylight Time) at the offices of Walder Wyss Ltd., Seefeldstrasse 123, 8008 Zurich, Switzerland.
mer
INVESTOR INFORMATION
Copies of our annual reports on Form 10-K, proxy statements, quarterly reports on Form 10-Q, and current reports on Form 8-K8-K
are available to shareholders upon request without charge. Please visit our website at www.crisprtx.com, send requests by e-maill
to ir@crisprtx.com or send a written request to:
CRISPR Therapeutics, Inc., 105 West First Street, South Boston, MA 02127, ATTN: Investor Relations
STOCK INFORMATION
Our common shares are traded on the Nasdaq Global Market under the symbol “CRSP”.
FORWARD LOOKING STATEMENTS
This annual report contains “forward-looking statements” which are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, as amended. The forward-looking statements in this annual report do not constitute
guarantees of future performance. Investors are cautioned that statements in this annual report that are not strictly historical
statements, including, but not limited to, statements concerning: our plans for and our preclinical studies, clinical trials and pipeline
products and programs, including, without limitation, manufacturing capabilities, status of such studies and trials, potential ex-
pansion into new indications and expectations regarding data generally; the data that will be generated by ongoing and planned
clinical trials, and the ability to use that data for the design and initiation of further clinical trials; our plans and expectations for the
commercialization of, and anticipated benefits of, CASGEVY, including the anticipated patient populations eligible for CASGEVY in
jurisdictions where it has been or may be approved; the sufficiency of our cash resources; the expected benefits of our collabora-
tions; and the therapeutic value, development, and commercial potential of CRISPR/Cas9 gene editing technologies and therapies.
You are cautioned that forward-looking statements are inherently uncertain. Such forward-looking statements are subject to a
number of risks and uncertainties that could cause actual results to differ materially from those anticipated, including, without lim-
itation, the risks identified in our annual report on Form 10-K and our other filings with the Securities and Exchange Commission.
We assume no obligation to update any forward-looking information contained in this annual report.
CRISPR Therapeutics AG
Baarerstrasse 14
6300 Zug
Switzerland
www.crisprtx.com